NOTWITHSTANDING a degree of financial stabilisation achieved over the past four years, a majority of weak economic fundamentals are struggling to change course.

A review of key economic indicators finalised by the ministry of finance ahead of upcoming mandatory Article-IV Consultations with the International Monetary Fund starting tomorrow in Dubai suggests the official story of economic turnaround made out for public consumption would be difficult to sell to the IMF experts.

There is, however, no doubt that some major economic indicators have improved since the PML-N came to power in May 2013. Yet vulnerabilities continue to remain. Economic numbers are unlikely to change significantly in the run up to the finalisation of national accounts by the end of next month, suggesting that the targeted GDP growth rate of 5.7pc for current year may be a far cry.

It would be interesting to see if the industrial sector rebounds with higher output in the remaining months to reach targeted 5.9pc, otherwise it could pull GDP rate down

The report finalised by Finance Secretary Tariq Bajwa noted that inflation, imports, trade and current account deficits and net foreign investments were on a growth trajectory but growth in revenues, industrial output, exports, remittances and foreign exchange reserves was slower than last year.

Despite this, the report claimed the “latest economic indicators depict positive signs” though the next sentence says “production in the large scale manufacturing (LSM) sector stood at 3.9pc in July-December 2017 as compared to 3.94pc in the same period last year”.

The LSM growth rate has since gone up to 3.48pc according to latest data in seven months (July-January). Still, this was also lower than 4.5pc of the same period last year and much below the current year’s targeted growth rate of 5.9pc. It would be interesting to see if the industrial sector rebounds with higher output in remaining months to reach targeted 5.9pc, otherwise it could pull gross domestic product (GDP) rate down.

Alarmingly, the production of eight items in the first seven months grew at a nominal rate with the highest 0.9pc growth output achieved by food products while important sectors like textile having largest 21pc share in the LSM quantum index of growing by a miserly 0.08pc.

On the other hand, the products which showed decline in production in the seven months or remained static included important items like engineering products, rubber, petroleum, chemicals, leather and wood products.

The report said the inflation measured by Consumer Price Index (CPI) increased by 4.2pc in February compared to 4pc of February 2016. The eight-month CPI of July-Feb this fiscal year also increased by 3.9pc against 2.48pc of the same period last fiscal year.

During the eight-month period of this year, food inflation increased by 3.65pc compared to 1.53pc of same period last year while non-food CPI increased by 4.07pc this year against 3.16pc. More importantly, core inflation increased by more than 5pc in first eight months of current year against 3.98pc of same period last year.

The Wholesale Price Indicator that grew by 0.6pc in February 2016 jumped by 5.3pc the same month this year. The eight-month average WPI, on the other hand, increased by 3.46pc this year against negative 1.7pc of July-Feb period of last fiscal year.

Even though overall tax collections by FBR increased by 7.6pc in the first seven months of the current year, collections in sales tax — revenue key driver — posted a fall. This should be a cause of concern going forward. Sales tax collection in the first seven months of the current year was reported at Rs670bn against more than Rs672bn of last year, showing a decline of 0.3pc.

It was reported that total tax collections by FBR amounted to Rs1.692tr in first seven months (July-Jan) of the current year against Rs1.573tr of same period last year, up 7.6pc. Direct taxes in seven months amounted to Rs669bn this year against Rs605bn of same period last year, showing a 10.5pc growth.

Federal excise and custom duty were, however, a saving grace. Federal excise duty increased by almost 13pc to Rs96bn in first seven months this year while customs duty collections surged by a healthy 22.4pc to Rs257bn.

The report said exports in seven months declined by 1.3pc to $12.32bn while imports surged by 9.2pc to $25.54bn. As a consequence, trade imbalance widened by a massive 21.2pc to $13.22bn in first seven months.

Remittances from overseas Pakistanis, on the other hand, amounted to $10.95bn in seven months compared to $11.16bn of same period last year, down by almost 2pc.

The net inflow of foreign direct investment has posted a healthy growth of almost 53pc to $1.83bn against $1.2bn of last year. Current account deficit, on the other hand, grew by a massive 90pc to $4.72bn in seven months against $2.48bn of same period last year.

Gross foreign exchange reserves also moved on a downhill journey to touch $22bn as of March 1, after achieving a $24bn peak in October 2016.

The finance ministry’s report did not discuss latest situation on agriculture output perhaps because major crops like wheat are yet to reach harvesting stage.

Initial indications, however, suggest rice, maize and cotton may have already missed the target while wheat output may not reach targeted 26m tonnes. Sugarcane output is expected to exceed last year’s production.

Published in Dawn, Business & Finance weekly, March 27th, 2017