KARACHI: The GDP growth rate for 2016-17 will fall short of the target of 5.7 per cent, according to the half-yearly economic review issued on Monday by the Institute for Policy Reforms (IPR), an independent think tank.

The report said the GDP growth rate for the year will remain above 5pc. A sudden rise in the current account deficit is serious, it said. “At 2.6pc of GDP, it has breached already the year’s target of 1.5pc of GDP.” Pakistan’s exports as a ratio of GDP are at a historic low, it said, adding that this ratio was in double digits in 2000-10. It is now about 5pc.

Pakistan has had higher current account deficits before, but they were financed by aid or foreign direct investment (FDI). In other cases, the country had to go to the International Monetary Fund (IMF).

Part of the external debt also finances current expenditure. The government is borrowing to service debt. The State Bank of Pakistan (SBP) has imposed a condition of 100pc cash margin on consumer goods’ import. “We could see more restraints,” it said.

At 2.4pc of GDP in December 2016, fiscal deficit will exceed the government’s target of 3.8pc of GDP. “From now on, the SBP and the government must keep an eye on increase in inflation, though it is still under control,” it said.

The viability of the external sector depends on exports and workers’ remittances, which have been falling. “We have yet to see serious analysis or a strategy in response. More significantly, there is no thought given to job growth for the two million young Pakistanis entering the job market each year,” the report noted.

Investment has hovered around 15pc of GDP. In 2015, China, India and Vietnam invested 46pc, 32pc and 28pc of GDP, respectively, it said. “The additional amount needed to raise Pakistan’s total investment to the minimum desired level of 20pc of GDP is Rs1.7 trillion or $16 billion annually,” it said, noting that this must come from an increase in national savings and higher FDI. Incurring further debt, even if available, is unsustainable, it said.

The report said an improving security situation, China-Pakistan Economic Corridor (CPEC) investments and increase in development spending should strengthen investors’ confidence.

Published in Dawn, April 11th, 2017