ISLAMABAD: The investment-to-GDP ratio inched up to 15.78 per cent in the outgoing fiscal year from 15.55pc a year ago.

According to Economic Survey 2016-17, total investment amounted to Rs5,026 billion, up 11.05pc from 2015-16.

Consumption and investment contributed 7.92 and 1.28 percentage points to overall economic growth, respectively.

Consumption, investment and exports are the main drivers of economic growth under the expenditure approach, which is also recognised as the aggregate demand side of the economy.

According to the World Bank, GDP growth is higher for those countries that have relatively higher investment-to-GDP ratio.

Investment and business environment in Pakistan remained fragile in recent years due to a number of domestic and external factors. The government claims the situation has now improved and investment is going up on the back of better macroeconomic fundamentals and policies.

The survey says public investment has often been taken as a catalyst for private investment. The government is increasing public-sector development spending. The Public-Sector Development Programme (PSDP) grew from Rs348.27bn in 2012-13 to Rs800bn in the outgoing fiscal year.

The medium-term target is to increase investment to 20pc of GDP from its present level of 15.78pc.

Fixed investment has increased to Rs4,517bn, recording the growth of 11.23pc.

Private investment registered the growth of 6.63pc that is 9.9pc of GDP.

Public-sector investment increased to Rs1,363bn in 2016-17, up 23.6pc from a year ago. As a percentage of GDP, it increased from 3.79pc to 4.28pc over the last year.

Savings have long been considered an engine for economic growth. Countries that made sustained accumulation of fixed capital were able to achieve higher economic growth and development than others. The accumulation of fixed capital over the long run can only be possible through sufficient savings. National savings also play a dominant role in achieving the desired level of investment to meet the economic growth target.Contribution of national savings to domestic investment is the mirror image of foreign savings required to meet investment demand.

However, foreign savings are needed to finance the saving-investment gap. It is reflected in the current account deficit in the balance of payments.

National savings equalled 13.1pc of GDP against 14.3pc last year. Domestic savings were recorded at 7.5pc of GDP against 8.2pc a year ago. The slight decline in savings may be due to lower profits on savings schemes.

The survey said Shariah-compliant products are taking root in society and the Central Directorate of National Savings is working on the launch of Shariah-Compliant Savings Certificates.

Published in Dawn, May 26th, 2017