THE write-up ‘Econimic pressure points’ (Sept 15) by Sakib Sherani does not present the correct picture of the national economy.

The fact is that in a short period of four years Pakistan has achieved a remarkable economic turnaround. GDP growth of 5.3pc during FY2017 is the highest in a decade. Tax-to-GDP ratio has increased from 9.8 per cent to 12.5pc, fiscal deficit has been reduced from 8.2pc to 5.8pc and PSDP size has been increased from Rs348.27 billion during FY2013 to Rs1,001 billion for

FY2018, increased 3 times since FY2013, Pakistan’s FX reserves which were $11.02 billion, while SBP reserves were $6 billion, in June 2013 increased to the level of $20 billion with reserves at $14.4 billion.

It is important to mention that the high growth in GDP was achieved on the back of a strong performance in agriculture and services sectors, which grew by 3.5pc and 6.0pc, respectively, in FY 2017, compared with 0.3pc and 5.5pc last year. Industrial growth was recorded at 5.0pc in FY 2017. The LSM recorded a growth of 5.6pc in July-June FY 2017 compared to 3.1pc of the last year.

The writer’s claim of 50pc increase in public debt in four years from Rs14.5 trillion to Rs22 trillion is incorrect. The total debt increased from Rs13,483 billion to Rs19,634 billion until June 2017. Moreover, debt is correctly measured as a pakcage of GDP rather than in nominal terms. Total debt to GDP ratio stood slightly above 61 as of June 2017.

Also the claim that nearly $40 billion of new external debt has been contracted from June 2013 until March 2017 is incorrect. The government made repayment of around $17 billion until June 2017 mainly of loans contracted by the previous government. The net increase in external public debt from 2013 until March 2017 stood at $10.3 billion.

The contention of increased borrowing from commercial sources is also not correct. Out of total national debt, external debt constitutes only 29pc. Against the total external debt, the largest component is multilateral and bilateral concessional debt, which constitutes around 85pc. Borrowings from commercial banks, euro bonds and sukuk structures, constitute only 15pc of the total external public debt portfolio.

The spokesman said that GDP growth this year is projected at 6pc and will stabilize above this level in the following years if foreign exchange reserves are at a comfortable level of $20 billion sufficient to cover three months of imports. The recent pressure on external account generated by widening of current account deficit is only short term and will peak out this year as various energy and infrastructure projects are completed.

Spokesman

Finance Division

Islamabad

Published in Dawn, September 18th, 2017