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'GDP to grow 5.8pc in FY17-18': PML-N govt unveils election year report card

Incumbent managers of Pakistan's economy play up success of PML-N's development agenda in current tenure.
Updated Apr 27, 2018 10:53am

Minister for Planning and Development Ahsan Iqbal and Adviser to the Prime Minister on Finance Miftah Ismail on Thursday jointly unveiled the Pakistan Economic Survey 2017-18, a scorecard of the government's performance on economic management.

"Energy, economy, elimination of extremism and education were the 'four Es' that we [the PML-N] had discussed in our manifesto," Iqbal recalled in his brief speech.

"We created two plans ─ one was an immediate plan, the other was Vision 2025," he explained.

Federal Minister of Planning, Development and Reforms Ahsan Iqbal and Adviser to the Prime Minister on Finance Dr. Miftah Ismail showing off the PES 2017-18. ─ APP
Federal Minister of Planning, Development and Reforms Ahsan Iqbal and Adviser to the Prime Minister on Finance Dr. Miftah Ismail showing off the PES 2017-18. ─ APP

The PML-N government faced "major constraints and bottlenecks [in attaining its goals] as a development framework was not present [when it took over]," he said.

Despite this, the government had, over the last five years, allocated Rs47 billion to higher education, built 1,750 kilometres of roads, and added 11,000 megawatts power generation capacity to the national grid, the planning minister claimed.

"We provided energy to industries so that the economy could grow. Record demand has been generated from [an increase in] energy in Pakistan," Iqbal claimed.

"We have used our own budget to curb terrorism, financing Operations Zarb-i-Azb and Raddul Fasaad from our own pocket," he said.

Iqbal in his brief speech also touched upon the PML-N government's main infrastructural connectivity initiative — the China-Pakistan Economic Corridor (CPEC).

"CPEC is a reality today. Of a total investment of $46bn, $39bn is being used to build roads and infrastructure," he said.

CPEC investment is expected to reach $60bn by 2030. The PES stated that the government expects "this huge inflow of investment" to generate "massive economic activities and thereby employment opportunities".

Early-harvest CPEC projects have already created over 30,000 direct jobs for Pakistani citizens, whereas employment opportunities under CPEC are expected to rise further over the next 15 years.

Taking over from Iqbal, Miftah Ismail addressed criticism over the government's decision to unveil a budget for FY18-19 tomorrow, saying the government couldn't "possibly have given a budget for just three months."

"What were we supposed to do? Raise salaries for three months, tell India to stop LoC firing for three months, and reduce taxes for three months? That is not how economics works. If we were to do this, it would have been a disservice to our country and we would not have been doing our jobs," he said.

"The day the next government comes, it has the right to change whatever it wants in the budget. Also, Ahsan Iqbal has left a Rs100bn block for the next government to spend on development as they please. 95pc of the same expenditures are faced by every government. Each government has to pay salaries and so on," he said.

"You will see that all provinces will give their budget too, even though they are busy playing politics on the matter at the moment," Ismail added.

Iqbal chipped in: "The provinces have to present a budget that is based on their expenditures, and they are given revenues which mostly come from the federal government. [Therefore] the federal government has to define the country's economic policy for the next year. How can we leave them without a budget?"

Click on the tabs below to explore the government's economic performance over the last five years.

GDP GROWTH RATE

The gross domestic product (GDP) grew at a rate of 5.8 per cent over the past year, the PES revealed, narrowly missing the PML-N's manifesto target of at least 6pc.

"We would have achieved 6.1pc without political turmoil," the planning minister claimed. "This is compared to an average annual rate of 3pc GDP growth" before the PML-N came to power in 2013, he added.

Noting that the momentum of growth remained above 5pc for the last two years running, it reached a 13-year high of 5.8pc in FY17-18 on the back of "strong performance in the agriculture, industrial and service sectors", Iqbal said as he read out from the survey report.

Agriculture grew at a rate of 3.81pc, while the industries and services sectors grew 5.8pc and 6.43pc respectively, he announced.

The agriculture sector saw the highest growth over the last 13 years, Iqbal pointed out, explaining that the growth was achieved "on the back of initiatives such as expansion in credit to the sector, along with the Kissan Package, provision of better quality seeds including hybrid and high-yield varieties, and timely availability of agriculture inputs such as fertiliser, pesticides, etc."

Meanwhile, large Scale Manufacturing (LSM) registered growth of 6.13pc, the highest in 10 years, the PM's financial adviser Miftah Ismail revealed. Manufacturing grew by 6.24pc, the highest in 11 years, he said.

The services sector has seen stable growth of 6.43pc over the last two years, Ismail added.

Click on the tabs below to explore the government's economic performance over the last five years.

INFLATION

Average inflation from July-March in FY17-18 was contained at 3.78pc, lower than the 4.01pc observed during the same time period last year, Ismail said.

The PML-N had vowed to restrict inflation to 6pc.

"A moderate outlook of food prices amid abundant grain stocks and the recent increase in [the State Bank of Pakistan's] policy rate will help in containing the average inflation below target of 6pc during FY 2018," the PES report read.

"During the current fiscal year FY17-18, CPI increased to 4.6pc which was the highest since the start of current fiscal year. In January 2018 it came down to 4.4pc and in March 2018, it fell to an eight-month low at 3.2pc on account of subdued food prices, which offset the impact of rise of petroleum prices," the PES stated.

Click on the tabs below to explore the government's economic performance over the last five years.

FISCAL POSITION

The government said its revenues over the first six months of the ongoing fiscal year had increased at a faster pace compared to expenditures, which helped contain the fiscal deficit to 2.3pc of GDP over that period, compared to 2.5pc last year.

"During the past five years, the fiscal sector has witnessed a notable improvement on account of wide-ranging reforms in resource mobilisation and expenditure management," the government reported.

"Total revenues grew by 19.8pc to reach Rs2,384.7 billion during July-December FY 17-18, against Rs1,990.6bn in the same period of FY2017," the PES 17-18 document reported.

"The impressive performance both in tax and non tax revenues contributed to this significant rise in total revenues," it said.

The government also claimed better performance by the Federal Board of Revenue, which it said had been able to collect around Rs2.627bn in the first nine months of the current fiscal year, against Rs2,269bn during the same period of FY2017. This reflects a 15.8pc growth in FBR’s revenue collection from last year.

"Total expenditure increased by 14pc during July-December FY2018 and stood at Rs3,181bn, against Rs2,790bn in the same period of FY2017," read the PES report.

"Within total expenditure, development spending (excluding net lending) increased sharply and was recorded at 23.4pc to reach Rs614bn during July-December FY2018, as compared to Rs497bn in the comparable period of FY2017."

The government said the higher development spending was attributable to the enhanced Public Sector Development Programme (PSDP), which was 25.4pc larger compared to the same period in the preceding year.

"On the other hand, current expenditure grew by 13.5pc during July-December FY17-18 on account of a 12.4pc increase in federal and 15.8pc increase in provincial government current expenditures. In absolute terms, current expenditures increased from Rs2.24tr in the first six months of FY16-17 to Rs2.55tr during the same period of the current fiscal year," according to the PES.

"Substantive measures taken to control unproductive expenditures as well as increasing revenues helped in generating additional fiscal space for expenditure on development and on social safety net," it added.

Through these "substantive measures", the government was able to expand the federal PSDP from Rs348.3bn in FY2013 (when it assumed power) to Rs733.3bn this year — a 110.5pc increase.

It was also able to expand the Benazir Income Support Programme (BISP) by nearly 73pc to Rs121bn by FY2018, from Rs70bn when it took power.

However, the government’s efforts to curtail expenditures were not all successful, with current expenditures clocking in 13.5pc higher in the same period on account of a 12.4pc increase in federal and 15.8pc increase in provincial governments’ current expenditures.

Net debt increased from 60.2pc to 61.4pc, Ismail said, while the external debt has decreased from 21.4pc of GDP to 20.5pc of the GDP.

"The external debt that we have taken has been used on development and to finish projects that previous governments had taken on and not finished," Ismail explained.

Total public debt stood at Rs22.82tr by the end of December 2017, the PES said, while total debt was Rs20.88tr. Total public debt recorded an increase of Rs1.4tr during the first six months of the current fiscal year, the PES said.

Click on the tabs below to explore the government's economic performance over the last five years.

TRADE

"The current fiscal year has seen continued exports growth in all nine months," the report stated.

Exports increased by 12pc while imports have slowed down to 16.6pc as compared to 48pc at the start of current financial year, he added.

The PES said that exports from July-March in FY17-18 had reached $17.1bn, compared to $15.1bn in the corresponding period last year, registering 13.1pc growth.

The government attributed the decline in exports over the past few years to a global slowdown. Noting that the global economy is "on the track of recovery", the government said the upsurge in exports signalled the bottoming out of a negative trend.

However, imports were also up 15.7pc in the same period, rising from $38.4bn in the same period last year to $44.4bn, "showing an increase of $6.01bn in absolute terms".

"To slow down imports, an additional regulatory duty was imposed to curtail the inflated imports," the document said.

According to the government, the "rising imports of capital equipment and fuel" over the nine-month period were responsible for the stress on the balance of payments.

"Recovery in global oil prices also played a role in pushing up the import bill. The remarkable growth in exports earnings and remittances inflows was not sufficient to overcome the current account deficit gap. The SBP’s liquid foreign exchange reserves subsequently declined by $4.5bn," the government noted.

While Pakistan’s current account deficit contracted by 9.2pc month-on-month in March 2018, the current account deficit widened 50.5pc to reach 3.8pc of GDP in the first nine months of FY2018.

"This was mainly due to a 20.7pc widening in the trade deficit, amounting to $22.3bn. The widening of the trade deficit is mainly due to a surge in the import bill by 16.6pc," the government conceded.

The balance of payments remained stressed due to rising imports of capital equipment and fuel this fiscal year, while a recovery in global oil prices "also played a role in pushing up the import bill", the PES said.

The growth in export earnings and remittances was insufficient to overcome the current account deficit, it said.

Meanwhile, remittances grew 3.6pc in the nine-month period against a 2pc decline last year, reaching $14.6bn compared to $14.4bn during the same period last year.

"The trend will continue in coming months and expected that the target of $20.6bn will be achieved," the government said.

Foreign investment grew noticeably from last year, with both direct and portfolio investments registering gains.

"Net FDI inflows rose 4.4pc to $2.1bn in July-March FY17-18, against $2bn in the same period last year," the government said. It also noted that while China accounted for most of the FDI, "significant FDI from other countries like Malaysia and UK were also witnessed during this year."

Portfolio investments, on the other hand, were dominated by official inflows, with the government floating Sukuks and Eurobond, through which it raised $2.5bn.

"Public flows continued to dominate foreign portfolio investment in Pakistan. A massive inflow of $2.5bn in the second quarter of FY17-18 more than offset net foreign outflows of $90m in the country’s equity market," it added.

The drop was higher in the first five month of FY17-18, when official reserves decreased by $3.9bn. The decline came mainly in SBP’s liquid reserves (which at April 18, FY17-18 was $11.08bn), and reserves held by commercial banks $6.1bn during the period.

"With the current account deficit widening and not being fully offset by financial inflows, the country’s total liquid forex reserves fell by $4.5bn during July-March FY17-18," the PES said.

Click on the tabs below to explore the government's economic performance over the last five years.

INFRASTRUCTURE & ENERGY

The government's fixed investment has increased significantly in power generation and transmission as well as gas distribution projects since it took power in FY13-14, the survey said, with 35 projects with total power generation capacity of 12,230MW added to the system.

The installed electricity capacity stood at 29,573 MWs until February, which is an increase of over 6,600 MWs since last year.

Although power generation varies due to availability of inputs and other constraints, generation increased from 96,496 gigawatts/hour in FY12-13 to 117,326GW/hour in FY16-17, the survey claimed, exhibiting 22pc growth.

From July-Feb FY17-18, power generation remained at 69,956GW/hour.

According to PES data, earnings of Pakistan Railways experienced a 26.7pc increase over the last year. A hike was observed in the tonnes of freight carried as it increased around 62pc until December over the same period last year.

The telecom sector contributed Rs78.62bn in taxes, fees and other charges in the first two quarters of the current year as revenues reached Rs235.5bn.

Internet subscribers, which totalled 3.8m in 2013 are now at 45.37m, and cellphone subscriptions have reached 144.53m.

Click on the tabs below to explore the government's economic performance over the last five years.

SOCIAL INDICATORS

Health

The cumulative expenditure on health for both the federal government and provinces is estimated at Rs384.57bn for FY17-18, which is 31.75pc higher than the actual expenditure of Rs291.9bn during FY16-17, the survey said. terming this a healthy development.

From July-Feb 2017-18, health expenditures consumed 43.5pc of the budget allocation to reach Rs167.16bn against expenditure of Rs121.5bn in the same period last year, the PES said.

"In terms of growth, it [health expenditure] increased by 37.51pc. Viewed from GDP, it increased to 0.49pc during July-Feb FY17-18 from 0.38pc recorded in the same period of FY16-17," the PES said.

The document noted that although health outcomes have increased over the years, the shortage of equipment and staff is a "critical weakness" that continues to affect the provision of healthcare in the country.

"There is a dire need to expand services delivery and address the shortfall in health-related human resources and making better use of technology. Public-private partnerships need to be encouraged and coverage of public health programmes like Tuberculosis, Malaria, Hepatitis and other communicable diseases need to be expanded," the report said.

Education

Public expenditure on education as a percentage of GDP was estimated to be 2.2pc in FY16-17 compared to 2.3pc of the GDP in FY15-16. Education-related expenditure increased by 5.4pc to Rs699.2bn in FY16-17 from Rs663.4bn in FY15-16.

The provincial governments are also spending a sizeable amount of their Annual Development Plans (ADPs) on education, the PES said.

The government did not release revised figures for the literacy rate this year, but the PES states that the figures for 2015-16 may be considered for this purpose. "During 2017-18 the Pakistan Social And Living Standards Measurement Survey (PSLM) survey was not conducted due to the Population and Housing Census 2017. Therefore, the figures for the year 2015-16 may be considered for the current year."

The overall literacy rate in 15-16 was 2pc lower than it was the year before.

The literacy rate for males in Punjab and both genders in Khyber Pakhtunkhwa (KP) has exhibited an upward trend. Female literacy in Balochistan is dismal at a mere 24pc, compared to 56pc male literacy in the province.

The greatest decline in literacy rate from 2013-16 has been in KP, where it was at 53pc in 2013 but now rests at 36pc.

The PES reported that the government intends to "create a knowledge-based society for accelerating the on-going development process, and by allocating more financial resources for capacity building, research and development, provision of education access to low social strata children, decreased disparity, increased quality to strengthen retention and decrease dropout rate at all levels."

"Reduction of regional and gender disparity in human development is necessary to improve social indicators. The development of plans and strategies are under consideration with the federal and provincial governments to improve access, equity and quality of the basic and college education."

"For improving access, equity and quality education, investment is being made in the physical infrastructure, assurance of teacher’s attendance, upgradation of educational institutions and opening of new educational facilities for boys and girls. Standards for assessment and examination system are being improved to harmonise the systems of education at regional and international level. Real time monitoring system is being introduced in the education sector for quality assurance and achieving goals under the Vision 2025 and Five Year/Annual Plans," the survey elaborated.

Click on the tabs below to explore the government's economic performance over the last five years.