• Growth crashes into negative territory
• Public debt increases to 88pc of GDP
• FBR revenues to take Rs800bn hit
ISLAMABAD: The data released by the government presented a dismal economic performance as all indictors painted broad-based setbacks and Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh blamed Covid-19 for a loss of over Rs3 trillion to the national income.
Presenting the Economic Survey of Pakistan 2019-20 at a press conference on Thursday — a day before the announcement of the federal budget for financial year 2020-21 — the adviser spent a large part of his speech building narrative around inheriting a troubled economy and putting it on road to recovery before the Covid-19 pandemic hit economies of the world and Pakistan.
The data showed that not only most of the economic sectors actually went down but a few ones in the positive zone also missed targets. While Dr Shaikh put a brave face to fight back the economic contraction next year, he was equally uncertain about the recovery pattern or how long the downturn could go on to put numbers to economic loss, poverty rate or unemployment.
He, nevertheless, feared that exports and remittances could suffer and unemployment increase if the lockdowns and social distancing prolonged in the world and within the country. He said Pakistan’s gross domestic product (GDP) was estimated to have faced a Rs3tr loss. The GDP was expected to increase by three per cent with the support of economic policies, but it will now go down by -0.4pc. This means the national income would actually face 3pc to 3.5pc loss during this year.
On top of that, the adviser said the FBR revenues were projected to reach Rs4.7tr before the Covid-19 crisis, but they would now hardly be Rs3.9tr. About Rs800bn loss was simply on account of revenue, he said, adding that such a situation did not allow the government to further tighten the businesses and people in revenue pressure but warranted a helping hand to provide them with liquidity to better support the squeezing economy.
Dr Shaikh said the agriculture sector performed better with 2.67pc growth even though it missed the 3.5pc target. The industry went down by -2.64pc against a 2.3pc growth target, while the services sector dipped by -3.4pc against a 4.8pc growth target. He pointed out -7.1pc contract in transport and communication and -22.9pc fall in manufacturing, while fiscal deficit was estimated to touch 9.4pc against the 7.2pc target.
The Economic Survey launching ceremony was also attended by Minister for Economic Affairs Khusro Bukhtiar, Special Assistant to the Prime Minister (SAPM) on Commerce Abdul Razak Dawood and SAPM on Poverty Alleviation Dr Sania Nishtar. Other members of the PTI’s economic team Asad Umar, Omar Ayub Khan and Hammad Azhar were conspicuous by their absent.
Dr Shaikh said it was still very difficult to quantify the accurate impact of Covid-19 on the economy, but there was no doubt that it had been really hit hard and different institutions were making different projections based on quantum, severity and duration of the pandemic. “This is an unfolding event. The situation is evolving and no one could predict” how rapidly cases would increase and what would be the duration of the pandemic, besides what shape social distancing and lockdown would take in the coming days and weeks.
When the adviser was asked about the different projections — -1.5pc negative growth by the International Monetary Fund (IMF), -2.6pc by the World Bank and -0.4pc by Pakistani authorities — based on the same data and how many people could move into the poverty zone and how many to become jobless, he said it was not easy to make accurate projection because the situation was evolving on a daily basis and he was to be careful to rely on any number conclusively at this point in time or how many people would become unemployed or poor.
The adviser said the public debt had increased to 88pc of GDP and no government had been able to adhere to the legal requirement to keep the debt below 60pc of the GDP as stipulated in the fiscal responsibility and debt limitation law.
Khusro Bukhtiar said the external debt and liabilities stood at $76.5 billion and claimed that the previous government borrowed short-term commercial loans of $15bn.
Dr Shaikh said the present government also borrowed Rs7.6tr in the first year but only Rs1.5tr was on account of expenditure while all others were accrued on account of revaluation of old debt due to devaluation or over Rs1.2tr for cash buffer for strategic reason. During the current year, he said about Rs3.5tr borrowing took place, of which Rs2.7tr was on account of interest payments on the loans taken by the previous governments.
The adviser said the government had no intention to go for aggressive taxation but this did not mean that those who were rich would not be made to pay their due taxes. He said the IMF was a bank created by 200 countries to support members in distress by providing loans and policies. He said the IMF was the first to provide $1.4bn in emergency support and it also supported the government’s incentives package for small traders, the construction sector and industrial package along with social sector protection.
He said Pakistan wanted to give a message to the international community that it was a responsible country and had been treading the fiscal discipline in a professional and serious way. He said the economy was moving in the right direction before the Covid-19 crisis with considerable reduction in current account to $3.3bn and for the first time strict control in expenditure resulted in primary surplus.
Dr Shaikh gave credit to the prime minister and the army chief for putting a freeze on current expenditure and defence budget. He said no borrowing was made from the State Bank of Pakistan because it was not transparent attitude for one institution to borrow from another and charge its cost to the people through inflation. Also, not a single supplementary grant was issued to the ministries and divisions during the year, he added.
He said the government gave the Rs1.2tr economic stimulus package to provide relief to various sectors of the economy and people, and to manage the coronavirus damage in a better way, while the State Bank was provided subsidy for implementation of different programmes to provide support and relief to small and medium enterprises.
The adviser said non-tax revenue collection of Rs1.6tr against a target of Rs1.1tr was also the highest during the outgoing fiscal year and was a big step. The government had inherited an indebted economy and depleting foreign exchange reserves with threat of a potential default and was able to put together financial support from friendly countries and a big $6bn IMF programme that increased reserves from $9.7bn to $18.5bn by end of current year.
Published in Dawn, June 12th, 2020