ISLAMABAD: On New Year’s Eve, the Ministry of Finance estimated that the economy will grow at five per cent in the first half of 2022 with substantial improvement on the external side.
The ministry came out with robust projections for almost all major economic indicators at the close of calendar year 2021. In the first half of FY22, the GDP growth remained at 4pc, tax collection exceeded targets, reserves improved and the current account was reported lowest since 2011.
As per the projected outlook for the second half of FY22, the financial ministry estimates economic growth to stay at 5pc, annual exports at $31bn and remittances at $32bn. It projected that collections of Federal Board of Revenue (FBR) will reach Rs6 trillion and trade deficit to reduce in the second half of FY22.
The finance ministry further said that recent pressures on the current account are due to commodity shock but risks are receding due to timely policy actions.
Finance ministry analyses performance of last year
An official announcement of the finance ministry said it was important to note that this growth was achieved when the rest of the world was encountering massive output contraction. It is pertinent to note that record bumper crops were witnessed in 2021 and the trend is likely to continue next year as well, the ministry said.
Rice production came in at 8.4 million tonnes against last year 7.4m tonnes, maize at 8.5m tonnes against last year 7.9m tonnes and wheat at 27.5m tonnes against last year 25.2m tonnes. Cotton production hit 7.1m bales against last year’s 9.1m bales.
In 2022, sugarcane production is expected to reach 87.7m tonnes, wheat 28.9m tonnes, and rice 8.8m tonnes.
On the fiscal side, FBR revenue reached to Rs4.764tr while the growth in non-tax revenue has witnessed a massive increase to Rs1.630tr in the year 2021. The overall deficit situation has improved to 7.1pc of GDP in FY21 from 8.1pc in FY20.
The primary balance is also contained to 1.4pc from 1.8pc of GDP year earlier. This year, the tax situation is even better than last year and Pakistan is likely to post Rs6tr tax target and more than Rs1.2tr in a single year. So far due to excellent tax collection the primary balance has reported a surplus of Rs206bn in the first four month of current fiscal year.
Following Budget FY22, global commodity prices surged to unprecedented levels, triggering pressure on currencies and pushing higher inflation around the world. According to the FAO, world food prices climbed 27pc to hit a 10-year peak which was reflected from highest ever increase in inflation reported in leading developed countries including USA, UK, Germany and China in the year 2021.
On the external side, import growth is expected to slow down. Moreover, given the better-than-expected agriculture crop outlook, food imports will be curtailed. As per finance ministry analysis, 80-85pc of import surge is due to price effect while 15-20pc is quantitative, in line with economic growth.
Published in Dawn, January 1st, 2022