Finance Minister Ishaq Dar presented the economic survey for the fiscal year 2023 at a press conference in Islamabad on Thursday, which notably showed that the country’s industrial sector contracted by around three per cent.
Before presenting his government’s economic performance for the year, the minister went on a diatribe explaining the difficult condition in which the Pakistan Democratic Movement (PDM) had inherited the economy.
He claimed that he had left Pakistan in a strong economic position in 2017, when he last served as the finance minister under PML-N supremo Nawaz Sharif, saying that his topmost priority at this stage was ensuring macroeconomic stability.
Dar said he had previously championed a 3Es framework, adding that it was now being expanded to a 5Es framework focusing on exports, equity, empowerment, environment and energy.
“These are our five driving areas and we have made our roadmap for the next year based off them.”
According to documents shared by the minister, Pakistan achieved Gross Domestic Product (GDP) growth of 0.29pc for the outgoing fiscal year, missing the target of 5pc by a wide margin.
This paltry growth came on the back of 1.55pc, -2.94pc, and 0.86pc growth in the Agriculture, Industry, and Services sectors respectively, all three missing their targets comprehensively.
Most notable was the 2.94pc contraction in the industrial sector, against a target of 7.1pc growth.
The finance minister said the government’s aim was to take the back “to the path of progress where the country had reached in 2017”.
Dar said the government’s focus was on achieving macroeconomic stability along with moving on a “resilient and inclusive growth trajectory”, adding that it should be sustainable without maldistribution of resources and wealth.
“If we do all this then investor confidence will build up, market nervousness will improve and perceptions about Pakistan will also become better.”
According to documents shared by the minister, Pakistan registered inflation of 28.2pc in the nine-month period from July 2022 to March 2023, against 11pc in the same period last year.
The government had targeted inflation at 11.5pc for FY2023, missing its target significantly because of a sharp depreciation of the rupee and global supply shocks resulting in pricey imports.
According to the economic survey, inflation at 28.2pc was the highest recorded yet with the previous high at 17pc in FY 2008-09.
“The increase in inflation was broad-based with all categories recording higher inflation except for communication services,” the survey reads, adding that across product categories, inflation for transportation, given its direct link to fuel prices, registered a sharp increase of 52.8pc against 19.4pc during July-April FY22.
“Housing, water, electricity, gas and other fuel have recorded an increase of 13.6pc as against 11pc during the same period last year. The increase in domestic energy prices was attributed to rising global oil prices, exchange rate depreciation and adjustment in energy tariffs/petroleum levy,” the survey added.
Meanwhile, it said perishable food items were the main contributory factor in jacking up food inflation.
FBR tax collection
The Federal Board of Revenue (FBR) tax collection grew 16.1pc to Rs5637.9 billion from July to April against Rs4,855.8 billion in the year-ago period. The collection target for the 12-month period set by the government was Rs7,470bn.
The survey document shows that Pakistan’s exports declined by 9.9pc during July to March to $21bn compared to $23bn in the same period last year.
Meanwhile, imports during the same period amounted to $43.7bn compared to $58.9bn in the same period last year, reflecting a decline of 25.7pc. This reduction came primarily because of policy tightening and other administrative measures as the government sought to protect its depleting foreign exchange reserves.
As a result, the country’s trade deficit significantly shrank to 6pc of GDP, compared to 10.4pc from last year.
The current account balance improved by 74.1pc, recording a deficit of $3.4bn during Jul-Mar FY2023, against a deficit of $13bn in the year-ago period.
This led to the current account deficit shrinking to 1pc of the GDP, compared to 4.7pc during the same period last year.
“The predominant factor behind this improvement was the 29.7pc decrease in the merchandise trade deficit on the back of substantial decline in import payments to $41.5 billion in Jul-Mar FY2023 from $ 52.7 billion last year,” the document notes.
The survey notes that the fiscal deficit was “contained” to 3.6pc of the GDP during the first nine months of the current fiscal year against 3.9pc of the GDP in the same period of last year.
This was achieved by “strictly following prudent expenditure management and an effective domestic resource mobilisation strategy”.
According to the economic survey, the expenditures for the Public Sector Development Programme registered a decline of 1.8pc to Rs1,014bn in the nine-month period of Jul-Mar FY2023 against Rs1,032.7bn in the last year.
The survey added that PSDP funding for the next year was focused on projects supporting the 5Es framework; post-floods’ recovery, rehabilitation and reconstruction, and the China Pakistan Economic Corridor.
The document said that the federal PSDP’s pace of utilisation during July-March FY23 was “relatively slow” due to low quarterly release ceilings for the first half and dampening due to austerity.