Finance Minister Muhammad Aurangzeb is presenting Pakistan’s economic survey for the fiscal year 2024 at a press conference in Islamabad.
The Pakistan Economic Survey is an annual report that charts the country’s economic progress for the outgoing financial year, ie, from July 1, 2023 to June 30, 2024, and is one of the stages of the federal budget process that the public is exposed to.
The pre-budget report provides an overview of Pakistan’s economy and highlights its performance in various sectors, typically covering key indicators such as GDP growth, inflation, trade, and investment, as well as sector-specific performance in areas like agriculture, industry, and services.
Finance Minister Aurangzeb began with speaking about inflation. “It is important to see the level of inflation in 2022-23. [In this] year, the Pakistani rupee suffered nearly 29pc depreciation and the foreign reserves went to just two weeks of import cover.”
The finance minister said the current fiscal year started under the leadership of Prime Minister Shehbaz Sharif before the caretaker administration came in, and now the country was [again] under the leadership of Shehbaz Sharif, under his elected administration, for the next five years.
“It has been three to four months that I have been in this [finance minister’s] role,” Aurangzeb said. “But even when I was in the private sector, I was very clear that we’d have to go to the IMF programme.
“There is no plan B, and if there was a plan B, the IMF wouldn’t be called a lender of the last resort.”
He said it he believed it was a “courageous step” taken by the prime minister at the time to take the country the finish line in terms of signing the nine-month Stand-by agreement with the IMF.
“It was an important part of where we are today because without it, God forbid, we wouldn’t be here discussing the targets.
“As a country, we would have been in a different situation and we would have had the same discussion in a very different context.”
The press conference started with the recitation of the Holy Quran. Afterwards copies of the economic survey were distributed to the audience.
The impact on large-scale manufacturing (LSM) was bound to happen, the minister said, but described agriculture as a “saviour”. “As far as I’m concerned, as we move forward, agriculture is going to remain a very big upside for us in years to come and it is going to remain a huge lever of growth.”
“This was the GDP side of the story,” the minister added. “Apart from this, there is the fiscal side. The close to 30pc growth in revenue collected is almost unprecedented from the base where we started.”
He then went on to speak about the primary surplus. “Unless the provinces delivered on their surpluses, we would not be able to deliver the surplus. We have made this commitment to the Fund under the nine-month SBA — so I want to give them (provinces) credit for delivering on what they said they were going to deliver.”
“Regarding the current account deficit, you know what the target was, what was going to be said and what the predictions were being given.”
He said when the year was beginning, the approximate current account deficit was approximately $6bn. “But the current account deficit as per our latest forecast is about roughly $200m,” the minister added.
Aurangzeb said in the three months of 2024, the country experienced a current account surplus. “I don’t have the final number, but if I look at the $3.2bn remittances for the month of May, I’m pretty sure there will be another month where we will show a surplus.
“So my belief that by the time we come into government, the current account deficit would be less than a billion dollars had turned into a reality.”
He went on to praise successivee administrations for the relative economic stability seen over the past few months. “Firstly, the caretaker administration took administrative measures, [launched a crackdown] against hundi hawala, and stopped smuggling, etc.
“After that, the State Bank of Pakistan [worked on] the structural part. Capital requirements for exchange companies were increased, the exchange companies involved in speculation were phased out.”
Overall and sector wise growth rates
The agriculture sector saw a notable increase, growing by 6.25 per cent compared to the targeted 3.5pc and last year’s 1.55pc. Meanwhile, unlike last year’s contraction by 2.94pc, the industrial sector managed to grow by 1.21pc.
However, apart from agriculture, the overall GDP growth rate and the targets for the industrial and services sector were not met.
Trade deficit
FBR tax collection
Fiscal deficit
PSDP
Next stage
The next stage (tomorrow) involves the finance minister presenting the budget for the next financial year to the National Assembly. In the ensuing weeks, lawmakers will debate on the bill’s provisions and the budget will be made into law before the fiscal year ends.
Pakistan is looking to secure a “longer and larger” bailout with the IMF, and it is likely that the lender’s conditions will factor heavily into the forthcoming budget.
Significant economic challenges
According to the Planning Commission’s estimations made in the Annual Plan Coordination Committee, the economy faced significant challenges at the beginning of 2023-24, primarily due to the lagged impacts of economic disruptions of the previous year.
However, the economy made a moderate recovery later in the year and grew by 2.4 per cent.
During the year 2023-24, the primary driver of growth was the agriculture sector, growing by 6.3pc, owing to bumper outputs of wheat, cotton and rice.
The industrial sector grew by 1.2pc mainly due to a slowdown in large-scale manufacturing activities. However, there was growth in mining and quarrying, small-scale manufacturing, and construction.
The services sector also registered 1.2pc growth as wholesale and retail trade experienced a mere 0.3pc growth. The transport, storage and communications sector also recorded a low growth of 1.2pc due to subdued demand.
Total revenue collection grew by 41pc during July-March 2023-24, outpacing the 36.6pc growth of total expenditure. Both tax and non-tax revenues grew by 29.3pc and 89.8pc, respectively. Markup expenditure constituted 40pc of the total expenditure.
During July-April 2023-24, average inflation was recorded at 26pc as compared to 28.2pc in the same period of last year.
A continuously declining inflationary trend has been observed since January 2024.
More to follow
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