“Agricultural sector’s misfortune” is the scapegoat
2nd June – a day marked for when the federal ministry of finance formally presented the Pakistan Economic Survey 2015-16. The economic survey strengthened the nation’s preconceived notion of having passed yet another year in dismay.
Three years of the ruling government marked with the fact that Pakistan’s economy continues to maintain its growth momentum but targets are repeatedly being missed.
GDP GROWTH RATE
Pakistan’s economy during the Fiscal Year (FY) of 2016 recorded a growth of 4.71% which is the highest growth achieved since 2008- 09 but couldn’t achieve the targeted growth rate set at 5.5%.
The federal government claims of missing Gross Domestic Production (GDP) target largely due to the major setback in the agricultural sector, which witnessed a decrease of 0.19% mainly due to the massive decline in cotton production, missing the growth target which was set at 3.9%.
INDUSTRIAL AND SERVICE SECTOR
The Industrial sector recorded the growth of 6.80% surpassing the targeted growth set at 6.4%.
Whereas, services sector accelerated at the rate of 5.71% in this fiscal year as compared to 4.31% last year.
The Services sector also met the planned target set at 5.7% emerging as the most significant driver of economic growth and contributing a major role in augmenting and sustaining economic growth in the country.
In the new Pakistan Economic Survey 2015-16, quoting the latest figures pertaining to CPI Inflation during July-April FY 2016, it shows that it has been further contained at 2.79%, which is the lowest in 13 years. The underlying assumption for inflation was 6% in the target set in FY 2015.
The finance minister said that Inflation has been contained during current fiscal years due to better supply position of essential items and regular monitoring of prices and supply chain by the national price monitoring committee.
The government achieved 8.4% Tax-to-GDP ratio (PKR 2.3 trillion could be collected) in the current fiscal year which was previously at 11.0% of GDP during FY 2015.
It has been further planned to push Tax-to-GDP ratio to 12.5% (to collect PKR 3.4 trillion).
The problem of not achieving the desired target exacerbated because only 0.45% of the total population filed a tax return, which corresponds to just 15% of the potential tax base.
Thus, broadening the tax base is the need of time.
Federal tax revenues
Federal tax revenues posted a significant growth of 19.6%, of which Federal board of revenue (FBR) tax collections grew at 18.5%. During July-March, FY 2016 FBR tax collection stood at PKR 2,103 billion against PKR 1,775.1 billion in comparable period of last fiscal year. While as a percentage of GDP it stood at 7.1% during July-March FY-2016 against 6.5% in same period of last year.
Total investment has reached the level of PKR 4,502 billion as compared to the PKR 4,256 billion last year, showing the growth of 5.78% in FY 2016.
Fixed investment have increased to PKR 4,028 billion as compared to PKR 3,816 billion last year, it has recorded growth at 13.61% surpassing the target. Fixed investment was projected to grow from 13.5% to 16.1% of the GDP.
Private investment has recorded a growth of 3.71% and private investment as a percentage of GDP reached to 9.79%.
Whereas public investment grew by 10.63% and as percentage of GDP it has increased from 3.72% to 3.82%, which is an indicator that government expenditure strategy is development oriented.
LARGE SCALE MANUFACTURING
The large scale manufacturing (LSM) sector which contributes 80% in Manufacturing and 51.8% in industrial sector also registered an impressive growth of 4.70% during July-March FY 2016 compared to 2.81% of last year but couldn’t achieve the targeted growth rate set at 6.4%.
The budget deficit during the current fiscal year has been contained at 3.4% of GDP during July-March, FY 2016 against 3.8% of GDP in the same period of last year. A fiscal deficit target for the FY 2016 has been set at 4.3% which will be further brought down to 3.5% of GDP by FY 2018.
During July-April FY 2016, the remittances have reached to USD 16.034 billion as compared to USD 15.235 billion in the same period last year, recorded a growth of 5.25% over the last year.
According to the consolidated revenue and expenditure statement, total revenue witnessed a growth of 10.4% and stood at PKR 2,961.9 billion during July-March, 2015-16 against PKR 2,682.6 billion in the same period of last year.
The country’s total foreign exchange reserves reached to highest level to USD 21.4 billion by May 18, 2016, compared to USD 18.6 billion in end June 2015
Exchange rate remained at PKR 104.75 per USD in May FY 2016, compared to PKR 101.78 per USD at end June 2015.
Cost of war on terror: The Finance minister said the war on terror cost Pakistan USD 118 billion during the fiscal year 2015-16. He highlighted the last year losses inflicted in the war on terror cost USD 92.4 billion.
Planning, development and reforms ministry does its best to present the best picture possible of the country while boasting their efforts.
The ministry has yet again claimed that due to prudent economic policies and use of 100% development funds this year the government has achieved its goals. This assertion does nothing more than lead one to ponder why, despite annual growth, the majority of the targets still remains unachieved.
The verity remains that all major economic indicators have recorded significant improvement as compared to previous years but along with missed significant goals.