5.8 percent GDP growth in 2008
ISLAMABAD (June 10 2008): The Finance Ministry has projected 5.8 percent growth in GDP in 2007-08, with 5.4 percent in manufacturing, 4.8 percent in large scale manufacturing (LSM), and only 1.5 percent in the agriculture sector.
ECONOMIC SURVEY HIGHLIGHTS:
-- Debt burden rises to 56 percent;
-- Agri growth declines to 1.5 percent;
-- Budget deficit to be 4.7 percent of GDP;
-- Inflation at 10.5 percent;
-- External inflows decline to 82.2 percent;
-- Subsidy on fuel to cost Rs 175 billion;
-- Per capita income shows a rise of 18.4 percent;
-- Finance and insurance show 17 percent growth;
-- Investment decreases to 21.6 percent of GDP;
-- National savings rate declines to 13.9 percent;
-- Forex reserves show depletion of $4.1 billion;
-- Assets of banking system registers net expansion of Rs 203.1b, to Rs 5155 billion;
-- There has been reduction in poverty headcount;
-- Credit to private sector grows while portfolio investment shows deceleration.
According to the 'Economic Survey 2007-08', to be unveiled on Tuesday by Finance Minister Naveed Qamar, along with Special Secretary, Finance, Dr Ashfaque Hasan Khan, in 'P' Block auditorium of Pak Secretariat, public debt burden increased from 55.2 percent of GDP to 56 percent during 2007-08 due to huge burden of deficits.
In addition, public debt, as percentage of GDP, rose for the first time in 10 years as borrowing requirements for the budget deficit rose to Rs 683.4 billion during the outgoing financial year.
At the end of the current fiscal year, budget deficit is expected to be 4.7 percent of GDP, whereas average inflation has been projected at 10.5 percent. The country's budget deficit is expected to be Rs 683.4 billion, or 6.5 percent of the GDP--highest in the past 10 years.
Actual interest payments were Rs 503.2 billion for the outgoing fiscal year, against the budgeted figure of Rs 375 billion. Pakistan, which according to the previous government was considered one of the fast growing Asian economies, is now showing 13.3 percent increase in its debt, totalling $45.9 billion--by the end of March, 2008.
The figures released by the Economic Survey are not for the entire fiscal year, but up to March this year. According to the Survey, during the outgoing fiscal year M2 growth was entirely attributable to government borrowing for budgetary support, and Net Domestic Assets (NDAs) of banking system increased by Rs 656 billion due to borrowing for deficit financing. Net Foreign Assets (NFAs) of banking systems contracted by Rs 289 billion for 2007-08.
The Survey further shows that external inflows were adversely affected during the year, declining to Rs 119.4 billion, an overall 82.2 percent, or Rs 564 billion, of the budget deficit financing came from domestic sources, like banks and other financial institutions.
Subsidy on fuel will cost Rs 175 billion to the national exchequer despite recent increases in the prices of oil products by the present government. A massive slippage of Rs 324 billion has been recorded under other expenditures, and the Public Sector Development Program (PSDP) has been slashed by Rs 100 billion to rein in the deficit.
In the agriculture sector, sugarcane crop registered the highest ever production, of 63.9 million tons, while rice production showed a modest growth of 2.3 percent, to 5.6 million tons.
Cotton crop production has been estimated at 11.7 million bales against 12.9 million bales of 2006-07, and wheat crop production is estimated at 21.7 million tons against 23.3 million tons in the preceding year. The wheat figure remains controversial.
Per capita income showed a rise of 18.4 percent, from $925 to $1085, and real private consumption expenditure rose by 8.5 percent. Finance and insurance sector have registered a stellar growth of 17 percent, whereas external inflows were adversely affected, declining to Rs 119.4 billion.
Growth of small scale manufacturing sector has been recorded at 7.5 percent. The Survey further shows that investment decreased to 21.6 percent of GDP in 2007-08, from 22.9 percent in 2006-07. National savings rate declined to 13.9 percent from 17.8 percent of last year.
Pakistan's forex reserves have shown a significant depletion, of $4.1 billion, during three quarters of the outgoing fiscal year and, at the same time, assets of the banking system registered net expansion of Rs 203.1 billion, to Rs 5155 billion.
The Survey has shown that domestic debt increased by 15.7 percent--till end-March 2008--and current account deficit rose due to large trade deficit and outflow from services and income accounts of last year.
There has been reduction in poverty headcount, from 23.94 percent in 2004-05 to 22.32 percent in 2005-06. Pakistan's total population was estimated at 160.9 million.
Total labour force (ten years and above) was estimated at 111.39 million; national average of labour force participation rates total were estimated at 45.2 percent. Pakistan's population has been forecast to double by 2045, if it continues to grow at the current rate of 1.8 percent.
Credit to private sector grew by 14.9 percent due to bridge financing requirements to settle claims of oil marketing companies (OMCs) and independent power producers (IPPs). Portfolio investment shows large deceleration, whereas mutual fund industry grew from Rs 25 billion to Rs 313 billion.
Business Recorder [Pakistan's First Financial Daily]
