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Agri collapse casts shadow on government's growth story
Did the government meet its budgeted goals for the fiscal year 2015-16?
But this was compensated by the industrial sector as the construction and electricity sectors outperformed expectations.
The services sector grew at par with the set target, bolstered by an increase in salaries of government employees and defence servicing.
Below is a snapshot of the economic performance as presented by Dar:
KEY ECONOMIC INDICATORS
GDP GROWTH
Why? Even though the targets for industry and services sectors were achieved, the finance minister said a dismal performance in the agricultural sector resulted in an overall missed target for growth.
The agricultural sector witnessed negative growth at -0.19pc against a projection of 3.9pc.
Due to a 28pc decline in cotton crop, GDP growth suffered a decline of 0.5pc, Dar said. If this were not the case, "our GDP growth target would be 5.21pc", he said.
The industries sector, however, surpassed its estimated growth target of 6.4pc and the services sector achieved its targeted growth ─ although this growth is largely supported by an increase in the salary of government employees.
Know more: Pakistan misses economic growth target
Although the PML-N government has set an ambitious target of 7pc GDP growth by tenure end, the economy has consistently missed the growth target.
While the agriculture sector suffered, the government focused more on the industrial and services sectors which are the PML-N's linchpin.
The economy also suffered losses due to terrorism. A collective loss of nearly Rs3.2 bn was borne by exports ($800m), tax revenue ($2.3bn), infrastructure ($70m) and industrial output ($10m).
Presenting the PES, however, Dar emphasised the government's need to focus on agricultural growth potential. “We can't neglect any sector... Our focus will be a growth-oriented budget for the next year. The agricultural sector, which has growth potential, will be addressed in our next budget.”
“We have to make a collective effort to consolidate our gains and maintain our financial discipline.”
"If I did not have the support of Nawaz Sharif, the country would not have been on the path of success. I have always wanted to strengthen three institutions ─ The State Bank, the Pakistan Bureau of Statistics and Export Control Division.
INFLATION
*These figures have been calculated for the first nine months of the fiscal year.
Why? Inflation was under control primarily because the government pursued a tighter monetary policy — a higher interest rate — which translated into lower spending/demand and higher savings.
Headline Consumer Price Index inflation has sustained a rising trend since a 1.3pc low last September on the back of rising food, water, power, gas and electricity prices.
“Prices all over the world have been low,” the minister said. “This is a welcome sign.”
But core inflation ─ which typically excludes goods with volatile pricing ─ has remained subdued due to weakening demand pressures that are a direct result of an aggressive monetary policy in the form of higher interest rates. Low oil prices internationally have supplemented this trend.
Know more: Misplaced optimism surrounds monetary policy review
FISCAL DEFICIT
*These figures have been calculated for the first nine months of the fiscal year.
Why? The government was able to contain the fiscal deficit due to a slower pace of development spending than last year.
Of the Rs700bn allocated to the Public Sector Development Programme (PSDP), only about 61pc or Rs429bn was disbursed for development projects compared to Rs349bn or 67pc of the total Rs535bn allocated to the PSDP last year.
Note: Last year the government was forced to seek a relaxation of 0.3pc of GDP in the budget deficit target set with the IMF, equal to Rs100 billion, to meet extraordinary, unbudgeted and "one-off" expenditures arising from Operation Zarb-i-Azb.
TAX REVENUE
Tax-to-GDP ratio for the fiscal year came in at 8.4pc, which the government plans to push up to 12.5pc next year.
The problem is exacerbated because only 0.45pc of the total population filed a tax return, which corresponds to just 15pc of the potential tax base.
Read: Ultimate tax haven
But tax revenue has been on the up over the past few years, Dar claimed, as the government looks to widen the tax base through removal of non-essential SROs and new measures. Tax revenue last year was Rs2,063bn compared to this year's revenue of Rs2,344bn – a 13pc rise.
For an economy like Pakistan, which has been struggling in its attempt to surge growth, more indirect taxes are counter-productive because they end up hurting demand ─ which in turn weighs down on growth.
BALANCE OF PAYMENTS
The Balance of Payments situation shows a positive picture with the current account deficit coming in at 0.6pc of the GDP compared to 0.8pc last year.
"Our current account deficit is contained because of low oil prices and remittances," Dar said, which have resulted in higher savings.
But despite that, the trade balance has worsened with exports declining across all sectors and imports – other than food and energy – have increased.
Exports fell to $18.18bn, down 9.6pc from last year, while imports fell $32.42bn ─ a drop of 4.6pc compared to last year's figure.
Remittances amounted to $16.03bn this year.
Therefore, the country is still facing a current account deficit of $1.6bn despite record-high remittances and savings through cheaper oil imports.
The soaring remittances, which came in at around $15m, also translated into unprecedented forex reserves of over $20bn.
Did the government meet its budgeted goals for the fiscal year 2015-16?
- Finance Minister Ishaq Dar unveiled the Pakistan Economic Survey 2015-16 on Thursday, revealing that the PML-N government has missed its growth target by a wide margin, mainly because of an overall dismal performance by the agriculture sector.
But this was compensated by the industrial sector as the construction and electricity sectors outperformed expectations.
The services sector grew at par with the set target, bolstered by an increase in salaries of government employees and defence servicing.
Below is a snapshot of the economic performance as presented by Dar:
KEY ECONOMIC INDICATORS
GDP GROWTH
Why? Even though the targets for industry and services sectors were achieved, the finance minister said a dismal performance in the agricultural sector resulted in an overall missed target for growth.
The agricultural sector witnessed negative growth at -0.19pc against a projection of 3.9pc.
Due to a 28pc decline in cotton crop, GDP growth suffered a decline of 0.5pc, Dar said. If this were not the case, "our GDP growth target would be 5.21pc", he said.
The industries sector, however, surpassed its estimated growth target of 6.4pc and the services sector achieved its targeted growth ─ although this growth is largely supported by an increase in the salary of government employees.
Know more: Pakistan misses economic growth target
Although the PML-N government has set an ambitious target of 7pc GDP growth by tenure end, the economy has consistently missed the growth target.
While the agriculture sector suffered, the government focused more on the industrial and services sectors which are the PML-N's linchpin.
The economy also suffered losses due to terrorism. A collective loss of nearly Rs3.2 bn was borne by exports ($800m), tax revenue ($2.3bn), infrastructure ($70m) and industrial output ($10m).
Presenting the PES, however, Dar emphasised the government's need to focus on agricultural growth potential. “We can't neglect any sector... Our focus will be a growth-oriented budget for the next year. The agricultural sector, which has growth potential, will be addressed in our next budget.”
“We have to make a collective effort to consolidate our gains and maintain our financial discipline.”
"If I did not have the support of Nawaz Sharif, the country would not have been on the path of success. I have always wanted to strengthen three institutions ─ The State Bank, the Pakistan Bureau of Statistics and Export Control Division.
INFLATION
*These figures have been calculated for the first nine months of the fiscal year.
Why? Inflation was under control primarily because the government pursued a tighter monetary policy — a higher interest rate — which translated into lower spending/demand and higher savings.
Headline Consumer Price Index inflation has sustained a rising trend since a 1.3pc low last September on the back of rising food, water, power, gas and electricity prices.
“Prices all over the world have been low,” the minister said. “This is a welcome sign.”
But core inflation ─ which typically excludes goods with volatile pricing ─ has remained subdued due to weakening demand pressures that are a direct result of an aggressive monetary policy in the form of higher interest rates. Low oil prices internationally have supplemented this trend.
Know more: Misplaced optimism surrounds monetary policy review
FISCAL DEFICIT
*These figures have been calculated for the first nine months of the fiscal year.
Why? The government was able to contain the fiscal deficit due to a slower pace of development spending than last year.
Of the Rs700bn allocated to the Public Sector Development Programme (PSDP), only about 61pc or Rs429bn was disbursed for development projects compared to Rs349bn or 67pc of the total Rs535bn allocated to the PSDP last year.
Note: Last year the government was forced to seek a relaxation of 0.3pc of GDP in the budget deficit target set with the IMF, equal to Rs100 billion, to meet extraordinary, unbudgeted and "one-off" expenditures arising from Operation Zarb-i-Azb.
TAX REVENUE
Tax-to-GDP ratio for the fiscal year came in at 8.4pc, which the government plans to push up to 12.5pc next year.
The problem is exacerbated because only 0.45pc of the total population filed a tax return, which corresponds to just 15pc of the potential tax base.
Read: Ultimate tax haven
But tax revenue has been on the up over the past few years, Dar claimed, as the government looks to widen the tax base through removal of non-essential SROs and new measures. Tax revenue last year was Rs2,063bn compared to this year's revenue of Rs2,344bn – a 13pc rise.
For an economy like Pakistan, which has been struggling in its attempt to surge growth, more indirect taxes are counter-productive because they end up hurting demand ─ which in turn weighs down on growth.
BALANCE OF PAYMENTS
The Balance of Payments situation shows a positive picture with the current account deficit coming in at 0.6pc of the GDP compared to 0.8pc last year.
"Our current account deficit is contained because of low oil prices and remittances," Dar said, which have resulted in higher savings.
But despite that, the trade balance has worsened with exports declining across all sectors and imports – other than food and energy – have increased.
Exports fell to $18.18bn, down 9.6pc from last year, while imports fell $32.42bn ─ a drop of 4.6pc compared to last year's figure.
Remittances amounted to $16.03bn this year.
Therefore, the country is still facing a current account deficit of $1.6bn despite record-high remittances and savings through cheaper oil imports.
The soaring remittances, which came in at around $15m, also translated into unprecedented forex reserves of over $20bn.
