Pakistan Economic Survey 2019-20 launched-Here are the salient features

Government misses key targets set to achieve during this fiscal year

The government has unveiled the Pakistan Economic Survey for fiscal year 2019-20 and the economic indicators paint a bleak picture of the economy.  It is clear that the government's performance has been below par and quite a few key macro targets have been missed by a wide margin.

Negative growth in GDP

The provisional GDP growth rate for fiscal year 2020 is estimated at negative 0.38 per cent against a revised target of 2.4pc.

Agriculture sector growth

The agriculture growth remained at 2.6%. It was the only sector that showed positive growth in 2019-20.

 Negative growth in industry and services

The industry recorded -2.64% while services sector recorded -0.59% growth rates. Transport and communication growth also came in at -7.1% for Jul-April 2020.

The government, in the economic survey, said lockdowns imposed to curb the spread of Covid-19 "severely affected activity in contact intensive businesses" which is why the services sector posted negative growth of 0.59pc.

The manufacturing sector contracted by 22.9% year-on-year in March 2020.

High inflation

Consumer Price Index (CPI) inflation for the period July-April 2020 came in at 11.22pc against 6.51pc during the same period last year.

"Perishable food items are the main contributory factor in jacking up the food inflation," according to the survey, with inflation of 34.7pc recorded in this category.

FBR tax revenue impacted by COVID-19

Overall tax collection by the Federal Board of Revenue (FBR) grew by 10.8pc to Rs3, 300.6 billion during July-April 2020 against Rs2, 980 billion in the comparable period last year, according to the PES document.

"The rise in tax collection is attributed to various policy initiatives implemented at the start of financial year 2020 such as charging sales tax on more items at the retail price under 3rd Schedule, reinstatement of taxes on telecom services and an upward revision of tax rates on various salary slabs," the survey revealed.

But despite this increase, tax collection fell significantly below the government's revised target of Rs3, 908 billion. The target was revised from an initial Rs4,807 billion "keeping in view the economic slowdown consequent to the pandemic," the survey said.

The survey further revealed that the pandemic had a "significant impact on revenue collection efforts of FBR".

However, after the outbreak of Covid-19 pandemic, an average negative growth rate of 13.4pc was recorded during March 2020 and April 2020 compared to last year as well as in comparison to projected collection, according to the survey.

Current account deficit reduced

During July-March FY2020, current account deficit reduced by 73.1pc to $2.8 billion (1.1pc of GDP) against $10.3 billion last year (3.7pc of GDP), the survey revealed. "The current account deficit that we inherited was around $20 billion but we have reduced that to around $3 billion. This is a huge achievement of the government," remarked the PM's aide.

According to the survey, the significant reduction in the current account deficit "mainly reflected the impact of macroeconomic stabilisation measures undertaken over the past year, which have significantly curtailed the import demand of a wide range of non-energy and energy products".

Exports in the said period increased 1.1pc to $18.3 billion, while imports reduced by a significant 16.2pc to $32.9 billion compared to $39.3 billion from a year ago.

This led to a shrinking of the trade deficit, which saw a reduction of 31pc to $14.7 billion in the July-March 2020 period compared to $21.3 billion last year in the same period. As a percentage of GDP, Pakistan's trade deficit now stands at 6.6pc, considerably down from 8.5pc a year ago.

Fiscal deficit

The fiscal deficit went down to 4pc of GDP during July-March 2020 against 5.1pc of GDP in the comparable period last year, the survey revealed. But the government warned that by the end of the fiscal year on June 30, this deficit could widen to 9.2pc of the GDP (against a target of 7.5pc) when the true impact of Covid-19 and government's expenditures on that front are taken into account.

Reduced state expenditures

Talking about measures taken by the government to arrest ballooning internal and external imbalances, PM’s advisor on Finance Hafeez Shaikh praised Prime Minister Imran Khan and army chief Gen Qamar Javed Bajwa for their role in managing expenditures. Noting that the state had cut down its expenditures, he highlighted that at the same time, public spending had been increased.

Shaikh highlighted that the government did not taken any loans from the State Bank of Pakistan the entire year and did not give any supplementary grant to any department as it wanted to ensure the public's money was spent carefully.

Improved indicators

The advisor credited the successful policies of the government for an improvement in key indicators, taking note of "a stable exchange rate, healthy growth in FDI (126.8%), improved ranking in World Bank’s ease of doing business index, and ‘Stable’’ credit outlook to B3 from ‘Negative’ by Moodys".

The prime minister's advisor on finance said that the government had returned loans worth Rs5, 000bn over the course of the year. He said that Pakistan's revenue had declined due to a decline in its exports, and that the government had doubled the money for the coronavirus fund despite the economy suffering from setbacks due to the pandemic.

                                                                                   Khalid Bhatti