Finance Minister Miftah Ismail unveiled the Pakistan Economic Survey (PES) 2021-22, which showed a growth rate of 5.97 per cent against the target of 4.8 per cent.
However, the country’s growth story, post recovery from the pandemic, when the economy shrank, and maintained a V-shaped recovery by posting a real GDP growth of 5.97pc, subsided due to apparent macroeconomic imbalances, it suggests. that this growth is sustainable.
The country’s balance of payments situation, especially the trade deficit and the current account deficit, has gone out of control.
The Pakistan Economic Survey is an annual report on the performance of the economy, focusing exclusively on key macroeconomic indicators. Interestingly, this time – perhaps for the first time – a new government (the PML-N-led coalition) is projecting the economic performance of the previous government (PTI).
growth
Unveiling the survey, the Finance Minister said, “Achieving development was not an issue for Pakistan, the real issue is achieving sustainable development”.
“The GDP growth rate this year is 5.97 per cent, but as usual the current account deficit has once again shown that we have a balance of payments issue,” Ismail said.
This overall growth was driven by 4.40 per cent growth in agriculture, 7.19 per cent growth in industries and 6.19 per cent growth in services – meaning that all three major sectors exceeded their targets of 3.5 per cent, 6.5 per cent and 4.7 per cent respectively. have done.
Even though the country has exceeded the overall growth expectations as well as sector-wise development targets, according to the survey document, “the underlying macroeconomic imbalance and associated domestic and international risks have clouded the celebrations”.
trade deficit
The minister said that the imports amounted to $77 billion and this would be the highest import bill ever in terms of GDP. “Imports have increased significantly, but so have exports,” Ismail said.
According to the survey, during July-March FY2022, goods exports grew by 26.6pc and stood at $23.7 billion, while services exports grew by 17.1pc and stood at $5.1 billion.
“Despite the encouraging export performance, the country’s imports have also increased significantly. Widespread jump in global commodity prices, COVID-19 vaccine imports and demand-side pressures contributed to the rising imports,” PES said.
As a result, the trade deficit widened by 55.5 percent to $30.1 billion, or 8.6 percent of GDP, which the document described as “historically high.”
current account
Despite both export receipts and labor remittances reaching record-high levels during the nine-month period, import payments registered a “large, broad-based growth”.
As a result, the current account deficit widened significantly over the previous year, the document showed.
“These payment pressures were manifested on the interbank PKR-USD exchange rate, which declined by 14.1 per cent during July-March FY 2022. SBP’s forex reserves also came under pressure from the second quarter, during the first nine months of the financial year. fell by $5.9 billion to $11.4 billion by the end of March 2022.
Therefore, during this period, the current account recorded a deficit of $13.8 billion, or 3.6 percent of GDP, against a deficit of $0.5 billion in the previous year. The survey document showed that the major contributor to the higher current account deficit was the 55.5 per cent increase in the trade deficit during July-March FY 2022.
More to follow.