Islamabad June 8 2023: The present Government has shifted its focus from traditional development paradigm to earmark 5-Es framework covering Exports, Equity, Empowerment, Environment and Energy that will overcome the current challenges and improve standard of living of the masses.
The outgoing fiscal year (FY2023) has been a challenging year due to external and domestic factors. The government took every possible measure to improve the economy which we inherited.
“Today, we are launching the Pakistan Economic Survey 2022-23 which is a flagship publication of the Ministry of Finance which highlights the trend of macro-economic indicators, development policies, strategies, as well as sectoral achievements of the economy” says Muhammad Ishaq Dar Finance Minister of Pakistan.
The present government is firmly committed to restore macroeconomic stability, putting the economy on the inclusive & resilient growth trajectory, and building the confidence of markets & investors. The Pakistan Economic Survey 2022-23 will also provide evidence to show the efforts of the government.
The present Government took office at a time when the economy was already confronting challenges like shrinking fiscal space, inflationary pressure, mounting current account deficit, growing financing need, exchange rate pressure, and energy sector crisis.
We inherited 6.10% of GDP growth in FY2022 which was not sustainable due to severe macroeconomic imbalances. The overheated economy led to a widened current account and fiscal deficits and brought the economy to the brink of financial collapse.
In Fiscal year 2022, Fiscal Deficit increased from 5.8% (FY2018) to 7.9% of GDP while Fiscal Deficit increased from 5.8% (FY2018) to 7.9% of GDP. Resultantly, CAD was recorded at 4.7% of GDP ($ 17.5 bn).
In addition to PTI’s disastrous economic mismanagement and global economic situation, the challenge for the present government to revive the economy was made difficult by the unforeseen natural disaster in the shape of the 2022 floods.
The flooding has wreaked havoc on the economy. The damage is estimated at PKR 3.2 trillion ($14.9 billion), loss to the GDP at PKR 3.3 trillion ($15.2 billion), and the need for rehabilitation of damages at PKR 3.5 trillion ($16.3 billion).
To avert the crisis, the present government has taken important and tough decisions including (1) revival of the IMF program, (2) Introduction of austerity measures, cuts on non-development spending and withdrawal of the untargeted subsidies, (3) successfully securing financial support from friendly countries through bilateral and multilateral arrangements, (4) complete ban on the import of non-essential luxury items, (5) tightening monetary policy and fiscal consolidation measures to anchor inflation and external sector stability, (6) administrative measures to control the illegal outflow of foreign exchange reserves, (7) higher taxes and duties on the rich, (8) controlling the decline in Forex Reserves. Pakistan would have already defaulted if the pace of decline ($6400 mn as of the 3rd quarter of FY2022) had continued, (9) the present government has paid $ 6.5 bn of international commercial loans, out of which, $ 1.0 bn was international Sukuk, (10) managing the circular debt in the power and gas sector, (11) massively expanding social safety net for the poorest of the poor (BISP), (12) increase in BISP beneficiaries’ stipend by 25% w.e.f 1/1/23. The total BISP amount increased from Rs 360 bn to Rs 400 bn for the current fiscal year, (13) to promote internal Islamic financing, the government introduced 3- year and 1-year Ijara Sukuk instruments in January and February 2023 respectively. The target is to diversify Shariah Compliant instruments based, giving more options to investors with an appetite for Islamic investments, (14) approval of the Foreign Investment (Promotion and Protection) Bill, 2022 to protect investors from unnecessary court proceedings and to improve the investment climate in Pakistan and (15) starting barter trade with Iran, Afghanistan and Russia.
For FY2023, Provisional GDP growth estimated at 0.29%, on the back of 1.55%, -2.94%, and 0.86% in the Agriculture, Industry, and Services Sector respectively. The massive flood, recessionary global pressure, and contractionary economic policies hampered economic growth.
CPI Inflation (Jul-May FY2023) recorded at 29.2% (11.3% last year).
FBR Tax collection (Jul-May FY2023) grew by 16.1% to Rs. 6,210 bn (Rs 5,348.2 bn last year). Various tax policies and administrative reforms remained supportive in improving tax collection. Efforts are being made through maximum taxpayer facilitation, automation, ease of doing business, reducing human interface, track and trace system, and improving the overall efficiency of the tax machinery. Broadening Tax Base units have been established at Regional Tax Offices for the registration of new taxpayers with an aim to expand the tax base. FBR has registered 912,392 new taxpayers during the current year as of 31st March FY2023, against the target of 700,000 new taxpayers.
Fiscal deficit (Jul-Apr FY2023) recorded at 4.6% of GDP (Rs 3929 bn) against 4.9% of GDP (Rs 3275 bn last year), reflecting prudent expenditure management and effective domestic revenue mobilization.
Primary balance (Jul-Apr FY2023) posted a Surplus of Rs 99 bn (deficit of Rs 890 bn last year), reflecting a slowdown in the growth of non-markup expenditures.
Current account deficit (Jul-Apr FY2023) narrowed down by 76% to $ 3.3 bn ($ 13.7 bn last year). Trade deficit (Jul-May FY2023) contained by 40.4% to $25.8 bn (deficit of $ 43.4 bn last year). Imports (Jul-May FY2023) restricted to $ 51.2 bn ($72.3 bn last year), reflecting a decline of 29.2%. Exports (Jul-May FY2023) reached $ 25.4 bn ($ 28.9 bn last year), declined by 12.1%. Remittances (Jul-Apr FY2023) stood at $22.7 bn ($26.1 bn last year), contracted by 13.0%, mainly due to lower business activity, inflationary pressures in host countries, and easing of travel restrictions. FDI (Jul-Apr FY2023) decreased by 23.2% to $1170.1 mn ($1523.7 mn last year). Russia-Ukraine conflict, spiking inflationary pressures, a zeroCovid policy in China, financial turmoil, and rising debt pressures affected global FDI flows.
The present government took very tough and costly decisions in terms of paying political cost, successfully averted the looming threat of default and managed to rescue the crippled economy.
In the outgoing fiscal year (FY2023), the government succeeded in ensuring the sustainability of the external and fiscal sectors through various stabilization measures and structural reforms. As a result, the current account deficit narrowed down by 76% and fiscal deficit shrank to 4.6% of GDP in Jul-Apr, FY2023 as compared to 4.9% of GDP in the same period last year.
In FY2024, the government is gearing towards achieving higher growth of 3.5% through various measures like the Kissan package, industrial support, export promotion, encouragement of IT sector, and revenue mobilization etc.
The government has allocated Rs. 1.15 trillion for the development of next fiscal year. The PSDP funding is focused on projects which support 5Es Framework (i.e., Exports, Equity, Empowerment, Environment and Energy), CPEC and 4RF (i.e., Resilient, Recovery, Rehabilitation and Reconstruction Framework) in the aftermath of disastrous flood 2022.
Many interventions are also planned for the next fiscal year to boost productivity, innovations, food & water security, and enhancing social & physical assets to address SDGs.
The government is also focusing on creating a holistic digital ecosystem with infrastructure and institutional frameworks for rapid delivery of innovative digital services and to encourage the private sector to participate for enhancing the IT exports.
The government is targeting to enhance IT sector exports to more than $ 15 billion in next five years.
Various measures are also being taken to expand exports by introducing National Productivity Master Plan to enhance productivity, signing of trade agreements with neighboring countries and by launching Trade Readiness Programs etc.
To ensure availability of affordable energy the government has set the target to enhance the share of Green Energy to 20% in 2025 and 30% in 2030. The government is stressing on Energy Efficiency & Conservation and estimated to save primary energy up to 10 to 15%.