ISLAMABAD - An independent think-tank, Institute for Policy Reforms, on Thursday apprehended that government would miss most of targets of economic indicators including GDP growth, budget deficit and other main targets during ongoing financial year.

“Economy would fall well short of its target growth rate of 5.1pc. All determinants of growth such as agriculture and industrial production were sluggish and below the growth rate of the last fiscal year,” said Dr. Hafiz Pasha Managing Director, Institute for Policy Reforms at launching of report that reviews the country’s economic performance for the period July December 2014.

The IPR projected that GDP growth would remain in the range of 3.8 to 4.3 percent during this fiscal year 2014-15.

He said all determinants of growth such as agriculture and industrial production were sluggish and below the growth rate of the last fiscal year. Industry grew by 2.5pc in July-November 2014 compared to 6pc for the same period in 2013. The target for industrial growth was 7pc. Large-scale manufacturing grew only by 1.5pc. Likewise, growth of major crops was 2.5pc in July December 2014 compared to 3.7pc in 2013. Growth rates of minor crops and livestock increased though.

The IPR excepts that budget deficit would approach 6.1 percent by the end of June 2015 as against the target of 4.9 percent due to the increase in expenditures. The expenditures would rapidly increase due to the pending debt servicing obligations, expenditures on security arising from implementation of the National Action Plan and rehabilitation of IDPs, retirement of circular debt of the power sector. The other reason behind expected increase in budget deficit is slow growth in revenues, as actual tax and non-tax revenue may be down by about Rs 150 billion.

The IPR report further noted that it was unlikely too that the economy would meet the investment target of 16pc of GDP. Its three elements showed a mixed trend. Machinery import increased by 6pc and important segments, such as, textiles and agriculture saw double-digit decline.

Turning into inflation, the IPR estimated that it would remain at 5-5.5 percent this year. The report stated that inflation figure is understated, as it does not reflect the rise in the price of electricity, inclusive of fuel charges adjustment and higher inflation rate in larger cities.  

According to the IPR report, the government is not releasing funds for the public sector development programme, as it released only 28.2 percent (Rs 148.8 billion) of the annual PSDP. The government would scale back the PSDP to meet the fiscal target agreed with the IMF. Power load shedding continued unabated in the country. It was especially surprising that power sector saw the lowest rate of release. Private credit declined by almost 38pc during the period while public borrowing increased by almost Rs750 billion.

Issues endemic to the sector saw no resolution. Generation of power grew by a small 5pc above the level attained two years ago. Performance of Discos hobbled the sector and so far, it was unclear how the benefits from low fuel price would help strengthen the power supply.

Moving to balance of payments, he said that trade deficit widened by 36pc. Growth in home remittances and receipt of coalition support fund, however, alleviated the situation. Foreign exchange level increased also because of successful Sukuk bond float of $1 billion and release of $1.1 billion from the IMF. Foreign direct investment saw an increase though the total amount remained small. Pasha advised caution about external borrowing. Despite increase of $2.4 billion in borrowing, reserves grew by only $1.5 billion, which shows that already borrowings have financed BOP deficit. He considered this a risky strategy. Decline in export was a cause of concern. An overvalued exchange rate had reduced competitiveness of Pakistani exporters.