ISLAMABAD - The federal government on Thursday launched the Economic Survey 2019-20 that showed country has missed all major economic targets due to the coronavirus outbreak, which resulted in a negative 0.4 percent economic growth rate for the outgoing year.
Adviser to Prime Minister Dr Abdul Hafeez Shaikh claimed that country’s economic situation had improved before the coronavirus. However, Pakistan faced an economic loss of up to Rs3 trillion because of the COVID-19 pandemic in the current fiscal year, he said.
The Economic Survey showed that COVID-19 had dented the economy, as the government had missed all major economic targets during the fiscal year 2019-20. Pakistan’s GDP growth had contracted by 0.4 percent during FY20 as against the projection of over 3 percent. Growth of agricultural sector is 2.67 percent as compared to the target of 3.5 percent. Industrial sector’s growth has shrunk by 2.64 percent as against the target of 2.4 percent. Growth of services sector has also contracted by 3.4 percent as compared to projection of 4.8 percent. Manufacturing contracted by 22.9pc year-on-year in March 2020.
Addressing a press conference along with economic team, Adviser to PM on Finance said COVID-19 impacted economy of the entire world, and according to IMF forecast, the world’s income was expected to reduce by three to four percent. He said the economic stability under the present government was badly affected by the outbreak of the pandemic. He said the government made utmost endeavour to protect the economy and the people from the adverse impact of the pandemic.
Pakistan Economic Survey 2019-20
He informed that various institutes and economists had made different projections for economic growth of Pakistan after COVID-19. The International Monetary Fund (IMF) had projected Pakistan’s economic growth to contract by 1.5 percent while World Bank estimated it at negative 2.5 percent. However, the Country’s National Accounts Committee (NAC) had projected GDP growth at negative 0.4 percent. Hafeez Shaikh said that tax collection of Federal Board of Revenue (FBR) reduced by Rs800 billion in FY20 due to the pandemic. The FBR would hardly achieve Rs3.9 trillion in current financial year as against the revised target of Rs4.7 trillion. He claimed that FBR’s tax collection had improved by 17 percent before the coranavirus situation. IMF had reduced the tax collection target to Rs4.7 trillion for ongoing fiscal year from original target of Rs5.55 trillion before the pandemic outbreak. He announced that the government would not impose any new tax in the upcoming budget, which would be presented today (Friday), rather the government would try to help the people in the budget.
Adviser said that the government had controlled the budget deficit at 4 percent of the GDP during nine months (July to March) of the FY20 as compared to 5.1 percent of the corresponding period last year. Primary deficit was in surplus (negative primary deficit) of 0.5 percent of the GDP due to reduction in expenditures. Talking about measures taken by the government to curtail expenditures, he praised Prime Minister Imran Khan and army chief Gen Qamar Javed Bajwa. He said that the government had cut down its expenditures and at the same time, increased public spending.
Claiming economic achievements of the incumbent government, Hafeez Shaikh said that government had successfully controlled the current account deficit at $3 billion in FY20, which was around $20 billion when PTI took charge in 2018, showing reduction of 73 percent. Meanwhile, the government had paid Rs5 trillion in terms of loan and interest payment in last two years against the loans taken by the previous governments. Furthermore, he said the government had controlled its expenditures, which resulted in surplus primary budget that he claimed never happened in the past. Adviser informed that government had neither taken loan from State Bank of Pakistan nor approved any supplementary grants during FY20. He said that government had increased the budget of social safety net, Ehsaas Programme, to Rs192 billion in FY20 from Rs100 billion in FY2019 to help the poor segment of the society. He further informed that non-tax collection had increased to Rs1.6 trillion in current fiscal year from budgeted Rs1.1 trillion, which never happened in past.
Hafeez Shaikh said that debt to GDP ratio had increased to 88 percent. He said that none of the government had restricted the debt to GDP at 60 percent as per the law. The advisor credited the successful policies of the government, stating that “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”.
He said that economic situation was fragile when incumbent government took charge in 2018. Pakistan’s total debt and liabilities amounted to Rs30 trillion. Exports were not showing growth and foreign exchange reserves had plummeted to $9 billion from $17 billion. Imports were higher than exports. Similarly, Pakistan’s expenses were higher than its income and the country was about to default on its loans. “The country was witnessing growth on loans that were secured from abroad,” he said.
Speaking on the occasion, Federal Minister for Economic Affairs Khusro Bakhtiyar said that external debt was around $76.5 billion. Giving details, he said that external debt was $41 billion in 2008, $48 billion in 2013 and $73 billion in 2018. In last two of its tenure, the PML-N had generated $15 billion through Eurobonds and commercial borrowing, which was an expensive debt. Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood said that country’s exports had started increasing before COVID-19 but since March this year, the exports were continsouly declining due to coronavirus. He hoped that exports would increase in the months to come.
According to Economic Survey, the agriculture sector grew by 2.67 percent as against the target of 3.5pc. The growth occurred mainly in important crops during this year - production of wheat, rice and maize came in at 2.45 percent, 2.89 percent and 6.01 percent, respectively. However, cotton and sugarcane crops saw negative growth of 6.92pc and 0.44pc, respectively. Other crops--onion, potato, and vegetables showed positive growth of 4.57 percent mainly because of an increase in production of pulses, oilseeds and vegetables. Livestock sector registered a growth of 2.58 percent, which is a deviation from its historical growth primarily because of shrinkage in demand for dairy and poultry. Forestry has grown at 2.29 percent due to an increase in the production of timber.
The overall industrial sector saw negative growth of 2.64 percent. The large scale manufacturing (LSM) sector, which is driven primarily by QIM data (from July 2019 to March 2020), showed a decline of 7.78pc. Major decline has been observed in textile (-2.57pc), food, beverage & tobacco (-2.33pc), coke & petroleum products (-17.46pc), pharmaceuticals (-5.38pc), chemicals (-2.30pc), automobiles (-36.5pc), iron & steel products (-7.96pc), electronics (-13.54pc), engineering products (-7.05pc), and wood products (-22.11pc).
The major positive growth in LSM came in fertilizer (5.81pc), leather products (4.96pc), rubber products (4.31pc) and paper &board (4.23pc). Electricity and gas sub-sector has grown by 17.70pc mainly due to higher subsidies and better value-added in WAPDA & related companies. Construction activity has increased by 8.06pc mainly due to an increase in general government expenditure.
Pakistan’s services sector, which has remained major growth driver for many years, underwent a rare contraction of 0.59pc this year. While the wholesale and retail trade sector contraction by 3.42pc, the transport, storage and communication sectors showed a negative growth of 7.13 percent. Finance and insurance sector showed modest increase of 0.79pc. The remaining components of services--housing, general government and other private services saw positive growth of 4.02pc, 3.92pc and 5.39pc, respectively.
