Photo courtesy PID
Acknowledging the poor economic performance of the past year, Finance Minister Ishaq Dar on Thursday maintained that the ruling coalition had inherited the government at a difficult juncture and had prevented the country from defaulting through “difficult” decisions.
Addressing a press conference unveiling the Pakistan Economic Survey 2022-23, he said the government had come into power when inflating was rising, financing needs were growing and debt was at an all-time high. The situation was worsened, he claimed, because the previous government’s reneging on international sovereign commitments had damaged the country’s credibility.
Emphasizing the “heavy political cost” that had been paid by the government in implementing “tough measures” aimed at restoring international confidence—such as withdrawing subsidies on fuel, gas and electricity and imposing fresh taxes—he lamented that global crises and last year’s flooding had caused billions in losses that had further dented the economy.
“Hopefully, the IMF’s 9th review will be completed very soon,” he said, claiming it was “unnecessarily delayed.” To a question on high interest and exchange rates over the past year, Dar said these were hiked due to sovereign commitments. However, he added, he did not agree with how this had been achieved, as it put the country into a “vicious cycle” of devaluation. Alleging that “hidden hands” were behind the depreciation of the Pakistani rupee, he reiterated that the currency’s actual value was significantly better than what the market projected. “However, market perceptions and the IMF drama have artificially undervalued the Rupee by Rs. 40-45 against the U.S. dollar,” he claimed, urging media to inform the public that they should avoid converting their assets into dollars or gold in the national interest. “They will be at a loss soon,“ he claimed, adding efforts were underway to stem smuggling to further boost the currency.
According to the finance minister, Pakistan’s primary issue is one of liquidity and not insolvency. Despite having $70-100 billion in debt, he maintained, the country had assets valued at over $3,000 billion.
Planning Minister Ahsan Iqbal, meanwhile, stressed it would be unfair to compare the government’s performance against its set targets, as “this was a year of force majeure” when the government faced three “unprecedented accidents.” He listed these as a $50 billion trade deficit; lack of disbursements in the last quarter of the previous fiscal year for development projects; and the climate disaster brought by last year’s floods.
Economic Survey
According to the Economic Survey unveiled by the government, the provisional GDP growth of FY2022-23 was 0.29%, which it blamed on macroeconomic imbalances, supply shocks, and international economic slowdown. Referring to last year’s floods, it said they had disrupted the domestic supply of foodstuffs due to agricultural losses, adding flood damages equaled Rs. 3.2 trillion; GDP loss Rs. 3.3 trillion; and rehabilitation expenditures Rs. 3.5 trillion.
It further blamed inflation on a rise in international prices and currency depreciation, maintaining GDP at current market prices stood at Rs 84,657.9 billion in FY2023, showing a growth of 27.1% over last year. It also confirmed that per capita income had declined from $1,765 to $1,568 due to currency depreciation, lower GDP growth and rising population. The investment-to-GDP ratio stood at 13.6% compared to 15.6% last year.
On agriculture, it said this had increased by 1.55%, mainly due to wheat, sugarcane, maize and livestock. The industrial sector, meanwhile, declined by 2.94%, primarily due to losses in manufacturing, which accounts for 65% of the industry. The services sector, it said, had posted a meager growth of 0.86%.
Positively, the Survey suggested the fiscal deficit had reduced to 4.6% of GDP against 4.9% of GDP last year, adding the primary balance had posted a surplus of Rs. 99.1 billion against a deficit of Rs. 890.2 billion last year. Total revenues increased by 18.1% to Rs. 6,938.2 billion, it said, against Rs. 5,874.2 billion last year, with tax revenues increasing by 16.5% from Rs. 4,821.9 billion to Rs. 5,617.7 billion. Non-tax revenues likewise grew by 25.5% from Rs. 1,052.2 billion to Rs. 1,320.5 billion in the period under review.
Total expenditures grew by 18.7% from Rs. 8,439.8 billion to Rs. 10,016.9 billion in Jul-Mar FY2023 against the same period last year, while current expenditures grew by 25.3%. The Survey attributed this growth to a 69.1% growth in markup payments due to higher policy rates at the domestic and international levels and the depreciation of the rupee.
According to the Survey, exports declined by 11.7% during Jul-Apr FY2023, which it blamed on weak global demand and a decline in the domestic economy. Similarly, imports in the same period reduced from $65.5 billion last year to $46.9 billion this year due to policy tightening and other administrative measures. It said the current account had narrowed by 76.1%, going from $13.7 billion deficit last year to $3.3 billion this year. Workers’ remittances decreased by 13%, going from $26.1 billion to $22.7 billion. Net inflows of foreign direct investment, meanwhile, were recorded at $1.2 billion compared to $1.5 billion last year. The Pakistani rupee, per the Survey, depreciated by 27.8%, going from 204.8 in June 2022 to 283.8 in April 2023.
On public debt, the government said it stood at Rs. 59,247 billion at end-March 2023, with domestic standing at Rs. 35,076 billion and external public debt at Rs. 24,171.
On education, the Survey said there were 275,600 educational institutions in 2020-21 compared to 271,300 in 2019-20, with an estimated increase to 279,400 in 2021-22. It said the literacy rate had increased in all provinces—Punjab (66.1 to 66.3%); Sindh (61.6 to 61.8%); KP (52.4 to 55.1%); Balochistan (53.9 to 54.5%).
For health, the Survey said public health expenditure had increased by 56.8%, going from 1% of GDP last year to 1.4% of GDP this year.
In 2022, the urban population was recorded at 84.69 million against a rural population of 144.53 million. The Labor Force Survey 2020-21 recorded a total labor force of 71.76 million, of which 67.25 million are employed and 4.51 million are unemployed, an unemployment rate of 6.3%. The government also registered 829,549 workers for overseas employment in 2022, with the Survey claiming the significant increase was due to the COVID-related travel restrictions over the past two years.
The Survey stated that PIA had a total fleet of 35 airplanes, with its operating revenue increasing by 99.6% in 2022. At the same time, however, it operating expenditure also increased by 81.2%, recording a loss of Rs. 11,307 million. It said the country had a network of 48 national highways with a total length of 14,480km, while Pakistan Railways’ network consisted of 461 locomotives with route length of 7,791km.
On the power sector, the Survey said total installed capacity of electricity in the country was 41,000MW, of which hydroelectric contributed around 25.8%. The installed capacity of thermal, nuclear and renewables was about 58.8%, 8.6% and 6.8%, respectively. It said industrial, agriculture and commercial sectors consume 28.2%, 8.2% and 7.8% of electricity, respectively.