The Pakistan Economic Survey (PES) 2021-22 revealed on Thursday, showed a growth rate of 5.97 percent against a target of 4.8 percent.
However, the country’s growth story, having posted a recovery from the pandemic, when the economy contracted, and maintained a V-Shaped recovery by posting real GDP growth of 5.97pc was dampened in the face of glaring macroeconomic imbalances, suggesting that this growth is unsustainable.
The balance of payment situation of the country particularly stood out with trade deficit and current account deficits ballooning out of control.
The Pakistan Economic Survey is an annual report on the performance of the economy, focusing, in particular, on major macroeconomic indicators. Interestingly, this time — perhaps a first — a new government (PML-N-led coalition) is presenting the economic performance of a previous government (PTI).
GROWTH: Finance Minister Miftah Ismail, while unveiling the survey, said “achieving growth was not an issue for Pakistan, the real issue is achieving sustainable growth”.
“This year GDP growth is 5.97pc… but as usual the current account deficit has once again shown that we have a balance of payments issue,” Ismail said.
This overall growth came on the back of 4.40pc growth in Agriculture, 7.19pc growth in Industries, and 6.19pc growth in Services — meaning that all three major sectors surpassed their targets of 3.5pc, 6.5pc and4.7pc, respectively.
Even though the country surpassed overall growth expectations as well as sector-wise growth targets, “underlying macroeconomic imbalances and associated domestic and international risks have dampened celebrations”, according to the survey document.
The minister said imports came in at $77 billion and will end up being the highest ever import bill n terms of GDP. “Imports have increased quite a lot but so have exports,” Ismail said.
During Jul-Mar FY2022, goods exports grew by 26.6pc and amounted to $23.7 billion, whereas services exports grew by 17.1pc and amounted to $ 5.1billion, according to the survey.
“Despite the encouraging export performance, the country’s imports have also risen significantly. The broad-based surge in global commodity prices, Covid-19 vaccine imports, and demand-side pressures, all contributed to the rising imports, ” the PES said.
Resultantly, trade deficit grew by 55.5pc and amounted to $30.1 billion or 8.6pc of the GDP, which the document said is “historically high”.
CURRENT ACCOUNT: Despite export receipts and workers’ remittances both reaching record-high levels during the nine-month period, import payments registered a “sizable, broad-based increase”.
As a result, the current account deficit widened considerably over last year, the document revealed.
“These payment pressures manifested on the interbank PKR-USD exchange rate, which depreciated 14.1 percent during Jul-Mar FY2022. The SBP’s foreign exchange reserves also came under pressure from Q2 onwards, dropping $5.9 billion during the first nine months of the fiscal year to $11.4 billion by end March 2022.
Therefore, during this period, the current account posted a deficit of $13.8 billion, or 3.6pc of GDP, against a deficit of $0.5 billion last year. The major contributor to the higher current account deficit was the 55.5 percent increase in the merchandise trade deficit during Jul-Mar FY2022, the survey document revealed.
INFLATION: The year-on-year (YoY) inflation from July to April of the outgoing fiscal year was measured at 11pc, compared to the target of 8pc.
The PES cited abnormal increase in global commodity prices, especially crude oil and edible oil, as the reason for the rise in domestic prices.
“The group-wise breakdown indicates that major contributors to headline inflation are transport, followed by furnishing & household equipment maintenance and housing, water, electricity & gas.”
Non-perishable food items are the main contributory factor in jacking up food inflation, it further noted.