KARACHI: Pakistan’s economy and its people are facing a health crisis. With an economy burdened by high debt and riddled with taxation measures that target the paying sectors, policymaking is seen as being crucial to guide the country out of its perilous path.

However, when it comes to the healthcare and pharmaceutical sectors – an area where developing nations concentrate as they look for sustainable growth – experts rue the lack of attention and inconsistent policymaking.

Additionally, vested interests that have their hands in the smuggling and counterfeit drugs racket have caused additional headaches.

Experts say Pakistan budget massively negative for struggling healthcare sector

In Pakistan, life expectancy is hovering around 67 years, according to the latest Economic Survey, lower than almost all of its peer nations. The average in South Asia stands at 71.6.

A research report, “Healthcare in Pakistan: Navigating Challenges and Building a Brighter Future,” published in 2023 stated the solutions to the “stumbling and compromised healthcare system of Pakistan” are adequate financial support and infrastructure development. The paper also discussed several other challenges the important sector faces in Pakistan.

Arshad Rahim, a former executive associated with the pharmaceutical industry in senior leadership positions, highlighted that Pakistan has one of the lowest health budgets in the world. At less than 2% of GDP, it is lower even in comparison to regional or peer nations.

To give context, Bangladesh allocates 5% of its GDP to health. According to the World Health Organization (WHO), the health budget should be at least 6% of GDP.

Rahim emphasised that the country’s health sector direly needs disease preventive and health promotion measures along with healthier lifestyles.

Rahim also stressed the importance of distributing quality medicines as prescribed by doctors, as was done under the Sehat Sahulat Card, which allowed patients to access medicines through the card.

“It should resume,” he insisted.

Rahim has held several senior leadership positions, including serving as CEO of Wyeth Pakistan. He has also served as a member of the Policy Board at the Drug Regulatory Authority of Pakistan (DRAP).

He emphasised availability of quality medicines as poor quality drugs end up costing patients more.

He concluded that the future of the country depends on a healthy population.

Rahim also pointed out loopholes or leakages in the economy that need to be addressed. The funds saved need to be diverted towards the areas that can bring positive change among people’s lives.

“However, practical solutions must be suggested. Where will this money come from to improve the quality of the health sector? The government should focus on loss-making state-owned enterprises and turn them around.”

Former Pakistan Pharmaceutical Manufacturers Association (PPMA) Chairman Tauqeer Ul Haq also emphasised the need for the government to focus more on the health sector.

He stated that it is the government’s duty to step up and support the underprivileged sections of society.

The research paper mentioned earlier also said most life-saving medications are too expensive for people to afford.

“(Every) now and then, there is a shortage of medicines in the market,” the paper added.

However, Haq pointed out that there is a need for government intervention.

“The government is giving subsidies for various essentials. There should also be a subsidy for the poor to buy medicines. The government should provide free or at least subsidised medicines through government hospitals,” he said.

He added that the government used to offer such support in the past, but it has now almost been scrapped, with instances of budget lapses.

The industry official suggested that health cards under a government insurance policy should function throughout the country.

The former chairman was also disappointed with the budget, especially seeing that the government increased taxes on various items associated with the health sector.

Many experts point out the importance of the pharmaceutical and healthcare sectors as crucial for tangible as well as intangible benefits. Transfer of skills and technology as well as skilled personnel are all important characteristics of the industry.

However, it is the government’s inconsistent policymaking and high levels of intervention that have forced several players to exit the Pakistan market.

Additionally, it has been argued, Pakistan lacks international agreements and collaborations, limiting its market access and export potential.

Copyright Business Recorder, 2024

LAHORE: Phase-I of the Green Pakistan Up-scaling Program has achieved a plantation target of 2.12 billion to enhance the forest area in the country, said Economic Survey of Pakistan.

The programme is undergoing revision for the next four years (2024-2028), expanding its scope to include carbon finance mechanisms, scientific resource assessments, livelihood creation, and biodiversity conservation.

The Ministry of Climate Change and Environmental Coordination is working with Global Environment Facility (GEF) and Green Climate Fund (GCF) to reduce and minimize the carbon footprint, it added.

Different projects /programmes being undertaken through these funds include the Community Resilience Partnership Program, Distribution of Solar Products, Transforming the Indus Basin, Recharge Pakistan, and Scaling up of Glacial Lake Outburst Flood (GLOF) Risk Reduction in Northern Pakistan, among others.

Pakistan has been recognized as one of the top 10 nations most affected by climate change globally, according to German Watch’s Climate Risk Index. The country is experiencing unpredictable weather patterns, leading to occurrences such as flash floods, severe droughts, glacial lake outbursts, intense heat waves, and erratic rainfall. Consequently, its ecosystems and landscapes are steadily deteriorating. Forest fires are on the rise, plant and animal species are migrating, and water bodies and wells are depleting due to increased human activities.

Additionally, the rise in sea level and increased storm intensity can lead to coastal inundation and erosion and the loss of critical coastal habitats such as mangroves, which serve as important nurseries for many fish species.

The Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) indicates that climate change is likely to exacerbate the frequency and intensity of such extreme events. The government has already devised a strategy to address the challenges posed by climate change, incorporating policy interventions and climate-related measures such as the National Clean Air Policy (NCAP), Nationally Determined Contributions (NDCs), Pakistan Policy Guideline for Trading in Carbon Markets, National Adaptation Plan (NAP), and Climate Budget Tagging Initiative, among others.

Copyright Business Recorder, 2024

EDITORIAL: One of the most ignored contributors to the unemployment rate – which stands at 6.3 percent, according to the Economic Survey 2023-24 – is the very high birth rate of the country.

With the latter continuing to grow at a very fast pace in what is the fifth-highest populated country in the world even as the economy slows to a crawl, joblessness is bound to rise. Therefore, part of the effort to create more jobs must also focus on slowing down the birth rate.

The current rate of population growth drags down employment in two ways. One is very direct, with a lot more people entering the job market every year than it can handle.

And two, indirectly. Because the high birth rate also means that most children cannot be cared for adequately; hence the equally alarming rates of children born stunted and malnourished.

That puts them at a disadvantage right at the beginning of their lives as compromised mental and physical growth limits their gains from education – if they are lucky enough to have one – and ultimately pushes them to the margins of an already very cramped job market.

The latest employment statistics come from the Labour Force Survey (LFS) 2020-21, because PBS (Pakistan Bureau of Statistics) was busy with the 7th Population and Housing Census in 2022-23 – work is reportedly under way on LFS 2024-25 – and show that while some trends have changed, others have not.

“Technological transformation”, for example, has shifted the bulk of employment from agriculture (37.4 percent) to industry and services.

The services sector alone is now the largest growing sector of the economy, with 37.2 percent labour force participation.

Other than that, the same disturbing trends remain. Unemployment is highest in the youngest group (ages 15-24) at 11.1 percent, and second highest in the second youngest group (ages 25-34) at 7.3 percent, and in both cases much higher in females than males.

This is exactly how a youth bulge turns from a demographic dividend to a demographic disaster.

Pakistan is also one of the world’s youngest countries, so to speak, meaning a vast majority of its population comprises the youth. And instead of being an asset it has become a liability because it is an extra drag on the very economy it is supposed to provide extra momentum to.

These employment statistics, bad enough as they are, would become much worse if PBS surveyed under-employment as well.

It’s no secret that the financial collapse of the last few years, and the accompanying spike in unemployment, has reduced much of the middle class to working multiple odd jobs to make ends meet, while it has decimated lower income classes. So, unemployment alone does not depict the true, complete picture.

The nature of this year’s budget and requirements of the IMF programme make it pretty clear that the economy will remain caught in a low-growth band for the next few years; at least till strict structural adjustment is required to unlock the many tranches of the bailout loan.

That alone ought to make authorities think very seriously about the future and do what they can to relieve unnecessary pressure on the labour market. It is imperative to get the birth rate under control, an aspect of policymaking that does not get nearly enough attention at the top.

Copyright Business Recorder, 2024

ISLAMABAD: Benazir Income Support Programme (BISP) has been budgeted at Rs598.71 billion in financial year 2024-25, an increase of 27 percent in the programme’s annual budget in comparison to Rs 471.23 billion it has received in the outgoing financial year.

This increase in the budget is more than BISP’s estimate which was not expecting an increase of more than 20 percent in its budget, Business Recorder has learnt.

The reports received from informed officials indicate that BISP was projecting Rs 550 billion in the budget, an increase of 17 percent compared to its budget in the outgoing FY 2023-24.

Rs313.4bn disbursed among 9.4m BISP beneficiaries

The outgoing fiscal year’s budget initially showed an increase of only 10 percent compared to previous financial year—from Rs 408 billion to Rs 450 billion. Later, this figure was revised upward to Rs 471 billion showing a 15 percent increase.

But, like in the outgoing FY2023-24, the budgetary BISP data for upcoming FY 2024-25 has serious discrepancies.

According to budget documents issued by the federal government, Wednesday, BISP’s budget in the outgoing fiscal year is Rs 471.23 billion. Just a day earlier, the Economic Survey for outgoing financial year issued by the federal government showed BISP’s budget at Rs 466 billion.

The International Monetary Fund’s (IMF’s) country report on Pakistan from the last month mentioned BISP’s budget for FY2023-24 at Rs 472 billion.

In addition, federal government has repeatedly claimed that 9.3 million female beneficiaries receive financial aid under BISP’s flagship Kafaalat initiative.

However, the data received by Business Recorder from informed sources in BISP showed that 9.27 million beneficiaries were receiving quarterly stipend of Rs 10,500 each under Kafaalat programme. But, the federal government’s Economic Survey claimed that 9.4 million beneficiaries were receiving this stipend.

In April, last year, the then BISP Chairperson Shazia Marri first claimed that government increased BISP’s budget by 60 percent—from Rs 250 billion in FY 2021-22 to Rs 400billion in FY 2022-23 but then “revised” this claim, saying, the government increased BISP budget by 70 percent from Rs 235 billion in FY 2021-22 to Rs 400 billion in the FY 2022-23. This claim was contradicted by other the relevant government documents that showed BISPs budget at Rs 250 billion in FY 2021-22, and not Rs 235 billion.

Budget documents further suggest that BISP’s budget in 2022-23 was Rs 408 billion and not Rs 400 billion.

Copyright Business Recorder, 2024

ISLAMABAD: The Economic Survey 2023-2024 unveiled substantial financial commitments by the Government of Pakistan highlighting a disbursement of Rs 313.4 billion to 9.4 million beneficiaries through the Benazir Income Support Programme (BISP) till March 31.

This included Rs 257.5 billion for unconditional cash transfers (UCT) and Rs 56 billion for conditional cash transfers (CCT). According to the economic survey, a total of Rs 466 billion was earmarked for BISP to run various social protection programs for the FY2024.

Under the Benazir Kafaalat Programme, Rs 257.5 billion was distributed. The cash grant per beneficiary increased from Rs 3,000 to Rs 10,500 per quarter, with 9.4 million beneficiaries currently enrolled. From July to March FY2024, Rs 256.3 billion was disbursed to these beneficiaries.

The Benazir Taleemi Wazaif Programme enrolled 14.8 million children, with 2.2 million enrolled from July to March FY2024. Since its inception, Rs 117 billion has been distributed, with Rs 36.9 billion disbursed during the same period.

Pakistan faces a significant child nutrition crisis, with high rates of malnutrition (40.2% stunting, 28.9% underweight, and 17.7% wasting). The Benazir Nashonuma Programme operates in 158 districts through 545 facilitation centres, including 64 mobile sites in Sindh, Punjab, and KPK. By March FY2024, Rs 10.83 billion was paid to 1,873,557 beneficiaries as conditional cash transfers.

The Pakistan Poverty Alleviation Fund (PPAF) disbursed Rs 2.0 billion through partner organisations in 149 districts from July to March FY2024. Since April 2000, PPAF has disbursed Rs 241.57 billion to its partners to implement socioeconomic development projects, with 8.4 million micro credit loans given out, 60% of which went to women and 80% to rural areas. Under PPAF’s Interest-Free Loan Programme, 274,730 loans (65% to women) totalling Rs 12.2 billion were provided.

In FY2024, Pakistan Baitul Mal (PBM) received Rs 7.7 billion for financial assistance to destitute, widows, orphans, invalids, and other needy individuals. During July-March FY2024, Rs 1.4 billion was spent on 12,303 scholarship cases, while Rs 660.1 million was disbursed as marriage grants, benefiting 4,107 families with Rs 400,000 per worker. The Workers Welfare Fund (WWF) also disbursed Rs 575.5 million in death grants, covering 1,060 cases at Rs 800,000 per worker.

Copyright Business Recorder, 2024

ISLAMABAD: The cumulative education expenditures by federal and provincial governments declined as a percentage of GDP in the fiscal year 2023 and is estimated at 1.5 per cent of GDP compared to 1.7 per cent of GDP in the previous year.

The Economic Survey 2023-24 noted that expenditures on education-related activities during fiscal year 2023 increased 13.6 per cent and reached Rs 1,251.06billion from Rs 1,101.7 billion.

During 2021-22, the Pakistan Social and Living Standards Measurement (PSLM) Survey was not conducted by the Pakistan Bureau of Statistics (PBS) due to the scheduled Population and Housing Census 2022.

Therefore, the figures for the latest survey regarding GER and NER may be considered for the analysis.

However, according to the Labour Force Survey 2020-21, the literacy rate was 62.8 per cent in 2020-21 as compared to 62.4 per cent in 2018-19, higher in males (increased from 73.0 per cent in 2018-19 to 73.4 per cent in 2020-21) than females (from 51.5 per cent to 51.9 per cent for the same period).

Area-wise analysis suggest literacy increased in both rural areas from 53.7 per cent in 2018-19 to 54.0 per cent in 2020-21, while in urban areas, it increased from 76.1 per cent in 2018-19 to 77.3 per cent in 2020- 21. The male-female disparity seems to be narrowing down over time. The literacy rate has gone up in all provinces, with Punjab (increased 66.1 per cent to 66.3 per cent), Sindh (61.6 per cent to 61.8 per cent), Khyber Pakhtunkhwa (52.4 per cent to 55.1 per cent), and Balochistan (53.9 per cent to 54.5 per cent).

The literacy rate (10 years and older) is 60 per cent, showing that males are more literate than females. Punjab is at the top, while Balochistan is at the bottom. Youth literacy (15- 24 years) is 72 per cent (male: 79 per cent and female: 65 per cent). The province-wise comparative situation is the same, with higher disparities for females than males in youth literacy rates. The adult literacy rate is 57 per cent (male: 68 per cent and female: 46 per cent), which indicates that the adult male population is more literate than the adult female population.

In the PSLM 2019-20, the out-of-school children (OOSC) rate was 32 per cent in the country, with a higher rate of female OOSC (37 per cent) than males (27 per cent). Punjab had a 24 per cent OOSC rate, Sindh 44 per cent, Khyber-Pakhtunkhwa 32 per cent, and Balochistan 47 per cent. In all provinces, more females were out of school than males.

Copyright Business Recorder, 2024

ISLAMABAD: Pakistan is facing a shift from water-stressed to water-scarce status due to factors such as population growth, industrial expansion, inefficient irrigation, unsustainable groundwater use, inadequate storage, low water productivity, poor efficiency, and contamination of water resources. This has led to both quantitative and qualitative water losses.

According to Economic Survey 2023-24, to tackle these challenges, the water sector’s long-term planning acknowledges these issues based on the National Water Policy. The plan adopts the Integrated Water Resources Management (IWRM) approach, aligning with the policy’s objectives.

The connection between water, food, climate, and energy security becomes more evident in the impending water crisis.

The comprehensive plan addresses this nexus, guided by equity, efficiency, affordability, participatory decision-making, environmental sustainability, and practicability in line with Vision 2025 and the National Water Policy in its Northern Areas.

Rainfall across the country varies significantly in quantity, timing, and spatial distribution. The mean annual precipitation ranges from under 100 mm in portions of the Lower Indus Plain to over 750 mm near the foothills of the Upper Indus Plain. The nation relies on the three western rivers of the Indus (Kabul, Jhelum, and Chenab).

Meanwhile, the three eastern tributaries – Ravi, Sutlej, and Beas – were allocated exclusively to India. Approximately 2.66 million acre-feet (MAF) of water flows from India to Pakistan through these eastern rivers, complemented by an additional 3.33 MAF of runoff generated within Pakistan’s catchments.

The Kabul River contributes 21 MAF to Pakistan’s total surface water. According to Indus River System Authority (IRSA) facts and figures (Year 2022), the Indus River System receives an average annual inflow of about 146 to 150 MAF, predominantly sourced from snow and glacial melting.

The current water availability at canal head works is about 97.51 MAF, with estimated annual losses of around 50 MAF. Pakistan extracts approximately 50 to 52 MAF from aquifers, surpassing the sustainable limit of safe yield (Wapda).

Regarding vulnerability to climate change, Pakistan ranks 5th in the Global Climate Risk Index 2023, based on weather-related events from 2000-2019.

Despite contributing less than 0.9 percent to total global emissions, the country demonstrated high vulnerability during the 2022 devastating floods, highlighting the urgent impact of climate change.

Water projects achieved remarkable milestones, setting a precedent for excellence and innovation in water resource management. The dedicated efforts yielded key accomplishments that have addressed critical challenges and paved the way for sustainable and resilient water systems.

Copyright Business Recorder, 2024

The Economic Survey’s relevance, limited to data analysis, is neither up to date (limited to July-March or for nine months for most indicators even though monthly data for another two months is available on Finance Division and Pakistan Bureau of Statistics websites) nor unbiased as it has a penchant for supporting the ruling administration’s policies which renders the annual exercise of presenting it amidst much fanfare by the Finance Minister a day before the budget, meaningless and redundant.

In years when there is an administration change, the outgoing team laments a reverse bias, however this time around there is clearly an overt bias in favour of the Caretakers perhaps as the caretaker finance minister’s tenure - 17 August 2023 to 3 March 2024 - formed the major period under consideration by the Survey team.

Political pundits however claim that this strengthens the general perception that all the key stakeholders, civilian and military, were firmly on board in the selection of the caretaker economic team leaders as there was widespread acknowledgement that Pakistan’s economic recovery merited top priority.

This bias is indicated in the observation that the “Government’s dedicated efforts to complete 2023 Stand-By Arrangement (SBA) have yielded significant progress in reinstating economic stability.” The stability is evident when compared to the low base of last year which may explain why the Survey cleverly focuses on percentages rather than on total figures though there is a need for clarification/rationalization in some instances.

An example is the GDP growth projection of 2.4 percent for this year against negative 0.2 percent last year – but the investment to GDP ratio plummeted by one percentage point – from 14.1 to 13.1 percent this year with investment decreasing by 1.7 percent in real terms.

Savings increased from 12.6 percent last year to 13 percent this year, baffling given the average inflation of 24.5 percent July-May by the Pakistan Bureau of Statistics – a rate that should have implied negative private savings. Pakistani governments have negative savings evident from the budget deficits however inexplicably the Survey fails to provide separate data for public and private savings.

Be that as it may, this implies an investment-savings identity indicative of the fact that the government did not rely on foreign savings (borrowings) to increase the investment rate as in past years – no doubt as access to foreign commercial banking sector abroad as well as through issuance of sukuk/Eurobonds was not available due to Pakistan’s poor rating.

One major point of departure from previous surveys is the fact that improvements in key macroeconomic data of particular relevance to the general public post-date the departure of the caretakers which sceptics maintain reflect the primacy of public opinion by an elected government as opposed to a caretaker set-up: (i) the decision to review GDP growth for the first two quarters was taken end March and revised upwards for both quarters in May; (ii) inflation plummeted from 23.1 percent in February to 20.7 percent in March to 17.3 percent in April and 11.8 percent in May; and (iii) with the lack of organized labour exchanges in the country – in urban centres and more so in rural areas, claims of a decline or constant unemployment rate (6.3 percent) has little relevance. The irony is that neither of these adjustments contributes to any feel good factor as the public has its hand on the pulse of these indicators.

The Survey claims that “the economy has experienced a resurgence in moderate growth and a reduction in external pressures.” External pressures may have eased as all outstanding loan payments were made and roll-overs deferred however pending payments to foreign investors in the country especially those operating under the China Pakistan Economic Corridor (CPEC) umbrella should have been noted in the Survey.

Additionally, reliance on external resources has not abated as a proactive policy measure. The Survey notes that “Special Investment Facilitation Council (SIFC) aims to enhance the country’s business environment by providing a platform that supports foreign businesses and addresses obstacles that international companies may encounter thereby facilitating their progress.

These initiatives will help revitalise the manufacturing and mining sector and contribute to accelerate performance in the medium term.” SIFC members - senior most federal and provincial governments as well as civilian and security establishment – have to-date undertaken several high level visits to friendly countries seeking extension of roll-overs till the end of the next Fund programme, direct foreign investment inflows without government guarantees and deferral of repatriation of profits on existing investment; yet since its establishment on 17 June 2023 there has been no inflow of pledged investment though one may argue that roll-overs of over 9 to 10 billion dollars till the end of the yet to be agreed Fund programme may be secured.

There is no word of caution that sovereign guarantees must be sparingly given or contracts must be carefully vetted to ensure that there are no long negative term implications as are evident in the contracts signed with Independent Power Producers under the umbrella of the China Pakistan Economic Corridor.

Current expenditure has been cited as 12.33 trillion rupees July-March while the total budgeted amount was 13.3 trillion rupees – a rise of 33.4 percent which by itself explains the persisting double digit inflation.

To conclude, one would hope that the government revisits the Survey’s terms of reference and allows the team to note all issues, especially those sourced to flawed decisions, and focus on out of the box recommendations.

Copyright Business Recorder, 2024

ISLAMABAD: Pakistan will miss the inflation target of 21 percent set for the current fiscal year and will remain in the range of 23-24 percent, suggested the Economic Survey 2023-24.

During July-April fiscal year 2024, the Consumer Price Index (CPI) inflation rate remained at 26 percent, compared to 28.2 percent recorded in the same period last year. This indicates a better trend of slowing inflation.

Year-on-year, CPI inflation recorded at 17.3 percent in April 2024, down from 20.7 percent in March 2024 and 36.4 percent in the corresponding month last year. Therefore, the CPI inflation experienced a month-on-month decline in April 2024, falling to 0.4 percent from an increase of 1.7 percent recorded in the previous month.

Pakistan’s headline inflation decelerates further to 11.8% in May 2024

Inflation has become the most significant economic challenge in Pakistan. This problem did not arise suddenly but developed over the last three years. Globally, inflationary pressures have been observed after COVID-19.

Domestically, measures taken to address high and increasing fiscal and current account deficits resulted in double-digit inflation on a year-on-year basis since August 2019. The issue was highlighted in November 2021 when both food and non-food components of inflation surpassed single digits.

The average CPI inflation rate spiked to 29.2 percent in fiscal year 2023, and by May 2023, the year-on-year inflation rate had soared to 38 percent. This affected all CPI components, especially food and energy, which surpassed core inflation. The Russia-Ukraine conflict in fiscal year 2023 triggered a global economic crisis, causing substantial disruptions in food and energy supply chains.

Pakistan’s depleted foreign exchange reserves led to currency depreciation, exacerbating inflation. The floods in 2022 also resulted in significant economic damage, severely impacting the agriculture sector and disrupting the supply of perishable essential items, leading to increased prices. Political and economic uncertainties further fueled excessive aggregate demand, compounding inflationary pressure.

The survey noted that inflation was mainly driven by a gap between demand and supply, caused by excessive demand for goods and services compared to supply. This was influenced by increased government spending and growing consumer demand.

Additionally, factors such as rising energy prices, higher import costs, and wage pressures contributed to inflation. Fluctuations in the exchange rate, caused by economic factors, also increased costs for imported goods and services, adding to inflationary pressure. Pakistan heavily relies on imports for essential commodities like oil and food. While the prices of these commodities began to decline, they remained higher than prepandemic levels during the current fiscal year.

The conflict in Gaza and Israel has the potential to escalate and affect the broader region, which is responsible for 35 percent of global oil exports and 14 percent of gas exports. Ongoing attacks in the Red Sea, an important trade route handling 11 percent of international trade, along with the war in Ukraine, could cause new supply shocks impacting global recovery and leading to increased food, energy, and transportation costs.

Container shipping costs have already increased, and the volatile situation in the Middle East raises concerns. Further economic fragmentation may hinder cross-border commodity flows, intensifying price volatility. Additionally, extreme weather events such as floods and droughts, compounded by the El Nino phenomenon, could further raise food prices, worsen food insecurity, and challenge global efforts to control inflation.

In the medium term, the inflation rate (i.e., fiscal year 2025 and fiscal year 2026) is projected to normalize due to improvements in the agriculture sector and anticipated favorable global and domestic conditions, the survey noted.

Copyright Business Recorder, 2024

KARACHI: The tight monetary stance by the State Bank of Pakistan (SBP) resulted in a massive surge in the federal government’s interest expenses, which rose by 54 percent to Rs 5.5 trillion in the first nine months of this fiscal year (FY24).

According to the Economic Survey issued on Tuesday, the federal government’s interest expenses were recorded at Rs 5.517 trillion during July-March of the current fiscal year as against Rs 3.582 trillion in the same period last year (FY23), showing an increase of Rs 1.935 trillion.

The annual budgeted estimate for the interest expenses is Rs 7.302 trillion for FY24 and the sharp rise in current expenditures (Rs 12.33 trillion) is also primarily attributed to a massive 54 percent increase in mark-up payments.

First cut in 4 years: SBP reduces key policy rate by 150 basis points, takes it to 20.5%

The federal government’s interest expenses on domestic and external debt during July-March of this fiscal year is near about the total mark-up expenses incurred during the last fiscal year (FY23). The government paid Rs 5.695 trillion on account of mark-up payment during the last fiscal year.

Interest expense on domestic debt was recorded at Rs 4.807 trillion, which is 55 percent higher as compared to interest expense on domestic debt in the same period of preceding year. The annual budget expenses for FY24 are Rs 6.43 trillion.

Economic Survey revealed that the main reasons for increase is due to high cost of borrowing on new domestic debt and resetting of existing floating rate debt at higher rates on back of higher policy rate.

As around 74 percent of domestic debt is on a floating rate, the government’s interest payment surged with the increase of the policy rate.

The Monetary Policy Committee of State Bank of Pakistan (SBP) started monetary tightening in Sep 2021 to contain the inflation. MPC increased the policy rate by 25 bps to 7.25 percent in September 2021 and gradually it rose to 22 percent in June 2023.

Moreover, some of the increases in debt servicing are attributed to the expiration of the Debt Servicing Suspension Initiative (DSSI), which resulted in the accumulation of both long and short-term debt servicing.

Survey said that during July-March FY 2024, since external financing remained within the medium-term debt risk targets of 40 percent, significant borrowing had to be raised from domestic debt capital markets. In this regard, during the period under review, more than 70 percent of domestic debt stock was comprised of floating rate instruments, and a higher policy rate of 22 percent during the year triggered a sharp rise in domestic debt servicing.

The federal government has made Rs 710 billion interest payment on external debt during the first nine months of this fiscal year as against the full year Rs 872 billion allocated for FY24.

Domestic debt was recorded at Rs 43.4 trillion, revealing an increase of Rs 4.6 trillion. Following section highlights the developments in various components of domestic debt during the first nine months of the current fiscal year.

External public debt was recorded at US$ 86.7 billion at end-March 2024, revealing an increase of around US$ 2.6 billion during the first nine months of the current fiscal year.

Copyright Business Recorder, 2024

EDITORIAL: The Economic Survey 2024-25 gives good news: key macroeconomic indicators are better than the comparable period of last year with GDP growth rate of 2.38 percent this year against negative 0.21 percent last year (attributed to “catastrophic floods, surging world commodity prices, global and domestic monetary tightening and political uncertainty” though these catastrophic floods had a “fertility impact” on major crops - wheat, rice, cotton) with agriculture growth at 6.25 percent this year against 1.55 percent last year, industry growth at 1.21 percent this year against negative 2.94 percent last year, and services grew by 0.86 percent last year and positive 1.21 percent this year.

The not so good news is that the comparison with July-March 2022-23 is invidious as the then Ishaq Dar-led Finance Ministry had brought the country perilously close to default through implementing two majorly flawed policies that were violative of the pledges made under then then ongoing International Monetary Fund (IMF) programme leading to its suspension: (i) announcing unbudgeted 110 billion-rupees electricity subsidy to exporters, while 33 million Pakistanis were living under the open sky due to the devastating summer 2022 floods; and (ii) controlling the rupee-dollar parity that led to multiple prevailing exchange rates which, in turn, strangled official remittance inflows by 4 billion dollars. The obvious denouement: the bar was so low last fiscal year that any improvement, especially when calculated in percentage terms, would appear to be significant.

In addition, in spite of the bumper wheat crop this year the poor judgement call of the caretaker Punjab government to allow imports led to inability of the provincial government to purchase wheat directly from farmers due to lack of storage facilities leading to thousands of farmers facing a financial crisis.

Sadly this did not merit a comment in the Survey. And though cotton and cotton yarn exports rose on the back of a bumper cotton crop, yet total exports of the textile chain declined from 14.115 billion dollars July-April, 2023 to 13.550 billion dollars in the comparable period of this year. This is reflected by the fact that textile growth was negative 8.3 percent (July-March 2024) with pharmaceutical growth at 23.2 percent (Pakistan’s pharma sector is heavily dependent on import of raw materials) and furniture at 23.1 percent.

Large Scale Manufacturing sector (LSM) grew by 0.1 percent against negative growth last year. LSM data needs clarity on two counts.

First, there has been a steady widening of the differential in the LSM growth rate this year when compared with the same period last year – in July-October 2023, LSM experienced negative 1.67 percent growth against negative 0.44 percent in the comparable period of this year which widened to negative 2.67 percent July-January 2023 to negative 0.52 percent July-January this year and to negative 0.10 percent July-March this year to negative 6.99 percent in the comparable period of last year.

Bafflingly, this improvement occurred when investment to GDP declined this year to 13.1 percent from 13.6 percent last year.

Another surprising statistic is the claim that savings as a percentage of GDP improved from 12.6 percent last year to 13 percent this year – and this in spite of the inflation rate of 26 percent July-April cited in the Survey this year against 28.2 percent for July-June last year.

The general perception is that under- and over- stated data may perhaps have been considered critical to appeasing a restive public and convince the Fund that the economy has begun to show dividends based on policies being implemented under the nine-month-long Stand-By Arrangement (SBA) programme.

Domestic debt rose from 35 trillion rupees as stated in last year’s Survey to 43.4 trillion rupees this year – a rise of 24 percent, though external debt remained constant no doubt because of the inability of the government to procure affordable loans from the commercial banking sector abroad or issue sukuk/Eurobonds due to poor rating that has yet to be upgraded since approval of the SBA effective July 2023.

Poor rating or not the domestic stock market improved markedly perhaps on the back of the under negotiation successor to the SBA Fund programme.

Federal tax revenue as a percentage of GDP was a low 6.3 percent July-March this year against 6.1 percent last year with total current expenditure at 11.6 percent of GDP against 11 percent last year. Total revenue, however, was 9.2 percent this year as opposed to 8.3 percent last year.

In total terms direct taxes increased by 41.1 percent that may be construed as an attempt to deliberately mislead the public as the bulk of these direct taxes are on the back of withholding taxes imposed in the indirect tax mode whose incidence on the poor is greater than on the rich and is passed on in pricing invariably.

Needless to add, the auditor general in his report had urged Federal Board of Revenue to desist from this patently dishonest exercise yet to no avail.

Three major improvements are in the current account deficit though desired inflows from exports and remittances have yet to reach 2022 levels, the rise in foreign exchange reserves (strengthened almost entirely by the rollovers by friendly countries) and an improvement in the primary surplus though that is on the back of a rising budget deficit in total terms however the Survey notes that the deficit is the same as last year in percentage terms.

The Survey notes that the performance of the economy in the current year was below expectations. This observation does not take account of the usual over-optimistic projections made in our budgets – some targeted towards the general public (inclusive of understating the rate of inflation at 11.3 percent for May and an unrealistic 6.3 percent unemployment) while others are focused on appeasing multilateral lender concerns especially at present when negotiations on the next longer term IMF programme are under way that entail agreement on the macroeconomic indicators (measured by their acceptability by the Fund team) on which would depend the way forward, read conditions for the next programme – an element that accounts for the inordinate delay in the presentation of the three-year Budget Strategy Paper.

Copyright Business Recorder, 2024

ISLAMABAD: Economy is likely to have expanded by 2.4% in the fiscal year that ends this month, missing a target of 3.5%, the government’s economic survey showed on Tuesday, a day before the country’s federal budget is unveiled.

It was, however, an improvement on last year’s contraction of 0.17% and in line with the full-year projection of the State Bank of Pakistan, which cut its key interest rate by 150 basis points on Monday as it strives to boost the economy.

Pakistan’s current account deficit narrowed sharply by 95% to $200 million in the July to April period of FY24 versus $3.9 billion in the same period a year ago, the survey showed.

July-March economic survey envisages 3.5pc growth

The current account registered three straight months of surpluses until April, and May could be another month of surplus, Finance Minister Muhammad Aurangzeb said at the launching ceremony of the report.

The government in its monthly economic review at the end of May said it was targeting economic expansion of 3.6% for the new fiscal year starting in July, amid an uptick in economic activity.

Pakistan is in talks with the International Monetary Fund for a loan estimated to be anything between $6 billion to $8 billion to avert a default for an economy that is growing at the slowest pace in the region. Aurangzeb said talks with the IMF had been “productive and constructive” and that Pakistan was committed to economic reforms being discussed with the lender.

Prime Minister Shehbaz Sharif has publicly expressed his commitment to tough reforms since coming to power in a February election. These would be critical to securing the IMF loan, but high prices, unemployment and a lack of new job opportunities have piled political pressure on his coalition government.

One of the most difficult expected demands of the IMF programme is the increasing of revenues to trim the fiscal deficit. The government’s total revenue for three quarters of the current year stood at 9.78 trillion rupees ($35 billion), the survey showed, against a target of 12.4 trillion rupees.

Aurangzeb said the current year’s revenue collection marked a 30% increase over the year before, which he termed “unprecedented”. However, the central bank says that with structural reforms remaining elusive, any increase in revenues would likely be from tax and levy hikes.

Other key performance indicators mentioned in the economic survey include a fiscal deficit at 4.5% of GDP up until April, against a target of 6.5% for the full year.

ISLAMABAD: Finance Minister Muhammad Aurangzeb Tuesday forewarned that there are no sacred cows and everyone has to contribute to the economy and stated that dialogue with the International Monetary Fund (IMF) for the new programme is moving ahead positively.

While addressing a press conference after launching Economic Survey 2023-24 on Tuesday, the minister said that the EFF would be Pakistan’s programme which would be aided supported, helped, and funded by the IMF.

The minister said that there is no such thing as strategic SOEs, however, there can be strategic activity but this activity does not need to be kept in the public sector and has to be managed under the public-private partnership.

Aurangzeb highlights country’s progress towards economic stability

Aurangzeb said that Pakistan had a very constructive and productive discussion with the IMF because of the successful conclusion of the 9-month Stand-By-Arrangement (SBA). Going forward Pakistan is committed to the IMF reforms agenda as we have to increase the tax-to-GDP ratio, and fix the energy sector and SOEs. He said that the discussion with the IMF is progressing very positively and the government has to increase the tax-to-GDP ratio and reform the energy sector and SOEs.

About external financing under the fund programme, he said that the way the government managed the fiscal year 2023-24, and a similar pattern will follow in the next fiscal year (2024-25),- rollovers as well as expected commercial bank borrowings.

The minister said that the IMF is the lender of last resort and Pakistan had no Plan Band had to take the nine-month SBA. He said that Pakistan would have been in an entirely different situation if he had not gone to the IMF at that point in time.

The minister said although he has been in office only for three and a half months but even when he was in the private sector he was very loud and clear that Pakistan should take the IMF programme.

About the performance of the economy, he said that the LSM side was encouraging primarily because of interest rates and energy prices but termed agriculture as a saviour and stated that agriculture is going to remain a huge leverage of growth as the country goes forward.

On the fiscal side, he said that there was a 30 percent growth in revenue which was unprecedented and the federal government was able to relieve on primary balance to the IMF due to surpluses generated by the provinces.

He said that the current account deficit projection was $6 billion and now the latest forecast is it would be around $200 million this fiscal year because $3.2 billion in remittances in May would result in another month of surplus.

He said the currency stability was due to three of four reasons including prevention of Hundi/Hawala, smuggling and Afghan trade transit was checked and the SBP moved on structural side through which exchange company’s capital requirement was increased, exchange companies involved in speculation were phased out, etc.

Going forward the government will ensure that speculation does not resurrect.

He said that the foreign exchange reserves of the country are a little over $9 billion and these have not been funded by debt stock. As a result, this would help the country to start the next fiscal year on a very good and strong note.

The minister said that the inflation rate has also come down to 11.8 percent in May from 48 per cent which led to a reduction in the policy rate by 150 basis points and monetary easing has started and every central bank in the world does not want to reverse its decision in terms of easing.

He said the market has responded positively and foreign buying has come back into the market.

He said that track and trace was a “spectacular failure”.

He said that the DISCOs have to be run by the private sector and one thing is very clear these would not remain in the public sector.

In response to a question regarding capacity payment, the Minister of State for Energy Ali Pervez Malik said he felt that capacity payment was a huge burden due to which they could not give relief in the electricity price, adding that sovereign commitments have to be respected and dialogue and talks could be the only solution.

Asked about the problems and potential crisis facing the agriculture sector, the finance minister said that agriculture and information technology are two sectors that have nothing to do with the IMF and the government can make an intervention in terms of finance, seeds etc.

He said that the agriculture sector is a very critical pillar of growth.

He said PASSCO would be restructured and efforts would be made to get the government out of business sector.

The minister said that the sole purpose of the China visit was to rejuvenate the second phase of the China-Pakistan Economic Corridor (CPEC) and there were business-to-business meetings and debt rollover is an ongoing discussion which would be carried forward.

Copyright Business Recorder, 2024

ISLAMABAD: The life expectancy in Pakistan has increased from 65.7 years to 67.3 years from 2015 to 2022, revealed Economic Survey 2023-24 released here on Tuesday.

According to the survey, a wide range of government initiatives such as the programme for the elimination of Hepatitis, the control of diabetes, and the expanded program on immunisation played a critical role in the increase in life expectancy.

The economic survey further revealed that Pakistan’s life expectancy of 67.3 years as compared with other South Asian countries’ average life expectancy of 71.6 years is 4.3 years low.

Health science advancements have increased life expectancy: expert

The healthcare performance of Pakistan is detailed by comparing key indicators from 2021 and 2022 to those of 2015. There has been a significant improvement in all indicators, indicating a better overall profile of Pakistan’s health sector.

A decrease in the prevalence of child stunting from 41.4 in 2015 to 34 in 2022, and an expansion of immunization programs nationwide, it further said.

This is evident from the rise in Diphtheria Pertussis Tetanus (DPT) immunisation from 72 percent of children in 2015 to 85 percent of children aged 12-23 months in 2022.

Currently, health expenditures in South Asia account for 3.1 percent of GDP, with maternal mortality rates in South Asian countries recorded at 138 per 100,000 live births.

Moreover, the infant mortality rate in 2021 was 30.8 per 1000 live births, while the mortality rate of children under five years stood at 37.1 per 1000.

It further revealed that Pakistan was spending just one percent of the GDP on health expenditures.

Pakistan’s health indicators have shown modest improvement compared to previous years as mortality rates and life expectancy at birth indicate progress, and the immunisation profile has also improved. However, when compared to other regions, the overall picture seems not so good.

In order to provide healthcare services to the population, it is important to have enough healthcare professionals. Therefore, it is crucial to increase the number of healthcare workers in order to ensure the efficient delivery of health services. In 2023, there were 299,113 registered doctors and 36,032 registered dentists, compared to 282,383 doctors and 33,156 dentists in 2022. This represents an increase in the number of registered doctors and dentists by 5.9 percent and 8.7 percent respectively, while the country has 127,855 nurses, 46,110 midwives and 24,022 lady health workers.

The survey acknowledged that currently budgetary allocations to the health sector as a percentage of GDP are low which is critical to achieving universal health coverage, saying it is crucial to allocate a significant percentage of GDP to public sector health expenditures.

In Pakistan, health expenditure as a percentage of GDP is currently very low, but there are positive signs that this allocation will increase over time compared to previous years.

Every year, the federal government allocates funds under PSDP for the improvement of the health sector and development projects being implemented by the Ministry of NHSR&C, federal projects of provincial nature and special areas, the Defence Division, and the Pakistan Atomic Energy Commission (PAEC).

During FY 2022-23, the total public health expenditure is one percent of GDP. The total health expenditures were Rs843.2 billion in FY 2023, and in FY 2022, it was Rs919.4 billion, decreased from the previous year by 8.3 percent, moreover, the allocation for FY 2024 from PSDP was Rs25.3 billion.

After the 18th Constitutional Amendment, the health sector was devolved to the provincial governments, but the federal government still funds sector projects through PSDP. The Federal PSDP for 2023-24 was Rs950 billion, of which, Rs25.282 billion or 2.66 percent of total PSDP allocated to health sector projects. The Ministry of NHSR&C is sponsoring 40 health sector projects with an estimated total cost of Rs148 billion.

The federal and provincial governments have undertaken the following initiatives and interventions. Pakistan hosted the Global Health Security Summit on the 10th and 11th February 2024 in Islamabad, marking a proactive stride towards providing essential health facilities. The summit aimed to pre-emptively safeguard the world against potential future health crises, embodying a collective endeavour by experts, policymakers, and stakeholders on a global scale.

National Health Vision of Pakistan (2016-2025) is aligned with the objective of enhancing the health of all Pakistanis, with a particular focus on women and children, by ensuring universal access to essential healthcare services. The Constitution of Pakistan also ensures the equal right of people to avail health care facilities. This vision has been realised through the establishment of a resilient and responsive healthcare system, which also targets the attainment of goals outlined in the Sustainable Development Goals (SDGs).

Pakistan is committed to achieving the SDG Agenda 2030. Within the dynamic realm of global development, the nexus of health and nutrition assumes paramount significance, serving as the bedrock for national progress and well-being. Under the 3rd goal of the SDGs, the pursuit of equitable access to healthcare and nourishment emerges as a central tenet, embodying our collective aspiration for a healthier and more robust future.

The journey toward realising the SDGs in the domains of health and nutrition exemplifies a testament to resilience, innovation, and strategic collaboration. Governed by the framework of the SDGs, Pakistan has traversed a complex landscape, addressing not only the delivery of healthcare services but also the comprehensive enhancement of nutritional standards across varied demographics.

Pakistan has made significant progress in promoting health and well-being by improving healthcare infrastructure and investing in preventive medicine.

Efforts have been made to reduce disparities, improve accessibility, and build resilience against emerging health challenges.

The government is committed to enhancing the health and nutrition of the population and is working towards achieving the SDGs 2030 targets. However, more action is needed due to low healthcare spending, inadequate facilities, and lack of awareness. By addressing these issues through proactive measures and increased investment, the government aims to achieve these targets by 2030.

Copyright Business Recorder, 2024

ISLAMABAD: Total tax exemptions, concessions, zero-rating and special tax treatments to various businesses, sectors/industries, lobbies/groups and investors have cost the government Rs3,879.2 billion in 2023-24 against Rs2,239.6 billion in 2022-23, reflecting an increase of Rs 1,639.6 billion.

The tax expenditure report-2024 issued on Tuesday revealed that the cost of tax exemptions registered a growth of 73 per cent during 2023-24 as compared to tax expenditure in 2022-23.

The tax expenditure report-2024 has not mentioned revenue loss on account of tax exemptions available to industrial units located in erstwhile tribal areas during 2023-24.

Tax exemptions for steel, ghee units in Fata/Pata: Industries urge govt not to give any extension, threaten to shut down units

Out of the total cost of exemptions of Rs3,879.2 billion in 2023-24, sales tax exemption (SRO.321(I)/2022) on local supplies of petroleum products caused a massive revenue loss of Rs 1,257,513 million during the current fiscal year.

The Economic Survey (2023-24) released here on Tuesday disclosed that the sales tax expenditure remained highest during 2023-24 as compared to revenue loss on account of income tax and customs duty. All kinds of sales tax exemptions/concessions caused revenue loss of Rs 2,858.721 million; followed by customs duty loss of Rs 543,521 million and income tax revenue loss of Rs476,960 million during 2023-24.

The single-largest contributor to the surge in sales tax exemptions was the exemption from sales tax on petroleum products through statutory regulatory orders (SROs), showing a massive revenue loss of Rs 1,257,513 million during 2023-24. The sales tax exemption on import of petroleum products caused revenue loss of Rs 81,225 million during this period.

The survey disclosed an interesting figure that the fixed sales tax regime on cellular mobile phones caused a revenue loss of Rs33,057 million in 2023-24 as compared to Rs1,021 million in 2022-23.

The Federal Board of Revenue (FBR) has suffered a revenue loss of Rs214 billion on account of sales tax exemption on imports during 2023-24 as compared to Rs257 billion during 2022-23, reflecting a decrease of Rs43 billion.

Sales tax exemption on local supplies caused a revenue loss of Rs461 billion in 2023-24 as compared to Rs133 billion in 2022-23, reflecting an increase of over Rs328 billion.

The cost of income tax exemptions amounted to Rs476.9 billion against Rs423.9 billion, showing an increase of Rs53 billion and the cost of customs duty exemptions was Rs543.5 billion in 2023-24 against Rs521.7 billion in 2022-23, reflecting an increase of Rs21.8 billion.

The Economic Survey has not mentioned revenue loss on account of exempt business income granted to independent power producers (IPPs).

Similarly, the survey has not mentioned any revenue loss from capital gains. The accumulative revenue loss on account of tax credits amounted to Rs24.374 billion in 2023-24 against Rs52.133 billion in 2022-23, showing a decrease of Rs27.75 billion.

The income tax exemption from special provisions of the Income Tax Ordinance has caused revenue loss of Rs 62.756 billion during 2023-24 as compared to Rs 68.841 billion during 2022-23.

The income tax exemption from total income has revenue impact of Rs 293.460 billion during the period under review.

The income tax exemption available to the government income caused revenue loss of Rs57.517 billion during this period.

The income tax exemption available to the deductible allowances caused revenue loss of Rs 5.912 billion in 2023-24 against Rs 14.506 billion, showing a decrease of Rs8.594 billion.

The reduction in income tax rates has revenue implications of Rs 25.492 billion during 2023-24 as compared to Rs 24.444 billion in 2022-23, showing an increase of Rs1.048 billion.

The FBR has suffered a massive revenue loss of Rs675 billion in 2023-24 as compared to Rs390 billion in 2022-23 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. The loss on account of sales tax exemption (import and domestic stage) has been increased by Rs 285 billion.

The FBR has suffered a loss of Rs357.997 billion due to sales tax exemptions available under the Eight Schedule (Conditional Exemption/reduced rates) of the Sales Tax Act, 1990, during the period of 2023-24 against Rs129.906 billion in 2022-23. The revenue loss from conditional exemptions has been increased by Rs228.091 billion.

The total revenue loss from the zero-rating facility granted to various sectors under the Fifth Schedule of the Sales Tax Act, 1990, amounted to Rs206.053billion during the period under review against Rs139.448 billion in 2022-23, reflecting an increase of Rs66.605 billion.

The FBR has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account.

The cost of income tax exemptions increased from Rs423.9 billionin 2022-23 to Rs476.960 billion in 2023-24, reflecting a decrease of Rs53 billion.

The cost of exemptions in respect of customs duty has been calculated at Rs543.521 billion in 2023-24 as compared to Rs521.7 billion in 2022-23, reflecting an increase of Rs21.821 billion.

The exemption of customs duty available under Chapter-99 (special classification provisions) of the Customs Act has caused a revenue loss of Rs34.864 billion in 2023-24 against Rs22.240 billion in 2022-23, reflecting an increase of Rs12.624 billion.

The concessions under the Fifth Schedule of the Customs Act, 1969 caused a revenue loss of Rs190.688 billion in 2023-24 against Rs172.978 billion in 2022-23, reflecting an increase of Rs17.71 billion.

The FBR has revenue loss of Rs44.107 billion in 2023-24 against Rs102.658 billion in 2022-23 on account of tariff concessions and exemptions available under Free Trade Agreements (FTAs) and the Preferential Trade Agreements (PTAs). The revenue loss has been drastically reduced by Rs 58.551 billion.

Similarly, exemption of customs duty on the items by the automobile sector, exploration and production (E&P) companies, general concessions and the CPEC caused a loss of Rs146.598 billion in 2023-24 against Rs192.950 billion in 2022-23, showing a decrease of Rs 46.352 billion.

The export-related exemptions cost revenue loss of Rs127.264 billion during 2023-24 against Rs30.878 billion during 2022-23, reflecting a massive increase of Rs96.386 billion.

Copyright Business Recorder, 2024

ISLAMABAD: The Government said on Tuesday that prolonged disruptions in Red Sea will continue to disrupt supply chains including massive increase shipping charges which will potentially stall the efforts to contain inflation.

According to Economic Survey 2023-24, despite these challenges, global merchandise trade showed notable resilience in Q4 of 2023, with a significant surge of 6.3 percent compared to pre-pandemic levels in Q3 of 2019. However, the overall performance of global merchandise trade in 2023 remained subdued, with a 5 percent decline to $ 24.01 trillion.

In 2023, there was a significant decline in exports from Russia (28 percent), China (5 percent), Japan (4 percent), and Korea (8 percent).

The US also saw a slight decline in exports (2 percent). On the other hand, there was an increase in exports from Germany (1 percent), Mexico (3 percent), and the EU (2 percent). The drop in merchandise exports was due to lower commodity prices, reduced trade volumes, and exchange rate fluctuations.

However, the rise in commercial services trade was attributed to the recovery of international trade and the increase in digital services delivery. Climate change has caused a 36 percent reduction in trade transit through the Panama Canal due to low freshwater levels, making the shipping industry more vulnerable.

The economic survey has revealed that over 90 percent of Pakistan’s trade volume passes through maritime routes, with land routes primarily serving China, Afghanistan, India, and Iran by truck. Air routes are mainly utilised for high-value and perishable goods.

The recent disruption in the Red Sea, a critical trade route, poses severe consequences for Pakistan’s trade and overall economy. The Red Sea has historically been the shortest and most efficient trade pathway between Asia and Europe.

Rerouting trade around the Cape of Good Hope extends the journey by over 3500 nautical miles and adds 10 12 days of sailing time, significantly inflating freight costs. Pakistan’s heavy reliance on the Red Sea route is evidenced by its trade statistics.

Approximately 60 percent of Pakistan’s exports, valued at US $ 16.3 billion, and 30 percent of its imports, $ 23.2 billion, during FY 2023 are from the US, EU, and UK.

The repercussions of disruptions in this vital trade route are multifaceted. Delayed arrivals of essential goods, including raw materials and finished products, disrupt domestic supply chains. This delay, particularly in the supply of imported raw materials, has led to production slowdowns, exacerbating the deceleration of the LSM sector. The escalation in freight charges poses a significant threat to Pakistan’s major export commodities, such as textiles, rice, and fruits.

Notably, the textile sector, which accounts for around 60 percent of Pakistan’s total exports, is under immense pressure. The timely availability of raw materials and machinery imports is crucial for textile and apparel producers. Any disruptions in shipping schedules result in production delays and increased costs.

For instance, in mid-January, shipping companies hiked freight charges by 140 percent, rising from $ 750 to approximately $ 1800. This not only impacts exporters but also affects the competitiveness of Pakistani products in international markets. Moreover, the escalating tensions in the Red Sea have led to a decline in demand for Pakistani rice from traditional buyers in the Middle East, the United States, and Europe.

The complexity of the Red Sea disruption underscores the severity of its consequences for Pakistan’s economy. Prolonged disruptions will continue to disrupt supply chains, potentially stalling efforts to contain inflation.

As such, addressing the challenges posed by these disruptions is imperative to safeguard Pakistan’s economic stability and global competitiveness.

Copyright Business Recorder, 2024

ISLAMABAD: With 4.51 million unemployed population, the rate of unemployment in Pakistan stands at 6.3 percent, the Economic Survey 2023-24 released here on Tuesday revealed.

The survey said that according to the latest available Labour Force Surveys (LFS) 2020-21, the total labour force stands at 71.76 million (48.5 million rural and 23.2 million urban). The employed labour force stands at 67.25 million (45.7 million rural and 21.5 million urban).

It further said that the Pakistan Bureau of Statistics (PBS) was conducting Labour Force Surveys (LFS) since 1963; however, LFS for 2022-23 could not be undertaken due to the engagement of PBS with the 7th Population and Housing Census. However, work on LFS 2024-25 is under process.

The employment structure in Pakistan has changed over the decades.

Due to technological transformation, the share of employment in the agriculture sector (37.4 percent) has shifted to industry and the services sector. The services sector is the largest growing sector of the economy, and the share of employment in the services sector was 37.2 percent in 2020-21.

The unemployment profile, categorised by age and gender, reveals that the youth (aged 15-24) have the highest unemployment rate of 11.1 percent, with 10.0 percent for males and 14.4 percent for females. The second highest unemployment rate is seen in the age group of 25-34 years, with a rate of 7.3 per cent. Among this group, 5.4 per cent of males and 13.3 per cent of females are unemployed. Notably, unemployment is more prevalent among females, especially those between 15 and 24 years of age. This situation forces the youth to wait for employment opportunities after entering the labour force, which restricts their learning opportunities and may lead to a rise in discouraged workers.

Pakistani workers play a crucial economic role by sending remittances to their home country. These remittances serve as a vital source of income for many households in Pakistan, contributing to poverty alleviation, improving living standards, and stimulating consumption.

More than 13.53 million Pakistanis have gone abroad through official procedures to work in over 50 countries until April 2024. About 96 per cent of Pakistani registered workers for overseas employment in Gulf Cooperation Council (GCC) countries, especially Saudi Arabia and the United Arab Emirates. They contribute to the development of Pakistan’s economy by sending remittances, the primary source of foreign exchange after exports.

During 2023, the Bureau of Emigration and Overseas Employment (BE&OE) and Overseas Employment Corporation (OEC) have registered 862,625 workers for overseas employment. An overall increasing trend (4 per cent) was observed in terms of emigrants registered in 2023 (862,625) as compared to 2022 (832,339).

In 2023, the highest number of workers who went abroad for employment was from Punjab (489,301) followed by Khyber-Pakhtunkhwa (210,150), Sindh (72,382), and tribal areas (36,609), Azad Jammu and Kashmir 33,904 and Gilgit-Baltistan 1,551.

According to the BE&OE, during 2023, more than 49.5 per cent (426,951) of Pakistani workers moved to Saudi Arabia for employment, followed by the UAE (26.7 per cent) to earn their livelihood. Oman employed 60,046 Pakistani workers (7.0 per cent), while Qatar offered jobs to 55,112 individuals (6.4 per cent). Bahrain and Malaysia hosted 13,345 workers (1.5 per cent) and 20,905 workers (2.4 per cent), respectively.

The highly skilled persons who proceeded abroad for employment increased from 20,865 in 2022 to 45,687 in 2023. Similarly, an increase of 26.6 per cent and 2.28 per cent was also observed in highly qualified and semi-skilled trades during 2023.

On the other hand, a rise of 8.7 per cent was witnessed in unskilled categories. However, number of skilled workers registered for overseas employment decreased from 347,733 in 2022 to 314,932 in 2023. Upskilling and workforce certification are the pressing needs of the time to meet international standards and demand. In this regard, the role of NAVTTC and TEVTA is crucial to producing a skilled and qualified force.

Copyright Business Recorder, 2024

ISLAMABAD: Pakistan’s petroleum import bill declined in the first nine months (July-March) of fiscal year 2023-24 due to lower consumption, according to the Pakistan Economic Survey 2023-24 released on Tuesday.

The decline in consumption can be attributed to the decline in economic activity and increase in product prices, according to the survey.

Total imports of petroleum products declined to 11,047 thousand MT at a value of US $ 8.36 billion.

The major imported products are motor spirit (MS), high-speed diesel (HSD) and crude oil. As compare with nine month of last fiscal year 2022-23, MS import bill declined from $3.704 billion to $3.156 billion, HSD from $1.646 billion to $1.050 billion and crude oil from $4.287 billion to $4.051 billion.

The consumption of petroleum products has shown a decline of 7.2 percent (from 13.3 million tonnes to 12.3 million tonnes), during the first nine months (July-March) 2023-24. For instance, the survey pointed out, the transport sector alone has witnessed a decline in consumption of petroleum products from around 10.2 million tonnes to 9.8 million tonnes (a decline of 4.8 percent).

Oil and gas exploration companies showed a mixed trend during the period under review. A two percent decline has been witnessed in gas exploration and 1.5 per cent raise in crude oil production.

The gas production has been declined from 1,190 mmcft in first nine months of previous fiscal to 1166 per mmcft same period current year.

Crude oil production, however, raised by 1.5 percent from 25.5M barrel to 25.7M barrel.

Oil and gas exploration companies have been included in the top five sectors with 13.5 percent at sector-wise market capitalisation at the Pakistan Stock Exchange. The market capitalisation of these companies increased from Rs812.491 billion on June 2023 to Rs1.273 trillion by end March 2024 or 56.7 percent increased.

The maximum gas consumption is from the power sector, domestic, and fertilisers, with 894 MMCFD, 864 MMCFD, and 764 MMCFD, respectively.

Copyright Business Recorder, 2024

ISLAMABAD: The federal government has collected Rs719.592 billion petroleum levy (PL) on petroleum products in the first nine months (July-March) of the fiscal year 2023-24 against a PL budgeted target of Rs869 billion, according to Pakistan Economic Survey 2023-24.

The government raised the PL ceiling on petroleum products from Rs50 to Rs60 per litre in the current fiscal year to meet the budgetary target of Rs869 billion.

The survey highlighted that the considerable improvement in the non-tax collection has been realised on the back of higher receipts from SBP profit, PL, mark-up (PSEs and others), and royalties on oil/ gas, etc.

Higher receipts from the PL have driven substantial growth in the non-tax collection due to a gradual increase in PL from Rs10 (July 2022) to Rs50 per litre (November 2022).

As a result of this adjustment, receipts under the petroleum levy surged by more than 300 percent, reaching Rs579.9 billion in fiscal year 2023, as compared to Rs127.5 billion in fiscal year 2022.

In contrast, the growth in tax collection was reduced to 15.7 percent in the fiscal year 2023, from 28.1 percent in the fiscal year 2022.

The tax collection efforts faced numerous challenges due to massive floods, import compression, economic slowdown, a considerable decline in LSM output, and zero rating on petroleum products to relieve the masses, the survey maintains.

Copyright Business Recorder, 2024

ISLAMABAD: The information and communication industry demonstrated growth of -3.02 per cent because of a decline in telecommunication (Spectrum fee was down by Rs75 billion in fiscal year 2024 compared to fiscal year 2023), the Economic Survey 2023-24 noted.

The survey further noted that the IT industry in Pakistan currently generates an annual export of around $2.6 billion. However, to achieve the ambitious target of yearly exports of $15 billion in the next five years, adding at least 200,000 proficient and specialised IT professionals is necessary.

The industry holds substantial investment potential, with local investments of $6.3 billion and FDI (Inflow) of $1.4 billion from 2019 to March 2024.

Despite economic challenges such as higher business costs and inflationary pressures in fiscal year 2024 (July-March), the telecom sector showed resilience, expanding its services and generating telecom revenues of Rs735 billion (estimated).

During fiscal year 2023, the telecom sector remained a significant source of revenue generation, with Rs340 billion in GST, withholding tax, regulatory fees, initial and annual licence fees, and other taxes. During fiscal year 2024 (July-March), the telecom sector also contributed Rs213 billion.

ICT export remittances have surged from $339 million (17.44 per cent) to $2.283 billion during fiscal year 2024 (July-March) compared to $1.944 billion during the same period last year. In March 2024, ICT services export remittances surged to $306 million, an increase of 36 per cent compared to $225 million in March 2023.

Compared to the previous month of February 2024, ICT services export remittances increased by $49 million (19.1 per cent growth) in March 2024. The trade surplus of $1.996 billion, the highest in all services (87.43 per cent of total ICT export remittances), has been realised by the IT and ITeS Industry during the fiscal year 2024 (July-March), an increase of 15.84 per cent as compared to a trade surplus of $1.723 billion during the same period last year.

At the same time, the services sector has recorded a trade deficit of $1.655 billion during FY2024 (July-March). ICT sector exports of $2.283 billion are the highest among all services (39.31 per cent of the total export of services), with “Other Business Services” trailing at US$ 1.205 billion fromFY2024 (July to March).

Pakistan-based freelancers contributed foreign exchange earnings to Pakistan’s economy through remittances of $350.15 million during fiscal year 2024 (July-March).

The survey noted that recent developments, such as expanding broadband services, flexible pricing regulations for telecom operators amidst rising inflation, and the declining multi-SIM phenomenon, have led to a noteworthy increase in ARPU. In the fiscal year 2024 (Jul-Dec), ARPU reached Rs284/month compared to Rs248/month in the fiscal year 2023.

Pakistan offers its citizens some of the world’s lowest and most budget-friendly telecom prices. The one GB of data cost in Pakistan is a mere $0.12, making it the lowest in the region and sixth lowest globally.

An analysis of the effective price of one GB of data over the years reveals a consistently declining trend, with data costs per GB registering a 71 per cent decline since FY2018, decreasing from Rs114.6/GB to Rs32.8/GB during fiscal year 2023.

Broadband subscriptions surged to 130.5 per cent, increasing from 58.7 million in FY2018 to 135.4 million as of Mar 2024.

These statistics emphasise the growing significance of broadband services in Pakistan’s digitally connected society. Data usage in the telecom sector has seen a significant increase; the combined data consumption from both mobile and fixed broadband services in FY2024 amounted to a substantial 24,515 petabytes (estimated), emphasising the pivotal role of broadband in Pakistan’s digitally connected society and the need for infrastructure expansion.

Copyright Business Recorder, 2024

ISLAMABAD: The livestock sector of the economy has registered a growth of 3.9 per cent during 2023-24, revealed Economic Survey 2023-24 released here on Tuesday.

The survey said that gross value addition of the livestock sector has shown an increase, rising to Rs5,804 billion in 2023-24 from Rs5,587 billion in 2022-23, marking a growth rate of 3.9 per cent. Moreover, the sector’s net foreign exchange earnings make a meaningful contribution, accounting for approximately 1.6 per cent of the total exports in the country.

Pakistan has an estimated livestock 57.5 million cattle population, 46.3 million buffalos, 32.7 million sheep, 87 million goats, 1.2 million camels, 5.9 million asses, 0.4 million horses, and 0.2 million mules.

The country’s milk production has increased by 3.24 per cent from 67.8 million tons to 70 million tons. The country’s estimated milk production stands at over 70 million tons, of which, 26.1 million tons of milk production was from cows, 41.9 million tons from buffalos, 1.1 million tons from goats, 0.96 million tons from camels, and 42,000 from sheep.

The survey further said that animal husbandry is a cornerstone of rural economy, with more than eight million rural families deeply engaged in livestock production. This sector is a vital lifeline for these families, contributing significantly to their livelihoods by accounting for around 35-40 per cent of their total income.

In the broader economic landscape, the livestock sector has solidified its position as the primary driver of agricultural growth, comprising approximately 60.84 per cent of the agricultural value added and 14.63 per cent of the national GDP during 2024.

The government has recognised the inherent potential of this sector for economic growth, food security, and poverty alleviation in the country and has accordingly focused on its development. The overall strategy for livestock development revolves around promoting “private sector-led development with the public sector providing an enabling environment through policy interventions.” Regulatory measures have been implemented to enhance per unit animal productivity by improving veterinary health coverage, husbandry practices, animal breeding practices, assisted reproductive techniques, artificial insemination services, use of balanced ration for animal feeding, and controlling livestock diseases such as FMDE, PPR, LSD, and Avian Influenza.

The primary objective is to leverage the potential of the livestock sector for economic growth, food security, and rural socioeconomic uplift. To address investment-related issues in the value-added livestock export sector, the government is considering developing export meat processing zones and disease-free zones and compartments for FMD, PPR, and HPAI, among others, as well as, facilitating the establishment of modern slaughterhouses based on the industry’s requirements. The government also provides various schemes through the financial sector for a limited period to boost the livestock sector. The focus of the present government is on breed improvement for enhanced productivity, establishing a nucleus herd, identifying breeds well adapted to various agro-ecological zones of Pakistan, and importing high-yielding exotic dairy, beef, mutton breeds, and genetic materials (semen, ova and embryos). By implementing these measures, the government aims to stimulate growth in the livestock sector, generate employment opportunities, and contribute to the country’s overall economic growth and food security.

The poultry sector is a vibrant component of the livestock industry, providing employment opportunities to over 1.5 million people in the country. With a substantial investment of more than Rs1056 billion, this industry has experienced impressive growth, averaging a remarkable 7.3 per cent annual growth rate over the past decade. This expansion has led to Pakistan becoming the eleventh largest poultry producer in the world, with vast potential for future growth and advancement.

The poultry sector contributes around 40.7 per cent of the country’s gross meat production. To further strengthen and develop this industry, the poultry development strategy focuses on critical areas such as disease control, cutting-edge technology for poultry production in controlled environments, processing and value addition, improving poultry husbandry practices, and expanding product diversification.

Despite its growth and potential, the poultry sector in Pakistan faces various challenges, including disease outbreaks, feed quality issues, high production costs, non-availability of locally grown crops like soybeans, and market fluctuations. Addressing these challenges is essential for sustaining the sector’s growth and ensuring food security in the country.

Copyright Business Recorder, 2024

Pakistan’s Information and Communication Technology (ICT) sector exports remittances have surged 17.44% to $2.283 billion during FY2024 (July-March) compared to $1.944 billion during the same period last year, according to the Economic Survey 2023-24, which was revealed on Tuesday.

ICT exports are the highest among all services, consuming 39.31% of the sector’s total exports, with ‘Other Business Services’ trailing at $1.205 billion from FY2024 (July to March).

Key highlights of Pakistan Economic Survey 2023-24

In March 2024, ICT services export remittances surged to $306 million, an increase of 36% compared to $225 million in March 2023.

The IT industry in Pakistan currently generates an annual export of around US$ 2.6 billion. However, to achieve the ambitious target of yearly exports of $15 billion in the next five years, adding at least 200,000 proficient and specialised IT professionals is necessary. - Economic Survey 2023-24

Compared to the previous month of February 2024, ICT services export remittances increased by $49 million (19.1% growth) in March 2024.

The trade surplus of nearly $2 billion, the highest in all services (87.43% of total ICT export remittances) has been realised by the IT and ITeS industry during FY2024 (July-March), an increase of 15.84% as compared to a trade surplus of $1.723 billion during the same period last year.

At the same time, the services sector has recorded a trade deficit of $1.655 billion during FY2024 (July-March).

Pakistan-based freelancers contributed foreign exchange earnings to Pakistan’s economy through remittances of $350.15 million during FY2024 (July-March).

Economic Survey 2023-24: mobile phones dominate as Pakistan’s telecom sector imports stand at $1.62bn

“The development of Pakistan’s ICT sector can be gauged from the fact that over 20,000 IT and ITeS companies are registered with the Securities and Exchange Commission of Pakistan (SECP) comprising domestic and export-oriented enterprises,” the survey said.

Pakistan’s ICT industry exports to 170 countries and territories.

The top 15 export destinations for Pakistan’s ICT industry are the USA, UK, UAE, Ireland, Singapore, Canada, China, Saudi Arabia, Germany, Norway, Sweden, Australia, Switzerland, Japan, and Malaysia.

Capacity utilisation of Pakistan’s cement industry dropped to 54.64% during FY24 (July-April), its lowest level on record, revealed the Economic Survey 2023-24 unveiled on Tuesday evening by Finance Minister Muhammad Aurangzeb.

Pakistan’s cement industry has an overall production capacity of 82.25 million tonnes, but local dispatches and exports totalled a paltry 37.45 million tonnes during the 10 months of the outgoing fiscal year.

This put capacity utilisation at around 55%, which is the lowest since at least FY2006-07. Data before this period was not available in terms of capacity utilisation.

In FY2007, production capacity stood at 30.5 million tonnes with total dispatches at 24.26 million tonnes.

During these 17 years, the industry has taken its capacity to 82.25 million tonnes. However, in the current economic environment, the cement sector has been one of the hardest hit amid record high interest rates, runaway inflation and a rollback of development projects by the government becoming major headaches.

“The cement industry in Pakistan has faced multiple challenges,” stated the Economic Survey 2023-24 in its chapter on ‘Manufacturing and Mining’.

“The government’s fiscal constraints and limited foreign aid have delayed rehabilitation efforts in flood-affected areas and caused the overall slowdown of the construction sector.

“Additionally, the economic slowdown in global markets has resulted in lower cement exports to significant export destinations like Sri Lanka and Bangladesh, which have foreign exchange crises. Besides, the industry has also been impacted by the massive increase in prices of construction materials.”

Pakistan exports its cement and clinker to Afghanistan, Sri Lanka, Maldives, Djibouti, Somalia, Tanzania, Kenya, Uganda, Mozambique, South Africa, Madagascar, Comoros, Seychelles, Iraq, Ethiopia, Qatar, and the USA, according to the Economic Survey.

Finance Minister Muhammad Aurangzeb unveiled the Pakistan Economic Survey 2023-24 on Tuesday, recapping the annual report on the country’s economic progress for the outgoing financial year.

With 2.38% growth (July-March) in FY2023-24 against a contraction of 0.2% in FY2022-23 and inflation reading at 24.5% in July-May of the FY24, Aurangzeb said Pakistan will manage external debt in FY25 similar to its pattern adopted in the outgoing fiscal.

Business Recorder presents major highlights of the document that is mostly based on July-March of FY24 figures.

• Real GDP grew by 2.38% in FY24, reversing the negative growth of 0.2% in FY23 on prudent policy management, resumed inflows from partners, and recovery in major trading partners.

• The key driver of economic growth in FY24 was the agriculture sector, which grew the most in 19 years, according to the survey. The sector grew by 6.25% in FY24, driven by 16.82% growth in key crops like wheat, rice, and cotton.

• Industrial sector grew by 1.21% in FY24, with manufacturing up by 2.42% and construction by 5.86%.

• Services sector, making up 57.7% of GDP in FY24, experienced a moderate growth of 1.21%.

• GDP at current market prices increased by 26.4% to Rs106 trillion in FY24, up from Rs84 trillion last year.

• Per capita income rose by $129 to $1,680, due to increased economic activity and exchange rate appreciation.

• Investment-to-GDP ratio fell to 13.14% in FY24 from 14.13% in FY23, mainly due to contractionary macroeconomic policies and political uncertainty.

• Saving-to-GDP ratio was 13% in FY24, slightly down from 13.2% in FY23.

• Growth of the automobile sector plunged by 37.4% against a contraction of 42.2% last year.

• Pharmaceuticals witnessed encouraging growth of 23.2%, against a contraction of 23.1% last year.

• Food group imports declined by 14.2%. The group’s imports dropped to $6.3 billion.

The government is focused on maintaining a stable economy by prioritising exports and investment. Through continued policy and reform implementation, growth is anticipated to reach its medium-term potential of 5.5% by FY 2027 gradually. - Economic Survey 2023-24

• Pakistan’s headline inflation Consumer Price Index (CPI) averaged at 24.52% during July-May in FY24. In FY2022-23, CPI stood at 29.2%.

• Current account deficit (CAD) shrank by 94.8% to $200 million in July-April, compared to $3.9 billion during the same period last year.

• Trade deficit in goods decreased by 21.6% to $17.7 billion in July-April from $22.6 billion last year amid a significant decline in imports.

• Primary income account deficit rose by 34.8% to $6.1 billion in July-April, compared to $4.6 billion last year, driven by higher dividend repatriation and interest payments.

• Remittances experienced a 3% year-on-year (YoY) decline, totaling $23.9 billion during July-April.

• Financial account saw net inflows of $3.9 billion in July-April, mainly due to inflows from the International Monetary Fund (IMF)’s Stand-by Arrangement (SBA) and friendly countries, compared to outflows of $0.6 billion last year.

• Foreign Direct Investment (FDI) inflows increased by 8.1% to $1.5 billion in July-April, compared to $1.3 billion in the same period last year.

• Pakistan rupee appreciated by nearly 3.0% during the first eleven months of FY24 against the US dollar.

• Total public debt stood at Rs67.5 trillion by end-March 24. Domestic debt was recorded at Rs43.4 trillion while external debt reached Rs24.1 trillion ($86.7bn).

• With high revenue collection of Rs9.8 trillion (41% higher YoY), fiscal deficit was contained at 3.7% of GDP against the last year same period’s deficit of 3.6%.

• Total expenditures during grew by 37% to Rs13.7 trillion (Rs10.1 trillion in same period last year) mainly on account of 33% higher current expenditure (Rs12.3 trillion).

• Primary Balance posted a surplus of Rs1,615 billion against a deficit of Rs503.8 billion.

• Tax collection grew by 29% while non-tax revenues increased by 91%. However, for July-May, the Federal Board of Revenue (FBR) revenue collection stood at Rs8.1 trillion.

Intensified competition with China and weakened external demand hit Pakistan’s textile sector, which remained at the receiving end during the outgoing fiscal year, albeit its contraction was lower.

“The textile sector witnessed a dip of 8.3% during July-March of 2024, compared to a contraction of 16% in the same period last year,” read the Economic Survey 2023-24, released on Tuesday.

As per the survey, significant decline was seen in cotton yarn at 12.2%, and cotton cloth at 7.3%, which account for more than 80% of the textile sector.

“The leading cause of reduced production was the drop in the unit value of exports amidst weak external demand for textiles, coupled with intensified competition from China,” the survey highlighted.

“Additionally, increased power tariffs following the removal of energy subsidies for export-oriented sectors, high cost of imported raw materials, the phasing out of the Export Finance Scheme, and high interest rates were among the significant factors affecting textile output,” it added.

The textile sector remains Pakistan’s most critical manufacturing sector. The sector contributes nearly one-fourth of industrial value-added and employs about 40% of the industrial labor force.

“Barring seasonal and cyclical fluctuations, textile products have maintained an average share of about 54.5% in national exports,” read the survey.

The Economic Survey found that the country’s cloth sector produces comparatively low value-added grey cloth of mostly inferior quality due to poor technology, scarcity of quality yarn, and lack of institutional financing.

The production of cotton cloth decreased by 5.54% during the fiscal, clocking in at 5.9 billion square meters in FY23-24, as compared to 6.2 billion square meters in the same period last fiscal.

Meanwhile, the exports increased in quantity only, whereas value-wise cotton cloth only $1.42 billion in FY24, as compared to $1.53 billion in FY23, down 7.5%.

Pakistan’s GDP per capita (or per capita income) witnessed a rebound this fiscal year, standing at $1,680 compared to $1,551 last year. Meanwhile, size of the economy increased to $375 billion based on market prices, according to the Pakistan Economic Survey 2023-24.

The GDP or economy’s size, valued at current market prices, reached Rs106,045 billion. In US dollar terms, the current fiscal year GDP converts to $375 billion.

“Stability in the exchange rate and surge in economic activity increased the per capita income by 8.3%,” the economic survey said. “The per capita income rose to US $ 1,680, from US $ 1,551 in the previous year.

“The real, fiscal, and external sectors, as well as financial markets, have demonstrated resilience and steady improvement.”

Meanwhile, the inflationary pressure that has been a concern started to ease in FY 2024. In May 2024, headline inflation reached its lowest point in 30 months. On a year-on-year basis, CPI inflation was 11.8% in May 2024, a significant decrease from 38% in May 2023.

This decline can be attributed to several factors, such as monetary tightening, fiscal consolidation, smooth supplies of food items, favorable global commodity prices, and exchange rate stability.

Meanwhile, the investment-to-GDP ratio for FY 2024 remained 13.14%, a decrease from 14.13% in FY 2023, attributed to a global slowdown, political instability in the country along with restrictive macroeconomic policies.

Gross Fixed Capital Formation (GFCF) stood at Rs12,122.5 billion, an 11.4% increase over the FY 2023. Both private and public investments grew by 15.8% and 18.2%, respectively.

The national saving rate remained steady, recorded at 13.0% in FY 2024.

Imports by Pakistan’s telecom sector soared by 117.9%, jumping to $1.623 billion during July-March FY2024, according to the Economic Survey 2023-24 revealed on Tuesday. The sector’s imports stood at just $745 million for the same period of the previous year.

The biggest jump was seen in mobile phone imports. They increased by 181.3% during July-March FY2024 and hit $1.3 billion compared to $462.7 million in the same period the previous year.

“The removal of import restrictions in concurrence with rupee appreciation since September 2023, created a favourable environment, leading to higher imports of mobile phones,” stated the survey.

However, the sector’s imports stand in stark contrast as part of total imports since the country has seen a decline in imports amid “policy tightening and other administrative measures”, according to the survey.

The total imports during July-March FY2024 amounted to $39.9 billion compared to $43.7 billion in the same period last year, declining by 8.7%.

The contraction in imports was broad-based, said the Economic Survey, adding that all significant groups recorded declines.

On a year-over-year basis, imports increased by 29.8% in March 2024 and stood at $4.9 billion against $3.8 billion in March 2023.

Quarter of Pakistan’s total imports comes from China

Just like its exports, Pakistan’s imports are also highly concentrated in a few countries. Pakistan imports from countries like China, Saudi Arabia, UAE, and Indonesia, which constitute around 50% of the total imports.

The share of imports from China increased from 21% to 26% during July-March FY2024, while the share of imports from the USA decreased from 4% to 3% during the period under review.

China is one of the three countries with which Pakistan has a Free Trade Agreement (FTA). The other two countries are Sri Lanka and Malaysia.

Finance Minister Muhammad Aurangzeb sounded a confident tone, saying that Pakistan will meet its external debt obligations in the coming fiscal year, amid reports that the country’s requirements surpass its current level of foreign exchange reserves.

“On the external finance side, once the International Monetary Fund (IMF) programme is in place, I don’t see that as a big challenge,” said Aurangzeb, remarks that were made as he unveiled the Economic Survey 2023-24 on Tuesday evening.

The State Bank of Pakistan (SBP) in its post Monetary Policy Committee (MPC) briefing said in FY24 the total external debt to be serviced amounted to $24.3 billion with $3.9 billion allocated for interest payments and the remaining $20.4 billion as principal repayments.

The central bank informed that $10.8 billion has been paid till 11MFY24. Moreover, $1 billion additional payment is expected in the remaining months of FY24, and this will take total repayment to ~USD 12bn.

Addressing media persons, Aurangzeb maintained that Pakistan will manage external debt in FY25 similar to its pattern adopted in the outgoing fiscal.

We will see rollovers. I do see some of the commercial bank borrowing coming back in: Finance Minister Muhammad Aurangzeb

“We will follow almost the same pattern in terms of our repayment schedule,” he said.

“We will see rollovers,” said the former banker. “I do see some of the commercial bank borrowing coming back in.”

Aurangzeb shared that during the last fiscal year “some of the appetite disappeared, especially from the Middle Eastern commercial banks” due to the delay in the IMF programme back then.

“Because of the delayed programme, our ratings went down and therefore, they withdrew their support,” he said.

The finance minister said that on the external finance side, Pakistan is entering the current fiscal year “on a much stronger note, than we were in the last year”.

Aurangzeb remained confident that the debt repayment would not be “a big issue”.

“I do see some of the commercial bank borrowing coming back in,” said the minister.

Aurangzeb declined to give an estimate on the amount of borrowing.

The finance minister said authorities in Islamabad remain engaged with rating agencies.

“I believe that they will wait for the Extended Fund Facility (EFF) of the IMF to take place.”

Capacity utilisation of Pakistan’s cement industry drops to lowest on record

Economic activity has been slow in the South Asian country for the last two years after the government implemented tough reforms under an IMF bailout in a bid to stabilise a crumbling economy.

However, the phase is not yet over as Islamabad is again in talks with the IMF for a new longer-term bailout after completing a short-term programme earlier this year that helped the nation avoid a default.

“We are looking at the EFF and a larger and longer programme with the Fund because we seek permanence in the macroeconomic stability. Until we achieve this, the rating agencies will not move,” he said.

Aurangzeb said the government remains very keen to go for an inaugural Panda bond during the next fiscal year, and “hopefully, this calendar year”.

Federal Minister for Finance and Revenue Muhammad Aurangzeb categorically stated that there are “no sacred cows” when it came to contributing to Pakistan’s economy, remarks that were made as he unveiled the Economic Survey 2023-24 on Tuesday evening.

Pakistan missed its growth target of 3.5% in the outgoing fiscal year, posting a figure of 2.4%, revealed provisional figures of the survey, but Aurangzeb maintained that the road to stability is ongoing.

Agriculture sector has recorded highest growth in the last 19 years which is a significant achievement towards ensuring food security and price stability. - Economic Survey 2023-24

The country also missed most of its economic targets despite an improved performance by the agriculture sector with industries and services sector registering subdued growth of 1.2%.

“In FY22-23, our GDP contracted by 0.2%, while PKR depreciated by 29%, and our foreign exchange reserve went down to two weeks of import cover,” he said, recalling that the economy was in much worse shape earlier.

The former banker also reiterated his stance on “no such thing as Pakistan having a strategic state-owned enterprise”.

“I would like to repeat that there is no such thing as a strategic SOE,” he said, sitting alongside Minister for State Ali Pervaiz and secretaries of finance and planning.

His stance on strategic SOEs has seemingly clashed with reports that suggest the government is looking to privatise all entities of the government, barring those where there is ‘strategic need’ to retain.

Aurangzeb, however, said that the SOE might still have strategic needs, but cannot be a strategic entity.

The reference came as Pakistan pursues an aggressive privatisation programme, also being advocated by the International Monetary Fund (IMF).

On the IMF, Aurangzeb said Pakistan’s Stand-By Arrangement (SBA), which concluded in April, helped the economy.

“Even when I was there in the private sector, I was loud and clear that we should enter a programme with the IMF. There was no ‘Plan B’.

“If the nine-month SBA had not been achieved, we would have been in a very different situation.

“On the new programme, I can say that we have made considerable progress.”

Pakistan is currently engaged in talks for a longer, larger programme with the IMF, and talks are reportedly set to continue virtually.

Meanwhile, the finance minister said Pakistan’s Large Scale Manufacturing (LSM) was affected due to high interest rates and energy prices.

“However, our saviour was the agriculture sector, and it will continue to remain a huge lever of growth as we go forward.”

He said that during the fiscal year 2023-24, Federal Board of Revenue’s (FBR) tax collection grew by nearly 30%, “which is almost unprecedented”.

The finance minister projected Pakistan’s current account balance to be in surplus in May, reiterating that administrative measures taken by the government also stabilised the currency.

“Foreign exchange reserves improved to over $9 billion. Full credit to the central bank. Our reserves are not funded by the debt stock.

“Inflation has lowered from 38% (in May,2023) to 11% (in May 2024) on the basis of which the central bank has cut the policy rate.”

Aurangzeb said foreign buying in Pakistan’s stock market is also a sign of confidence.

“The SBP reducing the key policy rate is an independent market of confidence. (But) we need to increase our tax to GDP ratio.

“There are no sacred cows when it comes to taxation. Everyone has to contribute to the economy,” he said, a day before he presents the government’s budget proposals in the National Assembly.

ISLAMABAD: Prime Minister Shehbaz Sharif-led coalition government is to unveil Economic Survey 2023-24 for nine months (July-March) on Tuesday (today), according to which economic performance of the country remained below expectations despite better performance by the agriculture sector, as the contractionary fiscal policy constrained the growth recovery.

According to Survey, fiscal year 2023-24 started with the lagged impacts of economic disruptions which resulted in economic contraction of 0.2% in 2022-23. This contraction was primary culmination of catastrophic floods, surging world commodity prices, global and domestic monetary tightening, and political uncertainty. These factors narrowed the growth prospects for the current year. In this backdrop, overall macroeconomic conditions appeared somewhat improved during 2023-24 as the real economic activities moderately recovered from the contraction in last year.

The real GDP grew by 2.4% during 2023-24 compared to a contraction of 0.2% in 2022-23. The growth was primarily led by agriculture, with significant increase in the production of wheat, cotton and rice, as all touched the highest ever level. The fertility impact of floods and favourable weather conditions complemented by better availability of inputs and policy incentives improved output. This recovery supported some of the agro-based industries which kept decency in manufacturing sector’s growth.

Budget: Rs65.6bn proposed for Suparco

Moreover, withdrawal of import prioritisation measures improved availability of raw materials for industry as reflected in almost slight growth in the large-scale manufacturing (LSM), which stood at 0.1% after showing contraction last year. This was despite muted domestic demand amid tight fiscal and monetary policies and costlier energy.

The constricted import demand, high costs of inputs/ energy and borrowing, and weak domestic demand dampened the growth of industrial and services sectors. Both industrial and services sectors managed to grow by 1.2% each; fiscal consolidation measures managed to post primary fiscal surplus in the first three quarters like last fiscal year. However, the contractionary fiscal policy constrained the growth recovery. Both domestic and foreign investment remained dormant.

The buoyancy in Pakistan Stock Exchange (PSX), with an overall bullish trend in the second half of 2023-24, reflects signs of recovery of investor confidence in anticipation of a relative political stability. The market optimism is partially based on anticipated macroeconomic stabilisation under the new IMF’s Extended Fund Facility (EFF) programme, and the likely SIFC induced flows of investment from Middle East.

On external front, current account deficit continued its downward slide and CAD almost wiped out as the trade deficit further narrowed by US$ 5 billion in the first 10 months (July-April FY24). The upside is that exports posted double digit growth whereas imports contraction continued and remittances complemented the improvement in CAD.

Inflationary pressures persisted at elevated levels in 2023-24, primarily as a result of hike in domestic energy prices. To mitigate the high inflation, the policy rate was maintained at historically high rate of 22% throughout the year. This high policy rate also had severe implications for the fiscal policy as the government had to generate more revenues to finance high fiscal deficit that largely stemmed from high domestic debt servicing.

Economic Survey 2023-24 envisaged a revival of the economy with a growth target of 3.5%, assuming restoration of political stability, external account improvement, macroeconomic stability, and an anticipated fall in global oil and commodity prices. The economic growth achieved is 2.4% as agriculture performed better than the target whereas industrial and services sectors fell short of the targets and posted modest growth.

Agriculture Sector: agriculture sector was envisaged to grow by 3.5% on the assumptions of favourable weather conditions, ample water availability, certified seeds, fertilizers, pesticides, affordable agriculture credit facilities and increased productivity of livestock. During 2023-24, agriculture sector rebounded with a strong growth of 6.3% as against the last year’s growth of 2.3%, with major contributions coming from important crops and cotton ginning. The production of three important crops; i.e., cotton, rice and wheat increased by 108.2%, 34.8% and 11.6%, respectively.

The crops benefited from timely availability of inputs (certified seeds, fertilizers and water), favourable weather conditions and a significant growth in disbursement of farm credit (40% during July-March FY24). The increase in cotton output can also be attributed to better quality of pest resilient seeds and timely announcement of attractive minimum support price before sowing season. Value added in other sub-sectors of agriculture increased with growth in other crops recorded at 0.9%, livestock (3.9%), forestry (3%) and fishing (0.8%). Within other crops, the output of fruits grew by 8.4%, followed by vegetables (5.8%), and pulses (1.5%) whereas considerable decline of 14.4% was recorded in oilseeds production.

Industrial sector was expected to recover in 2023-24 with a targeted growth of 3.4%, contributed by expected growth of 3.2% in LSM. This expected growth was based on improved supply of inputs, anticipated fall in global oil and commodity prices, public sector expenditure and mega projects for infrastructure development.

Industrial sector’s growth during 2023-24 was constrained by continued import management measures, higher costs of energy and raw material, high interest rates and weak domestic demand. Consequently, industrial sector posted a low growth of 1.2% during 2023-24. Large Scale Manufacturing (LSM), which accounts for nearly half of industry, recorded a meagre growth of 0.1% (FISIM adjusted).

Mining and quarrying sub-sector also witnessed a growth of 4.8% against its target of 1.2% due to increase in the production of coal (37.7%), crude oil (1.5%) and other minerals (5.6%). Valued added in small scale manufacturing, slaughtering and construction grew by 9.1%, 6.6% and 5.9%, respectively. Construction expenditure increased by both private sector and public sector enterprises. On the other hand, electricity generation & gas distribution registered a decline of 10.5% because of a decrease in subsidies in real terms.

The commodity producing sectors grew by 4% during 2023-24 and the growth impact was not fully translated into the dependent services sector which posted a lower growth of 1.2%. Wholesale and retail trade, the largest sub-sector with nearly one-third share, grew marginally by 0.3% as the growth impact of agriculture sector was more than offset by slow growth in manufacturing and import compression. Similarly, transport & storage, the second largest sub-sector, grew at 1.2% and this slow pace is attributed to reduced use of air transport, pipeline transport and decline in sales of commercial vehicles and POL sales. However, major positive contributions to this sub-sector were made by railways, water transport and postal services. Other major contributions to the services sector came from education (10.3%), human health & social work activities (6.8%), accommodation & food services activities (4.1%) and other private services (3.6%).

Investment-to-GDP ratio decreased from 14.1% in 2022-23 to 13.1% in 2023-24 with decrease in both public and private investment-to-GDP ratios. Investment grew by 17.6% in nominal terms, however, decreased by 1.7% in real terms due to high inflation.

National savings slightly decreased to 13% of GDP in 2023-24 from its last year’s level of 13.2% mainly because of lower availability of foreign savings. Pakistan’s reliance on external borrowing to finance investment has decreased. The effectiveness of import compression measures is evident from higher level of domestic savings which edged up to 7.3% of GDP from 6.8% of last year.

Federal Budget 2023-24 estimated consolidated fiscal deficit at 6.5% of GDP. During July-March 2023-24, fiscal deficit stood at 3.7% of GDP, almost the same as was during the corresponding period of last year (up by an insignificant 0.01 percentage point). Total revenue grew by 41%. Tax-to-GDP ratio increased marginally from 6.7% to 6.8% and tax revenue in absolute terms grew by 29.3%. Federal taxes continued to remain the major driver with 92.4% share in total tax collection.

Direct taxes increased by 41.4% with their share rising to nearly half of total tax collection. This increase was mainly due to upward revision of income tax rates and higher collections from corporate profits, earnings on bank deposits and investment in government securities. Indirect taxes increased by 21.1% with customs duties, sales tax and federal excise duty posting growth of 15.2%, 17.7% and 64.2%, respectively. Provincial taxes increased by 19.3% largely on account of GST on services. Non-tax revenue registered a better growth of 89.8% on the back of growth of mark-up (PSEs & others) (166.1%), SBP profit (162%), and petroleum levy (98.5%), etc.

Total expenditure grew by 36.6% during July-March 2023-24 mainly due to 33.4% growth in current expenditure as mark-up expenditure recorded a substantial growth of 54%. Servicing of domestic and foreign debts grew by 54.7% and 49.6%, respectively. Within non-mark-up expenditure, subsidies declined by 9.8%. Development expenditure rose by 14.2%, as higher provincial ADPs spending (23.1%) more than offset 7.8% decline in federal PSDP expenditure. Federal deficit declined from 4.2% of GDP to 4.1% while provincial surplus decreased from 0.5% of GDP to 0.4%. Primary surplus improved from 0.6% to 1.5% of GDP.

At the beginning of 2023-24, external sector faced increasing financing gap, high volatility in forex reserves market and tightening of global financial conditions that impacted forex reserves and increased pressures on exchange rate. Subsequently, a crackdown on smuggling of foreign exchange, reforms in exchange companies introduced by the SBP in September 2023, sustained improvement in current account balance and inflows from IMF and other foreign donors alleviated the pressures on FX market and supported exchange rate stabilisation.

Current account deficit substantially narrowed to $ 0.2 billion during Jul-Apr 2023-24, around 94.8% lower compared to $ 3.9 billion in the corresponding period of last year, explained by sizeable reduction in the trade deficit, increase in interest payments and profit/ dividend repatriation. Both a decrease in imports and an increase in exports have helped narrow merchandise trade deficit. The growth of exports was driven by increased production and higher export prices of agricultural and food products.

Copyright Business Recorder, 2024