Fiscal year 2007 economic targets missed: SBP and FBS unanimous in their figures

The government once again suffered a setback, as the country missed its major economic targets, including food inflation, large scale manufacturing, current account deficit, trade deficit, exports, and private sector credit during the last fiscal year due mainly to unsustainable policies.
The final report on the country's economy by the State Bank of Pakistan (SBP) is expected next month, in which final figures regarding economy performance and other fundamental reasons will be explained. However, the official figurers released by the SBP and the Federal Bureau of Statistics (FBS) show that major economic targets were not achieved during last fiscal year.
The country has missed its current account deficit target, which usually shows the overall position of the country's inflows and outflows payments. In the last fiscal year, the current account deficit widened by 40 percent to 4.8 percent of the gross domestic production (GDP) and all-time high level of seven billion dollars.
The government had set the current account deficit target at 4.3 percent of the GDP, however, for the first time in the history of the country, the current account deficit reached 4.8 percent of the GDP against the target of 4.3 percent in FY07.
The SBP statistics show during the last fiscal year, the country's current account deficit went up by $ 2.026 billion, as a result it reached new peak of $ 7.016 billion at the end of the last fiscal year while it stood at $ 4.99 billion in FY06. "Failure in achieving export target is the main cause of the widening current account deficit, besides widening trade deficit, services deficit and tremendous raised in income deficit during the last fiscal year", analysts said.
The other major key target missed during last fiscal year is export target, which is also a main factor for widening the current account deficit.
The country fell short of its export target of $ 18.6 billion by $ 1.6 billion, as overall exports stood at $ 17.01 billion during the last fiscal yea. However, for the first time in the country's history, exports crossed $ 17 billion mark.
"The country's cost of doing business remained much higher than the other regional countries, including India and Bangladesh, which have put a negative impact on the export," exporters said.
Due to the rising import of the country also missed its trade deficit target of $ 9.4 billion during last fiscal year. The trade deficit grew by 11.53 percent to highest ever level of $ 13.528 billion in the last fiscal year as against the $ 12.12 billion in FY06, depicting an increase of $ 1.399 billion.
In the last fiscal year, the imports of luxury items raised imports bill to $ 30.54 billion as compared to $ 28.58 billion in FY06, witnessing an increase of 6.85 percent or $ 1.96 billion.
The Large Scale Manufacturing (LSM) is the second largest sector of the economy accounting for over 20 percent of GDP showed the poor performance in last fiscal year. Its growth target of 13 percent missed by 4 percent during the last fiscal year, in the wake of high interest rates and increasing cost of doing business in the country. Statistics shows that LSM growth has been declining for last three years due to high interest rates, besides increasing cost of production.
In last fiscal year, country's foreign debt also increased by two billion dollars to 39.265 billion dollars against 37.265 billion dollars in FY06. While the domestic debt also swelled by Rs 160.754 billion to Rs 2,457.650 billion from Rs 2,296.896 billion in FY06. The budgetary deficit also widened to 4.5 percent of GDP from 4.20 percent, depicting an upsurge of 30 basic points in last fiscal year.
Huge liquidity also depreciated the rupee by 20 pisa against the dollar during last fiscal year. Now it is being traded at Rs 60.40 per dollar as compared to Rs 60.20 per dollar previously.
The rising inflation was a major threat for the economy, therefore, the SBP adopted a tight monetary policy to control the inflation besides, liquidity in the market. Another key challenge for the economy was to reduce the money supply growth, which was also missed by 1-2 percent. The set target of money supply growth for the last fiscal year was 13.5 percent, however, it is estimated that its growth would be 14.5-15.5 percent.
The SBP statistics shows that overall the country earned $ 4.125 billion against the payments of $ 8.250 billion in the account of services trade, including transportation, travel, royalties, insurance, financial during last fiscal year, depicting a 50 percent or $ 4.125 billion deficit.
"Travel advised by different countries for Pakistan, law and order situation, high cost of doing business and electricity shortage are the major reason in the failure of achievement of economic targets," said economist Shahid Hussian.
He said the tight monetary policy e also put negative effect on the economy targets and Commerce Minister Hamayun Khan also identified this matter in the new trade policy.
Regarding achievement of GDP growth target of 7 percent, he said this has happened due to the good performance of services sector specially banking, insurance, besides the agriculture sector. "The export targets were on real basis, however, these were not achieved due to poor performance of textile sector due to higher production cost," he said.
Shahid Hussian said despite the all-time high foreign investment no green filed investment was witnessed in the industry, as the foreign investors invested in the existing business in the Pakistan.
Single largest sector of the national economy "agriculture" made a modest recovery from the dismal performance of last year, as overall agriculture grew by 5 percent in FY07.
The impressive growth in major crops owes partly to the bumper wheat and sugarcane crops and partly to the base effect as it is measured from a low base of last year. Wheat production was up by 10.5 percent to 23.5 million tonnes, the highest ever wheat production recorded in the country's history.
Sugarcane production improved by 22.6 percent last year to 54.8 million tonne- the second highest size of the crop in the country's history. While the third largest crop cotton has missed its production and overall production stood at 12.5 million bales against the target of 13 million bales last fiscal year.
In addition, two other major crops, rice and maize did not perform well. Both rice and maize registered negative growth rates of 2 percent and 4.5 percent, respectively.
In the last fiscal year, some of new records were made including all-time high level of foreign investment, workers remittances and foreign reserves. With 3.39 billion dollars upsurge the overall foreign investment touched all-time high level of 8.416 billion dollars, including 5.125 billion dollars foreign direct investment against the target of $ 6 billion.
Workers remittance also touched new peak, as the country received ever-highest workers' remittances over $ 5.493 billion in the last fiscal year by breaking its previous record of $ 4.6 billion in FY06. The target of tax collection also achieved during the last fiscal year and overall collection crossed the target of Rs 835 billion.
The services sector also performed well but its growth was less than FY06. In last fiscal year, it achieved 8 percent growth against 9.6 percent in FY06. The agriculture loan target also was achieved in the last fiscal year, as the commercial and specialised banks surpassed the target of credit disbursement to the agriculture sector in FY07. The total disbursements reached Rs 168.3 billion representing 22.4 percent growth over the preceding year disbursement of Rs 137.5 billion and exceeding the actual target of Rs160 billion.