The government inherited a declining economy with energy shortages, law and order challenges and an unfavourable global scenario. The outgoing government had created a bubble economy based on consumer credit, privatisation proceeds, foreign aid, real estate overestimation and speculative buying of stocks. Inflation touched the highest mark of 25% in October 2008. The economy was already on the rocks with sinking growth rates, a sharply declining exchange rate, reduced productivity due to energy shortages and a decrease in foreign direct investment. This was further aggravated by global recession, historic high oil prices, and subsequent reduction in global aggregate demand.
The PPP-led coalition government took tough decisions and based the economy on sound fundamentals. Resilience of the economy was tested several times by one crisis after another that included global recession, which started in 2008, and great floods and devastating rains in 2010 and 2011. Due to government's prudent management to restore economic stability through various economic policies the economy posted a growth rate of 3.1 percent in FY10 as compared to 1.7 percent in FY09. In the year FY11 the growth rate stood at 3.0 percent despite unprecedented damage caused by floods. Growth rate picked up again in FY12 - 3.7 percent - that shows the way towards high growth in coming years. The growth performance when viewed in the backdrop of extraordinary shocks of high commodity and oil prices, security situation, and the fallout of global financial crisis seems reasonably satisfactory. The government has adopted the new growth strategy, which focused on the software of economic growth (issues of economic governance, institutions, incentives and human resources, etc) and provides an environment in which the hardware of growth (physical infrastructure) could be expanded and made more productive at every level. To continue development process at fast track and accelerate economic growth despite huge financial constraints, the government made a special effort to fully fund the PSDP. The government increased the size of development expenditure from Rs 416 billion in 2008-09 to Rs 873 billion during the current fiscal year. This shows an average annual increase of 20% during this period.
The government initiated important mega projects in energy and infrastructure sector which would provide the economy a base for sustainable economic growth in future. Some of the initiatives include: Neelum-Jhelum Hydropower Project, Diamer-Bhasha Dam, 4th Tarbela Extension Project; Chashma Nuclear Power Projects 3 and 4, Lyari Expressway, Mekran Coastal Road, M4 Motorway from Faisalabad to Khanewal, KKH Skardu Road and Realignment of KKH Road due to Attabad Lake. Mega projects completed during the period include Chashma Nuclear Power Project 2, Mangla Raising Project, Mirani Dam Project, Islamabad Peshawar Motorway and Islamabad Muzaffarabad Expressway.
To encourage private sector and to make the investment climate more attractive, the investment policy 1997 has been revised. A new investment strategy (2010-2015) has been formulated in consultation with federal and provincial governments. BoI is currently in the process of finalising MoUs with Investment Promotion Agencies (IPAs) of Argentina, Kuwait, Tajikistan, Sudan, Jordan and Egypt. In order to facilitate foreign companies/entities, their online registration with BoI has been initiated. All these measures have a lot of forward and backward linkages, which will support economic growth process in the long run.
As a result of continuous effort the average inflation (CPI) has been reduced to 11 percent in FY12 and the government is hopeful to achieve the target of 9.5 percent for the current fiscal year. It has succeeded in containing inflation to single digit (9.6 percent) in July 2012, 9.1 percent in August 2012 and 8.8 percent in September 12 on account of effective monetary policy and prudent expenditure management, adopting austerity measures, restructuring and reducing subsidies for the public sector enterprises (PSEs). This is the third consecutive month in which inflation is contained to single digit. The declining trend in prices of essential commodities like sugar (-30.03%), chicken Farm (-9.51%), Tea pack (-0.8%), Garlic (-6.07%), Moong pulse (-14.08%), Mash pulse (-10.50%), Masoor pulse (-6.65%), Veg. Ghee loose (-0.55) and Gur (-18.77%) since September-2011 to September-2012, contributed to bring down the inflation rate. The government is keeping a close watch on the movement of the prices of essential items through regular ECC meetings and suggests necessary steps for maintaining price stability. The Cabinet also reviews inflationary trends and prices of essential commodities in its meeting on a regular basis. National Price Monitoring Committee is also monitoring prices of essential commodities in consultation with Provincial Governments and concerned Federal Ministries/ Organisations. These comprehensive efforts and strategic measures of the Government are playing a significant role to continue the downward slide of inflation rate over last several months.
The government remained committed to pursuing a sustained poverty reduction strategy. Recognising the need to protect poor and vulnerable segments of society, several safety net programs have been launched to minimise the adverse effects of poverty on the targeted population of the country. These programs include: Benazir Income Support Programme, Pakistan Poverty Alleviation Fund, Pakistan Bait-ul-Mal, Zakat funds, Employees Old Age Benefits Institution, Workers Welfare Fund, Peoples Works programme (PWP) I & II and various micro-finance initiatives.
Benazir Income Support Programme (BISP) started with the primary objective of providing immediate relief to the poor. It has made remarkable progress by providing much needed relief to over 4 million recipients including Internally Displaced Persons, flood affected people and bomb blast victims all over Pakistan. The number of BISP recipients is expected to be increased to 7 million after the on-going processing of data collection during the "nation-wide poverty scorecard targeting survey" is completed. BISP has launched a number of programmes of social safety including; (i) Payment to Recipients, (ii) Graduation Initiatives, (iii) Waseela-e-Haq, (iv) Waseela-e-Rozgar, (v) Waseela-e-Sehat and (vi) Waseela-e-Taleem. During the last fiscal year 2011-12, Rs 49.5 billion was spent and an allocation of Rs 60.0 billion had been earmarked for Benazir Income Support Programme in the current Federal Budget.
Pakistan Poverty Alleviation Fund is dedicated to microcredit, enterprise development, community-based infrastructure and energy projects, livelihood enhancement and protection, social mobilisation, and capacity building. An allocation of Rs 3000.0 million has been earmarked for the current fiscal year. Pakistan Bait-ul-Mal is making a significant contribution in poverty reduction by providing assistance to destitute, widows, orphans, and other needy people. An amount of Rs 2.0 billion was spent during 2011-12 while Rs 2.0 billion has been earmarked for the current fiscal year. Zakat funds have been utilised for the assistance to the needy, indigent, poor, orphans, widows, handicapped and the disabled.
Employees Old Age Benefit Institution is providing benefits to the old- age workers through Old Age Pension, Invalidity Pension, Survivors Pension and Old Age Grants. Workers Welfare Fund is providing housing facilities, Marriage Grant, Death Grant and Scholarships etc to the industrial workers. During last financial year 2011-12 an amount of Rs 12.0 billion was spent and for the current financial year an amount of Rs 12.0 billion has been earmarked. In order to create employment opportunities and eliminate poverty, various micro-finance initiatives in collaboration with all stakeholders have been undertaken.
Peoples Works Programme (PWP) I & II are providing electricity, gas, farm-to-market roads and other services to the rural poor. Expenditure on PWP-I during the last financial year was Rs 3986.085 million, and allocation for the current budget is Rs 5.0 billion. Expenditure on PWP-II during the last financial year was Rs 34900.187 million, and allocation for the current budget is Rs 22.0 billion.
The federal government is making every possible effort to minimise poverty and support vulnerable segment of society. Even after devolution of social sector ministries to provinces, the federal government committed to bearing Rs 100 billion up to the current NFC period for health vertical programmes and population welfare programmes. The federal government has planned, implemented and funded various projects in Balochistan despite a challenging situation. The government raised the salaries of government employees by more than 150 percent in its tenure and enhanced pension for the benefit of retired employees and improved the pension delivery system through induction of biometric system in order to reduce the problems faced by pensioners.
The government has focused on development of productive sector and created a conducive environment for agriculture sector through better prices, better seeds and timely provision of inputs. As a result, during the four years of democratic governance an additional Rs 800 billion was transferred to the rural economy as compared to only Rs 329 billion in the preceding eight years, which certainly increased economic activities in rural areas, increased income and consumption of the rural population and poor class certainly have benefited.
Remittances sent by overseas Pakistanis have doubled during the last four years. Improvement in inflow of remittances through Pakistan Remittances Initiative (PRI) and government policies to export manpower abroad facilitated in increasing remittances. The workers' remittances during July-June FY12 reached $13.2 billion mark against $11.2 billion last year, showing an increase of 17.7 percent. The remittances from Saudi Arabia, recorded a massive growth of 38.1 percent, followed by the UK (26.8 percent), other GCC countries (14.5 percent), the USA (12.9 percent) and the UAE (9.7 percent). Since the launch of the PRI, the share of workers' remittances coming through the banking channel has increased considerably - from 75 percent in 2009-10 to 91 percent in 2011-12. Remittances jumped from $6.4 billion in 2007-08 to $13 billion by year-end 2011-12. The rapid increase in remittances is playing a significant role in improving the socio-economic conditions of the households and also accelerate their economic activities through a multi-channel approach.
The government is very much committed to improving reliability of national statistics. The General Statistics (Reorganisation) Act, 2011 has been passed by the Parliament and received the assent of the President on 28th May, 2011. Accordingly the Federal Bureau of Statistics, the Population Census Organisation, the Agricultural Census Organisation and the Technical Wing of Statistics Division have been merged into a new entity, the Pakistan Bureau of Statistics (PBS). The PBS has been established for producing reliable, authentic, timely and transparent data. It envisages to develop a coherent, co-ordinated and a sustainable system of data collection, analysis and dissemination, meeting internationally acceptable standards with greater public access to data.
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