Positive GDP growth rate unlikely?

ISLAMABAD: With negative growth in the large scale manufacturing industries, besides a decline in major agriculture crops including cotton and wheat, the country is unlikely to achieve a positive Gross Domestic Production (GDP) growth rate in the current fiscal year.

This was stated by Dr Hafeez Pasha, former finance minister while speaking to the host of Aaj TV’s ‘Paisa bolta hay’ programme and Islamabad Resident Editor of Business Recorder Anjum Ibrahim.

Dr Pasha also stated that credit to the private sector touched Rs1 trillion following decline in policy rate, where major portion was routed to stock market, resulting in a bullish trend in the stock market.

ADB projects GDP growth at 3pc, inflation at 10pc

“High energy prices including gas and electricity tariff, input cost increase coupled with restrictions on raw material imports, large scale manufacturing sector could not register growth, affecting overall GDP growth”, said Dr Pasha, adding that cotton crop registered 30 per cent decline, while wheat crop was forecasted not to be good on the back of 30 per cent lower return for farmers last year due to non-procurement by the caretaker government which opted for import. He said that in real terms investment in industrial sector registered significant decline.

Dr Pasha said that Consumer Price Index (CPI) came down to near five per cent, which was at one time more than 30 per cent. Prices are not going down, but the pace of increase in prices has slowed down, said Dr Pasha, adding that some food items’ prices also came down including wheat flour prices, which was good for consumer but unfortunate for farmers who did not get due return despite giving bumper crop last year. Gas prices were increased by more than 500 per cent last year, which resulted in high inflation.

Quoting Pakistan Bureau of Statistics (PBS), Dr Pasha said that real wages declined by 20-25 per cent for the last three years, especially for skilled people and the private sector.

He said government employees’ salaries were increased while one provincial government i.e. Punjab increased its members’ salaries by up to 500 per cent. He said another reason behind decline in inflation was stability in commodities’ prices in the international market especially oil prices which remained in the range of 70 dollar per barrel, helping in low inflation. Another reason, he said was stability in the rupee.

Replying to a question regarding intervention in the market to keep rupee stable, Dr Pasha said that intervention can be made indirectly as well including controlling imports physically, like, 25-30 per cent decrease was recorded in vehicles’ imports during the last two to three years.

He said surplus current account was reported in November with record remittances of around 35 per cent increase were sent by workers especially in the Middle East and the US and around $4 billion increase was registered in the first five months.

Talking about pending amount of independent power producers (IPPs) against government, he said that the country has to repay around $12 billion to $14 billion debt, but hardly $1.5-2 billion were repaid during the first five months of the current fiscal year. Does it mean Pakistan is delaying repayment to keep reserve stable, he asked. Despite inflows from International Monetary Fund (IMF) and deposits from Saudi Arabia, reserves hardly reached the level of two and a half month import cover against minimum standard of three months.

Dr Pasha said that the government has budgeted to issue bonds in the international market and borrow from foreign commercial banks, but inflows from both are negligible.

He said that on many fronts, the country was not showing good progress in terms of reforms, fearing programme suspension in March when the Fund would reach for review, putting the country in a high risk situation.

He said the policy rate came down due to decline in inflation. However, outside perception is different due to low repayment to the creditor, resulting in negligible fresh inflows.

He said that the Special Investment Facilitation Council (SIFC) was expecting to bring around $10 billion investment to the country, however, hardly $1.5 billion to two billion were received during the first five months indicating clear challenges in foreign inflows at all fronts.

He said the IMF has explicitly talked about SIFC in the new Extended Fund Facility (EFF) programme. The IMF also talked about Sovereign Wealth Fund, which Pakistan needs to manage carefully, he added.

Copyright Business Recorder, 2024