Prime Minister's Advisor on Finance, Revenue and Economic Affairs, Dr Miftah Ismail is to unveil Economic Survey 2017-18 on Thursday (today), according to which the present government has missed all major economic targets including growth and fiscal deficit for the fifth consecutive financial year of its tenure.
Former Finance Minister, Ishaq Dar who faced figure fudging accusations during the launch of Economic Survey 2016-17, had set the following economic targets for FY 2017-18: (i) increase in real GDP growth of 6 percent; (ii) investment as a percentage of GDP at 17 percent; (iii) development budget at Rs 1.001 trillion; (iv) inflation below 6 percent; (v) budget deficit at 4.1 percent of GDP; (vi) tax to GDP ratio at 13.7 percent; (vii) foreign exchange reserves level that can cover a minimum of four months of imports; and (viii) net public debt to GDP ratio below 60 percent of GDP.
However, against the target of increase in real GDP growth of 6 percent, growth was recorded at 5.8 percent whereas investment to GDP has been estimated at 16.4 percent against the target of 17 percent. The utilization of federal development budget is expected to be around Rs 800 billion against the allocation of Rs 1.001 trillion. Budget deficit is projected to cross 5.5 percent for the current fiscal year against the target of 4.3 percent of GDP while foreign exchange reserves presently only cover three months of imports the major factor being a decline in remittances from Arab countries especially from Saudi Arabia.
Net public debt to GDP ratio was projected to be below 60 percent of GDP, however, it has increased to 69 percent of GDP with total domestic debt increasing to Rs 15.9 trillion and foreign debt to touch $93 billion by June 2018. Exports under the Strategic Trade Policy Framework (STPF) were targeted at $35 billion but these are to remain below $25 billion, lower than $25 billion the present government inherited in 2013 when it came to power.
FBR revenue growth was targeted to increase by 14 percent, however it will remain around 11.3 percent for the current fiscal year and there is a significant shortfall in non-tax revenue collection as well. Sources said that saving was expected to touch the lowest level with 11.4 percent against the target of 14.5 percent set for the current fiscal year with national saving at 11.4 percent against the target of 14.5 percent with around 6 percent by non- resident Pakistanis and 5.4 percent by people living in Pakistan. They added that the war on terror cost is projected at $125 billion and poverty is projected at around 25 percent.
The government had also announced addition of 10,000 MW of electricity to the system by the end of its term, which is possible, but the issue of transmission and distribution system remains unresolved.
The government had also announced an addition of 10,000MW of electricity to the system by the end of its term, which is possible, but the issue of transmission and distribution system remains unresolved.
A subsidy of Rs 100 per bag on urea has not been paid to the local fertilizer companies.
The government claims that dHowehuring 2017-18 GDP registered a growth of 5.8 percent - the highest in the past 13 years. This growth emanated from 13-year highest growth in agriculture and 10-year highest growth in industry. Services sector also grew as targeted.
The target for real GDP growth for 2017-18 was set at 6 percent based upon sectoral growth projections for agriculture, industry, and services at 3.5 percent, 7.3 percent and 6.4 percent, respectively. Most of the macroeconomic indicators remained stable due to strong agriculture and industrial growth, revival of private sector activities and expansion in construction sector during 2017-18.
Agriculture was targeted to grow by 3.5 percent on the basis of expected contributions of important crops (2 percent), other crops (3.3 percent), cotton ginned (6.5 percent), livestock (3.8 percent), fishery (1.7 percent) and forestry (10 percent). Agriculture surpassed its target of 3.5 percent and registered a growth of 3.8 percent. Improvement in crop production is partially attributed to Government support for the agriculture sector and price recovery in commodity markets. Important crops grew by 3.6 percent while other crops registered a growth of 3.3 percent. Livestock, forestry and fishery achieved growth of 3.8 percent, 7.2 percent and 1.6 percent, respectively.
Industrial sector registered a growth of 5.8 percent during 2017-18 compared to the target of 7.3 percent. The growth largely came from construction and manufacturing sectors. Manufacturing grew by 6.2 percent in 2017-18 with a growth of 6.1 percent in Large Scale Manufacturing (LSM). Mining and quarrying sector posted a growth of 3 percent against target of 3.5 percent, while construction sector showed growth of 9.1 percent against the target of 12.1 percent. Overall performance of commodity producing sector improved from 3.8 percent in 2016-17 to 4.8 percent in 2017-18.
Services sector achieved the growth target of 6.4 percent during the year 2017-18. Wholesale and retail trade grew by 7.5 percent and surpassed its target of 7.2 percent. Transport, storage & communication managed to grow by 3.6 percent against its target of 5.1 percent. Finance & insurance attained a growth of 6.1 percent against its target of 9.5 percent. General Government Services grew by 11.4 percent compared to its target of 7 percent. Other Private Services grew positively at 6.1 percent against its target of 6.7 percent during 20 17-18.
Savings and Investment: Total investment for 2017-18 was recorded at 16.4 percent of GDP compared to 16.1 percent in 2016-17 on the back of increased public and private investment. Though private investment registered a growth of 9.8 percent in 2017-18, it has the potential to grow further due to the improved investment milieu and ongoing CPEC related activities.
National Savings remained at 12.1 percent of GDP during 2017-18 compared to 12 percent in 2016-17, growth in savings lagged behind the required level. The lack of national savings led to increased reliance on external resources for investment. This led to an increase in current account deficit.
Fiscal Developments: During the first half of the current year, fiscal performance remained on track as substantiated by a lower fiscal deficit of 2.3 percent of GDP as compared to 2.5 percent during July-December 2016 and the target of 4.1 percent for the current year. The FBR's tax collection was recorded at Rs 2.254 trillion during July-February 2017-18 compared to Rs 1.9217 trillion collected in the corresponding period of 2016-17, registering a growth of 17.3 percent.
Monetary Developments: The policy rate stood at 40 year lowest at 5.75 percent for the first 6 months of 2017-18 and inched up to 6 percent in January 2018. Borrowing from scheduled banks was retired to the tune of Rs 1.3785 trillion in July-March 2017-18 while Government borrowing from the SBP stood at Rs 2.2367 trillion during the same period.
Inflation: Average inflation for 2017-18, targeted at 6 percent, was contained at 3.8 percent for July-March 2017-18.
Balance of Payments: The current account deficit for July-February 2017-18 stood at $10.8 billion compared to $ 7.2 billion in July-Feb 2016-17 indicating current account deficit at 4.8 percent of GDP compared to 3.6 percent last year. During this period, exports increased by 12.2 percent compared to a decline of 0.8 percent in July-February 2016-17 whereas imports increased by 17.3 percent compared to an increase of 12.5 percent in comparable period of 2016-17. The total liquid foreign exchange reserves stood at $ 17.6 billion on 6th April 2018.
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