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.