Pakistan’s economy grew by 3.7 percent in the current fiscal year with tax collection up an “unprecedented” 25 percent, Finance Minister Abdul Hafeez Shaikh said Thursday.
He unveiled the statistics one day before presenting the next budget to parliament amid concerns that Pakistan is headed towards a financial crisis unless it returns to the IMF.
“The growth rate remained 3.7 percent and it is the highest in the past three years,” Shaikh told a news conference of the current fiscal year that ends June 30.
“The growth rate for a country like Pakistan should be at least five to six percent and this is our medium term goal,” he said.
Shaikh said that high oil prices in the international market had affected economies all over the world.
Pakistan has also suffered from a second consecutive year of major flooding, totting up losses of $3 billion, Shaikh said.
The minister said the budget deficit was five percent for the period July 2011 to April 2012. External forecasts predict it will nudge closer to seven percent of GDP for the fiscal year amid warnings that the government is running out of ways to fund it.
The IMF bailed out Pakistan with an $11.3 billion loan package in 2008 that stopped last November after Islamabad rejected strict reform demands, largely over tax.
Shaikh said tax collection had increased by 25 percent compared to the previous year.
“For the first 10 months we had tax collection of 1,450 billion rupees as compared to 1,050 billion rupees last year and it is an increase of 25 percent which is unprecedented in Pakistan’s history,” Shaikh said.
The country’s tax revenues are among the lowest in the world at just 9.8 percent of GDP in fiscal 2010-2011, says the Asian Development Bank. Less than two percent of the population pays tax on their income.
The minister said the government had reduced its expenses by 10 percent.
Inflation stood at 10.8 percent, compared to 13.8 percent during the previous fiscal year, he said, adding: “We have adopted a tight monetary policy.”
Pakistan has also missed out on payments from the United States for its efforts to fight militancy under the Coalition Support Fund (CSF).