A report on the state of Pakistan’s economy was unveiled by Finance Minister Miftah Ismail in Islamabad on Thursday.

He was joined by ministers Khurram Dastagir, Ahsan Iqbal and Ayesha Ghaus Pasha. Dr Imtiaz and Hamid Yaqub worked on this report, Ismail said.

“Pakistan’s story is unfortunately the same that it was before,” said Ismail. “As soon as we grow a little, we get stuck in a Current Account deficit.”

The GDP growth was 5.9% but our Current Account deficit grew and we faced a balance of payments crisis.

“Our textile people did good work, I’d like to congratulate them,” he said.

There was a time when our exports were half of imports. It is a source of worry that we can finance our imports only 40% by exports and need other sources, like remittances, to cover it.

Our reserves have gone down to less than $10 billion, he said. But China is helping us, so by Monday or Tuesday it will go up to $12 billion. We are grateful that it will give us $2.4 billion.

“We need to fix the direction of the economy,” he said. With the international prices of oil up, we had to increase the price of petrol in Pakistan twice, he regretted.

He said, however, that they had made the difficult decisions to correct the economic path. “We have avoided a default,” he said. “We are on the road to stability.”

We will show sustainable, responsible growth, he added. “We should not face a balance of payments crisis again and again. We want inclusive growth; this is the mistake we have made again and again.”

He commented on how growth should be managed. A rich man’s basket is a lot of imports, a poor man’s basket doesn’t have those items. Inclusive growth is to increase the spending power of the poor man. It will not increase your import bill.

He said that when the previous PML-N government finished its tenure, the tax-to-GDP ratio was 11.1 per cent. “The tax-to-GDP ratio shouldn’t be less than 15%, particuarly for a nuclear-capable country,” said Miftah.

When the government took over this year, the federal deficit was Rs5,600 billion, the finance minister said. “The year we left, we repaid Rs1500 billion. This year, Rs3900 billion will be repaid.”

The finance minister said that the real challenge was sustainable growth while saying that the PTI government had cause irreparable damage to the economy during its tenure.

The finance minister then handed over the microphone to Planning Minister Ahsan Iqbal.

Planning & Development

Planning and development minister Ahsan Iqbal said that the private sector depends on public sector investment. “In the budget, Rs 900 billion has been earmarked for PSDP. However, it was later reduced to to Rs700 billion.”

When we took over the government, the PSDP budget stood at Rs550 billion, he added. Iqbal said that the planning sector suffered the most during the previous government’s regime.

He said that Pakistan has a very large population of youth and the government will allocate budget for their training and development. He said projects, including the ML-1, were held hostage over political preferences. “Work on five of the nine special economic zones (SEZ) of the China-Pakistan Economic Corridor (CPEC) is yet to take off.”

The budget of the Higher Education Commission (HEC) has been increased by 67 per cent.

Energy crisis

Federal Minister for Power Khurram Dastgir also went after the PTI for the country’s current economic crisis.

“6,000 MW power projects are not operating due to lack of fuel, said the minister. Circular debt stands at Rs2,470 billion.

He said that power generation in the country had eclipsed demand in May 2018. “If all the plants are operational, loadshedding will end.”

IMF update

During the question and answer session that followed the press conference, Miftah was asked about the ongoing talks with the International Monteray Fund. “We will move towards an agreement after the budget,” he replied.

He said that relevant information and details have been shared with the international lender.

Key points

• The GDP growth was 5.9% but our Current Account deficit grew and we faced a balance of payments crisis.
• There was a time when our exports were half of imports. It is a source of worry that we can finance our imports only 40% by exports and need other sources, like remittances, to cover it.
• Pakistan’s exports have increased by 28 per cent. However, that situation has changed and now the situation is such where it is having on our balance of payments.“
• The country’s trade deficit currently stands at 45 billion dollars.
• The export to GDP ratio should not be less than 15%.
• Situation to get better after receiving $2.5b from China that is expected in next few days.
• Industrial sector recorded 7.8 per cent growth in 2021.
• Construction sector grew by 3.1 per cent.
• Agriculture sector grew by 4.4 per cent.
• Wheat production stood at 26.39 million tonnes in last fiscal year.
• Three million tonnes of wheat to be imported this year.
• Crops rose 6.6 per cent, livestock grew by 3.3 per cent.
• Cotton production was very low last year.
• Imports have increased by 50%.
• Rs900 billion were earmarked for PSDP, which has been reduced to Rs700 billion.
• Higher Education Commission (HEC) budget increased by 67 per cent.

Sector-wise change

About the survey

The survey contains performance of various sectors of the economy including agriculture, industry and services. Pakistan Economic Survey also highlights the performance of other sectors like energy, capital market, health, education, transport and communication, inflation, trade and payments, public debt, population, climate change, and social protection.

The survey comes at a time when Pakistan faces several economic battles including a precarious balance of payments’ position, rising inflation, and pending outcome of talks with multiple lenders including the International Monetary Fund (IMF). This has put pressure on the central bank-held foreign exchange reserves, which have fallen to a critical level of under $10 billion.

The economic review covers a timespan when the country was confronted with multiple challenges including the fight against the pandemic, which resulted in massive expenditure on vaccinations, before effects of the Russia-Ukraine war started to take a toll. The economy was also affected by the US withdrawal from Afghanistan, with its evacuation efforts taking centre-stage last year.

Later, a post-pandemic global economic recovery also resulted in a commodity ‘super cycle’ that took a direct hit on net importers like Pakistan, with oil prices becoming a major issue.