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Review of economic survey

The Analysis of Economic Survey of Pakistan FY2019 analyzed that the macroeconomic stability is a fundamental pre-requisite for sustained economic growth. Pakistan’s economy has experienced frequent boom and bust cycles. Typically, each cycle comprised of 3-4 years of relatively higher growth followed by a macroeconomic crisis which necessitated the stabilization programs. The inability to attain sustained and rapid economic growth is because of structural challenges which require effective monetary and fiscal initiatives to attain macroeconomic stability.

It has been also analyzed that the outgoing 5-year plan has seen an average growth of 4.7 percent against the target of 5.4 percent. This growth can be characterized as a consumption led growth. The unplanned borrowing from dissimilar sources increased both private and public consumption resulting in higher debt repayment liabilities, which created severe macroeconomic imbalances. The investment did not pick up as higher demand was met mainly by imports leading to enormous increase in external imbalances. Because of low growth in revenues and the unplanned and unproductive expenditures, the fiscal deficit widened. The present Government of Pakistan faces formidable macroeconomic challenges.

According to the Asian Development Bank (ADB) maintained Pakistan’s economic growth rate forecast unchanged at 2.8 percent but cut the Indian output for the second time in 3-month to 5.1 percent. Following a steep growth slowdown in Pakistan to 3.3 percent during FY2019, signs of economic stabilization are emerging during ongoing fiscal year 2020, as forecast in the Update. At 2.8 percent growth rate, the country’s economy would be the slowest growing economy in a bloc of 8th South Asian nations. During September, the ADB had projected that economic growth rate in Pakistan would be 2.8 percent — the lowest in South Asia — and the inflation rate would be 12 percent — the highest in the bloc of 8ht nations — in the ongoing fiscal year. Now these projections have been kept unchanged, although the government of Pakistan has lately recorded that it would attain over 3.5 percent economic growth rate during FY2020 on back of recovery in the agriculture sector.

Pakistani economists also revealed that Pakistan is second to none having (almost) all the resources required to boost and attain economic growth, but remains a poor country. It is also important to note that the developing the underdeveloped people, connecting the country to the world mainly for trade and investment and confining government’s role to policymaking and letting people run businesses are the main problems. The present government of Pakistan had to reach out to the rest of the world to develop the country because no country was able to prosper alone. Pakistan had to sell its products to other countries to attract investment and increase business.

 

Furthermore, the State Bank of Pakistan (SBP) has also projected over 3.5 percent economic growth rate. The Experts also revealed that despite tight monetary policy and a modestly strengthening currency, inflation in Pakistan averaged 10.1 percent in the first three months of FY2020. It is also predicted that the poverty rate in Pakistan would jump to over 40 percent by June 2020 because of low economic growth rate and double-digit food inflation. Statistics showed that 8.0 million people have already been added to the ranks of the poor by the end of the first year of the present government.

It is also projected that total 10 million more people would slip below the poverty line by the end of FY2020. In a population of 207 million, there will be 87 million poor people in the country at the end of the second year of the government. The report also revealed that regional GDP is forecast to enlarge by 5.2 percent in 2019 and 2020, both statistics adjusted down from Asian Development Outlook 2019 Update in September. Presently, the government of Pakistan has received $452.4 million as the second tranche of $6 billion IMF loan, taking the foreign exchange reserves of the struggling economy up to $18 billion. The SBP’s reserves increased $14 million to $10.907 billion.

South Asia

Statistics showed that inflation in Pakistan remains at a 9-year high, inflation in South Asia remains benign, as worldwide oil prices moderate more and worldwide food price inflation decelerates. Inflation in Pakistan was accelerating because of heavy indirect taxation, exchange rate depreciation, rise in electricity and gas tariffs, food supply shocks because of administrative and seasonal factors and hike in petroleum products.

For South Asia, the ADB revised inflation projections up to 4.4 percent for this year and lowered to 4.8 percent for next year 2020. Inflation in India, having remained well below the 4 percent target in the first half of this ongoing fiscal year 2019, crossed above it during October 2019 to reach 4.6 percent as food inflation soared to 6.9 percent. The ADB had also projected 6.8 percent economic growth rate for India in April 2019, which it cut down to 6.5 percent in September. Because of slowing Indian economy, the ADB also lowered the South Asian GDP growth forecast for 2019 from 6.2 percent in the 2019 update to 5.1 percent, and for 2020 from 6.7 percent to 6.1 percent. The Experts revealed in the report that Bangladesh’s headline inflation remained stable in first 3-month of this fiscal year, with year-on-year inflation slightly growing to 5.5 percent during September this year from 5.4 percent a year earlier. In Maldives, statistics also explained that inflation averaged a scant 0.02 percent in the first three quarters of this year as worldwide oil and food prices declined, as did administrated prices. Furthermore, inflation soared on a year-on-year basis in mid-September from 3.9 percent a year earlier to 6.2 percent in Nepal.

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