STATE OF THE ECONOMY
Pakistan economy generally displayed positive trends
From Shamim Ahmed Rizvi,
June 21 - 27, 2004
Launching Economic Survey 2003-04, Finance Minister, Shaukat Aziz declared at a crowded press conference in Islamabad last week that pursuing strong economic fundamentals country's economy had gathered greater momentum during current financial year posting 6.4 GDP growth rates against original estimates of 5.3 percent. Almost all economic indicators exhibited marked improvement in 2003-04 fiscal year, he added.
The economic survey is a pre-budget document that out lines country's economic performance of the first nine months of the fiscal year. Unemployment rate also grew to 8.27 percent during the year. Numerically speaking, this means there are 3.72 million jobless people in the country, according to statistics.
A cursory glance of the economic survey released at the press conference, however, revealed that while Pakistan economy generally displayed positive trends led by a sharp growth in manufacturing and constructive making 6.4 percent GDP growth rate possible it showed poor performance in the agriculture sector achieving 2.6 percent growth against the estimated target of 4.2 percent. The progress made so far has not been commensurate with the country's potential and the challenges of job creation, poverty alleviation, minimizing social inequality and strengthening physical infrastructure still lie ahead.
He read out a list of achievements that included higher than targeted growth rate accompanied by a stellar rise in industrial production; a double digit growth in per capita income; strong upsurge in domestic investment; sharp increases in the consumption of electricity and gas; further fiscal consolidation; strong growth in exports and imports; a further strengthening of the external balance of payment and a sharp decline in the country's debt burden. Besides, not only the rising trend in poverty "has been arrested but a reversal has begun to take place" as poverty rate "has dropped by about 4.2 percent from last year's 32.8 percent," he said. This claim is however not support by ground realities.
He said the country still faced a lot of challenges and the achievements were not commensurate with the country's considerable potential. He cited job creation, poverty alleviation and minimizing social inequality as some of the key challenges that lay ahead. In terms of growth rate, the minister said only China, India and Thailand grew faster than Pakistan during the year.
Within the overall borrowings from the banking system, the government borrowed Rs.53.6 billion for budgetary support against a retirement of Rs.52.5 billion in the same period of last year. The government sector was expected to remain fiscally prudent and therefore, a meager amount of Rs.15 billion was earmarked for net budgetary borrowings and a retirement of Rs.6 billion was projected for commodity operation," the survey noted.
Following are the main achievement in different sector of economy:
REBASING OF NATIONAL ACCOUNTS
A major event of the year was rebasing of national accounts from the year 1980-81 to 1999-2000 that resulted over all size of the economy to go up from $70 billion to $95 billion. He explained that there was no impact on growth rate due to the change of base year. As a result of rebasing, the official data now covered a new range of products and economic activities such as courier services, travel agencies, mobile telephone, etc.
Major crops, accounting for 34 percent of agricultural value addition, grew by 2.8 percent against at 6.9 percent rise in value addition a year earlier, and against a target of 5.5 percent for 2003-04. The performance of two major crops cotton and wheat was lackluster as cotton suffered pest attacks and wheat crop was afflicted by lack of rain or too much rain. The livestock sub-sector, which accounts for almost one half of overall value addition in the agriculture sector (49 percent), witnessed a modest growth of 2.6 percent.
An unprecedented growth in the large-scale manufacturing sector, which grew by 17.1 percent against a target of 8.8 percent and last year's actual rate of 7.2 percent, spearheaded the overall growth in the sector.
Small-scale manufacturing continued to grow at an estimated 7.5 percent rate. The construction sector grew by 7.9 percent against 3.1 percent of last year.
PER CAPITA INCOME:
The per capita income in dollar terms increased from $526 to $652 per annum, showing an increase of 24 percent.
Total investment picked up sharply to 18.1 percent of GDP in 2003-04 against 16.7 percent last year. Fixed investment also rose sharply to 16.4 percent of GDP against 14.8 percent last year.
Private sector investment also increased from 11.2 percent to 11.7 percent of GDP. Public sector investment improved significantly by moving from 3.6 percent of GDP last year to 4.6 percent of GDP this year.
National savings as a percentage of GDP remained flat at around 20 percent over the last two years mainly on account of a significant improvement in the current account balance.
The inflation rate, as measured by the change in the consumer price index (CPI), averaged 3.9 percent during the first ten months (July-April) 2003-04 against 3.3 percent in the same period last year.
Food and non-food inflation has been estimated at 4.9 percent and 3.3 percent against 3.1 percent and 3.4 percent in the same period of last year.
Net tax collection during the first ten months (July-April) of the current fiscal year (2003-04) stood at Rs. 397.2 billion against a target of Rs. 388.8 billion, surpassing the target by a fair margin. Against the annual target growth of 10.7 percent, tax revenue has grown by 12.8 percent in the first ten months of the current fiscal year.
During July-April 2003-04, exports showed a double-digit growth of 13.1 percent to $ 10 billion against $8.846 billion over the same period last year, thereby achieving 82.7 percent of the export target set for the current fiscal year.
Imports during this period grew by 19.0 percent rising to $12.012 billion from $10.097 billion for the comparable period last year, causing the trade imbalanvce to expand by $759.9 million.
The increase in imports was attributed to higher machinery imports of 22.5 percent, as well as non-food, non-oil imports which witnessed strong growth rate of 31.7 percent and could be considered a leading indicator of a surge in economic activity.
REMITTANCES AND RESERVES.
The inflow of workers remittances during the 10 months amounted to $3.21 billion against a full year target of $3.6 billion.
The foreign exchange reserves stood at $12.5 billion and were sufficient to finance about one year's imports, giving the much-needed stability to the exchange rate.