ISLAMABAD: Pakistan’s economic growth rate fell to 0.3% in the outgoing fiscal year due to harsh restrictions imposed on imports to prevent sovereign default, leaving the industrial sector crippled with spillovers on the services sector.
The 0.29% growth rate is the minimum increase in the national output in the last four years, which exposes the mismanagement of the highly insufficient economy to meet the needs of 250 million people.
Despite severe floods, the agricultural sector still posted 1.6% growth, beating all forecasts of contraction due to a devastating impact on crops. The industrial sector contracted by 2.94%. But the services sector — the single largest sector in the economy — showed nominal growth of 0.9%.
According to a report in The Express Tribune, the government has missed all sectoral targets, thanks to its economic mismanagement that also caused massive layoffs and contributed towards the 59-year-high inflation rate of 36.4%.
The National Accounts Committee, in a controversial fashion, met on Wednesday night and approved the provisional gross domestic product (GDP) growth rate for the fiscal year 2022-23, which is ending on June 30. Zafar Ali Shah, Planning Secretary, chaired the meeting.
The outgoing financial year will be marked in Pakistan’s history when the country experienced a highly mismanaged economy, devastating floods that washed away crops, and a sharp fall in the purchasing power of the people due to record inflation.
To strike a deal with the International Monetary Fund (IMF), the government devalued the rupee and raised electricity costs, severely harming the economy. In the end, neither the economy be saved from disaster nor could the IMF program be revived.
Following the National Accounts Committee meeting, the planning secretary reported that the expected GDP growth rate 2022-23 is 0.29 per cent.
According to the sources, due to disagreement over the increase in national output, the government postponed the meeting of NAC four times in one week. The sources added, “Some officials of the Pakistan Bureau of Statistics ran from one office to another to reach an agreement.”
It is a recession in growth, but not an overall recession in the economy, said Dr Nadeem Javaid, chief economist of the Planning Commission.
There was a broad-based slump in the economic output, primarily because of the adverse impact of the floods and the government’s mismanagement. The GDP is the monetary value of all services and goods produced yearly.
The nearly 0.3% growth rate was far lower than the official target of 5%, in line with the estimates of the World Bank, the Ministry of Finance, the IMF, the State Bank of Pakistan, and the Asian Development Bank. All the institutions anticipated a 0.2% to 0.8% economic growth rate.
The data is provisional and subject to variations till the final results are available at the end of the fiscal year. The economic growth rate during the previous year of the PTI rule was 6%, which the NAC adjusted on Wednesday to 6.1%.
Even the provisional nominal growth rate may become controversial after initial estimates suggest normal contraction. Renowned economist Dr. Hafiz Pasha has estimated that the economy has contracted by over 3% during the outgoing fiscal year.
The details showed that the massive curbs on imports and consumption pulled down the economic growth rate, which triggered a severe external sector crisis – an identical pattern observed in 2018 when Pakistan fell in the lap of the International Monetary Fund.
Last year, there was a 6.1% growth rate – the end of the Pakistan Tehreek-e-Insaf government – the highest in four years. The last time the country saw a 6.1% growth rate was in 2017-18 – the last year of the PML-N government, which was also driven by consumption and imports and took the nation back to the IMF.
During 2017-2018 and 2021-2022, Pakistan’s growth was primarily financed through foreign savings, which is highly unsustainable. Against the official target of attaining a 3.9% growth rate, the agriculture sector is provisionally estimated to grow by 1.6%. The growth appears surprising and could result from adding value to around Rs500 billion in flood expenses.
The floods washed away major crops, created food shortages, and wiped out people’s bread and butter. In the previous fiscal year, the agriculture sector grew by 4.3%.
Chief Statistician of PBS, Dr Naeem ul Haq said the agriculture sector grew on the back of better crops of wheat (27.6 million tons) and sugarcane (9.1 million tons).
The chief statistician denied any pressure on him to turn negative growth into positive territory.
The industrial sector contracted 2.94% against the target of achieving 7.4% growth. The government suffocated industrial growth by placing curbs on imports, which led to a shortage of raw materials and the consequential closure of the factories. Still, the contraction appears less than signs of a steep slowdown in significant industries.
In the last fiscal year, the industrial sector grew by 6.8%. The State Bank of Pakistan also raised the interest rates to a record 21%, hoping to curb inflation. But yet, the central bank failed to contain the inflation that has already crossed 36.4%.
The government had set the growth target at 4% for the services sector. But according to provisional numbers, the services sector showed a marginal growth rate of 0.9%. According to the NAC, the services sector expanded 6.6% in the previous fiscal year.
The NAC also increased the economic growth rate for the PTI government’s second final year from 6 per cent to 6.1%. The GDP growth estimate for 2020–21 was finally cut down to 5.8 per cent.
