ISLAMABAD: Pakistan’s Federal Finance Minister Muhammad Aurangzeb on Tuesday said that the federal government has no plan B other than going to the International Monetary Fund (IMF) for a bailout program, adding that the standby agreement with IMF has helped Pakistan to overcome the economic crisis.
While addressing a news conference briefing about the Economic Survey for the financial year 2023-24, the finance minister said that Pakistan’s growth rate had decreased by 0.2 percent in the financial year 2022-23, while the value of the Pakistani rupee also decreased by 29 percent in the same year and foreign exchange reserves also decreased.
He said that the rate of growth in Pakistan this year was 2.38 percent, and the agriculture sector has seen the highest growth in the last 19 years.
The finance minister said that the economic recovery is taking place due to the government’s initiatives, and the standby agreement with IMF during the previous government’s tenure.
The finance minister said that the current account deficit for the new financial year has been estimated at $200 million.
Muhammad Aurangzeb said that a 30% growth in revenue has been seen which is unprecedented.
He said that despite taking the interest rate up to 22%, the target of reduction in inflation could not be achieved. However, the reduction in interest rates by the State Bank is a step in the right direction.
He said that during the fiscal year 2023-24, Federal Board of Revenue (FBR) tax revenue collection grew by nearly 30 precent, which is unprecedented.
The minister presenting the documents at a press conference revealed the government’s plan for the next fiscal year after the National Economic Council (NEC) approved a massive hike in its Public Sector Development Programme (PSDP) budget for the next fiscal year.
He said in 2022-23 the Pakistani rupee suffered nearly 29pc depreciation and the foreign reserves went to just two weeks of import cover.
The finance minister went on to say the current fiscal year began under the leadership of Prime Minister Shehbaz Sharif before the caretaker administration came in, and now the country was [again] under the leadership of Shehbaz Sharif, under his elected administration, for the next five years.
The Pakistan Economic Survey is an annual document that charts the country’s economic progress for the previous financial year, from July 1, 2023 to June 30, 2024.
“In FY22-23, our GDP contracted by 0.2%, while the PKR depreciated by 29%, and our foreign exchange reserve went down to two weeks of import cover,” the minister said.
“Even when I was there in the private sector, I was loud and clear that we should enter into a programme with the International Monetary Fund (IMF). There was no Plan B.”
“If the nine-month SBA was not achieved, we would have been in a very different situation,” he said.
He added that Large Scale Manufacturing (LSM) was affected because of the high interest rates and energy prices. The minister noted that the agriculture sector was the saviour of Pakistan, and it will continue to remain a huge lever of growth as we move forward.
The minister added when the year started, the approximate current account deficit was approximately $6bn. “But the current account deficit as per our latest forecast is about roughly $200 million,” he added.
The survey comes before the federal budget for the fiscal year 2024-25, which is scheduled to be presented on June 12.
The coalition government led by Pakistan Muslim League-Nawaz (PML-N) is likely to bring ambitious fiscal targets in the Budget 2024-25 that will help to strengthen its case for a new bailout package with the International Monetary Fund (IMF), officials and analysts said.
Facing severe financial constraints and slashing the development funding under the IMF programme, the Annual Plan Coordination Committee (APCC) has proposed Rs1,221 billion for the development programme at the federal level for the financial year 2024-25. It would be the first budget of the incumbent government.
As Pakistan is trying to secure a loan programme to avoid a default in a slow-paced economy, the international lender has asked the country to raise provincial taxes, particularly on agriculture, property tax and sales tax on services.
Pakistan is currently in negotiations with the IMF for a loan worth $6 billion to $8 billion to avert a default for an economy that is moving ahead at the slowest pace in the region.
Pakistan’s GDP increased by 2.38 percent in the fiscal year 2024, with strong growth in the agriculture sector which expanded by 6.25 percent compared to 2.27 percent growth during last year, while both the industrial and services sectors grew by 1.21 percent, according to Pakistan Economic Survey 2023-24.
According to the economic survey, the GDP, valued at current market prices, reached Rs 106,045 billion (US $ 375 billion), with a 26.4 percent increase from the previous year’s Rs 83,875 billion (US $338 billion). The per capita income rose to US $ 1,680, from US $ 1,551 in the previous year, driven by improved economic activity and a stable exchange rate. The investment-to-GDP ratio for FY 2024 remained at 13.14 percent, a decrease from 14.13 percent in FY 2023, attributed to a global slowdown, political instability in the country along with restrictive macroeconomic policies. Gross Fixed Capital Formation (GFCF) stood at Rs 12,122.5 billion, an 11.4 percent increase over the FY 2023. Both private and public investments grew by 15.8 percent and 18.2 percent, respectively. Nevertheless, the national saving rate remained steady, recorded at 13.0 percent in FY 2024.
The agriculture sector has shown a growth of 6.25 percent in 2023-24 compared to 2.27 percent last year, driven by healthy growth in important crops. Specifically, there was a significant growth of 16.82 percent in the production of major crops. Wheat production has witnessed a record growth of 11.6 percent, reaching 31.4 million tonnes compared to 28.2 million tonnes last year. Cotton production, which was severely damaged by floods and rains last year, recorded 10.2 million bales compared to 4.9 million bales last year, growing by 108.2 percent. Rice production also saw a significant increase, reaching 9.9 million tonnes compared to 7.3 million tonnes last year, representing a growth of 34.8 percent.
In contrast, sugarcane and maize production declined by 0.4 percent and 10.4 percent, respectively, with sugarcane production at 87.6 million tonnes compared to last year’s 88.0 million tonnes, and maize production at 9.8 million tonnes compared to 11.0 million tonnes last year. The negative growth in sugarcane and maize has been offset by the substantial growth in wheat, cotton, and rice.
Livestock, which accounts for 60.84 percent of the agricultural sector and 14.63 percent of GDP, grew by 3.89 percent in 2023-24, up from 3.70 percent last year. The forestry sector, contributing 2.33 percent to agricultural value addition and 0.56 percent to GDP, grew by 3.05 percent, compared to a significant 16.63 percent growth last year.
Meanwhile, Large-Scale Manufacturing (LSM) remained in negative territory at -0.1 percent during July-March FY 2024, an improvement compared to the -7.0 percent growth in the corresponding period last year. During this period, 11 out of 22 sectors witnessed growth, including Food, Wearing Apparel, Leather, Wood Products, Coke & Petroleum Products, Chemicals, Pharmaceuticals, Rubber Products, Machinery & Equipment, Furniture, and Other Manufacturing (e.g., footballs). On a year-on-year (Y-o-Y) basis, LSM increased by 2.0 percent in March 2024 against a contraction of 26.4 percent in the same month last year. However, on a Month-on-Month (M-o-M) basis, LSM declined by 9.4 percent in March 2024 compared to a decrease of 3.1 percent in February 2024.
The Mining and Quarrying sector recorded at 4.9 percent during FY 2024 against a dip of 3.3 percent last year. During July-March FY 2024, production of major minerals such as Coal, Chromite, Iron Ore, Soapstone, Magnesite, and Marble witnessed growth of 37.7, 36.9, 63.9, 29.3, 34.4, and 23.2 percent, respectively. However, some minerals experienced negative growth, such as Natural Gas (-2.0 percent), Dolomite (-2.1 percent), Sulphur (-20.3 percent), Barytes (-10.9 percent), and Ocher (-24.8 percent).
