Economic Survey 2010-11: Floods, terrorism, oil price surge restrict growth to 2.4%

Published: June 3, 2011
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Finance Minister Hafeez Sheikh said Pakistan was unable to meet its target of 4% GDP growth for the year 2011-2012.

Finance Minister Hafeez Sheikh said Pakistan was unable to meet its target of 4% GDP growth for the year 2011-2012.

Hafeez Shaikh reveals missed targets; budget due today. Finance Minister Hafeez Sheikh said Pakistan was unable to meet its target of 4% GDP growth for the year 2011-2012.
ISLAMABAD: 

The worst floods in the country’s history, the ongoing war against terrorism and a spurt in world oil prices pulled back the economy that grew by only 2.4% against a target of 4.5% in the outgoing financial year, said Finance Minister Hafeez Shaikh.

Unveiling the Economic Survey of Pakistan 2010-11, which reviews all sectors of the economy in detail, Shaikh said the floods created the domino effect that not only damaged the agriculture sector but also had a negative impact on the manufacturing and services sectors. Except at the external front, that is the current account, the government missed all economic targets including the most important one – the budget deficit.

“The estimated Gross Domestic Product (GDP) growth might inch up by another 0.1% to 0.2% as final statistics will only be available after June,” Shaikh said. In absolute terms, the size of Pakistan’s economy is estimated at $210.8 billion or Rs18.1 trillion.

“Despite difficult times the government maintained austerity, reduced central bank borrowing and expanded the tax net, which ensured the growth rate of 2.4%,” Shaikh said. The agriculture sector grew by only 1.2% due to growth in the livestock sector, manufacturing sector grew by three per cent and services sector by 4.1%, he said.

Shaikh said that the floods caused losses worth Rs855 billion, of which Rs429 billion was lost only by the agriculture sector. He said that 20 million people were affected and major crops registered a negative growth of four per cent. The floods also disrupted the business cycle, affecting both production and revenue generation. Cotton production declined by 11.3% and the country produced 11.4 million bales this year. Rice production dropped by 30% and remained at 4.83 million tons.

Shaikh said that rampant insecurity had also badly affected the economy. “Pockets in conflict zones remained underdeveloped, which negatively impacted economic growth,” he said.

He said the government was caught off-guard by a surge in world oil prices. It had estimated prices to rise to 75 dollars per barrel but actual increase was 125 dollars per barrel.

Due to this increase, production by power plants dipped as the government could not provide the required quantity of oil for electricity generation. On top of that, the government took a Rs50-billion hit in revenue by not fully passing on the increase to final consumers, he said.

“The power sector was given importance during the last two years for revival of industry and the government gave subsidies worth Rs500 billion to protect the end consumers against a steep rise in the prices of electricity and petroleum products,” Shaikh said.

He said that investment was one area that could have shown some progress but did not due to an unstable security situation, high interest rates, electricity outages and cuts in the Public Sector Development Programme.

In terms of the economy’s total size, investment dipped to 13.4% against last year’s 15.4%. But in absolute terms, total investment grew and stood at Rs2.5 trillion, which is Rs300 billion more than last year.

Shaikh said that the national budget deficit is expected to remain at 5.7% or Rs1.02 trillion. This gap between national income and spending is Rs181 billion more than the revised budget target. But the position of the federal budget deficit is worse which, Shaikh said, is estimated at 6.3% or Rs1.14 trillion.

He said that for budget financing, the government has so far borrowed Rs544 billion, which is Rs114 billion more than last year’s borrowings. He said that so far, the Federal Bureau of Revenue has collected Rs1.3 trillion in taxes and, to achieve the end-of-year target of Rs1.58 billion, it must collect Rs272 billion this month.

On the external front, he said, the government has a “good story to tell”. Exports were healthy and there was encouraging growth in remittances, which will boost business, he said. “The current account is expected to remain in surplus.”

“Despite a bad year, we have to be far-sighted, need to get access to western and European markets and expand the tax base for ensuring macroeconomic stability,” Shaikh said.

Published in The Express Tribune, June 3rd, 2011.

The full text of The Economic Survey 2010-2011 can be viewed here.


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Reader Comments (41)

  • Jun 2, 2011 - 5:43PM

    Our foreign exchange reserves are not a measure of success! they are filled with loans from China, Saudi Arabia and the IMF. Recommend

  • Meekal Ahmed
    Jun 2, 2011 - 5:43PM

    Make that 6.1% at the end of the fiscal year! Recommend

  • FactCheck
    Jun 2, 2011 - 5:52PM

    Earth shattering news?Recommend

  • Danish Kamal
    Jun 2, 2011 - 5:56PM

    Now we start to believe that why Pakistan calls as a Fail State. Its not just propaganda there is something smouldering behind it.Recommend

  • Kasim
    Jun 2, 2011 - 6:11PM

    Another Bad News…Disappointed. I am deeply thinking and asking others to think “Are we a failed state?”. Seems to be true.Recommend

  • Hedgefunder
    Jun 2, 2011 - 6:26PM

    Nothing new ! As this was forgone conclusion, for even an O level student to understand that the very idea of meeting targets is not something Pakistan has ever achieved..
    So much for being self supporting nation without Aid !!! Dream on, at least for another decade, while they are at it , keep an eye on nations such as Bangladesh, Sri Lanka, etc…..Forget India, as they don’t even come in to equation They are playing in very different league now!!. They will leave Pakistan behind economically in next decade if they are not too careful !!!Recommend

  • Hedgefunder
    Jun 2, 2011 - 7:11PM

    So now perhaps, Mr Minister, you will redraft your Budget Statement to GA, and start acting like responsible person that you are. Also please let members of the house know the reality of the Economic Situation at present and for coming year in Pakistan, rather than postering them with some ridiculas statements in regards to what has been achieved or will be achieved in coming year!!!
    This is not an Political Issue ! Its an Issue which affects every Fabric of Pakistani Society, so better to face the facts.Recommend

  • Aurangzeb Rao
    Jun 2, 2011 - 7:20PM

    like we never thought this could ever happen :)Recommend

  • Bangash
    Jun 2, 2011 - 7:52PM

    There can be no economic growth as long as bombs are going off.Recommend

  • Grace
    Jun 2, 2011 - 8:06PM

    Until we bring the terrorism and criminality of our interfering neighbours under control, things will not improve.Recommend

  • yem
    Jun 2, 2011 - 8:19PM

    don’t worry, India also failed to achieve it’s growth target. Recommend

  • Sharjeel Jawaid
    Jun 2, 2011 - 8:48PM

    In is common knowledge how much tax is paid by those in high places, inlcuding members of National Assembly and Senate.
    Not to forget that billionaire politicians pay a few thousands rupees. Recommend

  • Hassan
    Jun 2, 2011 - 9:17PM

    Well Guys we have stand for our country. we always say govt. did this and govt did that. we have to work together. lets put govt on one side i know it is corrupt and there is no leadership. but what we are?
    90% of us don’t pay taxes and than we say govt take loan.
    If we want to finish corruption we have to stop giving and taking it.
    we have to expect that we are in war and our enemy are laughing at us. i was very shame of my self that why i am not fighting with our army standing next to them.
    We did stand with our army in 1965. Why not today.
    our economy can come out off all this if we just stand together and think positive. Our media just shows negative news about our Pakistan. But there are a lot positive things as well.#
    Our electricity problem can be solved if we just learn to stop wasting electricity.

    i am only trying to say is(IF ONLY EACH OF US CAN GET OURSELF RIGHT AND THINK POSITIVE AND WORK FOR OUR COUNTRY TOGETHER WE CAN GET OUR PAKISTAN OUT OF THIS ALL SITUATION). Recommend

  • Faheem Jehangir
    Jun 2, 2011 - 9:45PM

    Dear Finance Minster, last year, I got so much hope after listening to your budget speech. There was a spark in your delivery and you seemed quite optimistic about the wellbeing of the destitute at large. But, I am half-disappointed today. Half, because I understand how much the floods damaged our economic-hardware, and other half because you could have done better than this.

    Today, I wonder why you didn’t talk about bad governance and high transaction costs; I wonder how would you enforce the wealthy lot to pay their taxes whereas the media reports tell us that you (yourself) didn’t pay taxes in last few years; I wonder how ingenious we were to opt IMF support; I wonder if we have any good news to tell regarding MDGs for which we took around US$30 billion since the Millennium Declaration (2000-01); I wonder what was the progress on energy fronts; I wonder where are the results of ‘Poverty Survey’ and what are the initial outcomes of the multi-million mega-project ‘Benazir Income Support Program’; I wonder when shall we register the merchants and traders and take them into the tax net; and I wonder, and I keep wondering…???Recommend

  • Sharik Hussain
    Jun 2, 2011 - 9:55PM

    As long as Associated Press is there, no good news related to Pakistan will emerge.Recommend

  • Mirza
    Jun 2, 2011 - 9:59PM

    So what if we fail to meet the economic targets and fail. Shocked, no, not at all.
    The country is making progress as we gather more and more nuclear warheads and missiles. We have chosen a path to compete with large countries even though our GDP is a fraction of that of India. Who cares about the public and basic needs, we are happy and proud that our most efficient army is well equipped to protect “its own interests and high value targets”. Stop caring about the civic and economic needs of bloody civilians. Recommend

  • Shamsi Ajanee
    Jun 2, 2011 - 11:35PM

    ” $623 million by forcing wealthy tax evaders”

    1 or 2 citizens of Pakistan who have been paying less than Rs 10,000 in tax can pay this amount.
    What is needed is political will and some brilliant FBR officialsRecommend

  • Haris
    Jun 2, 2011 - 11:44PM

    @Bangash:
    can you read? it says 2.5% gdp growthRecommend

  • Arvind
    Jun 2, 2011 - 11:45PM

    @Yem but still GDP growth rate of India was 7.8 % in last fiscal year and without any foreign aids, does that make you happy?
    @Kasim and Danish Kamal: I agree with you guys, nothing wrong in accepting the truth.Recommend

  • Meekal Ahmed
    Jun 3, 2011 - 2:23AM

    @TightDhoti:
    I don’t know if your facts are correct. However, as long as these “reserves” are not used, it is fine. It is when they are drawn-down that we have a problem. Recommend

  • Meekal Ahmed
    Jun 3, 2011 - 2:32AM

    If they do tax the rich, however tentatively, it will have a huge positive impact and the FM will go down in history as the first person to dare to do it. I expect the stock market to soar and the exchange rate to appreciate (not a good thing).

    The provinces need to be told, in clear terms, that failure to tax agriculture and property will mean a reduction in the NFC transfers and other loans and grants by the center by amount of the tax revenue foregone.

    They also need to be told what their budgets need to be to be consistent with the 4% target — and not like last time when they took off on a competitive race to spend. Recommend

  • MilesToGo
    Jun 3, 2011 - 3:23AM

    Forex that come in as form of loan will go back for repayment of loan.Recommend

  • pl/sql
    Jun 3, 2011 - 4:47AM

    Pakistan will achieve 20% GDP growth for the rest of 2011 InshallahRecommend

  • mussarat Hussain
    Jun 3, 2011 - 7:03AM

    Did we ever meet growth target?

    I will appreciate if someone tells me the year.

    MussaratRecommend

  • ashok sai
    Jun 3, 2011 - 9:05AM

    This is all due to US misguided policies, now that we have understood and leaned towards our ‘all weather friend’, within two years we will be achieving 10% GDP growth, Cheers.Recommend

  • R S JOHAR
    Jun 3, 2011 - 10:57AM

    When most of the foreign aid is spent on defence then how can the economy grow ?Recommend

  • from India
    Jun 3, 2011 - 12:04PM

    pakistan may collapse like soviet union !!Recommend

  • king
    Jun 3, 2011 - 12:22PM

    India should concentrate on infrastructure. High GDP can not be sustend for long time.Recommend

  • ImnIndian
    Jun 3, 2011 - 2:03PM

    @king – no worries, india is focussing on creating infrastructure. india has a bright future ahead.Recommend

  • king
    Jun 3, 2011 - 2:41PM

    @ImnIndian: I am too an Indian and closely monitoring India’s infrastural projects. I am disapponted with the speed of completion. Malaysia is far ahead of us. Recommend

  • Jun 3, 2011 - 3:35PM

    I thought it was the IMF that said to revise growth target.Recommend

  • Kasim
    Jun 3, 2011 - 3:40PM

    @from India: This may happen if proper reconciliation steps are not taken in right direction. As a Pakistani, We should feel proud of our Country but at the same time, We should realise the reality too.

    Khuda Hafiz.Recommend

  • Khair Buksh
    Jun 3, 2011 - 4:40PM

    Increasing support prices of crops ,salaries,pensions,perks of civil,defense services etc is no short-medium-long term solution to economic welfare of people or economy.It results counter productive to increase commodity prices hundred of times and so inflation,deficits galore economy,IMF dependence etc.Once again raise in salaries pensions in government employees will imbalance the salaries sectors of the country.Better alternatives be considered as ration card system on modern lines.Recommend

  • yem
    Jun 3, 2011 - 6:58PM

    @Arvind
    brother,, im happy. but correction- india expected 8.6%, but achieved 8.5% last fiscal year, and not 7.8% (its jan to march growth rate) Recommend

  • Bangash
    Jun 3, 2011 - 7:58PM

    Its sad that such a large country with 200 million population has a small economy of a mere $200 billion :(Recommend

  • mussarat hussain
    Jun 3, 2011 - 10:08PM

    @from India:

    Why dont you speak about love, peace and unity instead of talking about “collapse” and breakdown. Remember, stronger Pakistan is in the “LARGEST INTEREST” and key to the survival of Bharat.

    Let’s be optimist and talk about peace and love in the region instead of adding fuel to the fire.

    MussaratRecommend

  • mahmood
    Jun 4, 2011 - 5:16AM

    I suspect your real economic growth was a negative and perhaps even a large negative —- the World is just coming out of a recession/depression and Pakistan is lagging behind the rest of the World. Does anyone in Pakistan really believe their economy is growing?Recommend

  • Thinking
    Jun 5, 2011 - 8:17AM

    Surely this is the fault of RAW and the CIA. They are trying to ruin Pakistan. Recommend

  • emp
    Jun 5, 2011 - 12:56PM

    @thinking
    don’t think too muchRecommend

  • abid jan
    Jun 28, 2011 - 6:49PM

    i love my pakistan,envirment is how bad or good,we do not leave pakistan but still struggle to finish these issues.pak army zinda rahe ta qayamat.Recommend

  • Jemal
    Jul 10, 2011 - 4:04PM

    Our country specially ISI is too busy interfering in other countries polices that we are drowning in debt. Why can’t we have a better relations with our neighboring countries ? Is it our greed and jealousy or our two faced policies ? I love my country but lets be honest, the the people/parties running it are the worst human beings ! they initialized Taliban along with america in our country and sent it to Afghanistan and now we are suffering from it. Why ? why would you not let our neighboring countries to be peaceful ? Sooner or later everyone will realize this !

    Recommend

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