Inflation has become a global challenge and the US, UK, European Union and all emerging markets are currently facing the highest inflation in the last three decades, said the Finance Division while responding to criticism over the state of Pakistan’s economy.
“Pakistan’s economy is also facing inflation headwinds due to record high international energy and food prices,” it said in a statement on Wednesday.
“However, in line with the government’s vision of a social welfare state, it has provided unprecedented relief to the masses by lowering prices of petrol, diesel and electricity.”
Moreover, it said, the government also rolled out the most comprehensive and targeted food subsidy programme that covered 20 million households (54% of the population).
It claimed that people had recognised the steps taken by the government to provide relief to the masses.
The Finance Division called the latest political episode an attempt to cripple the economy at a time when it was showing rapid recovery from the Covid shock, which was termed the worst global economic crisis since the Great Depression by the International Monetary Fund (IMF).
“Effective data-driven response helped Pakistan to control the pandemic and outperform other countries,” the Finance Division said.
The GDP growth accelerated to 5.4% in 2021 following a pandemic-induced contraction of 0.5% in 2020, it pointed out.
In comparison, the US economy contracted 4%, EU 8%, India 7.3% and the Gulf 5%.
Citing World Bank data, it stated that Pakistan outperformed all regional economies during 2020-2022, with the lowest unemployment rate in the South Asia region at 4.3% compared to India’s 8%, Bangladesh’s 5.4% and Sri Lanka’s 5.9%.
The government unveiled a fiscal and monetary stimulus package of Rs2.5 trillion (6% of GDP, or $16 billion) in March 2020.
The package focused on emergency cash assistance to 15 million families through the Prime Minister’s Ehsaas Programme, covering nearly 45% of the population.
“In the current year, the economy is projected to sustain the growth of 5% with record exports of $30 billion, record remittances and highest-ever agriculture farm output,” the statement said.
“Private sector credit growth has doubled in the current year as a result of higher manufacturing and services industry activity.”
The manufacturing sector posted a growth of 7.6% in the current year and the manufacturing index (QIM) in January 2022 recorded the highest-ever output. Unlike the previous boom-bust cycles, the government was focused on sustainable “inclusive” growth, the Finance Division said.
The key risk of a balance of payment crisis has been pre-empted through early monetary and exchange rate adjustments and as a result, the current account deficit has started to decline as it fell to $545 million in February from an average of $1.5 billion in the previous seven months, it added.
Published in The Express Tribune, March 24th, 2022.
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