KARACHI: The State Bank of Pakistan (SBP) said on Wednesday that the growth rate for gross domestic product (GDP) will remain below target in the current fiscal year after the budget deficit doubled for fiscal year 2012-2013.
In its annual report on the state of the economy for 2012-13 released on Wednesday, the SBP said real GDP growth rate in fiscal 2014 is likely to remain between 3%-4%. In contrast, the annual plan for fiscal 2014 sets a GDP growth rate target of 4.4%.
According to the State Bank’s Annual Report on the State of Economy for the year 2012-13 released on Wednesday, Pakistan’s economy grew at 3.6 per cent and inflation fell to single-digit in Fiscal Year 2013.
The report noted that the soft global commodity prices, downward revision in energy prices and a relatively stable exchange rate allowed the average inflation rate to fall to 7.4 per cent in FY13, which was much lower than the 9.5 per cent target for the year.
“In a repeat from the previous year, the budget deficit exceeded the target for FY13 by a wide margin, as the realised deficit was 8.0 per cent of GDP, against a target of 4.7 per cent,” said the report. For the third consecutive year, the energy sector was addressed by paying off the circular debt, which pushed the fiscal deficits above the respective targets for these years.
According to the report, SBP projected that the GDP would grow in the range of 3.0 – 4.0 per cent fiscal year 2013-14, which is higher than the IMF’s growth forecast of 2.5 – 3.0 per cent.
Inflation outlook, based on October 2013 data, was in the range of 10.5 to 11.5 per cent, a more realistic outlook based on latest data shows average inflation for FY14 to remain between 10 and 11 per cent.
The International Monetary Fund (IMF) gave a brief reaction to the SBP report. In a tweet from their Pakistan specific Twitter account, the financial institution noted that projected growth between 3-4% was good considering the challenges faced. However, it added that more was still needed to be done.