Most indicators reflect substandard show

GDP growth rate, revenue collection, current account deficit among disturbing stats.

KARACHI:

In contrast to Finance Minister Ishaq Dar’s tall claims about his outstanding achievements in the outgoing fiscal year, most economic indicators show the performance by the poster child of the Nawaz administration has been less than exemplary.

Dar has indeed pulled a few rabbits out of his hat – such as bringing down the rupee-dollar exchange rate substantially – during his first year in office. While he remains steadfast in defending his one-year record in arguably the single most important federal ministry, let us take a brief look at some of the key economic indicators for 2013-14.

The government failed to achieve its target for the mother of all economic indicators – gross domestic product (GDP) growth rate – for 2013-14. With GDP growth rate expected to be 4.14% for the outgoing year, the government is going to miss its original target of 4.4%.

Nine-month provisional data shows the below-target performance is attributable to less-than-expected growth in agriculture and services sectors. More importantly, the 4.14% estimate is based on the budgeted public-sector development spending. However, the actual spending is going to be less than half of the allocation, which is likely to further reduce the GDP growth rate to 3.9%.

The government managed to keep fiscal deficit lower than its budgeted level during 2013-14. The government has revised it downwards to 5.7% from the budgeted 6.3% for the outgoing fiscal year. However, the decrease is mainly due to a less-than-budgeted development expenditure by central and provincial governments.

Taxing

As for revenue collection, the Federal Board of Revenue (FBR) is going to miss the twice-revised target of Rs2.275 trillion in the outgoing fiscal year. Most analysts believe that, in addition to its organisational inefficiencies, the FBR’s underperformance has a lot to do with the government’s pandering to vested interests by means of tax exemptions offered via statutory regulatory orders (SROs).



Other targets

Similarly, annual targets for savings and investments as a percentage of GDP are also expected to be missed this year. In contrast with the target of 15.1% of the GDP, the share of investments in 2013-14 remained 14%. The savings-to-GDP ratio remained 13% in 2013-14 as opposed to the original target of 14%.

With regard to the current account deficit, SBP data shows it widened to $2.1 billion in July-April of 2013-14 as opposed to a deficit of $1.5 billion recorded in the comparable period of the preceding fiscal year, up 37.3% on a year-on-year basis.



The main reason for a widening current account deficit is the imbalance in the trade of services, whose deficit clocked up at $2.2 billion as opposed to a deficit of $1 billion in the corresponding 10 months of 2012-13.

The average CPI inflation for July-April has remained 8.7%, which is higher than the fiscal year’s target of 8%, according to the State Bank of Pakistan (SBP). Inflation has been rather volatile in the outgoing fiscal year. It surged sharply in November and then declined for a few months to settle at 9.2% in April mainly because of unexpected movements in food prices and changes in administered prices.



Forex on the rise

Foreign exchange reserves held by the SBP have seen some positive improvements. They plunged to $3.1 billion in January from $5.2 billion at the beginning of the fiscal year, a drop of 38.8% in just seven months. But following the finance minister’s stern warnings to foreign currency hoarders, coupled with the issue of Eurobonds and sale of 3G/4G licences, SBP-held foreign exchange reserves started building up again. They have now risen to $8.3 billion, up 161.6% from January.



Despite many pronouncements by the finance minister about Pakistan’s re-emergence on the global investment map, foreign direct investment (FDI) has remained $750.9 million in the first 10 months of the outgoing fiscal year. This reflects a decrease of $111 million, or 13%, from the FDI recorded in the corresponding period of the preceding fiscal year. REPORTING BY KAZIM ALAM

Published in The Express Tribune, May 26^th, 2014.

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