Finance Minister Shaukat Tarin is unveiling the Pakistan Economic Survey 2020-21 at a press conference in Islamabad.
The Pakistan Economic Survey is an annual report on the performance of the economy, focusing in particular on major macroeconomic indicators.
Tarin started out by underscoring the impact of Covid-19 in causing the economy to contract last year. But, he said, the decisions of this government under Prime Minister Imran Khan helped the economy stabilise which resulted in improving performance on the growth front.
"The government itself had set [GDP] growth will be 2.1pc and the IMF predicted even lower. But the decisions by this government such as incentivising manufacturing and textiles, construction, and interventions in agriculture have helped the economy recover."
Pakistan has recorded a provisional growth rate of 3.94pc in the first 9 months (July to March) of the fiscal year.Tarin said large-scale manufacturing (LSM) showed growth of 9pc, while the agriculture sector growth clocked in at 2.77pc – against a target of 2.8pc – despite the "cotton crop getting ruined".
He said even though the cotton crop did not perform so well, yields of other crops compensated for that, resulting in overall growth in agriculture of 2.77pc.
The finance minister said the government wanted to control inflation "but prices are still high and affecting the common man".
"So the way to solve this is by increasing production and that is why we have focused on agriculture in this budget," Tarin said.
'Focus now on growth'
Tarin said he had told the prime minister it was time to focus on sustainable growth "until we go to 5-8pc GDP growth".
"We will do interventions and take care of the poor. The poor man has been crushed in this stabilisation phase because the dreams we have shown them have been of a trickledown economy. And this can only happen when growth is sustainable and continuous for 20-30 years," he said.
Tarin, however, emphasised that this growth should not be based on borrowing.
"Countries which had sustainable growth, they grew continuously for 20-30 years. What have we done? Every time we grow by borrowing money, which is credit-based growth."
Nominal rise in debt
The finance minister said Pakistan's total debt had increased nominally in the last 9 months.
He said Pakistan's total debt increased Rs1.67 trillion in FY21 to reach Rs38 trillion. "Out of this Rs25 trillion is local debt while around Rs12.5 trillion is foreign debt."Tarin announced special incentives for important ministries such as housing and construction.
The finance minister said that in terms of growth rate, Pakistan was ahead of targets set by the government and IMF for the outgoing fiscal year
"The Covid-driven survey revealed that when Covid-19 started, the working population was 55.74 million and this figure dropped to 35 million meaning nearly 20 million people were laid off
Due to the prudent policies of Prime Minister Imran Khan, the working population has been restored to 53 million people meaning that gap of only 2.5 million people remains.
Despite obstacles, decisions taken by this government, and the incentives given by this government, showed a prominent growth.Remittances clocked in at a record high, surpassing $26 billion during the year under review. The minister said they are expected to amount to $29 billion.
Crude oil price rose 119% and the government did not pass on the price to consumers.
However, the wheat price rose 29% and had to raise it 29% as well.
Tarin mentioned that the government was trying to control inflation. “We have to enhance production; hence, the budget focuses on agriculture.”
Agriculture
Tarin mentioned that the government was trying to control inflation. “We have to enhance production; hence, the budget focuses on agriculture.”
“We have to become net exporter so we can control market prices,” he added.
Sharing plans for the next fiscal year the minister said that the government will introduce cold storages and commodity warehousing to decrease margins of a middleman.
“We need administrative measures such as price control,” he emphasised.Remittances clocked in at a record high, surpassing $26 billion during the year under review. The minister said they are expected to amount to $29 billion.
Crude oil price rose 119% and the government did not pass on the price to consumers.
However, the wheat price rose 29% and had to raise it 29% as well.
Tarin mentioned that the government was trying to control inflation. “We have to enhance production; hence, the budget focuses on agriculture.”
Agriculture
Tarin mentioned that the government was trying to control inflation. “We have to enhance production; hence, the budget focuses on agriculture.”
“We have to become net exporter so we can control market prices,” he added.
Sharing plans for the next fiscal year the minister said that the government will introduce cold storages and commodity warehousing to decrease margins of a middleman.
“We need administrative measures such as price control,” he emphasised.
The finance minister said that the Pakistan Stock Exchange (PSX) is the fourth-best capital market in the world and best in Asia.
Pakistan raised $2.5 billion in the international market. Demand was $5.3 billion but we went for $2.5b
“Debt is not a good thing but it is, however, necessary,” he said.
Tarin said that the government tried to enhance surplus capacity. Broadband subscribers have hit 100 million users with 48% penetration rate.
Development programmes
Ehsaas programme is one of the best programmes introduce worldwide. 15 million families have so far benefited from this programme.
Emergency cash was given to all these families. Prime Minister introduced the Kamyab Jawam programme and 8500-9000 people have registered so far.
During the fiscal year under review, one billion trees have been planted. All credit rating agencies reaffirmed their support, which means the stabilisation programme has succeeded.
“Now we have to move towards growth,” Tarin reiterated.
Industries
Lower segments would be given top priority in growth strategy.
Read more: Rs26.5 billion Ehsaas supplementary budget approved
“Our focus will be on SMEs and exports,” the minister revealed. Amount of loans given to 6-8 million SMEs clock in at 1.8 million.
“We will shift from traditional exports and transform it along with fixing large scale manufacturing sector.”
The strategy also includes the dire need for a paradigm shift to increase exports. The Commerce Ministry has been directed to identify sectors that need relaxation.
Growth strategy
IT is growing at 50% and we want the sector to grow at a rate of 100% next year.
“We need to enhance exports, FDI and maintain remittances to increase the inflow of dollars,” Tarin said.
“We want to make surplus food and would like to grow the housing sector.”
Areas to be tapped
The government wants to manage the power sector. “It is a black hole for us,” the minister stated.
The agriculture and manufacturing sectors have immense potential.
Tarin revealed that Prime Minister Imran Khan refused to enhance power tariffs for IMF.
Highlighting the circular debt crisis Rs450 billion was supposed to be the circular debt for the outgoing year, unfortunately, they stood at Rs200 billion.
China Pakistan Economic Corridor (CPEC) helped in establishing, however, we could not bring investors in these SEZs.
“We should take benefit of SEZs. China is going to outsource85 million jobs,” he stressed.
The minister said Pakistan needs to attract investors to earn dollars which will help pay off loans.
State-owned entities are draining money. Moreover, DISCOs, PIA and Railways are under immense losses.
We are making a board of prominent professionals under Privatisation Commission and will give 15 entities under them,” Tarin disclosed.
These 15 entities would then be removed from under ministries.
Financial sector
Bank footprint is only 33% of GDP compared to 50% in Bangladesh and 100% in Korea
“We need to fix this,” he emphasised, adding, “Our bank footprint is among lowest in the world.”
