ISLAMABAD -UNS- Advisor to Prime Minister Imran Khan on Finance, Abdul Hafeez Shaikh unveiled the pre-budget document, Economic Survey 2019-20 to share the key economic indicators and the performance of different sectors of the economy.
While unveiling the Economic Survey 2019-20 in a press conference on Thursday, Hafeez Sheikh said that Pakistan Tehreek-e-Insaf (PTI) government took loans to tackle the burden of the debt left by previous governments.
Sheikh said before the coronavirus, taxes were increased by the FBR by 27%.He said Prime Minister Imran Khan’s vision is that the most important is the nation, who are underprivileged. Therefore, the Ehsaas Programme budget was almost doubled. There was no political, geographic, or religious consideration regarding this, he said.
The government set aside Rs152 billion for the former tribal areas, said Sheikh. It also set aside Rs701 billion for the PSDP.
The IMF has forecast a global economic contraction of 3 to 4%, warned Sheikh. Because of this, remittances will also drop, he said, adding that Pakistan will be affected along with the rest of the world.
Sheikh said it is difficult to say anything about the novel coronavirus, because different people have different approaches to it. He said the economy contracted 0.4% because of it. The country also lost 3 to 3.5% of its revenue.
FBR tax collection could have reached Rs4,700 billion but right now it’s at Rs3,900 billion, said Sheikh. The FBR lost Rs700 billion to Rs750 billion in tax collection. But the requirement is to go to people to help, not to tax them, he said.
The government has already decided that it has to save people and the economy from the coronavirus, said the premier’s adviser. The SBP gave subsidies and several programmes were also introduced.
Under the stimulus package, it was decided that 16 million families needed to be supported, he said, explaining that so far 10 million families have been given support packages across Pakistan so far.
When we will reach 16 million families, we will have reached nearly 100 million people, he said.
Small and medium enterprises and all small factories were given three-month grants in paying their bills so that they could recover from the coronavirus lockdown. Rs50 billion was given for agriculture so that fertilizer prices could be reduced and the havoc of locusts could be dealt with.
The government also provided main food products at lower prices, said Sheikh, adding that subsidies were given during Ramazan as well.
Rs30 billion has been set aside for underprivileged persons so that they could built their houses, he said, adding that mortgages have also been reduced.
Sheikh discussed the growth of the major sectors, with agriculture growing 2.67%, industry -2.64% and wholesalers -3.4%. Manufacturing showed a negative growth of -22.9%.
Called the Pakistan Economic Survey 2019-20, the annual document reflects on the government’s economic performance for the current fiscal year, which is ending on June 30. It reviewed targets for the GDP growth rate and other economic indicators the government had set at the beginning of the year and report how many of these targets have been met.
It is expected that the GDP growth target will be missed by a notable margin. The government had estimated that the economy would grow 4% but it now expects it to contract 0.4%. This will be the first time the country has a negative GDP growth rate in nearly seven decades.
The government had to apply the brakes on economic growth in line with the conditions set under a $6 billion IMF bailout programme signed last July. It took a host of other measures as well, such as clamping down on imports by increasing duties, which curbed domestic consumption or spending. The central bank raised interest rates to a multi-decade high of 13.25%, making loans expensive for businesses, which were forced to hold new projects and business expansion and many resorted to cost-cutting through layoffs.
An inflationary budget followed by higher electricity and gas tariffs and a 25% currency devaluation pushed the inflation rate to a decade high of 14.6% in January.
However, things started looking good a few months ago. The current account deficit shrank 75% in the first nine months of the current fiscal year, inflation started slowing down, falling back into the single-digit and the central bank cut interest rates–but the worse had yet to come.
Amid early signs of economic recovery, the COVID-19 contagion happened, bringing the already sluggish economy to a grinding halt for at least two months. After the country went into lockdowns and chose trade suspensions, Pakistan’s exports fell sharply and remittances slowed. At home, businesses were shut and factories closed, resulting in a significant dip in the government’s tax revenue.
On the other hand, expenses increased as the government introduced a Rs1,200 billion relief package, including cash stipends for the most vulnerable segment of society. It subsidised electricity and gas bills, offered cheaper loans to businesses to prevent unemployment and increased spending on healthcare infrastructure.
The government eased its lockdown in the last week of May (after Eid), but a two-month disruption in economic activities was enough to send the GDP in the negative zone this year.
Agriculture, the second-largest sector of the economy or 20% of the GDP, is expected to grow at 2.7% versus the target of 3.5%. Production of major crops including wheat, rice and cotton fell short of the targets. Given the sector employs half of Pakistan’s workforce, the recent locust invasion is going to make matters worse next year. Media reports say locusts have damaged wheat, pulses and vegetable crops in Sindh and can wipe out more than a third of the country’s major crops.
The industrial sector is expected to grow at -2.3% against an estimate of 2.3% as most of the targets within this sector were missed. Large Scale Manufacturing remained the biggest under-performing segment within the industrial sector, contracting 7.8% against a growth target of 1.3%. The services sector is also expected to contract 0.6% compared to a growth target of 4.8%.
This is developing story. It will be updated in the evening after the Pakistan Economic Survey 2019-20 is unveiled.