How will Pakistan fare in FY-17? This is the question everyone is asking, as the GDP growth inches slowly and poverty rises.
However, Finance Minister Ishaq Dar is claiming that Pakistan’s GDP growth will rise to even 5.7 per cent as compared to FY-16.
Who is earning what? Where the government remains bogged down? What is the real GDP rate and where poverty stands – up or down? These are the evergreen controversies in Pakistan. Even now these are the hot topics across Pakistan over the year-end. The key characters in the debate are, besides the international multilateral funding institutions like the World Bank, the International Monetary Fund (IMF), Manila-based Asian Development Bank and the Jeddah-based Islamic Development, the State Bank of Pakistan (SBP), and Pakistani government leaders, led by Finance Minister Ishaq Dar, and the independent Pakistani economists and analysts.
The SBP, the central bank, has just unveiled its SBP Annual Review – 2015-16, which sheds light on most aspects of the country’s economy, and previews the microeconomic targets for FY-17 in the light of the actual performance in FY-16.
The GDP growth in FY-17 is set at 5.7 per cent, but the SBP expects it to a range between five and six per cent. “If a higher projection is achieved, it will so for the first time since 2007. It will also a signal that the economy has fundamentally moved up to a higher growth trajectory. The current indications, based on the first four months of FY-17, are that it may not happen because farm output is down and it is not likely to rise in whole of FY-17. The Large Scale Manufacturing industry, which showed a rise of just two per cent in July-September as compared to the target of the planned target of six per cent,” said Dr Hafeez Pasha, the former Finance Minister of Pakistan, who currently heads Karachi-Pakistan based Institute of Business Administration (IBA).
With limited growth in sectors like industry, trade, exports and banking but construction and real estate going up, and if the present trends continue, “the GDP growth rate is unlikely to exceed four per cent. This is substantially below the SBP projection of five to six per cent growth rate,” Dr Pasha said.
The government’s inflation rate target is six per cent while the SBP projects it at 4.5 to 5.6 per cent in FY-17. The actual inflation in the first four months, July-October, it was four per cent. “As such, the inflation rate projection by SBP of some increase in the rate of inflation appears to be valid,” Dr Pasha also said.
The SBP expects the current account deficit in the range of 0.5 to 1.5 per cent of the GDP in FY-17, while the government puts it at around 1.5 per cent. This optimism is based on the revival of exports by five per cent. In fact, exports in the first four months of this fiscal have declined by six per cent and home remittances sent by Pakistanis working overseas are down by one per cent. The current account deficit has widened by 6.3 per cent, and already has reached 0.6 per cent of GDP.
But, where is progress and prosperity ending up? This stark question stems from the independent research and analysis that clearly confirmed this week that poverty in Pakistan is, in fact, rising, despite all claims by the government and multilateral institutes about economic progress and growth.
Christine Lagarde, managing director of the IMF, endorsed the official view of the pro-poor analysts, during her visit to Pakistan this week. But, addressing bankers and economists, Lagarde asked Pakistan to do more for the poor. She said: “Although more than 1.5 million poor households are now benefiting from targeted social assistance than three years ago, more efforts are required to end the agonies of the poor.”
“Applauding other good efforts of Prime Minister Nawaz Sharif’s government, Lagarde pointed out that power outages have gradually decreased and the financial performance of the power sector is strengthening. A country-wide strategy to improve the business climate is being implemented,” she said at a joint press conference with Finance Minister Ishaq Dar. She also urged Pakistan that “corruption or the perception of corruption can only be eradicated through honesty, transparency and accountability.”
The writer is based in Islamabad. Views expressed by him are his own and do not reflect the newspaper’s policy.
This article first appeared in Khaleej Times. Click here to go to the original.