Contrary to reports about the underperformance of the economy under the PTI government, the Pakistan Economic Survey 2021-2022 shows a growth rate of 5.97 per cent against a target of 4.8 per cent during the period under review. As is well known, the Economic Survey is an annual account taking of government expenditure and income, with particular focus on major macroeconomic indicators. A unique aspect of this year’s economic survey is that for the first time in the country’s history, a new government has presented the economic performance of a previous government (PTI).

Available figures show that the previous government handled economic matters well as a result of which the economy rebounded from the damage done by the pandemic and maintained a V-shaped recovery by posting real GDP growth of 5.97pc this year. The overall growth came on the back of 4.40pc growth in agriculture, 7.19pc growth in industries, and 6.19pc growth in services — meaning that all three major sectors surpassed their targets of 3.5pc, 6.5pc and4.7pc, respectively.

Even though the country surpassed overall growth expectations as well as sector-wise growth targets, the underlying macroeconomic imbalances and associated domestic and international risks cloud the economic horizon. The overall balance of payment situation of the country deteriorated with the trade deficit jumping almost 50pc and the current account deficit spiralling out of control.

Imports swung to the staggering figure of $77 billion which is the highest ever import bill in terms of GDP. Balancing the situation, exports put up a positive performance, growing by 26.6pc and rising to $23.7bn. On the other hand, services exports grew by 17.1pc and amounted to $5. The surge in imports was caused by the unprecedented rise in global commodity prices, Covid-19 vaccine imports, and demand-side pressures, according to the Economic Survey. As a result, the trade deficit grew by 55.5pc, amounting to $32.9 billion or 8.6pc of the GDP which has been described by experts as “historically high”.

A salient feature of this year’s economic outlook is the growth in workers’ remittances which reached record-high levels during the nine-month period of the year. On the other hand, import payments registered a “sizable, broad-based increase” as a result of which the current account deficit widened considerably over last year.

Payment pressure manifested itself in the interbank PKR-USD exchange rate, which depreciated 14.1 percent during Jul-Mar FY2022. The SBP’s foreign exchange reserves also began to dwindle from Q2 onwards, dropping $5.9 billion during the first nine months of the fiscal year to $11.4 billion by end March 2022.

In consequence, the current account posted a deficit of $13.8bn, or 3.6pc of GDP, against a deficit of $0.5bn last year. The major contributor to the higher current account deficit was the 55.5pc increase in the merchandise trade deficit during Jul-Mar FY2022.

In the words of the Economic Survey, “The widening of the current account deficit together with a build-up in inflationary pressures in the backdrop of the geopolitical situation (especially the Russia-Ukraine conflict) has created significant challenges for sustainable economic growth. In addition, the recent emergence of domestic conditions (including political instability) is eroding business confidence. Thus, all in all, inflationary and external sector pressures have created macroeconomic imbalances in the economy.”

In the midst of all this, inflationary pressures accentuated. The year-on-year (YoY) inflation from July to April of the outgoing fiscal year was measured at 11pc, compared to the target of 8pc. As explained by experts, an abnormal increase in global commodity prices, especially crude oil and edible oil, was the main factor behind the rise in domestic prices. Transport, housing, water, electricity and gas all became more expensive. Non-perishable food items were the main contributory factor in jacking up food inflation.

On the revenue side, the Federal Board of Revenue initiated various policy and administrative measures to facilitate the taxpayers to mobilise domestic resources and generate sufficient revenue without hurting the growth momentum in the outgoing year. As a result, FBR tax collection witnessed a substantial growth of 28.5pc during July-April FY2022. The amount collected during this period stood at Rs4,855.8bn as compared to Rs3,777.7bn last year.

However, despite the significant rise in tax collection, higher current and development expenditures widened the fiscal deficit during the July-March FY22 period to 3.8pc of the GDP compared to 3pc during the same time last year. Due to IPPs circular debt payment, social sector spending, and higher development expenditures, the fiscal sector remained under tremendous pressure. All these factors, along with the global economic challenges posed by the Russia-Ukraine conflict as well as the impact on international commodities and oil prices, have increased the risk of fiscal downslides during the current fiscal year.