FeaturedNationalVOLUME 17 ISSUE # 31

Elusive sustainable growth

Pakistan’s GDP grew at 5-6pc during the last two years. The growth rate is expected to slow down in the current fiscal year and inflation has reached an unprecedented level. It is sad that politics has again derailed the economy and the country has lost its path to sustainable growth.

The PTI government had taken harsh decisions to revive the national economy. It attempted to remove structural flaws in the economy. Its biggest achievement was the market-determined exchange rate. It stopped keeping the value of the dollar artificially low, saving Pakistan billions of dollars every year. For many decades, every government would inject $5-7 billion into the market to prop up the Pakistani rupee against the US dollar. The PTI government lifted a huge burden on the national economy. However, it pushed up prices of everything. The PTI government could have performed even better if the pandemic had not hit the country and the world. Then politics also played a major role in the destabilization of the economy. The former government froze electricity, gas and fuel prices after it saw its ouster through a no-confidence motion. Though it achieved remarkable success in the fight against the pandemic and saved the economy from major losses, macroeconomic imbalances increased in its last months.

It was a pleasant surprise that Pakistan’s economy grew more than international and national forecasts in the last fiscal year. The 5.97pc GDP growth was much higher than the projections of 4pc and 4.3pc by the International Monetary Fund and the World Bank, respectively. The growth was mainly contributed by the industrial sector, followed by services and agriculture sectors. In the agriculture sector, a robust growth was seen in four major crops — cotton, rice, sugarcane and maize — while a dip was noted in wheat production.

According to the Economic Survey of Pakistan, the size of the economy rose to $380 billion in 2021-22 from the revised figure of $346.76b the previous year. The size of the economy grew in dollar terms as the rupee strengthened against the greenback — the highest-ever increase in any year. The per capita income hit Rs314,353, up from Rs268,223 for 2020-21. The per capita income in dollar terms jumped to $1,798 from the previous year’s projections of $1,676.

The overall industrial sector increased by 7.19pc in 2021-22, while it recorded a growth of 7.81pc in 2020-21. The large-scale manufacturing industry grew by 10.48pc. Major contributors to the growth were food (11.67pc), tobacco (16.7pc), textile (3.19pc), wearing apparel (33.95pc), wood products (157.5pc), chemicals (7.79pc), iron & steel products (16.55pc), automobiles (54.10pc), furniture (301.83pc) and other manufacturing (37.83pc).

The crops sub-sector improved from 5.92pc to 5.96pc. Other crops improved from the provisional growth of 8.08pc to 8.27pc in revised estimates. The industrial sector’s growth in the revised estimates is 7.81pc, which was 7.79pc in the provisional estimates, while the services sector’s growth improved from 5.7pc to 6pc. The growth in agricultural, industrial and services sectors was 4.40pc, 7.19pc and 6.19pc, respectively. The growth in the agriculture sector was achieved despite a fall in wheat production. The growth in important crops during the last fiscal year was 7.24pc against the previous year’s 5.83pc. The growth in production of important crops — cotton, rice, sugarcane and maize — were estimated at 17.9pc, 10.7pc, 9.4pc and 19pc, respectively. Cotton crop production increased from last year’s 7.1 million bales to 8.3m bales; rice output from 8.4m tonnes to 9.3m tonnes; sugarcane production from 81m tonnes to 88.7m tonnes; and maize production rose from 8.4m tonnes to 10.6m tonnes. Wheat production decreased from 27.5m tonnes in 2020-21 to 26.4m tonnes in 2021-22. Other crops showed growth of 5.44pc, mainly because of an increase in production of pulses, vegetables, fodder, oilseeds and fruits. The livestock sector grew by 3.26pc against 2.38pc the previous year and forestry 6.13pc against a negative growth of 0.45pc.

The services sector showed a growth of 6.19pc in 2021-22, against 6pc in 2020-21. The wholesale and retail trade industry increased by 10.04pc. The growth in trade value added relating to agriculture, manufacturing and imports stands at 3.99pc, 9.82pc and 19.93pc, respectively. The electricity, gas and water industry shows a growth of 7.86pc, mainly due to an increase in subsidies in 2021-22. Value added in the construction industry, mainly driven by construction-related expenditure by industries, registered a modest growth of 3.14pc in 2021-22 against 2.48pc the previous year, mainly due to an increase in general government spending.

Despite the positives, inflation remained the biggest challenge to the previous government and people, mainly because of higher food prices, role of middlemen and imported inflation. The new government is also facing the same challenges. It should provide subsidies to people on food for a short-term solution to inflation and focus on agriculture development for a permanent solution to the problem.

The previous government faltered when it froze the prices of electricity, gas and fuel. It overburdened the economy to save its politics. When the new government hiked their prices steeply, the lives of the common people became more miserable. It is clear that the economy could not suffer the huge loss for longer. The PTI government took a number of harsh economic decisions and its popularity had plunged in its last days. It left the rest of the decisions for the new government, which are not only hurting the people but also the ruling parties.