NationalVOLUME 17 ISSUE # 9

Reliefless prosperity

As supply chain and health issues subdue global growth, Pakistan is expected to progress more than national and international forecasts. Its growth rate for the current fiscal year could be about 5pc, as it has successfully tackled the pandemic while its agriculture produce, exports and industry are rising. There are distinct signs of an economic recovery but its fruits have not reached the common man.

The Federal Board of Revenue (FBR) reported “historic high” tax collection during November, which surged by 35pc to Rs470 billion against the target of Rs408 billion. According to provisional figures, the FBR has collected net revenue of Rs2,314 billion during the first five months (July-November) of the current fiscal year 2021-22, which has exceeded the target of Rs2,016 billion by Rs298 billion. The 36.5pc growth comes despite the “daunting challenges, compelling constraints posed by the coronavirus pandemic, and sporadic tax cuts announced by the government as relief and price stabilisation measures,” it said in a statement. The collection stood at Rs1,695 billion during the same period last year. The revenue board stated that after collecting over Rs4.7 trillion and exceeding its assigned revenue targets set for the tax year 2020-21, the FBR has successfully maintained the momentum set in July 2021. “The tax collection posted historic high growth in the first quarter of the current fiscal year,” it revealed, adding that during the first four months (July-October), the FBR far surpassed its revenue target by Rs233 billion. “This spectacular performance in the first five months of the current fiscal year clearly shows the FBR is well on its way to achieving the assigned target of Rs5,829 billion for the year,” the statement read.

Overseas Pakistanis sent the highest-ever $8 billion remittances during the first quarter of the current fiscal year, registering a growth of 12.5pc over the same period last year. The State Bank of Pakistan (SBP) reported that with inflows of $2.7b in September, workers’ remittances had continued their strong momentum and remained above $2b since June 2020. “This is the 7th consecutive month when inflows recorded around $2.7b on average,” the SBP noted. In terms of growth, remittances increased by 17pc in September compared to the same month last year, while compared with August inflows it was 0.5pc higher. The country had received record remittances of $29.4b in FY21 which helped it curtail the current account deficit.

Pakistan’s exports had the fastest growth rate in South Asia during November. The country’s exports grew by 33.5pc compared to Bangladesh’s 31.3pc and India’s 26.5pc growth. Pakistan’s exports during the month under review jumped to a historic monthly high of $2.903 billion as compared to $2.174 billion during the corresponding period last year. The figures surpassed the government’s target of $2.6 billion. During the first five months of the current financial year, Pakistan’s exports increased by 27pc to $12.365 billion, as compared to $9.747 billion recorded in the same period last year, against a target of $12.2 billion for the period. The government has set a target of $38 billion for exports of goods and services for the ongoing fiscal year whereas it is optimistic that exports would exceed $40 billion in the current fiscal year.

The World Bank has warned that Pakistan’s growth would depend on implementation of key structural reforms, particularly those aimed at sustaining macroeconomic stability, increasing competitiveness and improving financial viability of the energy sector. The current account deficit is projected to widen to 2.5pc of GDP in FY23 as imports expand with higher economic growth and oil prices. Exports are also expected to grow strongly after initially tapering in FY22, as tariff reform measures gain traction supporting export competitiveness. In addition, the growth of official remittance inflows is expected to moderate after benefiting from a Covid-19 induced transition to formal channels in FY21. Despite fiscal consolidation efforts, the deficit is projected to remain high at 7pc of GDP in FY22 and widen to 7.1pc in FY23 due to pre-election spending. Implementation of critical revenue-enhancing reforms, particularly the General Sales Tax harmonisation, will support a narrowing of the fiscal deficit over time. Public debt will remain elevated in the medium-term, as will Pakistan’s exposure to debt-related shocks, it added.

Pakistan’s economy is expected to continue recovering in fiscal year 2021-22, with real GDP projected to rise by 4pc, according to the Asian Development Bank (ADB). It said that the 4pc growth forecast was based on the assumption of recovery in private investment as consumer confidence and business activity improved amid the ongoing vaccination rollout and various economic stimulus measures announced in the budget for FY22. The ADB said that the 4pc growth rate was contingent on the resumption of structural reforms later in the year in an ongoing programme under the International Monetary Fund (IMF) Extended Fund Facility. It said that the outlook for agriculture was encouraging in view of the government’s ambitious Agriculture Transformation Plan. Growth in the industry is forecast to improve in FY22, driven by fiscal incentives announced in the FY22 budget, a substantial rise in the budgeted development spending and strong private consumption underpinned by adequate agricultural harvests, strong remittance inflow and pickup in earnings as social restrictions are reduced and most economic activity resumes. Enhanced growth in agriculture and industry and expected improvement in domestic demand are projected to boost growth in services, strengthening their contribution to the overall growth in FY22.

According to the latest data, Pakistan has produced 27.5 million ton wheat against a target of 27.3 million ton, while production of maize was 8.9 million ton against the 8.5 million ton target. Pakistan also produced 87.7m ton sugarcane against 81.m ton last year, rice 8.8m ton (8.4m ton last year) and cotton 8.5m ton (7.1m ton last year). The government believes agriculture facilitation measures and the encouraging performance of major and minor crops will further ease out the inflationary pressures as it would further increase the supply of food items to the market.

Rising food prices and unemployment remain the biggest issues of Pakistanis. The government will have to check food prices urgently as people cannot wait for long for it. If the economy is really improving, its fruits should also reach the common people.