Lahore: Pakistan’s real economy is performing well with favourable signs for GDP growth rate, inflation, consumption, and private sector economic activities. Weak economic fundamentals, however, detract from this positive picture. This was stated by Institute for Policy Reforms in its six-months review of the performance of the economy
IPR’s report said that budget deficit for fiscal 2018 will exceed target while the current account deficit for the year will end at an unprecedented high. It said that Pakistan is effectively in a debt trap where new borrowing is servicing past debt. Both domestic and external debt are at an all-time high. Continued weak fundamentals will damage the real sector and reduce growth rate. The longer the country postpones addressing the real causes of economic difficulties, the worse would be its effect.
While tabling this fiscal year’s budget, GoPhad announced a combination of macro stabilizing and growth measures to achieve its target GDP growth rate of 6% in FY 18. These measures included higher revenues and lower current expenditure, as well as increase in investment, especially through FDI from China and a large PSDP.
Continuous growth in government revenue for three years running has helped limit the fiscal deficit. During July-December 2017-18, FBR revenue grew by a further 18%. On the other hand, investment has not kept pace with plans.
Actuals for the half year show GDP growth rate will be close to target and above last fiscal. LSM has grown by 5.55%, 0.8% off target. With a favourable monetary policy, demand has fueled production of consumer durables. Estimates for growth of major crops are favourable and half-year power supply grew by 11.8% over last year.
There are signs that this positive picture may not continue for long. Growth inducing machinery import declined by 3%, import of power generation machinery fell by 26% and construction machinery by 24%. So far, GoPhad attributed the economy’s runaway current account deficit to such imports.
Published in Daily Times, April 10th 2018.