Finance Minister Muhammad Aurangzeb on Tuesday admitted Pakistan failed to achieve most macroeconomic targets in fiscal year 2023-24, adding the agriculture sector had played a key role in achieving GDP growth of 2.38%.
Unveiling the Economic Survey of Pakistan 2023-24 at a press conference in Islamabad, he pointed to high interest rates and energy prices as key reasons for subdued growth in large-scale manufacturing. “The agriculture was the savior, backed by the bumper crops. Agriculture is going to remain a huge lever of growth as we go forward,” he said, noting the sector had posted growth of 6.25%, the highest in 19 years.
To a question, he said that agriculture would remain the backbone of Pakistan’s economy as the sector—along with I.T.—had nothing to with demands imposed by the International Monetary Fund (IMF) for a new Extended Fund Facility. “Half of agricultural sector is dairy production and livestock,” he said, adding there was great scope for exports of the same to China.
“Countries only function through taxes, not charity,” he emphasized. “There are no sacred cows. Everyone will have to contribute to this economy,” he said to questions on expanding the tax net. He also made clear that Pakistan had no “Plan B” and required a fresh IMF loan to ensure economic revival. He said the government planned to proceed in the coming year in the same manner as last year, seeking rollovers of some loans and borrowing as needed from commercial banks.
Stressing the country was entering the coming fiscal year in a much stronger position that it had been last year, he clarified that repayments would not prove a major concern. “Once the [IMF] program is in place, I don’t see external financing as a big challenge,” he said.
According to Aurangzeb, the incumbent government was committed to undertaking reforms under the leadership of Prime Minister Shehbaz Sharif. He pointed to an “unprecedented” 30 percent growth in revenue collection and appreciated provinces for delivering on their primary surpluses, noting the country could not have delivered on its commitments to the IMF without this. He also appreciated stability in the rupee’s value and a current account surplus for the past three months.
Summarizing some occurrences of the past year, the finance minister said the interim government had attempted to curb smuggling via Afghan transit trade and stop currency hoarding. “We are trying to prevent currency speculation from happening again,” he said.
To a question on privatization of state-owned assets, Aurangzeb said he believed the government should have minimal involvement and reiterated that there were no “strategic” assets requiring government control. In this regard, he said power distribution companies must be privatized, as losses due to power theft had hit an estimated Rs. 500 billion.
To a question on capacity payments to independent power producers, Minister of State for Finance Ali Pervaiz Malik—accompanying Aurangzeb at the press conference—said such payments had to be obliged under sovereign commitments.
Aurangzeb also admitted the investment-to-GDP ratio was at its lowest in 50 years but maintained this would not impact key projects under the Public Sector Development Program. However, he added, the government must shelve critical projects for now.
Economic Survey findings
The Economic Survey is an annual document issued ahead of the budget, detailing macroeconomic indicators of the outgoing fiscal year. According to this year’s document, the real, fiscal, and external sectors, as well as financial markets, have demonstrated resilience and steady improvement.
It provided a provisional GDP growth of 2.38%, with total size of the economy increasing by 26.4% from $338 billion to $375 billion. The country’s per capita income rose to $1,680 from $1,551 the previous year, with the report crediting improved economic activity and a stable exchange rate. The investment-to-GDP ratio was recorded at 13.14%, a decrease from 14.13% the year prior, which was owed to a global slowdown, political instability and restrictive macroeconomic policies.
On agriculture, the report said the sector showed 6.25% growth thanks to bumper crops of wheat, cotton and rice. Wheat, it said, grew by 11.6%, reaching 31.4 million tons compared to 28.2 million tons last year. Cotton, meanwhile recorded 10.2 million bales compared to 4.9 million bales last year, growing by 108.2%, as it recovered from losses caused by floods in 2022. Rice production increased by 34.8% from 7.3 million tons last year to 9.9 million tons this year.
On the industrial sector, the Economic Survey states it has posted a moderate growth of 1.21%, adding the sector’s performance is dependent on industry, which comprises 65.3% of its total make-up. It said mining had increased by 4.85%, while crude oil, coal, marble, limestone, and laterite production had also posted hikes.
Additionally, per the report, textiles increased posted a negative growth of 8.27%; beverages 3.43%; tobacco 33.59%; non-metallic mineral products 3.89%; coke and petroleum 4.85%; and pharmaceuticals 23.19%. Meanwhile, food posted growth of 1.69%; wearing apparel 5.41%; and wood 12.09%.
On inflation, the Survey said it was recorded at 26% for the period July-April FY24 against 28.2% during the same period last year. It said the Sensitive Price Indicator (SPI) had similarly declined to 30.2% from 31.7% last year. Food inflation (urban) had declined from 48.1% in May 2023 to 11.3% in April 2024, it said, adding this decrease reflected fiscal consolidation, favorable global commodity prices, and the base effect.
Additionally, the Survey showed the fiscal deficit during July-March FY24 at 3.7% of GDP, the same as last year. The primary balance, meanwhile, posted a surplus of Rs. 1,615.4 billion (1.5% of GDP) during July-March FY2024, compared to Rs. 503.8 billion (0.6% of GDP) last year. The current account deficit decreased from $3.9 billion last year to $0.2 billion in July-April FY24 thanks to a 10.6% increase in exports and a 5.3% drop in imports.
Total revenues, per the report, increased by 41% in July-March FY24, compared to 18.1% last year, primarily due to a sharp rise in non-tax revenues, which grew by 90.7%. Total tax collection (federal and provincial) grew by 29.3% during July-March FY24, compared to 16.5% last year.
The document also claimed 4.5 million individuals were unemployed in the country, with youth aged 15-24 having the highest unemployment rate of 11.1%, based on a Labor Force Survey from 2021.