Not a victory yet

Owing to a poor performance by the agricultural sector, the national economy missed with a slim margin its growth target set for the current fiscal year. In its annual meeting, the National Accounts Committee — a forum representing the federal government, all the provinces and special areas — has estimated 4.14pc rise in GDP for this fiscal year that is based on actual data for 10 months and provisional data for the remaining two months. This is a bit short of the official target at 4.4pc but better than 3.7pc projected by the IMF. The growth rate got a boost from a robust performance of the industrial sector, particularly large scale manufacturing that surpassed its annual target by a reasonable margin. Services sector missed its projection by a negligible 0.1pc. A lacklustre performance by the agriculture sector was the major reason behind the slower than targeted economic growth rate this fiscal year This provides a bit of a pause for the government to celebrate. Last year, the GDP growth stood at 3.7pc against 3.8pc in 2011-12. Finance Minister Ishaq Dar was quick to describe this year’s performance as an ‘indicator of growing economy’ but perhaps stopped short of declaring a victory following recent criticism by some eminent economists over ‘borrowing spree and unprecedented international debt contracts’. A lacklustre performance by the agriculture sector was the major reason behind the slower than targeted economic growth rate. During fiscal year 2014-15, the agriculture sector is estimated to have recorded a growth of 2.12pc, significantly lower than 3.8pc projected in the budget strategy paper last year. It was even lower than last year’s growth at 2.9pc. As such, agriculture contributed 0.45pc to 4.14pc GDP growth. This was despite a bumper wheat crop of 25.3m tonnes against last year’s 24.2m tonnes. Cotton output this year was, however, reported at 12.7m bales against last year’s 13m bales. Overall, the crop sector grew by 1.15pc against a growth rate of 2.3pc last year and 3.22pc in 2011-12. Major crops grew by 3.74pc while other crops posted a decline of 3.53pc when compared with last year. Cotton ginning and related activities also dropped by 1.33pc. Livestock growth remained subdued at 2.9pc this year against 3.5pc last year and 4pc in 2011-12. The industrial sector was the major driving force behind 4.14pc GDP growth which expanded by 5.84pc due to improved energy supply during current fiscal year, exceeding the target of 4.8pc. It was a significant improvement over the last year when it had posted a growth of about 1.4pc. Among the industry’s sub sectors, large scale manufacturing grew by 5.31pc against a target of 4.5pc and up from last year’s 4.1pc. A major improvement was seen in the electricity sector that grew by 3.7 pc this year against a negative performance of 16.33pc last year. When put together, commodity producing sectors (agriculture and industry) grew by 3.94pc this year against just 2.14pc last year and 3.1pc in 2011-12. The two sectors together contributed 1.65pc to economic growth this year. Services sector posted a growth rate of 4.29pc this year against a target of 4.6pc and last year’s growth rate of 4.85pc. Although slightly short of target, the services sector had the largest share of 2.19pc in 4.14pc growth rate. In its sub-sectors, wholesale and retail trade expanded by 5.2pc against 3.38pc of last year while finance and insurance sector expanded by 5.2pc, followed by 4pc of housing sector that has remained unchanged for third year running. The FBR revenue surged by 15.6pc in first 10 months of the current year to Rs1.745trn. Budget deficit during the same period stood at 4pc of GDP or Rs1033bn against Rs1262bn or 5.5pc of corresponding period last year. Similarly, remittances grew by 11.4pc to $19.11bn. Likewise, nine-month exports rose by 6.1pc against 0.85pc growth in imports. As a consequence, trade deficit dropped by 5.8pc to $13.9bn. Foreign exchange reserves touched $12.92bn as on May 13, a significant improvement since last year. The ministry of finance has conceded that debt servicing has become the largest drain on national budget. For example in 2012-13, debt servicing comprised about 41pc of the total revenue whereas government’s debt servicing below 30pc is normally considered to be a sustainable level. On another risk analysis basis, Pakistan’s total public debt as percentage of revenues stood at 482pc in 2012-13, whereas public debt around 350pc of government revenues is generally believed to be within the bounds of sustainability, according to the ministry of finance. The ministry adds that the government was borrowing to pay interest on the debt stock.