At the press conference in Islamabad, Finance Minister Ishaq Dar unveiled the economic survey for the fiscal year 2023. Before diving into the data representing his government’s economic stewardship for the year, Dar depicted the challenging economic landscape inherited by the Pakistan Democratic Movement (PDM).
Drawing a comparison to his last stint as the finance minister under Nawaz Sharif in 2017, he highlighted the superior economic footing of Pakistan during that time. His foremost priority now, he emphasizes, is reinstating macroeconomic stability.
Economic Growth Misses the Target
Based on the records provided by the minister, the outgoing fiscal year witnessed a mere 0.29 percent Gross Domestic Product (GDP) growth, falling considerably short of the targeted 5 percent. This meager growth can be traced back to a less-than-expected growth of 1.55 percent, -2.94 percent, and 0.86 percent in the Agriculture, Industry, and Services sectors, respectively. Among these, the 2.94 percent shrinkage in the industrial sector, against a growth target of 7.1 percent, was especially notable.
Rampant Inflation
Pakistan experienced inflation of 28.2 percent from July 2022 to May 2023, a sharp rise from 11 percent during the same months last year. This substantial inflation, which considerably exceeded the government’s 11.5 percent target for FY2023, was attributed to a significant depreciation of the rupee and global supply shocks driving up the cost of imports.
FBR’s Tax Collection Progress
The Federal Board of Revenue (FBR) demonstrated a 16.1 percent increase in tax collection, accumulating Rs 5637.9 billion from July to April, in contrast to Rs 4,855.8 billion collected in the year’s corresponding period. The collection target set for the 12 months by the government was Rs7,470 billion.
Trade Deficit in the Spotlight
According to the survey, Pakistan’s exports dropped by 9.9 percent to $21 billion from July to March, compared to $23 billion in the previous year’s equivalent period. Concurrently, imports amounted to $43.7 billion, marking a 25.7 percent decline from $58.9 billion during the same period last year. This downturn was mainly attributed to policy tightening and administrative measures to preserve the diminishing foreign exchange reserves. Consequently, the trade deficit markedly reduced to 6 percent of GDP, compared to last year’s 10.4 percent.
A Better Current Account Balance
The current account balance improved by 74.1 percent, recording a deficit of $3.4 billion in the July-March FY2023 period, compared to a deficit of $13 billion in the previous year. The current account deficit thus decreased to 1 percent of the GDP, a significant improvement from 4.7 percent in the last year. The survey credits a 29.7 percent decrease in the merchandise trade deficit as a primary factor for this improvement.
Fiscal Deficit Under Control
The fiscal deficit was “contained” to 3.6 percent of the GDP in the initial nine months of the fiscal year, showing a slight improvement from the 3.9 percent during the same period last year. This was accomplished through “strictly following prudent expenditure management and an effective domestic resource mobilization strategy,” as per the survey.
