ISLAMABAD: Unlike in the past, the Pakistan Tehreek-i-Insaf (PTI) government has managed to bring the sustainability to macroeconomics as the economy has displayed unprecedented resilience despite several challenges.“Despite the most devastating health and Economic Shocks of century i.e COVID-19 and recent multi decade high-price commodity shock, Pakistan economy has displayed the greatest resilience, which is unprecedented in the 74-year history of Pakistan,” finance ministry said in a report released on Friday at the end of current calendar year.
According to the report, Pakistan boom-bust life cycle appeared cyclical than sustainable in past as has been reflected from past global commodity, political or economic shocks of 1998, 2009, & 2018, where economy got busted in very short interval of time. It said, Pakistan’s macroeconomic performance was widely accepted by all international macro-economic Financial Institutions (Including IMF, World Bank, ADB, Moody’s, S&P and Fitch etc.) while government’s response to the pandemic had been widely acclaimed and recognized.
According to ‘The Economist’, Pakistan has been ranked number 1 in the ‘Economists’ world normalcy index as the country has lifted most of its COVID-19 restrictions imposed to curb the virus spread.Pakistan has rolled out the largest social safety net in Pakistan’s history. According to World Bank report “global social protection responses to Covid-19” (May-2021) Pakistan ranks 4th globally in terms of the number of people covered and 3rd globally in terms of the percentage of population covered amongst those that covered over 100 million people; the World Bank has stated that only few countries have attained impressive six-digit levels in this regard. Pakistan’s Ehsaas Emergency Cash is one of them.
According to the report, Pakistan’s response to COVID was most effective and timely than rest of the world, despite the fiscal constraints. The Vision of Prime Minister Imran Khan of implementing the smart lockdown is the most appropriate, which allowed the economy to grow.The government and State Bank of Pakistan took many initiatives to provide relief to the people which included, a fiscal relief package of Rs1,240bn to provide relief to neutralize the socio-economic impact of Covid-19.On the other hand, economy performed above expectations; GDP growth 4%, tax collection exceeded above targets, reserves improved, current account reported lowest since 2011. This growth was achieved when rest of the world was encountering massive output contraction. India (-8%), UK (-10%), USA (-3.7%), Iran (-6.5%).
On corporate sector, the report said, interest rates remained lower for most of the year at 7%, which gave impetus to private sector while the aggregate profit after tax of KSE-100 in 3Q of 2021 was reported at Rupee 258 billion, the Highest in the last 10 years. The report said, the growth was broad based, corporate sector has posted the record profitability of Rupees 929 billion in FY21, up from Rupee 587 billion in 2018. Overall, 247% growth in companies’ incorporation (69,380 companies during July-2018 to Dec-21 reported, compared to 19,996 companies in the last three years of PML-N government).
On external sector, it added, remittances and exports are above than pre-Covid level of 2019-20 while current account deficit posted 10 years low of US$1.9bn in FY21.Exports of Goods came in at $25.6bn, up 14% higher in FY21, it said adding that for the first time in the last ten years, exports indicators are looking promising and the average monthly exports now targeting US$3bn from US$2bn as in PMLN time. Exports of services also increased by 10% to US$5.9bn while IT sector exports have doubled from PMLN time and expected to reach US$3.5bn to US$4bn, up 300% by the end of this government’s term.
The remittances have piled up to record level to US$29.4bn, from US$23.1bn year earlier, it added.The other hallmark of PTI government in its three years was the contraction of unnecessary imports and imports substitution. However, recent commodity price shock has jacked up the imports, it added.On fiscal side the report added, the federal taxes registered a record growth in FY21 and came almost Rupee one trillion more than 2018 level at Rupee 4,764 billion. Similarly, the growth in non-tax revenue has witnessed a massive increase to Rupee 1,630 billion.Overall, the deficit situation has improved to 7.1% of GDP from 8.1% in FY20 while the primary balance was also contained to 1.4% from 1.8% of GDP year earlier.
Meanwhile, following Budget FY22, global commodity prices surged to unprecedented levels, triggering pressure on currencies and pushing higher inflation around the world.The report said under Ehsaas Emergency Cash Program, the government has disbursed Rs 179.3 billion to 14.8 million beneficiaries to provide immediate cash relief of Rs 12,000 whose livelihood has been severely affected by the pandemic. The government has cleared the outstanding power sector dues in tune of more than Rupee 220 billion and refunds of more than Rupee 250 billion whereas the power supply remained uninterrupted, resultantly exports and industrial output growth remained in double digit.The rural economy was strengthened, construction boom while more than Rupee 1,000 billion worth projects were approved in one year.
The construction of Dams initiated which will double the water storage from current 13 million acre feet and addition of 10,000 mega watts of electricity.The country has scored overall well on health front, more than 150mn vaccines have been administered. Close to US$2bn spent on vaccines without provincial contribution.Highest number of social and economic programs were launched which included Kamyab Pakistan, Sehat card, EhsasRashan, KamyabJawan, Mera Pakistan MeraGhar, Kissan card etc.
The government focused on non-conventional products and market exports for diversification especially on IT sector related incentives, Implemented the toughest FATF action plan in limited period and introduced better administrative controls and productivity growth brought prices of essential food items down.Going forward, the report expected the growth to stay at 5%, exports $31billion, remittances $32 billion, taxes Rupee 6,000billin and trade deficit to reduce in second half of FY22. The recent pressures on Current account are due to commodity shock but risks are receding due to timely policy actions, it concluded.