Advisor to Prime Minister on Finance Abdul Hafeez Sheikh unveil the pre-budget document, Economic Survey of Pakistan 2019-20 on Thursday.
Addressing media, while unveiling the Economic Survey 2019-20, Sheikh said that the present government inherited the economic crisis of the current account deficit which amounted to $20 billion from the previous government, where Pakistan’s external account was moving towards default, whereas our expenditure was more than our income.
Sheikh said that the government was inducing growth by taking loans from external sources, in such a situation the government decided to mobilize resources by seeking loans from partner countries and the International Monetary Fund (IMF).
GDP growth rate for fiscal year 2020
While unveiling the survey, Sheikh informed that the provisional GDP growth rate for fiscal year 2020 is estimated at negative 0.38 percent on the basis of 2.67, -2.64, and -0.59pc growth in agricultural, industrial and services sectors, respectively.
“Although, provisional GDP growth rate for FY2020 is estimated at negative 0.38 percent, however, macroeconomic stabilization measures undertaken by the government over the past year resulted in significant reduction in Saving-Investment Gap which was mainly driven by reduction in trade deficit and increase in workers’ remittances. It is also mentionable that fiscal deficit remained contained in first three quarters of FY2020,” read the survey.
Sheikh said that the government also decided to improve the country’s tax regime and improve the country’s exports by providing incentives to the businesses. “The C/A deficit amounting to $20bn was brought down to $3bn, this is a big achievement of the government,” he said.
Meanwhile, as per the survey, total public debt was recorded at Rs 35,207 billion at end March 2020 compared with Rs 32,708 billion at end June 2019, registering an increase of Rs 2,499 billion during first nine month of current fiscal year while Federal Government borrowing for financing of its deficit was Rs 2,080 billion.
He informed that the present government surpassed the non-tax revenue to Rs1.6 trillion.
While praising Prime Minister Imran Khan and COAS Gen Qamar Javed Bajwa, Sheikh said that the government had cut down its expenditures and at the same time, increased public spending.
Secondly, Sheikh said the government also made Rs5,000 billion in debt service payment, thirdly, the government strictly controlled its expenditure, the advisor said that the government didn’t take any loans from the State Bank of Pakistan (SBP) for an entire year and did not give any supplementary grant to any department.
“This was the first time that our primary balance went into surplus,” said Sheikh.
Current Account Deficit
During July-March FY2020, current account deficit (CAD) reduced by 73.1 percent to US$ 2.8 billion (1.1 percent of GDP) against US$ 10.3 billion last year (3.7 percent of GDP), read the survey.
Sheikh said that the government aimed to provide further relief to the masses by not imposing new taxes. “Despite a small budget, we doubled the budget for the Ehsaas Programme so that the money could reach the people,” he said.
Talking about the ongoing coronavirus pandemic, Sheikh said that the government policy has been to maintain a balance between saving people’s lives and protecting the economy as well.
The advisor said that the country’s economy suffered losses worth Rs3000bn. In order to mitigate the impact, the government announced an Rs1240bn package, he said.
The IMF has forecasted the global economy would decline by 3-4pc, and the loss in global demand also affected our exports. “It is difficult to ascertain anything related to coronavirus,” he said.
“The outbreak of Coronavirus (COVID-19) has negatively affected the near-term outlook. It has brought significant challenges for the economy by squeezing the economic gains achieved during the ongoing fiscal year. In particular, fiscal accounts are expected to come under tremendous pressure,” read the survey.
The Federal Board of Revenue (FBR) tax collection target was expected to reach Rs4.8 trillion, but has now been reduced to Rs3.9 trillion, meaning FBR sustained losses of up to Rs700-800 billion in its tax collection, informed Sheikh.
“We do not want to add the burden of more taxes on our citizens, in order to stimulate economic growth amid coronavirus pandemic,” he said.
“FBR tax collection has witnessed a remarkable turnaround during the current fiscal year after posting negative growth of 0.4 percent in FY2019. The overall FBR tax collection grew by 10.8 percent to Rs 3,300.6 billion during July-April, FY2020 against Rs 2,980.0 billion in the comparable period last year. Within the total, the domestic component of tax revenue collected by the FBR grew by 14.7 percent to stand at Rs 2,777.7 billion in first ten months of the current fiscal year against Rs 2,421.1 billion in the comparable period last year,” read the survey.
Support from international lenders
The survey read that there has been considerable support from international lenders. The IMF has given a one-year relief to Pakistan amid the pandemic and a US$1.386 billion were given under the Rapid Financing Instrument to address the economic impact of the COVID-19.
Aid packages from Asian Development and the World Bank, along with inclusion by G-20 in their debt relief program, will enable the economy to greatly make up for the projected loss, stated the survey.
“As the economy slowly reopens, it is expected that the adverse impact of COVID-19 will be bottoming out. However, the framework for recovery will depend on various factors like extent of adverse impact on various sectors, duration as well as severity of lockdowns and the associated risks. The outlook therefore carries challenges due to uncertainties associated with it,” stated the survey.
The survey stated that in order to control the price hike, the government made efforts through ensuring smooth supply of commodities, checking hoarding, smuggling and undue profiteering.
“Further, vigilant monitoring of prices both at federal and provincial level was ensured. In addition, to check inflationary impact, borrowing from SBP has been discontinued and restriction has been imposed on supplementary grants to control aggregate demand and ease out inflationary pressures.”
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