Import restrictions harm the industrial sector:
ISLAMABAD: Due to harsh import restrictions implemented in an effort to prevent a sovereign default, Pakistan’s economic growth rate fell to 0.3% in the previous fiscal year, crippling the manufacturing sector and having an adverse effect on the services sector.
The national output has grown at the slowest rate in the last four years, which highlights the mismanagement of the economy and how inadequate it is to meet the requirements of 250 million people.
In spite of severe flooding, the agriculture sector still experienced 1.6% growth, outpacing all predictions of contraction because of the catastrophic effect on crops. By 2.94%, the industrial sector was contacted. However, the economy’s largest sector by far, the services sector, experienced nominal growth of 0.9%. Due to the government’s poor economic management, which led to significant job losses and the 59-year-high inflation rate of 36.4%, all sectoral goals have failed.
The preliminary Gross Domestic Product (GDP) growth rate for the fiscal year 2022–23, which ends on June 30th, was approved by the National Accounts Committee at a contentious meeting on Wednesday night. Zafar Ali Shah, the planning secretary, presided over the meeting. The previous fiscal year will go down in Pakistan’s history as the time when the nation suffered from terrible floods that destroyed crops, a seriously undermanaged economy, and a sharp decline in people’s purchasing power as a result of record inflation.
In an effort to reach a deal with the International Monetary Fund (IMF), the government has severely damaged the economy by depreciating the rupee and raising utility costs. In the end, neither the IMF project nor the economy could be salvaged from collapse.
Following a meeting of the National Accounts Committee, the planning secretary reported that the expected Gross Domestic Product (GDP) growth rate for the years 2022–2023 is 0.29 percent.
Due to disagreement on the rise in national productivity, the government postponed the NAC meeting four times in one week, according to the sources. According to the reports, certain Pakistan Bureau of Statistics employees traveled between offices to strike an agreement.
According to Dr. Nadeem Javaid, the Planning Commission’s senior economist, it is a recession in growth but not an overall recession in the economy. A general decline in economic output occurred, primarily as a result of poor government administration and the negative effects of the floods. The total cost of all products and services produced in a year is the GDP.
The growth rate of almost 0.3% was in accordance with forecasts from the Ministry of Finance, the State Bank of Pakistan, the International Monetary Fund, the World Bank, and the Asian Development Bank but far below the stated goal of 5%. The institutes unanimously forecast an economic growth rate of 0.2% to 0.8%.
The number is merely an estimate and is liable to change once the fiscal year’s end brings us the final figures. The NAC revised the economic growth figure from 6% during the final year of the PTI regime to 6.1% on Wednesday.
After preliminary estimates revealed a normal contraction, even the provisional nominal growth rate may become debatable. According to estimates from renowned economist Dr. Hafiz Pasha, the GDP actually shrank by more than 3% over the previous fiscal year.
Details revealed that severe restrictions on imports and consumption had a negative impact on economic growth, which had already set off a severe external sector crisis. This pattern was also evident in 2018 when the country was placed under the supervision of the IMF.
The Pakistan Tehreek-e-Insaf government ended last year with a 6.1% growth rate, the highest in four years. The previous time the nation experienced 6.1% growth was in 2017–18, the final year under the PML–N, which was again fueled by imports and consumption and sent the nation back to the IMF.
Pakistan’s growth in 2017–2018 and 2021–2022 was entirely financed by foreign savings, which is incredibly unsustainable. The agriculture industry is projected to increase by 1.6%, which is below the declared objective of 3.9% growth. The growth appears unexpected and could be due to the value addition of approximately Rs500 billion in flood-related costs.
Major crops were destroyed by the floods, which not only led to a lack of food but also eliminated peoples’ primary source of income. Agriculture experienced 4.3% growth during the previous fiscal year.
According to PBS Chief Statistician Dr. Naeem ul Haq, the agriculture sector expanded as a result of better harvests of wheat (27.6 million tonnes) and sugarcane (9.1 million tonnes).
The head statistician denied that he was under any sort of obligation to turn the negative growth trend around.
In contrast to the anticipated growth rate of 7.4%, the industrial sector shrank by 2.94%. The government itself stifled the development of the industrial sector by imposing import restrictions that resulted in a shortage of raw materials and the resulting closure of factories. Even said, there are fewer indicators of a sharp slowdown in important industries due to the decline.
The industrial sector rose by 6.8% over the previous fiscal year. Additionally, in an effort to rein in inflation, the State Bank of Pakistan raised interest rates to a record 21%. However, the central bank was unable to stop the inflation, which has now reached 36.4%.
The government set a 4% growth goal for the services industry. However, according to preliminary data, the services sector only experienced a 0.9% marginal growth rate. According to the NAC, the services industry grew 6.6% in the preceding fiscal year.
The NAC also increased the PTI government’s second-last-year economic growth rate from 6% to 6.1%. The final GDP growth rate for 2020–21 was lowered to 5.8%.