Amid missing out on all major and key macroeconomic targets for the outgoing fiscal year 2023-24, the Shehbaz Sharif-led regime is heading towards a front-loaded IMF-sponsored program for three years period in a bid to stabilize the economy.
Pakistan’s economy is standing at a crossroads where it has moved from negative growth in the last financial year 2022-23 to slightly positive growth trajectory of 2.38 percent for the current financial year 2023-24 ending on June 30, 2024. The upcoming Economic Survey for 2023-24 will show a mixed picture of the economy to portray all is well but analyzed in detail it demonstrates that all key and major targets were missed out in the current fiscal year.
The government missed out on its annual GDP growth rate target of 3.5 percent and achieved a growth rate of 2.38 percent for the current fiscal year. The agriculture sector remained the largest contributor in this growth rate of 2.38 percent with wheat production stood at the highest-ever yield of 31.4 million tons and cotton production up to over 10.22 million bales during the current fiscal year 2023-24.
The per capita income in dollar terms has gone up to $1678 in the current fiscal year against $1568 in the last financial year.
The provisional growth in agriculture is 6.25%, whereas it is 1.21% for both industries as well as for the services sector.
The growth of agriculture is mainly due to double-digit growth in important crops i.e. 16.82% on the back of bumper crops of wheat (11.64% from 28.16 to 31.44 MT), cotton (108.22% from 4.91 to 10.22 million bales) and rice (34.78% from 7.32 to 9.87 million Tons).
Two important crops i.e. sugarcane (-0.39% from 87.98 to 87.64 Million Tons) and maize (-10.35% from 10.99 to 9.85 million tons) have posted negative growth.
Industry in 2023-24, has shown a growth of 1.21% provisionally. The mining & quarrying industry has witnessed a growth of 4.85% because of an increase in the production of crude oil (1.51%), coal (37.72%), and other minerals (7.57%). The electricity, gas, and water supply industry has shown a negative growth of 10.55% because of a decrease in subsidies in real terms due to the high deflator.
The construction industry increased by 5.86% due to an increase in construction-related expenditures by private and public sector enterprises.
The services industry has also shown a growth of 1.21% in 2023-24.
While CPI-based inflation is on decline and expected to remain in the range of 23 to 24 percent on average for the current fiscal year. This low GDP growth rate of 2.38 percent and inflation in the range of 24 percent demonstrates the bitter reality that Pakistan is still in the clutches of stagflation and its ultimate result will be rising poverty and unemployment. The latest estimate of poverty shows that it stands in the range of 39.5 percent population living below the poverty line in Pakistan.
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Another important aspect of the economy is related to investment to GDP ratio which fell below 50 years low since 1972-3 as it stood at 13 percent of GDP in the current fiscal year 2023-24.
With this background, Pakistan is negotiating a fresh bailout package from the IMF whereby the Fund staff gave its prescriptions of tight fiscal and monetary policies for stabilizing the economy which was lying in ICU despite coming out from negative growth to positive growth. The path of stabilization will be crystal clear reducing the fiscal deficit through raising tax and non-tax revenues and curtailing wasteful expenditures on subsidies and State-Owned Enterprises (SOEs) in the next budget.
Now, a million-dollar question lies ahead as in the upcoming budget the incumbent regime would have to demonstrate its political will before the IMF through whether it could deliver on the key conditions of the Fund program or just want to do window dressing to run the economy with status quo. Based on this question, the IMF will decide the fate of the next program. And of course, Uncle Sam helps us again to avert any looming crisis then the IMF might become lenient again. But at the moment the lender of last resort seems very tough and decisive for giving its prescription to the patient lying in ICU.
