Fiscal Year 2016-17: all major targets missed


-File Photo

Prime Minister Nawaz Sharif’s economic team headed by Finance Minister Senator Ishaq Dar has failed to achieve its targeted GDP growth for the fourth consecutive year due to dismal performance of different sectors including declining exports.

Dar will unveil the Economic Survey 2016-17 on Thursday (today) with claims of achieving GDP growth of 5.3 per cent – missing the target by 0.4 percent. Independent economists maintain that growth figures have been “managed” to show a growth above 5 per cent, adding that ground realities with respect to agriculture and services sector growth do not support the government’s claim.

The government has missed all the major economic targets for the current fiscal year, from fiscal deficit to current account deficit, as well as trade deficit and GDP growth. The fiscal deficit for the current fiscal year, sources say would be well over 4 percent against the budget target of 3.8 percent for the current fiscal year (with the annual Plan showing a 22 percent rise in fiscal deficit between July-March 2015-16 and the comparable period in the current year) and achieving export target of around Rs 23 billion would be impossible given the trend of the first nine months of the current fiscal year.

Exports are expected to decline to $20 billion during the tenure of the present government from $25 billion when it came to power in 2013. The decline in exports along with other factors led to an increase in the current account deficit to $6.1 billion during the current fiscal year with State Bank of Pakistan giving the current account deficit for July-April at $7.2 billion.

The government had budgeted 3.5 per cent growth in agriculture, 7.7 per cent in industry and 5.7 per cent in services respectively; however, the claimed growth of 9 months of current fiscal year does not show encouraging prospects despite the fact that industry was exempted from load shedding on dedicated feeders.

Agriculture was targeted to grow by 3.5 percent on the basis of expected contributions of important crops (2.5 percent), other crops (3.2 percent), cotton ginned (2.5 percent), livestock (4.0 percent), fishing (3.0 percent) and forestry (3.0 percent).

According to the government, agriculture met the target of 3.5 percent. However, Dr Ashfaque Hasan Khan, former Advisor to the Finance Ministry, maintained that GDP growth was less than 5 per cent and was “rationalized” after Finance Minister Ishaq Dar returned from China.

The statistics show that major crops grew by 4.1 percent while other crops registered a growth of 0.2 percent. Livestock, fishery and forestry achieved growth of 3.4 percent, 1.2 percent and 14.5 percent.

“Given that Sindh and barren areas were affected due to less rains this year, then how could the targeted 26 million tons of wheat produced?” he questioned. The government claims that overall target of wheat crop was achieved despite lower production from barren areas.

Cotton production showed a growth of 7.6 percent, though falling short of its target. Rice crop registered a growth of 0.7 percent inexplicably in spite of the area under rice cultivation declining by 0.6 percent. Sugarcane crop remained satisfactory and registered a growth of 7.6 percent prompting the government to claim that overall growth in agriculture increased by 3.5 percent in 2016-17.

Industrial sector registered a growth of 5 percent during 2016-17 against the target of 7.7 percent which is 2.7 per below the target.

Manufacturing grew by 5.3 in 2016-17. The over-all output of Large Scale Manufacturing (LSM) increased by 4.9 percent for 2016-17. Mining and quarrying sector posted a growth of 1.3 percent against target of 7.4 percent for 2016-17. Small and household manufacturing met its target of 8.2 percent.

Value addition in electricity, gas and water supply grew by 3.4 percent against the targeted growth of 12.5 percent. Construction sector showed growth of 9.1 percent against the target of 13.2 percent.

Large Scale Manufacturing (LSM) growth, a contributor to the Gross Domestic Product, is collected from different Associations or Chambers who reportedly are not providing accurate figures, a perception shared by officials and independent economists.

Services sector registered a growth of 6 percent against its target of 5.7 percent with a positive contribution by its constituent subsectors. Specifically, wholesale and retail trade, transport, auctioning, hoteling and restaurants have been the major contributors of growth in services in 2016-17.

Wholesale and retail trade grew by 6.8 percent and surpassed its target of 5.5 percent. The subsector, transport, storage and communication, (dominated by transportation services) managed to grow by 3.9 percent, against its target of 5.1 percent. In transportation, the contributors to its positive growth were Railways, Communication and road and storage.

Finance and Insurance grew by 10.8 percent surpassing its target of 7.2 percent. This was achieved mainly due to better performance of scheduled banks and activities auxiliary to financial services and insurance activities. With a positive growth in real estate, construction and residential societies, Housing Services registered the targeted growth of 4 percent maintaining the same pace over four consecutive years since 2013-14.

General Government Services grew by 6.9 percent against the target of 7.0 percent. Most of the government expenditures were on security and defence services. In development expenditures, construction of roads and highways, power generation, and social sector expenditures remained on government priorities. Other Private Services grew positively at 6.3 percent against its target of 6.7 percent for 2016-17.

Saqib Shirani argued that the scale of manipulation in agriculture figures would not be as much but it would be considerable in services sector. “We have to see whether the target is achieved in finance or government services. These are areas which are linked to deficit. As such, showing growth in these areas is negative.

Growth of 10.7 per cent in finance and insurance is the result of massive borrowing from the State Bank of Pakistan (SBP),” he said adding that the incumbent government’s borrowing is very complicated. Shirani said that it is hard to tell the people that it’s not as positive as is being portrayed rather it is negative, he continued.

During 2016-17, fixed investment as a percentage of GDP increased from 14 percent in 2015-16 to 14.2 percent in 2016-17. Public investment as percentage of GDP increased from 3.8 percent to 4.3 percentage whereas Private investment as percent of GDP declined from 10.2 percent to 9.9 percent. National Savings were at 13.1 percent of GDP 2016-17, falling short of the target of 16.2 percent of GDP. The government also claims that overall fiscal deficit was curtailed from 8.2 percent of GDP in 2012-13 to 4.6 percent in 2015-16 and was targeted at 3.8 percent during 2016-17.

The FBR’s tax collection was recorded at Rs 2, 260.5 billion during July-March 2016-17 as compared to Rs 2, 103 billion during the corresponding period last year, registering a growth of 7.5 percent. Direct taxes and indirect taxes registered growth of 12.4 percent and 4.5 percent, respectively.

Customs duties and federal excise duty recorded growth of 14.5 percent and 10.6 percent, respectively. Sales tax registered a growth of 0.4 percent. Current and development expenditures grew by 5.8 percent and 14.9 percent, respectively.

Money supply (M2) grew by 7 percent (Rs 903.9 billion) during July 2016 to April 2017 compared to its expansion by 6 percent (Rs 683.8 billion) during the corresponding period of last year. Private sector credit gained momentum and availed credit not only for working capital but also for fixed investment.

Credit to private sector expanded by Rs 513.5 billion as against the expansion of Rs 336.5 billion last year. The current account deficit for July-March 2016-17 stood at $6.1 billion as against a deficit of $2.3 billion in July-March 2015-16.

Trade deficit during the first nine months of this fiscal year stood at $17.8 billion with exports of $16.1 billion and imports of $33.9 billion. Exports declined by 1.4 percent whereas imports increased by 14.2 percent. The decline in exports resulted from global slump in oil and commodities prices.

Workers’ remittances amounted to $15.6 billion in first ten months of FY17, compared with $ 16 billion during same period last year ie a decline of 2.8 percent. The reason for the decline: a recession in the Middle East.-Business Recorder