Finance

In 2008 Pakistan’s economy was displaying disfigurement due to multiple adverse internal and external shocks of extreme nature. The resilience of economy was tested several times by one crisis after another since earthquake of 2005 and devastated floods and rain in 2010 and 2011. Moreover, the national economy remained affected by the intensification of war on terror, adverse effects of the turmoil of global financial crisis, acute energy shortages and volatile security situation which resulted in less external inflows. Consequently, the growth rate stood at 3.7 per cent in FY08, and further contracted to 1.7 percent in FY09. However, due to government’s prudent policies to restore macroeconomic stability through fiscal and monetary policy and reducing planned public sector development expenditures the economy posted a growth of 3.8 percent in FY10 while during FY11, it stood at 2.4 percent on account of unprecedented calamity of the floods. The growth performance when viewed on the backdrop of extraordinary shocks of high commodity and oil prices and the fallout of global financial crisis seems reasonably satisfactory.

The GDP growth for FY12 was estimated 4.2 percent which has been revised downward to 3.6 percent on account of damages caused to both major and minor crops in Sindh province. However, government’s supportive policies to commodity producing sector have helped the sector. It may be safe to assume that we can end up close to 4 per cent of GDP growth.

The government focused on development of productive sector and created conducive environment for agriculture sector through higher prices, better seeds and timely provision of inputs. As a result during the last three and half years additional Rs. 753 billion were transferred to the rural economy as compared to only Rs. 329, billion in preceding eight years.

Inflation rate has also been contained through tight monetary policy and prudent expenditure management. The inflation rate after remaining in double digit since 2009 reached again to single digit in December, 2011. Previously single digit at 8.9 per cent was achieved in October 2009 after witnessing the highest inflation rate of 25 per cent in October, 2008. The recent data suggests that in February, 12, the CPI inflation again increased to 11 percent, which is due to the upward adjustment of energy, gas and fuel prices. But government’s commitment is to contain the inflation to the targeted 12 percent during FY12.

Fiscal situation was well contained compared to the challenges due to security and floods.  Efforts are being taken to manage fiscal deficit within acceptable level. Current expenditures have been curtailed by adopting austerity measures, restructuring and reducing subsidy on PSEs. Consequently fiscal deficit declined from 7.6 percent in FY08 to 5.9 percent in FY11. During July-January, 2012 fiscal deficit stood at 3.1 percent of GDP. Similarly various tax measures have been taken to broaden the tax base such as: monitoring and risk based audit, strengthening electronic payment, close watch on Afghan transit trade and recovering arrears etc. These measures helped FBR to collect Rs 1558 billion during FY11 against Rs 1008 billion in FY08. FBR Tax collection showed a significant growth of 54.6 percent since FY08. For current fiscal year 2011-12, the target of Rs 1952 billion has been set which is expected to be achieved as total collection during first eight months of FY12 stood at Rs 1103.4 billion against Rs. 876.0 billion in the comparable period of last year showing an increase of 26.0 percent. It is also worth mentioning that in FY10 the major development was the announcement of 7^th NFC award after a gap of 19 years.

Federal Government has planned and implemented as well as funded various projects in Balochistan despite the challenging situation related to recession, sectarian violence and hike in oil prices. Finance Ministry has provided Rs.120 billion as arrears of GDS prior to 1991 under Aghaz-e-Huqooq-e-Balochistan (AHBP). This will be payable in twelve years starting from 2010-11 at the rate of Rs.10.00 billion per annum.  Rs.17 billion has been released in FY 2010-11. Sum of Rs.3.419 billion has been reserved/allocated for the creation of 5000 posts against which Rs.1.547 billion have been released. Rs.1 billion has been released for IDPs of Dera Bugti.

The Implementation of a Macroeconomic Stabilization program led to a marked improvement in the external account position.  In FY10, Pakistan’s current account recorded a surplus of US$ 1.3 billion after a gap of two years. While current account balance turned into surplus to $ 214 million in FY11 as against deficit of $ $3.9 billion last year. However in January, 2012, current account posted a deficit of $305 million mainly due to lack of external inflows, global economic recession and higher import payments. The exports grew from $20.1 billion in FY08 to $ 25.4 billion in FY11, thus registered a growth of 24.1 percent. During July-Jan, FY12 it stood at $ 14.1 billion as compared to $ 13.2 billion during the same period last year thus posted an increase of 7.0 percent. Imports grew from $ 35.4 billion in FY09 to $ 35.9 billion in FY11 thus registered a growth of 1.4 percent as compared to 24 percent growth in exports.  During July- Jan, FY11‑12, imports stood at $23.2 billion as compared to $ 19.7 billion during the same period last year. The foreign exchange reserves also reached to US $ 18.3 billion by the end-June 2011 as against US$ 11.4 billion in FY08‑09. In March, 2012 it stood at $ 16.4 billion despite repayments made to IMF.

Workers’ remittances remained an important source of foreign exchange earnings. Remittances were US $ 7.8 billion in FY09. Improvement in inflow of remittances through Pakistan Remittances Initiative (PRI) and government policies to export manpower abroad facilitated in increasing the remittances and it reached to US$ 11.2 billion in FY11‑12, thus witnessing a growth of 44 percent during the period under review. During July- Feb FY11‑12, remittances witnessed a growth of 23.0  percent and stood at $ 8.5 billion as compared to 24 percent growth in exports.

Various steps have been taken to reduce inter corporate circular debt, improving PEPCO’s receivables and creating efficiency to reduce the difference between determined and notified tariff. Additionally, the government has initiated conservation programs to create efficiency in the use of energy to control demand.

In order to improve the productivity and efficiency of our Public Sector Enterprises (PSEs) a Cabinet Committee on Restructuring (CCoR) has been formed to restructure key public sector enterprises such as PIA, PEPCO, Railways, TCP, USC, Pakistan Steel Mills, NHA.

For more detail please visit: http://www.finance.gov.pk/