- While launching Economic Survey, finance minister says $2.4bn from Beijing expected soon
Finance Minister Miftah Ismail unveiled the Economic Survey 2021-22 on Thursday, expressing hope that foreign exchange reserves held by the State Bank of Pakistan (SBP) will rise to $12 billion in coming days after the inflow from China is recorded. His remark came during a press conference held to review the government's economic performance during the outgoing fiscal year, a day before it announces the federal budget.
Miftah, who succeeded Shaukat Tarin as the country’s finance czar in mid-April (which interestingly is when the survey review period ends), chaired the launch ceremony of the Economic Survey 2021-22.
"This year, Pakistan achieved a GDP growth of 5.97% as per new estimates," said Miftah while addressing a press conference. "However, the problem is that as soon as we see growth, the current account deficit goes out of control, and we see a balance of payment crisis."
"We will see record imports of $76-77 billion, which is the highest not only in absolute terms but as per the GDP ratio as well."
The finance minister said exports have increased, but "we still have a massive trade deficit."
"This is a matter of great concern that we could only finance 40% of our imports through our exports, while for the remaining 60% we have to rely on remittances and loans, which lead to balance of payment problems."
The finance minister said foreign exchange reserves have fallen, but will increase to around $12 billion after "we receive $2.4 billion from China in coming days".
Miftah said that Pakistan needs to correct its economic direction.
"At present, oil prices are hovering around $120-123 per barrel — thus, we were compelled to raise petroleum rates twice."
Criticising former prime minister Imran Khan, Miftah said that due to the past government's decisions the incumbent was compelled to make some tough calls. "But thankfully, we have averted a default and stabilised the economy."
"In addition to sustainability, we also require inclusive growth. The government provides subsidies to industrialists to boost economic growth, which is a strategy, however, providing subsidies to the wealthy increases our import basket.
"If we achieve inclusive growth, by facilitating the poor masses by enhancing their spending power, this could lead to an increase in our domestic and agricultural production," he added.
Miftah said that the previous government should have taken advantage of the pandemic-induced plunge in global energy prices, saying that Pakistan Tehreek-e-Insaf (PTI) should have made long term agreements and that would have averted prevailing inflation.
Talking about Foreign Direct Investment (FDI), Miftah said it stood at $2 billion in 2017-18, which is now at $1.25 billion in the first nine months.
The minister added that achieving growth in Pakistan is not difficult. "The challenging part is to make this growth sustainable and inclusive."
The Economic Survey 2021-22
The survey contains performance of various sectors of the economy including agriculture, industry and services. Pakistan Economic Survey also highlights the performance of other sectors like energy, capital market, health, education, transport and communication, inflation, trade and payments, public debt, population, climate change, and social protection.
The survey comes at a time when Pakistan faces several economic battles including a precarious balance of payments' position, rising inflation, and pending outcome of talks with multiple lenders including the International Monetary Fund (IMF). This has put pressure on the central bank-held foreign exchange reserves, which have fallen to a critical level of under $10 billion.
The economic review covers a timespan when the country was confronted with multiple challenges including the fight against the pandemic, which resulted in massive expenditure on vaccinations, before effects of the Russia-Ukraine war started to take a toll. The economy was also affected by the US withdrawal from Afghanistan, with its evacuation efforts taking centre-stage last year.
Later, a post-pandemic global economic recovery also resulted in a commodity 'super cycle' that took a direct hit on net importers like Pakistan, with oil prices becoming a major issue.