Pakistan sees revenue increase, but drop in targeted growth

KARACHI, Pakistan

Pakistan has missed major growth targets but has seen an increase in revenues during the outgoing fiscal year of 2022-23, according to the country's finance minister on Thursday.

Releasing the economic survey for the fiscal year 2022-23 in the capital Islamabad on Thursday, Ishaq Dar said the country missed the GDP growth target by a wide margin for the outgoing fiscal year, achieving only 0.29% compared to the target of 5%.

The document shows that Pakistani exports plummeted by 9.9% in July-March to $21 billion, compared to $23 billion in the same period last year.

The government's policy of reducing imports to save the fast-depleting foreign reserves has resulted in a significant decline in the import bill, which amounted to $43.7 billion from July 2022 to May 2023, against $58.9 billion in the same period last year, reflecting a 25.7% decrease.

Reduction in the import bill subsequently resulted in a significant drop in the country’s trade deficit which shrank to 6% of GDP, compared to 10.4% last year.

Inflation and current account deficit

Defending the government's economic policies, which have invited ire from some economists, Dar said the coalition government has saved the country from "default."

"You may criticize us on the basis of (economy) numbers. But we have saved the country from default at the cost of our politics. We have preferred economy over politics," he said, claiming that the country was on the verge of default when the 13-party coalition government came into power in April 2022.

The country registered inflation of 29.2% from July 2022 to May 2023, compared to 11.3% in the same period last year, according to documents shared by the minister.

The government had targeted inflation at 11.5% for the 2022-23 fiscal year but missed the target significantly because of a sharp depreciation of the rupee (local currency) and global supply shocks resulting in costly imports.

The current account balance improved by 74.1%, registering a deficit of $3.4 billion, against a deficit of $13 billion in the previous fiscal year.

The predominant factor behind this improvement, according to the document, was the 29.7% decrease in the merchandise trade deficit on the back of a substantial decline in import payments to $41.5 billion in the July-March period of the outgoing fiscal year, from $52.7 billion in the previous one.

Growth in tax revenues

Pakistan's tax revenues grew by 16.1%, although it missed the actual target, the documents showed.

The tax authorities collected 6.2 trillion Pakistani rupees ($22 billion) from July to May, compared to 5.3 trillion rupees ($18.7 billion) in the year-ago period. The collection target for the 12-month period was 7.4 trillion rupees ($26 billion).

Planning Minister Ishaq Dar, who also accompanied Dar at the news conference, accused the previous government of Imran Khan of "sabotaging" an over $6 billion bailout package offered by the IMF.

Islamabad has been negotiating with the IMF since early February for the release of $1.1 billion, part of a $6.5 billion bailout package that, ironically, was inked in 2019 by Khan’s government.

To meet the IMF’s stringent demands, Prime Minister Shehbaz Sharif and his coalition government have cut back on subsidies, removed an artificial cap on the exchange rate, mounted taxes, and hiked fuel and electricity prices.

All these developments, including the soaring inflation, stalled growth, and the weakening of what was once the strongest currency in the region have left the South Asian nation and its over 220 million people facing an economic crisis of exceptional proportions.