The Pakistan Economic Survey 2022–23 confirms what was already known: the nation is recovering from a year of unheard-of economic ruin. The survey’s unflattering portrayal of the situation was influenced by the global economy’s pressure for recession, supply shocks brought on by the conflict in Ukraine, and the devastation caused by the last monsoon’s catastrophic flooding, which washed away crops and destroyed farmland and infrastructure. The government appeared to be clueless and helpless throughout the fiscal year in the face of the unrelenting domestic political unrest Imran Khan had stoked. This is likely the biggest disadvantage the economy faced this year.
Ishaq Dar, the finance minister, made a point of mentioning how the PTI government destroyed the economy, but it seems he hasn’t yet realised how the PTI’s removal from power severely restricted the PDM coalition government’s ability to manage the economy, making it all but ineffective. The survey unequivocally demonstrates that, despite the coalition government’s ability to swerve the economy just in time to prevent it from tipping over into default, it almost completely lost control of the situation after that and the economy continued to decline throughout the year. Forecasts for growth were repeatedly lowered until we ended the year with a provisional GDP growth rate of 0.29 percent.
The nominal primary surplus and a smaller current account deficit, both of which are due to the government’s implementation of import compression, are the most notable positives (on paper) revealed by the survey. While administrative import restrictions enabled the government to achieve a primary surplus of Rs 99.1 billion (0.6 percent of GDP) compared to a deficit of Rs 890.2 billion last year and reduce the CAD for the period of July 22 to April 23 by 76% to $3.3 billion or 1.0 percent of GDP from $13.7 billion or 3.6 percent of GDP last year, they unmistakably had a corresponding negative impact on exports (down 12.1% to $25.4 billion from $28.9 billion last year).
Other encouraging findings from the survey include higher revenue collection (up 18.1% to Rs6,938.2bn), which could be attributed to better administration, and improved national saving (up 44.7% growth on the back of lower public spending on consumer durables, cars, machinery, and appliances due to stellar inflation).
Happily, the improvement affects both tax revenue streams (up 16.1% to Rs6,210.1bn) and non-tax revenue streams (up 25.5% to Rs1,320.5bn).
Comparatively to the same period last fiscal year, inflation for the period of July through May was reported at 29.16%. Workers’ remittances decreased over the July-April period to $22.74 billion from last year’s $26.14 billion, while total debt and liabilities (Rs72.97 trillion), central government debt (Rs59.24 trillion), and external debt and liabilities (Rs35.68 trillion) all increased. The worsening exchange rate of the rupee is largely to blame for this aggravation, while Dar’s decision to keep the rupee pegged for a portion of the year, which gave rise to a forex black market and forced remittances into grey channels, is clearly to blame for the latter.
As of May 27, the nation’s hard currency reserves were a pitiful $4.09 billion.
In comparison to last year, when it was 15.70%, investment as a percentage of GDP stood at 13.60% between July and June. The amount of money in circulation as of May 20 was Rs1,230 billion compared to Rs879 billion the previous year, a glaring example of how bad inflation has been this year.
As a result of this exceptional inflation, which raised the policy rate to 21.0 percent over the course of a year, the private sector’s credit was squeezed more severely than ever before, falling to a meagre Rs75.4 billion as of May 12 from Rs1,345.2 billion the year before. Working capital loans were repaid to the tune of Rs460.3 billion up until April, compared to Rs628.9 billion last year, while fixed investment loans stood at Rs185.4 billion during the period of July to April.
