Economic survey revealed: Dialogue with IMF fruitful, says finance minister

Finance Minister Muhammad Aurangzeb has unveiled the economic survey for the fiscal year 2024 at a press conference in Islamabad.

Shedding light on the economic gains and losses,  the minister explained the measures to curb economy-related crime like illegal money exchange and hoarding.

He said dialogues with the IMF are fruitful. He stressed the need to improve the power sector and governance.

Finance Minister Aurangzeb said it is important to see the level of inflation in 2022-23 when the Pakistani rupee suffered nearly 29pc depreciation and the foreign reserves went to just two weeks of import cover.

He stressed that he has been in the finance minister for three to four months but even when he was in the private sector, he was clear that the IMF programme was inevitable.

“There is no plan B, and if there was a plan B, the IMF wouldn’t be called a lender of the last resort.”

He said he believed it was a “courageous step” taken by the prime minister at the time to take the country to the finish line in terms of signing the nine-month Stand-by agreement with the IMF.

“It was an important part of where we are today because without it, God forbid, we wouldn’t be here discussing the targets.

 “As a country, we would have been in a different situation and we would have had the same discussion in a very different context.”

“This was the GDP side of the story. Apart from this, there is the fiscal side. The close to 30pc growth in revenue collected is almost unprecedented from the base where we started.”

The economic growth fell short of the target, standing at 2.38% compared to the projected 3.5% while average inflation exceeded estimates of 21%, reaching 23.2%.

https://www.youtube.com/watch?v=x8TuaYrLJ1U

In FY24 to date, the government faced significant challenges in meeting crucial economic targets. Economic development, industrial growth, inflation, agriculture, and electricity production have all fallen short of expectations.

The agricultural sector saw mixed results. While the growth rate was 6 percent, surpassing the target of 3.5 percent, major crop production exceeded expectations at over 11 percent against a 3 percent target. Livestock met expectations at 3.9 percent growth, while production by fisheries lagged behind at 0.8 percent against a 3 percent target.

The industrial sector took one on the chin this fiscal year with overall output at 1.2 percent, well below the pre-determined target of  3.4 percent. The manufacturing sector’s output was 2.4 percent, while growth in the services sector was only 1.2 percent.

The import bill for goods is expected to be limited to $55 billion, lower than the $58 billion target. The export target of $30 billion will likely be achieved, leading to a trade deficit of $25 billion, much better than compared to a target of $28 billion.

The survey highlights notable achievements in various sectors, such as per capita income, remittances, exports, and tax revenue. The agriculture sector performed well, surpassing the target of 3.4% to a growth rate of 4%, particularly in staple crop production, which recorded a significant improvement of 16.8% as opposed to the target of 3%. Major crops such as wheat, rice, and corn saw impressive increases in production.

The industrial sector struggled to meet targets, with industrial growth at only 1.2% against the targeted 3.4%. Manufacturing also fell short, achieving 2.4% compared to the 4.3% target. Similarly, the performance of major industries was 0.1% against the target of 3.2%, while the services sector saw modest growth of 1.2%, below the targeted 3.6%.

Talking about the primary surplus, the minister said: “Unless the provinces delivered on their surpluses, we ould not be able to deliver the surplus. We have made this commitment to the Fund under the nine-month SBA — so I want to give them (provinces) credit for delivering on what they said they were going to deliver.”

“Regarding the current account deficit, you know what the target was, what was going to be said and what the predictions were being given.”

He said when the year was beginning, the approximate current account deficit was approximately $6bn. “But the current account deficit as per our latest forecast is about roughly $200m,” the minister added.

Aurangzeb said in the three months of 2024, the country experienced a current account surplus. “I don’t have the final number, but if I look at the $3.2bn remittances for the month of May, I’m pretty sure there will be another month where we will show a surplus.

“So my belief that by the time we come into government, the current account deficit would be less than a billion dollars had turned into a reality.”

Economic Survey 2023 24 by Khawaja Burhan