The country’s rebased economy demonstrated a strong resilience for a second year by recording a provisionally estimated growth rate of close to 6 per cent in 2021-22 with broad-based expansion in all its key sectors. It recovered from the contraction and pandemic-triggered crisis the previous year with a growth rate of 5.74pc in FY21.

An estimated 5.97pc growth was recorded this fiscal year as the industry grew at the fastest pace (7.19pc) followed by the services sector (6.19pc) and agriculture (4.4pc). This was a deviation from the past trend when the services sector used to outpace growth in the industrial sector. Large-scale manufacturing grew by 10.4pc. All the three sectors surpassed their respective targets. Per capita income improved to $1,798 from last year’s revised $1,676.

According to the Pakistan Economic Survey (PES), the Gross Fixed Capital Formation in the year under review increased by 24.6pc, contributed by a 20.6pc increase in the private sector and 14.9pc in the public sector. This can be partly attributed to tax exemptions that grew by 33.71pc to Rs1.757 trillion owing to the PTI-government’s massive relief measures to industry and agriculture while pursuing a growth strategy.

Growth was achieved despite deep cuts in the Rs900bn budgeted Federal Public Sector Development Programme (PSDP). To finance the fiscal deficit, the PSDP was frozen at Rs480 billion.

The high growth numbers boasted by the Pakistan Economic Survey lack the fundamentals to sustain momentum

Quoting a study, Dr Hafiz A. Pasha says PSDP spending is one of the two prerequisites for GDP growth. A 1pc increase in PSDP as a percentage of the GDP contributes 1.7pc to economic growth and a 100 basis point increase in the State Bank policy rate would slash private investment by 1.6pc

The finance ministry is now working on a vision “to maintain national economic and financial stability along a path of sustainable and inclusive growth.’ “Unless we reform the power sector and bring good governance, it will be albatross around our neck,” says Finance Minister Miftah Ismail.

The Planning Commission has also questioned the quality of economic growth, arguing it was ‘primarily fueled by excessive demand-driven consumption.’ To quote PES, the share of consumption in real and nominal GDP reached 99pc and 96pc respectively during 2021-22. Surging overseas workers’ remittances spiked consumption and raised domestic demand.

With investment to GDP ratio stuck between 14-15pc Pakistan is placed 133 among 151 countries, says PES, adding even in Bangladesh the ratio is 30.5pc. The current level of savings and investment is insufficient to boost growth momentum.

The strong growth has also lost much of its lustre owing to skyrocketing high inflation which has turned into a politically sensitive issue, bringing into sharp focus issues such as its highly disproportionate impact on the vulnerable and the surging inequality between the rich and the poor.

Only 1.77pc of GDP was spent on the education sector in the outgoing year compared to 9.7pc in FY21.

The macroeconomic imbalances have forced policymakers to take painful prior actions — hike in power and petroleum prices — to qualify for another International Monetary Fund tranche to shore up falling foreign exchange reserves and manage the balance of payments.

According to PES, inflation was recorded at 11.3pc in July-May, up from 8.8pc for the same period last year.

An eminent US economic sociologist Lindsay Owens traces the roots of high inflation to ‘Greedflation’ — profits derived from inflation in the United States — also applicable elsewhere including Pakistan.

Improved commodity production has been unable to create enough trade surpluses and despite significant improvements, export earnings trail behind surging imports.

Nishat Group Chairman Mian Muhammad Mansha says ‘you can’t build foreign exchange reserves with exports alone, adding that India has accumulated reserves of $650bn mainly by attracting foreign direct investment.

Published in Dawn, The Business and Finance Weekly, June 13th, 2022