Pre-budget document outlining the nation’s socio economic benchmarks for the last fiscal year is presented by the finance czar.
ISLAMABAD: The Economic Survey of Pakistan 2023–24 has been released. It is a pre-budget document that lists the nation’s principal socioeconomic accomplishments from the previous fiscal year. The study was presented by Muhammad Aurangzeb, Minister of Finance.
Aurangzeb emphasised that the currency fell by 29% and Pakistan’s GDP shrank in the fiscal year 2022–2023. As the lender of last resort, he emphasised the need of joining the IMF programme. “We must go with IMF as there is no plan B,” he stated.
The administration is putting more of an emphasis on high-potential industries including IT, SMEs, mining and minerals, travel, exports, and agriculture. Aurangzeb pointed out that things would have been quite different in the absence of the IMF. Emphasising the need of securing the next IMF credit programme, he acknowledged the difficulties faced by the large-scale manufacturing (LSM) sector as a result of rising energy prices and inflation.
Aurangzeb emphasised agriculture’s success, pointing said that a record harvest greatly boosted GDP growth. He made note of the ongoing difficulties that have plagued the past several years from FY 2022.
During the fiscal year, revenue collection increased by an unprecedented 30%, a development that Aurangzeb credited to the provinces for providing surpluses that made the IMF’s nine-month standby agreement possible.
He pointed out that the economy entered a stabilisation period in FY 2024, with the federation benefiting from provincial development and an almost 30% increase in Federal Board of Revenue (FBR) revenue.
By the time the fiscal year ends on June 30, projections indicate that the current account deficit (CAD), which was predicted to be over $6 billion in FY24, may be as low as $200 million. Remittances from employees, estimated at $3.2 billion, should maintain the current account’s surplus during the whole fiscal year.
Aurangzeb attributed the reduction in smuggling and abuse of the Afghan transit trade to administrative measures taken by the government.
In order to bring about a structural shift, he commended the State Bank of Pakistan (SBP) for its involvement in maintaining the currency through the gradual closure of weak exchange businesses and the encouragement of banks to start exchange companies.
There has been a decrease in outside pressures and a modest expansion of the economy. Aurangzeb gave his word that speculative activity in the rupee-dollar market will not return, pointing to SBP administrative actions as proof.
“We have foreign exchange reserves of $9 billion, providing cover for two months of imports,” he stated. Through digital transformation, Aurangzeb emphasised the role of the IT industry in boosting economic growth and raising the standard of living for the populace.
Aurangzeb emphasised that investment is the main force behind economic growth and pointed out that Pakistan’s investment rate is now falling. With anticipation of monetary easing, he reported a decline in food inflation to 11.8% in May and a decline in core inflation.
With a 58% GDP share, the services sector has continued to hold the top spot for a number of years. Regarding monetary policy, Aurangzeb voiced optimism, forecasting a policy rate in the single digits for the upcoming fiscal year.
The talks with the IMF were characterised as constructive and fruitful. Compared to the previous year, when wheat output was 28.16 million tonnes, Aurangzeb recorded an 11.6% rise to 31.44 million tonnes.
The budget will be unveiled tomorrow after Prime Minister Shehbaz Sharif gives his assent. According to Aurangzeb, in 2023 the GDP shrank by 0.2%.
After the press briefing ended, a Q&A round got underway.
According to Aurangzeb, the economy was saved by agriculture, especially bumper crops, and the rupee declined by 26% in 2023. He underlined how important it is to enforce laws in the areas of power and taxes. “We have to enforce the tax policies which we are unable to do right now,” he stated.In response to a query, Aurangzeb said that because the track and trace system had fallen short of expectations, the government needed to deal with leaks in tax collection. “First, leaks must be contained. The FBR increased revenue collection by 30%. Track and trace was ineffective. Everyone must contribute to the economy; there are no “holy cows.”
He said that the involvement of experts from the private sector will enhance corporate governance in DISCOs. He said that there was a current account surplus during the first three months of the fiscal year and that power theft is thought to have cost Rs. 500 billion.
Aurangzeb emphasised intentions for DISCOs to be privatised while reaffirming that they will not stay in the public sector. “Discos are going to be sold off… In the previous several months, we were able to attain monetary stability,” he remarked. “Sovereign pledges are honoured. Once everyone is on board, we need to address problems.”
He mentioned that in the first three quarters, the budget deficit was 37% of GDP.
Accompanying Aurangzeb was State Minister for Finance Ali Pervez Malik, who stated that capacity payments would decrease as grid electricity use grew. “The population growth rate stood at 2.55%.”
The weight of capacity charges would lessen with improvements in power usage and reforms, Malik continued. He claimed that the purpose of electrical load-shedding is to reduce cyclical debt. “We have adequate electricity generation capacity,” he stated.
One of the main complaints, overbilling, was addressed by Aurangzeb, who also promised changes. “You would soon hear good news in the power sector,” he stated.
He pointed out that while public and private investment increased by 15.8% and 18.2%, respectively, the investment-to-GDP ratio for FY24 stayed at 13.14%. He said that the agricultural industry will continue to be a vital pillar of growth.
“Stabilisation is the main goal of the IMF programme,” Aurangzeb stated. “Agriculture and IT have nothing to do with the IMF; these are under our control.”
In response to a query, Aurangzeb restated that although the IMF project is centred on stability, industries like IT and agriculture remain autonomous and subject to government oversight. “We have to improve productivity,” he stated.
Aurangzeb emphasised the potential in dairy and animal exports and gave Prime Minister Shahbaz Sharif credit for initiating the economic revival. He conveyed assurance over the IMF program’s importance.
He lauded the administration for taking a courageous position by signing the nine-month standby agreement and brought up the HBL agricultural plan, which aims to lessen the influence of intermediaries. Aurangzeb declared, “I believe in agriculture,” and that the government should withdraw its intervention in the field.
There were plans revealed to reorganise the wheat procurement firm, PASSCO. In support of his argument for more private sector involvement in agriculture and less government assistance, Aurangzeb cited the example of rice, whose exports had increased this year.
Aurangzeb highlighted the significance of enforcement actions in reaching a 30% increase in tax collection while reporting 1.25% growth in the industrial and services sectors. “We have to end leakages to achieve our targets,” he stated.
Assuring that speculative activity in the currency rate market has been reined in, he revealed that the second phase of the China-Pakistan Economic Corridor (CPEC) was the main focus of his recent visit to China, with a business-to-business agenda.
Aurangzeb pointed out that lower inflation has been caused by Pakistani enforcement actions as well as the conclusion of the world commodities cycle. Domestic fertiliser output rose by 17.3%, and by 2025–2026, inflation is predicted to drop to 5-7%.
He pointed out that the per capita income had increased to $1,680 from $1,551 the previous year, and he recognised that several choices made by the National Economic Council (NEC) had been overturned. When it came to handling the repayment of foreign debt, Aurangzeb voiced confidence, anticipating rollovers and some borrowing from commercial banks. “Repayment of debt won’t be a problem in the upcoming year”, he said.
After returning from the United Arab Emirates and holding a first meeting, Aurangzeb said that commercial bank borrowings are once again available. “We are very keen to go for the inaugural Panda bonds in the next fiscal year,” he stated.
He said that Ishaq Dar, the Foreign Minister and Deputy Prime Minister, had asked the IMF two questions. “We did not wait for the budget and other things, but opted to digitalise the FBR and hired an international firm for digitalisation to reduce human intervention in the FBR.”
Aurangzeb pointed out that if inflation rises once again, all central banks across the world have decided to boost interest rates. “There is no harm in dialogue; all central banks are clear that if inflationary pressure slips in, they will jack up rates.”
He highlighted that notifications should be delivered through a centralised digital system, with human interaction reserved for assessing velocity, and that FBR data should be utilised for analytics rather than field data. He praised the caretaker administration for its part in the privatisation of PIA. “The caretaker government did well in terms of pushing ahead with PIA’s privatisation, and we will hopefully see results by July.”
According to Aurangzeb, the continuing PIA due diligence should be finished by the end of July or early August. “After completing this transaction, we’ll go on to the airport transaction in Islamabad. We won’t stop here—we’ve received offers to outsource Islamabad Airport,” he said.
He emphasised that cooperation between the federal and provincial governments is necessary. Aurangzeb said that the PIA transaction is moving forward with regard to State-Owned Enterprises (SOEs) since the government is unable to continue carrying a deficit of Rs. 1 trillion. Additionally, he affirmed that Pakistan Steel Mills will be sold for scrap and that there is no opportunity for them to resurrect.
Aurangzeb noted that he chairs SOEs and emphasised the achievements of the banking industry, especially the National Bank. Projects covered by the Public Sector Development Programme (PSDP) are filtered using a mechanism that gives priority to those that have a large economic impact.
The government has a lot of unfunded projects, but the minister of finance said it will only pursue those that have a big economic benefit. Similar goals for such initiatives will be significant economic gains.
Malik stressed that savings are the foundation of investing. “We need to shift the economy’s trajectory towards saving in order to boost investment,” he continued.
According to Aurangzeb, the prime minister leads the National Economic Council (NEC), which is a strategic forum that also includes other ministries and chief ministers of provinces. Instead of only meeting once a year, he proposed that the NEC meet regularly to discuss performance and establish goals.
“We have introduced the public-private partnership model for the first time and will strictly enforce it,” he stated.
2024–2025 Budget
The government budget for the fiscal year 2024–25 is scheduled to be unveiled on Wednesday, June 12, ahead of this survey.
In order to strengthen its case for a fresh bailout agreement with the International Monetary Fund (IMF), officials and analysts suggest that the coalition government, led by the Pakistan Muslim League-Nawaz (PML-N), intends to set ambitious budgetary objectives in the Budget 2024–25.
The Annual Plan Coordination Committee (APCC) has suggested that the federal development plan for the financial year 2024–25 receive Rs1,221 billion, acknowledging significant budgetary limitations and decreased development funds under the IMF programme.
The current administration is going to propose its first budget with this one. With its economy in a slump, Pakistan is looking for a loan programme to avoid defaulting. The IMF has advised the nation to increase provincial taxes, especially those related to agriculture, services sales tax, and property taxes.
In order to avoid a default in its economy, which is expanding at the slowest rate in the region, Pakistan is in negotiations with the IMF for a loan estimated to be worth between $6 billion and $8 billion.
Ever after winning the general elections on February 8, Premier Shehbaz has made a strong commitment to implementing strict reforms. However, political pressure has been applied to his coalition administration due to high prices, unemployment, and a dearth of fresh job possibilities.
The budget’s goals for privatisation revenues will be another crucial component.
By selling a portion of its national airline, Pakistan hopes to achieve its first significant sale in almost 20 years. This is anticipated to be the first in a string of sales of businesses that are losing money, especially in the problematic power industry.
