KARACHI: Pakistan has missed its Gross Domestic Product (GDP) target by 4.7 percent and is likely to post GDP growth of 0.29 percent in the fiscal year ending June 2023, well below the target of 5 percent set last year, according to the country's economic survey launched on Thursday.  

This was revealed as Pakistani Finance Minister Ishaq Dar presented the Pakistan Economic Survey 2022-23, a yearly flagship publication of the Ministry of Finance which highlights the trend of macro-economic indicators and development policies and strategies, as well as sectoral achievements of the economy.

Dar will present the annual budget document before parliament tomorrow, Friday. 

Addressing a press conference, Dar called the outgoing year “a difficult year for the economy,” saying the coalition government faced “extreme challenges” when it came to power in April 2022.

Indeed, the country’s economy has suffered record high inflation and an economic slowdown compounded by devastating floods last year and a failure so far to unlock crucial finances from the International Monetary Fund. The IMF had demanded a number of prior actions from Pakistan, including reversing subsidies, a hike in energy and fuel prices, jacking up its key policy rate, a market-based exchange rate, arranging for external financing and raising over 170 billion rupees ($613 million) in new taxation.

The fiscal adjustments have already fuelled Pakistan's highest ever inflation, which hit 37.97% year-on-year in May, but the IMF has yet to release the $1.1 billion funding stalled since November as part of the $6.5 billion Extended Fund Facility agreed in 2019.

“Pakistan has paid a huge political cost of meeting IMF reforms … the structural reforms, the power reforms, gas reforms,  the fiscal reforms … we had to do the pending actions,” Dar told reporters.

“For Pakistan, this political cost was worth it … The revival of this [IMF] program was important because of Pakistan’s credibility.”

Dar said he was hopeful the 9th review of the program would be concluded soon.

“The first priority is to pay off sovereign debts, then food and pharmaceutical imports,” Dar said, adding that the government had repaid $6.5 billion in international commercial loans, with $1.0 billion of that amount being in the form of international Sukuk.

The Economic Survey document said the Pakistan economy lost momentum in the first quarter of the ongoing fiscal year “due to the severe downturn in the global economy and flash floods of July-August 2022 and as a result the economy suffered from significant domestic supply disruptions.”

Pakistan estimated flood damage at Rs3.2 trillion ($14.9 billion) and loss to GDP at Rs3.3 trillion ($15.2 billion), and recorded the need for rehabilitation of damages at Rs3.5 trillion ($16.3 billion). On the international front, the prolonged Russia-Ukraine conflict had adversely affected global growth and inflation remained unexpectedly high, the document said.

The survey report revealed that agriculture sector growth remained 1.55 % as compared to 4.27% last year, industry posted negative growth at -2.94 % against 6.83% last year while manufacturing posted -3.91% against 10.86 % last year and wholesale and retail trade posted -4.46% as compared to 10.3% last year.

Average year-on-year inflation rate for the period up to May 2023 was recorded at 29.2 percent, the survey found.

In April and May, the country’s inflation hit record levels, which were also the highest in Asia.

The survey said Pakistan’s inflation had been driven by international commodity prices, global supply disruptions, flood damage to crops, currency depreciation, and political uncertainty in the country.

The fiscal deficit was 4.6 percent of GDP for the fiscal year up until April, a slight improvement from last year’s 4.9 percent, the survey showed, adding that the primary balance recorded a surplus of 99 billion Pakistani rupees.

KARACHI: Cash-strapped Pakistan plans to save $1 billion per year through a new energy conservation plan that calls for, among other measures, closing markets across the country earlier than normal business hours, according to a government document, though Pakistani business leaders have rejected the proposal as “unrealistic” and “illogical.”  

Planning Minister Ahsan Iqbal this week announced that the National Economic Council (NEC) had approved a proposal to close all markets across the country at 8pm from July 1.

The move is part of a larger scheme by the government to spur economic growth through an action plan called Export, E-Pakistan, Environment and Climate change, Energy and infrastructure and Equity and Empowerment or 5Es framework and Sustainable Energy for All (SE4ALL), a brain child of the planning ministry.  

The energy conservation plan and associated implementation roadmap was approved by the federal cabinet in January 2023 while the National Energy Efficiency and Conservation Policy 2023, prepared by the National Energy Efficiency and Conservation Authority (NEECA), was approved by the federal cabinet on May 10, 2023.

“The easy to deploy short- and medium-term administrative measures proposed under this conservation plan could save estimated outflow of USD ($) One billion per annum in terms of energy saving,” a government document seen by Arab News said.

Listing measures under the plan, the document said:

“The closure of commercial markets at 8 pm which will result in annual energy saving of 2.85 billion electricity units and will offer a financial saving of 282 million USD, Ban on the incandescent bulbs which will result in a saving of 1 billion electricity units in a year with a financial benefit of 103 million USD, Mandatory installation of the conical baffles in the water geysers which will save 419 million USD.”

Overall, the long-term implementation of the NEECA policy measures will result in financial savings of $6.4 billion from 2030 onwards, according to official estimates.    

The South Asian nation last attempted to enforce early market closures in June and December 2022 but was met with resistance from traders. This time too, Pakistani traders have rejected the government’s plan, saying it will cause revenue and job losses at a time that the country is grappling with record inflation, fiscal imbalances, and low reserves.

“We strongly reject the government's plan to shut down markets at 8pm,” Kashif Chaudhry, the president of the Markazi Tanzeem-e-Tajran Pakistan, a central body of traders, said in a statement. “The decision has been taken in haste without consulting traders. It is an unrealistic plan.”  

Chaudhry called the plan an “enemy of traders and the public,” and said such “illogical energy conservation plans” had also failed in the past.
 
Atiq Mir, the chairman of the All Karachi Tajir Ittehad, the main business association in the city, concurred with Chaudhry.

“The decision is not practicable,” he told Arab News. “Such decisions were taken in the past and could not be implemented.”  

Retail sector stakeholders said the government’s decision would impact both revenue generation and employment rates.

“I think the decision taken is not realistic under the current economic downturn and would put the livelihood of around three million people at stake,” Rana Tariq Mehboob, the chairman of the Chainstore Association of Pakistan (CAP), told Arab News.

“This decision will hit the economy with around Rs3.6 trillion losses while it is already reeling under the impact of slowdown.”  

Experts also said there was little hope the new plan would be implemented.

“They will not be able to implement this time too,” Ammar Habib Khan, an economist and energy expert, told Arab News. “Due to weak administration and weak enforcement mechanisms, you can’t implement this energy saving action plan … In fact, there is no will to enforce it.”    

Ahsan Iqbal and other planning ministry officials did not respond to Arab News queries about expected measures to enforce the energy saving plan.