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Missing macroeconomic targets: GDP to remain 3.5-4%, fiscal deficit to rise 5.5-6%, agri sector to grow 2%

Missing macroeconomic targets: GDP to remain 3.5-4%, fiscal deficit to rise 5.5-6%, agri sector to grow 2%

ISLAMABAD: The PML-N-led federal government once again would not be able to achieve main macroeconomic targets, including GDP, budget deficit and rate of investment, set for the current fiscal year 2014-15.

This was discussed in an event arranged by Institute for Policy Reforms (IPR) to review the country’s economic performance for the first quarter (July-September) financial year 2014-15 as well as government’s economic performance scorecard against objectives set in the 2013 elections manifesto.

Former federal minister and Chairman Institute for Policy Reforms Humayun Akhtar Khan said that the country’s economic growth could not touch 4pc for a long time. It was expected that the government would take short-term measures to put the economy on track and then launch a comprehensive plan for sustained economic growth, but it couldn’t do so.

Former Finance Minister and Managing Director IPR Dr Hafeez Pasha, speaking on the occasion, informed that government would not able to achieve the macroeconomic targets during ongoing financial year. The country’s GDP growth rate would remain around 3.5-4 percent as against the government’s estimates of 5.1 percent. Rate of investment would be 14-14.5 percent of the GDP as compares to the target of 15.7 percent. Fiscal deficit would go up to 5.5-6 percent of the GDP against the target of 4.9 percent of the GDP. Current account deficit would soar to 1.4 percent of the GDP against the government’s estimates of 1.1 percent of the GDP.

He told the participants of the event that government could not achieve the agriculture sector growth target due to floods in Punjab, as the growth of this sector would be around two percent against the target of 3.3 percent. However, Dr Pasha informed that government would achieve the inflation target, as it would remain 6-6.5 percent during current fiscal year against the estimated target of eight percent. He was of the view that inflation rate could further decline if government had not increased the power tariff by imposing an equalisation surcharge and enhancing wheat support price by Rs 100 per 40 kg.

The former finance minister criticised the government for not releasing funds for public sector development programme to restrict the budget deficit target within level. The budget deficit remained at 1.2 percent during first quarter (July-September) of the year 2014-15 despite a significant shortfall in FBR revenues. The target of restricting budget deficit was achieved due to big cut in releases of PSDP funds and receipt of two tranches of coalition support fund (CSF) and higher revenues from petroleum levy, he added.

Presenting alarming situation on poverty and unemployment, Dr Pasha said around three million people annually are going living below poverty line.

He said the government overstated GDP growth rate and the actual growth rate is between 3.3 and 3.5 percent. The government claimed that economic growth was 4.1 percent during last financial year. Talking about the manufacturing sector growth, Dr Pasha said growth of Large-Scale Manufacturing was only 4 percent against the required a growth rate of 4.6 percent in 2013-14.

The implied target for the rate of investment in 2013-14 was 15.7 percent of the GDP. The actual rate achieved is 14 percent. Therefore, there has been a significant shortfall in relation to the target. Investment too has been tardy. Private credit grew by just Rs5 billion in the first quarter as opposed to 32 billion in the same period last year. Tax collection remains a concern. First quarter receipts alone showed a shortfall of Rs.49 billion.