Agriculture boosts GDP growth to 2.38%, as other sectors miss targets: Aurangzeb

Country’s Per capita income increase by US$129 to US$1680 in FY 2024; Investment to GDP ratio stands at 13.14 percent in FY2024; Agriculture sector posts 6.25% growth in FY 2023-24: Economic Survey; NHA portfolio comprises 123 projects with Rs 156.50 bln allocation: Economic Survey; Manufacturing, Mining sectors contribute 13.6 % to GDP in FY 2024; Pakistan, CoD narrowing down to US $ 0.5 billion during July-March FY 2024

ISLAMABAD (APP): Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb on Tuesday said that despite challenges, the country had made significant progress in achieving macroeconomic stability, with a remarkable 30 percent growth in revenue collection, a reduced current account deficit, reduction in inflation and a stable currency.

Addressing a press conference at the launching ceremony of Economic Survey of Pakistan 2023-24, the minister said, this situation indicated a remarkable turnaround from a precarious economic situation, characterized by a 0.2% GDP contraction, 29% rupee depreciation, and a shrinking foreign exchange reserves, which had declined to just two weeks’ worth of import cover.

He said, despite challenges in the large-scale manufacturing (LSM) sector due to interest rates and energy issues, the country’s GDP growth had found a silver-lining in the agriculture sector, which had been boosted by bumper crops.

He said, the agriculture and the dairy and livestock sector were expected to remain a key driver of growth in the years to come.

Finance Minister Muhammad Aurangzeb said the economic journey of Pakistan in the current fiscal year commenced under the leadership of Prime Minister Shehbaz Sharif before caretaker administration, who took the bold step of approaching the International Monetary Fund (IMF) and singing of 9-month Standby Agreement, which was very important part of the progress the country had been witnessing today.

He said had it not been signed, the situation would have been very different and there would have been discussions on economic figures in a very different context. He said the decision of going to IMF had proven fruitful for the country’s economy.

He was of the view that successful conclusion of the IMF’s Stand-By Arrangement (SBA) had also restored the confidence in Pakistan’s economy.

Talking about future programme with the Fund, the minister said Pakistan and IMF have had a productive and constructive dialogue during the fund’s recent visit. He said, the successful conclusion of the Stand-By Arrangement (SBA) has demonstrated Pakistan’s commitment to discipline, which had been acknowledged by the IMF.

He said, the dialogue focused on the constructive nature of Pakistan’s reform agenda, which the government had pledged to continue.

He said the programme with IMF, was for the benefit of Pakistan to improve its economy. “This is Pakistan’s programme, which was being aided, supported, and funded by the IMF.” The key areas of focus include enhancing tax revenues, improving the complex energy equation, and implementing power sector reforms besides privatization of state-owned enterprises (SOEs).

He said, the discussion with IMF were progressing positively, with both parties committed to working together to achieve Pakistan’s economic goals.

The minister said the country’s Current Account Deficit (CAD) had also seen a significant reduction, from an estimated $6 billion to just $200 million. “The country has even experienced a current account surplus for three months adding the surplus is expected during the month of May as remittances stood at $3.2 billion during the month.”

He said the currency had stabilized and inflation had come down, leading to a reduction in policy rates by State Bank of Pakistan adding market rates had responded positively, with foreign buying returning to the market.

The currency had stabilized due to a series of administrative measures taken by the caretaker government, including the crackdown on Hundi-Hawala, smuggling, and the regulation of transit trade to Afghanistan.

Additionally, he added, the State Bank of Pakistan’s structural interventions had successfully eradicated speculation in the market, contributing to the currency’s stability.

The finance minister expressed optimism about Pakistan’s economic growth, citing the agriculture and IT sectors as critical pillars. He noted that the two sectors were within the government’s control and could be improved to increase yields.

He also highlighted the potential of dairy and livestock exports, which needed to be exploited.

The minister said measures were being taken to check leakages at the Federal Board of Revenue (FBR) and reduce human intervention through digitalization.

He estimated power theft at Rs 500 billion and announced plans to improve corporate governance in distribution companies (Discos), which would be privatized. A law had already been passed by the Parliament to facilitate the process.

On inflation, the minister attributed the easing of inflation to administrative measures and reduction in global commodity prices.

To a question, he expressed confidence in managing the economy in 2024-25, citing plans for rollovers and commercial bank borrowing. He said the government would prioritize repayment of loans, following the same pattern as was done in the fiscal year 2023-24.

The minister expressed the intention to issue an inaugural panda bond during the ongoing calendar year to diversify the funding base.

To a question on the Public Sector Development Programme (PSDP) funding, he said high-impact value projects would be funded through the Programme.

Speaking on the occasion, Minister of State for Finance and Revenue Ali Pervaiz Malik emphasized the importance of anchoring economic stability, stressing the need to move forward in partnership with the International Monetary Fund (IMF).

He praised Prime Minister Shehbaz Sharif’s commitment to protecting vulnerable sectors from additional burdens, noting that the government was working tirelessly to enhance revenues through documentation.

He said the prime minister was cognizant of the damages suffered by the agriculture sector and had pledged compensation for the affected farmers.

The minister acknowledged that capacity payments were sovereign commitments and expressed optimism about resolving such issues through negotiations.

According to the Economic Survey, the real fiscal and external sectors as well as financial markets had demonstrated resilience and steady improvement.

In the fiscal year 2023-24, Pakistan’s GDP (gross domestic product) increased by 2.38 percent, with strong growth in the agriculture sector which expanded by 6.25 percent as compared to 2.27 percent growth in the last year.

Both the industrial and services sectors grew by 1.21 percent.

The GDP, valued at current market prices, reached Rs 106,045 billion (US $ 375 billion), with a 26.4 percent increase from the previous year’s Rs 83,875 billion (US$338 billion).

The per capita income rose to US$ 1,680, from US$ 1,551 in the previous year, driven by the improved economic activity and a stable exchange rate.

The investment-to-GDP ratio for the FY 2023-24 remained 13.14 percent, a decrease from 14.13 percent in FY 2022-23, attributed to a global slowdown, political instability in the country along with restrictive macroeconomic policies. Gross Fixed Capital Formation (GFCF) stood at Rs 12,122.5 billion, an 11.4 percent increase over the FY 2022-23.

Both private and public investments grew by 15.8 percent and 18.2 percent, respectively. Nevertheless, the national saving rate remained steady, recorded at 13.0 percent in the FY 2023-24.

The investment to Gross Domestic Products GDP ratio stood at 13.14 percent in FY2024 compared to 14.13 percent in FY2023 mainly due to contractionary macroeconomic policies and political uncertainty.

According to Pakistan Economic Survey, launched here on Tuesday, the real GDP posted a growth of 2.38 percent in FY2024.

The saving to GDP ratio recorded at 13.0 percent in FY2024 compared to 13.2% in FY2023.

According to the Survey, the growth of agriculture sector estimated at 6.25 percent in FY2024. This growth is mainly driven by 16.82 percent growth in important crops such as wheat, rice and cotton.

The industrial sector posted a positive growth of 1.21 percent in FY2024. Industrial sector performance is mainly driven by the manufacturing sector (2.42%) and construction sector (5.86%).

Services sector constitutes the largest share of 57.7 percent in GDP for FY2024. This sector also witnessed a moderate growth of 1.21 percent.

The prudent policy management and the resumption of inflows from multilateral and bilateral partners, and the gradual economic recovery in the major trading partners, turned the negative growth in FY2023 to positive growth in FY2024.

According to the Survey, the robust growth in agriculture sector, the highest in last 19 years emerged as the key driver of economic growth in FY2024.

The prolonged inflationary impact is gradually fading in FY2024. The inflation is trending downward steadily since third quarter of FY2024.

This improvement is picking up the aggregate demand along with the resilient external sector and fiscal consolidation.

The GDP at current market prices increased to Rs 106, 045 billion in FY2024, showing a growth of 26.4 percent over (Rs. 83,875 billion) last year.

Per capita income increased by US$129 to US$1680 as compared to US$1,551 of last year on the account of increase in economic activity and appreciation in the exchange rate.

The Manufacturing and Mining sectors with their significant contribution of 13.6 percent to the Gross Domestic Product (GDP) in fiscal year 2024, have the potential for further growth.

According to the Economic Survey 2023-24 launched here on Tuesday, these sectors saw a growth of 2.4 and 4.9 percent respectively, compared to a decline of 5.3 and 3.3 percent last year, said the National Account Statistics.

This positive trend is particularly noteworthy in Pakistan, where manufacturing plays a significant role in the industrial sector, making up 11.9 percent of the GDP.

The manufacturing sector is diverse, consisting of Large-Scale Manufacturing (LSM), Small-Scale Manufacturing (SSM), and Slaughtering, according to the System of National Accounts (SNA).

Historically, LSM dominates the manufacturing sector, accounting for 69.3 percent of Manufacturing and 8.2 percent of the overall GDP.

According to the Economic Survey, small-scale manufacturing and slaughtering comprise 19.5 percent and 11.3 percent of the manufacturing sector, contributing 2.3 percent and 1.3 percent to the GDP, respectively.

The performance of the LSM is a key indicator of overall industrial health, and it is assessed monthly through the Quantum Index of Large Scale Manufacturing Industries (QIM).

During July-March FY 2024, LSM recorded a slight decline of 0.1 percent, a significant improvement from the 7.0 percent decline last year. However, it’s important to acknowledge the challenges faced by the textile sector, a major component of LSM, it added.

Rising input costs, lower export values, competition from China, and higher power tariffs led to a significant reduction in production. The discontinuation of the Export Finance Scheme and high interest rates further exacerbated the situation.

In the Food group, wheat and rice milling saw minor declines despite the better harvests, while sugar production slightly increased owing to higher sucrose recovery rates despite lower output.

Construction activities declined due to higher financial costs, reduced incomes, and lower government spending.

Tight monetary conditions and political uncertainty also played a role, along with increased coal prices and decreased demand impacting cement production.

Additionally, sluggish activity in industries like automobiles and heavy machinery led to lower steel utilization.

The pharmaceutical sector improved due to stable exchange rates and higher medicine prices, but the automobile industry faced reduced production owing to low demand, high borrowing costs, and import restrictions, it added.

The allocation of National Highway Authority (NHA) in the development budget i.e. PSDP 2023-24 consisted of 123 projects with a budgetary allocation of Rs 156.50 billion including 68 ongoing projects with an allocation of Rs 99.36 billion and 52 new schemes with an allocation of Rs 48.12 billion.

According to the Economic Survey 2023-24 released on Tuesday, by Federal Minister for Finance Muhammad Aurangzeb, the NHA network presently comprised 48 national highways, motorways and strategic roads with a total length of 14,480 km.

“The NHA portfolio is also comprised of three BOT (Built-Operate-Transfer) schemes with a budgetary allocation of Rs 9.02 billion, “the Economic Survey said.

In addition to this, it said, “PC-I of three projects including construction of 4-lane Highway form Shikarpur-Rajanpur (221.5km), construction of 4-lane Highway form Rajanpur-D.G. Khan (121.50 Km) and construction of Additional Carriageway Dera Ghazi Khan,Dera Ismail Khan Section of N-55 (208.19 km) have been approved by various project approval forums i.e.CAREC/ ECNEC.”

The document further said the NHA had played a vital role in accelerating socio-economic development via reliable and sustainable road infrastructure and through regional and international connectivity via communication and related services.

The agriculture sector in the country witnessed 6.25 percent growth during fiscal year 2023-24 compared to 2.27 percent of the corresponding period of the last year.

According to the Economic Survey of Pakistan 2023-24 launched here Tuesday, the agriculture sector growth was driven by healthy growth in important crops, specifically, there was a significant growth of 16.82 percent in the production of major crops.

Wheat production has witnessed a record growth of 11.6 percent, reaching 31.4 million tonnes compared to 28.2 million tonnes last year, whereas cotton production, which was severely damaged by floods and rains last year, recorded 10.2 million bales compared to 4.9 million bales last year, growing by 108.2 percent, it added.

Rice production also saw a significant increase, reaching 9.9 million tonnes compared to 7.3 million tonnes last year, representing a growth of 34.8 percent, it added.

In contrast, sugarcane and maize production declined by 0.4 percent and 10.4 percent, respectively, with sugarcane production at 87.6 million tonnes compared to last year’s 88.0 million tonnes and maize production at 9.8 million tonnes compared to 11.0 million tonnes last year, it revealed.

The negative growth in sugarcane and maize has been offset by the substantial growth in wheat, cotton and rice

Other crops have also shown growth, increasing by 0.90 percent compared to a decline of -0.92 percent last year.

This growth is attributed to an increase in the production of fruits (8.40 percent), vegetables (5.77 percent), and pulses (1.45 percent). Additionally, cotton ginning, which has a share of 0.32 percent in GDP and 1.34 percent in agricultural GDP, grew by 47.23 percent due to the significant increase in cotton production.

Meanwhile, the livestock, which accounts for 60.84 percent of the agricultural sector and 14.63 percent of GDP, grew by 3.89 percent in 2023-24, up from 3.70 percent last year, it added.

The Economic Survey of Pakistan revealed that the forestry sector, contributing 2.33 percent to agricultural value addition and 0.56 percent to GDP, grew by 3.05 percent, compared to a significant 16.63 percent growth last year.

The current account deficit has significantly reduced, narrowing down to US $ 0.5 billion during July-March FY 2024, compared to US $ 4.1 billion in the same period last year.

According to Pakistan Economic Survey 2023-24 launched here on Tuesday, despite an uncertain global economic environment during the period, the government’s appropriate measures have improved the current account performance.

This reduction in the current account deficit has made external pressures sustainable and mitigated the risks associated with external financing difficulties.

Pakistan’s external account improved considerably during July-March FY 2024 as CAD narrowed down significantly by 87.5 percent to US $ 0.5 billion compared to US $ 4.1 billion last year.

The financial account also witnessed net inflows of US $ 4.2 billion, mainly augmented by inflows from friendly countries and official inflows, in sharp contrast to net outflows of US $ 1.1 billion during July-March FY2023.

The improved inflows in the financial account in July-March FY 2024 materialized amid the successful implementation of reforms agreed as part of the Stand-By Arrangement (SBA) with IMF.

The increase in CAD and financial support from bilateral and multilateral development partners have resulted in the building of foreign reserves. Specifically, reserves increased to US $ 8.0 billion by the end of March 2024 from US $ 4.4 billion at the end of FY2023.

The better performance of the external sector, coupled with the accumulation of foreign reserves, has instilled renewed confidence in the Pakistani rupee.

According the Survey launched the global merchandise trade for 2023 declined by 5 percent to US$24.01 trillion owing to global slowdown, trade fragmentation and geopolitical tensions.

According to WTO, global merchandise trade is expected to grow by 2.6 percent in 2024 and 3.3 percent in 2025. Downside risks includes: geopolitical tensions, rising protectionism, policy uncertainty, and supply disruptions.

Pakistan’s external account improved considerably during Jul-Apr FY2024 as CAD narrowed down by 94.8 percent to US$0.2 billion as compared to US$3.9 billion same period last year.

Trade deficit of goods contained by 21.6 percent to US$17.7 billion in Jul-Apr FY2024 as compared to US$22.6 billion last year on account of significant decline in imports.

The services account deficit reached US$1.9 billion in Jul-Apr FY2024 as against US$0.5 billion last year, owing to a sharp increase in services imports.

The primary income account deficit increased by 34.8 percent to US$6.1 billion in Jul-Apr FY2024, as against deficit of US$4.6 billion due to higher dividend repatriation and interest payments.

Remittances grew by 3.5 percent during Jul-Apr FY2024 and recorded at US$ 23.8 billion as against US$ 23.0 billion last year, owing to structural reforms related Trade and Payments.