Approval of the delayed economic growth plan
Approval of the economic growth strategy has been delayed as the government has yet to finalize a policy paper while macroeconomic policies are largely dictated by global lenders.
The approval of the macroeconomic growth strategy was taken off the agenda of the meeting of the Annual Plan Coordination Committee (APCC) which met a few days ago, according to sources from the Ministry of Planning and of Development. They said Planning Minister Asad Umar dropped the agenda after finding the draft strategy unsatisfactory.
It may also partially publish the poverty estimates in Pakistan’s next economic survey and may retain the provincial-level poverty estimates, the sources said.
The government does not intend to submit the growth strategy for approval to the National Economic Council (NEC) which will meet on Monday to approve next year’s macroeconomic growth targets and the development budget. Prime Minister Imran Khan chairs the CEN meeting and the four provincial chief ministers are also members.
“The consultation with the provinces on the new growth strategy is not over and we will now try to complete the process within the next three months,” said Ministry of Planning spokesman Zafarul Hasan Almas.
Zafar said the provinces are now important stakeholders in national planning and without their formal consent the growth strategy cannot be finalized.
Responding to a question, Zafar said provincial-level poverty estimates for the 2018-19 fiscal year may not be released due to incomplete consultation with provinces. He said the overall poverty rate and the distribution of rural and urban poverty levels could be given in the economic survey.
The latest poverty estimates show declining trends in Pakistan, as the survey for 2018-19 showed poverty decreased by around 3%, from 24.3% in 2015-16 to 21.5 % in 2018-19. The figures suggest an increase in poverty in Khyber-Pakhtunkhwa while it has decreased in the other three provinces, the sources said.
Read more: Growing economy but concerns remain
Pakistan’s 11th five-year economic plan ended in June 2018, and the ruling party spent the first two years deciding whether to come up with a 12th five-year macroeconomic plan or a three-year economic growth strategy.
The only guidance document is the 39-month Extended Fund Facility (EFF) of the International Monetary Fund (IMF) which is largely structured around quarterly fiscal and monetary targets. In the absence of a five-year plan or growth strategy, the Ministry of Finance, the Ministry of Planning and Development and the State Bank of Pakistan often give different sets of economic projections.
For example, for the next fiscal year, the Ministry of Finance wanted an economic growth target above 5%, but the Planning Commission obtained approval of the 4.8% target by the APCC.
The Pakistan Institute for Development Economics (PIDE) said the country needs to grow by 7-9% for 30 years to reduce public debt and create jobs by bringing about a radical change in the way the state works and redefining the role of government as a facilitator.
The economic growth rate of 7.11% is only required for full employment and to reduce debt, the economy must grow at a rate “above 8%”.
The government’s 3.94% economic growth figure this year has also become controversial.
As three economics ministers declared victory on Thursday, the State Bank of Pakistan released its second quarter economic report, warning the government of the three major challenges ahead and maintaining its growth forecast of 3%.
“Real GDP growth is likely to exceed the target of 2.1% and the SBP has revised its real GDP forecast for FY21 upwards to 2-3% from the previous range. from 1.5% to 2% provided in the first quarterly report. of fiscal 21 ”, according to the second quarter SBP report.
In a footnote, the SBP explained that the second quarter report was approved by the SBP board on April 30 and gives such projections.
The central bank also warned the government of the looming dangers of high inflation, insufficient income to finance debt, and increasing pressure on imports and external accounts.
“Despite improving overall macroeconomic indicators, a few trends will need to be monitored,” the SBP said.
He said the role of supply side challenges for several agricultural commodities, especially food items, has become more important in driving recent inflationary outcomes. The central bank said there was a need to implement effective supply management and early warning systems, to ensure the availability of accurate and timely data on stocks of key commodities, and to monitor prices at the retail level.
Second, servicing the debt remains a challenge, as revenue generation in the country is currently insufficient to fund the bulk of the mark-up payments, according to the central bank. During S1-FY21, almost 23% of interest payments were financed through the accumulated primary surplus; the rest was financed by the accumulation of additional debt, he added.
“Import pressures are intensifying, in the wake of the recovery in economic activity and rising world commodity prices,” the SBP said.