Pakistan’s recorded a gross domestic product growth of 5.97 percent in 2021-22, surpassing the target of 4.8 percent target, supported by buoyant agriculture, industry, and service sectors. Although the figures showed the country on a robust recovery path after the Covid-induced contraction, the government isn’t happy. This indicates what the government had been trying to avoid: overheating of the economy, means unsustainable growth. 

The unexpected recovery, as Finance Minister Miftah Ismail said while releasing the Pakistan Economic Survey 2021-22, comes with “landmines” with expansionary fiscal policy, resulting in a massive trade deficit of $45 billion—the highest in its history, and a whopping current account deficit of over $13 billion. 

The former PTI government, Ismail said, laid the landmines with ballooning current account deficit and later huge fuel subsidies, which the current government withdrew last week. He termed the current growth rate “unsustainable”

In the coming budget, the government will now focus on “fiscal consolidation and expenditure cuts”—which will be painful for common people—with the aim of achieving sustainable growth and increased exports. 

The budget deficit last year was around PKR 5.1 trillion (roughly $25 billion)— a deficit too large to be sustainable. The massive tax assumptions by the previous government—that the current government plans to withdraw—cost the exchequer around PKR 1.75 trillion ( roughly $8.7 billion) in revenue. 

Challenges are compounded by the almost unaffordable prices of global commodities and fuel—factors beyond the government’s control. “I cannot control this but cannot leave people without food and fuel, either,” Ismail said. 

The imports reached the highest ever imports of $76-77bn, which was also the highest ever even as a percentage of GDP and 48pc annual increase, thus leaving a trade deficit of a record about $45bn. The export to import ratio, which used to be earlier 1:1, has now come down to 2:3.  

In the coming budget, the direct taxation will be increased with the withdrawal of tax exemption. But the government's ability to provide relief to the middle class will be minimal.  And this is what ousted prime minister Imran Khan, tapping into people's growing frustration with the establishment as cost of living goes up and up, is seeking to exploit by threatening what he calls the " biggest protest march in Pakistan's history".

(SAM)