Islamabad – Pakistan expects the economy to grow by 5.5 percent in the next fiscal year, despite a lingering energy crisis that held back growth in several industries in the outgoing fiscal year ending June 30.
The National Economic Council, the country’s highest economic decision-making body which met with Prime Minister Nawaz Sharif in the chair, set 3.9 percent growth target for the agriculture sector and 6.1 percent for the manufacturing sector.
The meeting also approved 700 billion rupees ($6.88 billion approx.) budget for the Public Sector Development Program, besides setting $25.5 billion export target for the year beginning July 1.
The South Asia’s second-largest economy missed the 5.1 percent revised GDP target for the current fiscal year, largely due to the sluggish growth in the agriculture and services sector. The International Monetary Fund has projected 4.1 percent growth for Pakistan this year.
While the economy has shown signs of improvement, persistent structural weaknesses continue to weigh heavily on the overall performance.
In its latest report, Pakistan’s central bank has identified energy shortages as a “serious issue” in addition to lack of foreign direct investment inflows, sluggish growth in tax revenue and losses in the state-owned units that consume an estimated 400 billion rupees a year.
The IMF has noted positive progress in containing the fiscal deficit that peaked to over 8 percent of GDP in the FY12-13, compelling the government to seek a $6.6 billion bail-out from the IMF to avert an imminent balance of payment crisis.
Budget deficit was contained to 3.6 percent during July-March 2014-15 as compared to 3.8 percent last year, and is expected to be below 5 percent for the whole year.
Pakistan’s economy has also been helped by sharp decline in oil prices with its external account deficit recorded at $1.4 billion during July-April, FY15, nearly half of the deficit recorded in the same period last year.
Improvements in the economy also led to the up-gradation of Pakistan’s credit-rating to positive from stable by Standard and Poor’s, affirming a B-rating.
The IMF says Pakistan needs to stay the course of reforms to catch up with those fast-growing emerging markets that have pulled so many people out of poverty.
“Over the past two decades, there have been stops and starts along Pakistan’s economic reform path,” said Jeffrey Franks in, as he relinquished his charge as IMF’s chief mission in Pakistan in April. “In order to break out of that stop-go cycle, the authorities need to persist in those reforms until it becomes a virtuous cycle.”