KARACHI: The State Bank of Pakistan on Wednesday, reported that the economic growth rate in fiscal year 2023 would fall below the previously projected GDP growth rate. Earlier the growth rate for the current fiscal year was announced to be 3-4 per cent, but owing to flood-affected damage, economic turmoil, unstable policy and other factors the economic growth has been slashed down.
An economic health report issued by the central bank indicated that the progress of the country would be 3-4% below the projected growth.
The annual report detailing the State of Pakistan’s Economy indicates the country’s economic growth was stronger than expected in the 2021-22 fiscal year with real GDP increasing by 6pc compared to 5.7pc from previous year.
According to the report this strong economic growth attributed to a better agricultural output and large-scale manufacturing expansions.
The economic outlook said, “Pakistan’s economic growth is expected to moderate considerably during FY23,” adding, “The economy was already in a stabilization phase when wide-scale flooding hit a large part of the country at the start of FY23.”
“The flooding in FY23 is likely to impinge on the country’s real economic activity through various channels. Specifically, the losses in agriculture emerging from the damages to crops and livestock are likely to transmit to the rest of the economy through various backward and forward linkages.”
The report says the government has taken measures to control the situation, “the government has targeted to reduce the fiscal deficit to 4.9 percent of GDP in FY23 from 7.9 percent in FY22. This outcome would be achieved through both revenue and expenditure measures.”
“In FY23, it is expected that tax receipt will be boosted through the elimination of exemption, increase in the rate of tax, and restoration of the tax on fuel,” said the report.
In a growth sector, the report says, “Import rate declined on a year-on-year basis as compared to FY22, which is the biggest reason to reduced the pressure of economy.”
The report also highlighted some programs which the SBP temporary halted, as the central bank takes measures to reduce the pressure of demand.
The SBP said, “continuing the policy efforts to arrest demand pressures, the government and the SBP announced further corrective measures in the ongoing year. These included: (i) temporarily halting fresh disbursements under the schemes of Mera Pakistan Mera Ghar (MPMG) and Kamyab Jawan Youth Entrepreneurship for revisiting it later (KJYE); (ii) imposition of additional import duties on various categories including steel, food preparations, and transport; (iii) restoration of fuel taxation; (iv) introduction of temporary restrictions on certain imports; (v) a further 125 bps increase in the policy rate in July 2022; and (vi) linking markup rates on EFS and LTFF loans with the policy rate.”
The central bank is expecting betterment in the foreign exchange owing to the disbursement of the international loan, saying: “with the IMF program disbursements, the country is expected to receive external financing from multilateral and bilateral creditors that will considerably strengthen FX reserves position during FY23.”
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