PES 2022: Ballooning balance of payment deficit dampens Pakistan’s growth story – Business

Finance Minister Miftah Ismail released the 2021-22 Pakistan Economic Survey (PES), showing a growth rate of 5.97% compared to the target of 4.8%.

However, the growth story of this country, which recovered from the pandemic during economic downturn and maintained a V-shaped recovery with real GDP growth of 5.97%, contracted in the face of a striking macroeconomic imbalance, suggesting such growth. do. unsustainable

In particular, the balance of payments situation stood out as the trade and current account deficits soared out of control.

The Pakistan Economic Survey is an annual report on economic performance with a particular focus on key macroeconomic indicators. Interestingly, this time perhaps the first new government (PML-N led coalition) is presenting the economic performance of the previous government (PTI).


“Achieving sustainable growth is the real problem in Pakistan, not achieving growth,” the finance minister said in announcing the survey.

Ismail said, “This year’s GDP growth is 5.97%, but the current account deficit as usual showed us once again that there is a balance of payments problem.”

This overall growth was driven by a 4.40% growth in agriculture, 7.19% in industry and 6.19% in services. This means that the three main segments have exceeded their targets of 3.5%, 6.5% and 4.7% respectively.

The survey documents show that the country has exceeded its overall growth expectations and sectoral growth targets, but “basic macroeconomic imbalances and associated national and international risks have undermined the celebration.”

trade deficit

The minister said imports of $77 billion would be the highest ever in terms of GDP. “Imports have increased significantly, but exports have also increased,” Ismail said.

During the July-March 2022 fiscal year, exports of goods rose 266% to $23.7 billion, while exports of services rose 171% to $5.1 billion.

“Despite the strong export performance, imports also increased significantly,” PES said. “A wide range of global raw material prices, imports of COVID-19 vaccines, and pressure from the demand side all contributed to the increase in imports,” PES said.

As a result, the trade deficit grew by 55.5% and reached $30.1 billion, or 8.6% of GDP, which is “historically high” according to the documents.

current account

Import payments recorded “significant and widespread” growth, despite both export receipts and worker remittances reaching record levels in nine months.

As a result, the current account deficit widened significantly compared to last year, the document said.

‚ÄúThese payment pressures were reflected in the interbank PKR-USD exchange rate, which fell 14.1% during the July-March 2022 fiscal year. SBP’s foreign exchange reserves also came under pressure from the second quarter, dropping $5.9 billion in the first nine months of the fiscal year. $11.4 billion by the end of March 2022.

Thus, the current account recorded a deficit of $13.8 billion (3.6% of GDP) during this period, which was a deficit of $500 million last year. According to investigative documents, the main cause of the current account deficit was a 55.5% increase in the trade deficit in goods during July-March FY2022.

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