Pakistan’s economy teeters as industry booms while agriculture collapses

A cotton-led collapse in agriculture dragged the economy down, leading the government to miss its growth target of 5.5 per cent by a significant margin in the current financial year as real gross domestic product grew at a rate of 4.7 per cent. However, that was still better than in the last eight years.
“Agricultural production has unfortunately remained at negative-0.19 per cent against a growth target of 3.9 per cent,” Finance Minister Ishaq Dar conceded at an event releasing results of the “Pakistan Economic Survey 2015-16” on Thursday.
He also declared that Pakistan would not need a new IMF programme once the current one expires in November.
“The government has no intention to go back to the International Monetary Fund for a new programme,” he said, pointing to the improved fundamentals contained in the economic survey.
He said the government had stabilised the national economy as promised before the 2013 elections and the goal going forward was to achieve higher economic growth.
“The nation should rest assured we have moved out of the legacy … have achieved stability and are set to consolidate gains with growth without compromising on fiscal discipline.”
With a 28-per-cent decline, this year’s diminished cotton crop shaved 0.5 per cent off GDP, which would otherwise have increased by 5.1 per cent.
“Cotton led the decline and others followed,” Dar said, adding that it would be the biggest challenge of the budget, due yesterday, to figure out how to rescue agriculture from its doldrums.
The other challenge he outlined for himself was a decline in exports of almost 10 per cent over the last financial year.
The industrial and services sectors saved the day for the government, although they grew from narrow bases in automobiles, construction, fertiliser, pharmaceuticals and a few more.
The minister had to struggle to defend the 4.7-per-cent GDP growth figure as he faced repeated questions about the credibility and autonomy of the Pakistan Bureau of Statistics (PBS), whose chief statistician, a former bureaucrat, served the Ministry of Finance for almost two decades.
The secretary of the statistics division also found himself in the spotlight, since he was Dar’s principal staff officer until recently.
The PBS is an autonomous body and is supposed to function independently of any influence from the government, particularly the Finance Ministry. Both men in question sat in uncomfortable silence on both sides of the finance minister while he fielded the questions and offered to make the PBS more autonomous.
Dar said the cost of fighting terrorism to the national economy had now touched US$118.3 billion (Bt4.2 trillion), although it appears to be receding this year on account of an improvement in the security situation.
The estimated losses suffered by the economy due to the fight against terrorism have declined by almost 40 per cent from last year, touching $5.56 billion this year. The minister attributed this to the success of the Zarb-i-Azb operation and implementation of the National Action Plan.
He said the government could not afford to lose sight of any sector, as agriculture and industry each had a 21-per-cent share in the economy, along with the 58-per-cent share of the services sector.
“We will try to take major corrective measures for agriculture in the budget,” he promised.
The pace of industrial activity has picked up as its growth rate reached 6.8 per cent this year, compared with 4.81 per cent last year. The performance was slightly above the target of 6.4 per cent set at the start of the year.
Large-scale manufacturing (LSM), on the other hand, missed the growth target of 6 per cent, coming in at 4.61 per cent, still above last year’s figure, which was 3.29 per cent.
Automobiles led the increase in LSM, registering growth of 23.4 per cent, followed by fertiliser at 15.9 per cent, leather products at 12.18 per cent, rubber 11.7 per cent, cement 10.4 per cent, chemicals 10 per cent and pharmaceuticals at 7.1 per cent. LSM was marred by the closure of Pakistan Steel Mills due to suspension of gas supply by Sui Southern Gas Company, according to the economic survey.
Power generation maintained its growth trend from last year, increasing by 12.2 per cent, while construction boomed at 13.1 per cent, more than double its growth rate last year.
The services sector met its target of 5.7-per-cent growth, even though its two major components registered below-target growth. The transport and communications sector came in at 4.06 per cent against the target of 6.1 per cent.
Wholesale and retail trade also failed to meet 5.5-per-cent growth against a 5.5-per-cent improvement last year.