Pakistan will miss growth target set for the current
financial year, the fifth consecutive year, and the sluggish pace of
economy will continue for at least two more years, according to a World
Bank report, indicating a rise in unemployment.
The Global Economic Prospects Report 2013, released on Wednesday,
says Pakistan’s economy is expected to grow at a rate of 3.8%, half
percentage point below the target of 4.3% set for fiscal year 2012-13
ending June 30.
The report comes at a time when Pakistan is readjusting its
macroeconomic framework during ongoing talks with the International
Monetary Fund to pave the way for a fresh bailout programme. Both sides
have already wrapped up technical-level talks and are gearing up for
policy dialogue.
The World Bank says growth in Pakistan, the second largest economy in
South Asia, remained broadly stable if compared with last year’s growth
of 3.7%. However, the country is clubbed with Nepal that is projected
to grow 3.8%. Even Sri Lanka at 6.1% and Bangladesh at 5.8% are
projected to hit growth rates far higher than that in Pakistan.
Various studies, both independent and official, suggest that Pakistan
requires 7 to 8% annual growth to create jobs for the bulk of youth. In
the last five years, the country has posted sluggish growth, leaving
hundreds of thousands jobless every year.
The World Bank also projects sluggish growth for the next two years.
According to the report, there will be lacklustre growth in financial
years 2013-14 and 2014-15 at 4% and 4.2% respectively.
The bank says though industrial activity has started picking up,
inadequate supply of electricity and gas for firms with captive power
plants continues to hobble the industrial sector.
It fears that the pick-up in exports in the first five months of this
fiscal year on the back of increase in exports of garments and
processed cotton products may not continue in the remaining part of the
year. Electricity shortages during the second half of December have
already adversely affected textile production and may dampen export
growth in subsequent months, it says.
On the fiscal front, the bank again paints a dismal picture. Against
the government’s target of 4.7%, the budget deficit is expected to be
over 6%, a projection which is in line with the IMF forecast.
For the last five years, economic managers have been understating
expenditures and overstating revenues to show the budget deficit below
actual levels, experts say.
According to a finance ministry official, the government has now
presented a revised budget deficit figure of 5.6% to the IMF, largely
because of a shortfall in revenues. Compared to the annual revenue
target of Rs2.381 trillion, the government now expects to collect
Rs2.231 trillion, a shortfall of Rs150 billion or roughly 0.7% of gross
domestic product.