ISLAMABAD: Contrary to the official story of an economic turnaround, the government was updated on the deterioration in key economic indicators on Thursday.
The Economic Coordination Committee (ECC) of the Cabinet was briefed by Finance Secretary Tariq Bajwa about rising inflation, expanding current account deficit, falling exports and remittances, lower industrial output and increasing trade balance.
Headed by Finance Minister Ishaq Dar, the committee also approved the payment of salaries for November to the employees of Pakistan Steel Mills amounting to Rs380 million.
According to sources, the meeting participants were informed that the growth rate in large-scale manufacturing in the first seven months (July-January) of 2016-17 was down 0.04 per cent. It grew 3.90pc in the seven months of this fiscal year against 3.94pc a year ago.
Although the total tax collection was 7.6pc higher year-on-year in seven months, the main revenue driver – General Sales Tax – was down 0.3pc from a year ago.
Likewise, exports in seven months fell 1.3pc to $12.32 billion this year. In contrast, imports increased 9.2pc to $25.54bn in the same period.
As a consequence, the twin deficits widened significantly. Trade deficit expanded more than 21pc to $13.22bn while current account deficit widened 90pc to $4.72bn in seven months of 2016-17.
This was also contributed by a marginal fall in remittances that stood at $10.95bn in seven months against $11.16bn a year ago.
The ECC also conceded it in an official statement. “The committee, however, showed concern over the widening of current account deficit and the finance minister urged to increase exports of goods and services to bridge the gap,” it said.
The ECC was told that inflation was rising again. Measured by the Consumer Price Index, inflation increased at the rate of 3.9pc in the first eight months of 2016-17 against 2.5pc last year.
The Wholesale Price Index also rose 3.5pc in eight months against negative growth of 1.7pc a year ago.
The Sensitive Price Index moved in a narrow band to 1.2pc compared to 1.02pc last year.
On the positive side, the net inflow of foreign direct investment (FDI) surged 52.7pc in July-Jan to reach $1.83bn against $1.2bn a year ago.
The Finance Ministry, however, tried to give the situation a positive spin. It said the LSM was continuously moving upwards. The meeting was told that wood, leather, engineering, chemicals and coke and petroleum products registered a decline over the last year while products showing positive growth included iron and steel, electronics, non-metallic minerals, pharmaceuticals, food beverages and tobacco, automobiles, paper and board, fertiliser and rubber.
The statement said the outlook of the industrial sector was positive and encouraging as credit to the private sector has expanded more than 22pc. The industrial sector is improving due to persistent growth in electricity generation and gas production in January, it said.
The ECC noted that imports were coming in the machinery group that showed productivity, it added.
The committee found that the stock of wheat on February 28 was 5.52m tonnes, showing a sufficient quantity of local wheat for the releases to mills by provincial food departments and the Pakistan Agricultural Storage and Services Corporation.
The total reported stock of sugar in the country on February 22 stood at 3.2m tonnes. The stock of various products of petroleum, oil and lubricants averaged 30 days on March 1.
Published in Dawn, March 3rd, 2017