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Friday, June 03, 2011
Floods, oil prices, security hit economy
* Minister says economy grew only 2.4% in fiscal year ending June 30 with deficit at 5.3% of GDP, inflation 12%
* Growth during last three years lowest in three decades
By Sajid Chaudhry
ISLAMABAD: Federal Minister for Finance Dr Abdul Hafeez Sheikh said on Thursday that last year’s devastating floods, energy crisis, hike in international oil prices and internal and regional security challenges were the main factors that hit the country’s economy and subsequently slowed down the growth rate during the fiscal year 2010-11.
Addressing a news conference at the launching ceremony of Pakistan Economic Survey 2010-11, the minister said the economy had grown only 2.4 percent in the fiscal year ending June 30 with the fiscal deficit at 5.3 percent of GDP and inflation at 12 percent.
Sheikh said that due to these factors, the growth target of 4.5 percent was missed and real GDP growth was recorded at just 2.4 percent.
The survey covers the development of all the important sectors of economy, including growth and investment, agriculture, manufacturing, mining, fiscal development, money and credit, capital markets and inflation and debt and liabilities.
The survey also highlights the performance of education, health and nutrition, besides showing the overall population, labour force and employment, poverty, transport and communication.
Energy crisis, internal and regional security challenges, the 2010 floods collectively restricted the GDP growth at 2.4 percent in the fiscal year 2010-11.
Pakistan’s average economic growth in PPP-led coalition government during the last three fiscal years 2009-11 stood lowest in three decades at average 2.6 percent.
During the same period, other Asian countries grew by 8.4 percent, with India, Sri Lanka and Bangladesh showing a growth of 7.7, 6.6 and 6 percent, respectively.
The finance minister said that the floods in 2010 affected about 1.6 million families and caused damages worth $10.5 billion to the economic infrastructure, agriculture and other properties.
He said that security situation in the country as well as regional security impact was also taking toll on the economy. He said that business activities in some areas had curtailed while the negative impact on foreign investors’ confidence was also witnessed abroad that caused decline in investments.
He said that the third major challenge that the economy faced during the outgoing fiscal year was increase in oil prices, adding that the price of the commodity that increased from $75 to $125 per barrel also affected the power generation and performance of the industrial and manufacturing sector.
The government did not pass on the actual impact to the consumers and sustained a revenue loss of Rs 50 billion on subsidising POL products.
The minister said that budget deficit was projected at 4 percent of the GDP at the time of the announcement of the budget, however, due to the floods, subsidies and security related additional expenditures it was now projected at 5.1 percent of the GDP and if the government paid Rs 120 billion for clearance of circular debt the deficit might increase to 5.7 percent of the GDP in 2010-11.
Finance Secretary Dr Waqar Masood Khan informed reports that according to 2005-06 PLSM survey, incidence of poverty in the country stands at 23.9 percent and based on labour force survey unemployment rate at 5.8 percent.
According to the highlights of the economic survey, Pakistan’s public debt increased by Rs 1.162 trillion in nine months. Pakistan’s external debt increased from $55.9 billion to $59.5 billion by end March 2011 with an increase of $ 3.6 billion. The country’s debt burden defined as external debt and liabilities as percentage of foreign exchange earnings decreased from 146.6 percent by end-June 2010 to 127.2 percent by end-March 2011.
Courtesy www.dailytimes.com.pk