ECONOMIC SURVEY 2023-24: No sacred cows, everyone must pay taxes: Aurangzeb

ISLAMABAD: The Economic Survey for 2023-24 unveiled on Tuesday showed that Pakistan’s economy experienced persistent stagflation for the last two consecutive years whereby the country clinched a low GDP growth rate of 2.38 percent and average inflation of 26 percent for the outgoing fiscal year.

The Economic Survey, which was launched by Minister for Finance Mohammad Aurangzeb, demonstrated that the country missed out on all major macroeconomic targets except the current account deficit as the GDP growth rate, inflation, fiscal deficit, investment to GDP ratio, savings to GDP ratio could not be achieved in the outgoing fiscal year. The investment to GDP ratio remained at 13 percent in FY2023-24, which was the lowest in the last 50 years since 1972-3.

The growth rate figure of 2.38 percent will be insufficient to dent unemployment and the prevalence of poverty in Pakistan. The per capita income has touched $1,680 in Pakistan in 2023-24. The government did not release any latest figures on unemployment and poverty in Pakistan. The World Bank has estimated that the poverty level crossed 40 percent mark in the country.

The Economic Survey highlighted that the GDP, valued at current market prices, reached Rs106,045 billion ($375 billion), with a 26.4 percent increase from the previous year’s Rs83,875 billion ($338 billion). The per capita income rose to US$1,680, from US$1,551 in previous year, driven by the improved economic activity and a stable exchange rate. The investment-to-GDP ratio for FY2024 remained at 13.14 percent, a decrease from 14.13 percent in FY 2023, attributed to a global slowdown, political instability in the country along with restrictive macroeconomic policies.

However, the Minister for Finance made it crystal clear that there would be no “sacred cows” and every sector would have to contribute for paying its due taxes. The privatisation, he said, would be pursued and PIA’s transaction was expected to be done in July/August in the coming fiscal year. He paid tributes to former caretaker minister for privatization for undertaking spadework to move loss making entity of PIA towards privatisation. “I don’t believe that there is any Strategic State Owned Enterprises (SOEs) and the government would have to come out from running the busineses,” he said and added that PASSCO would be restructured.

Aurangzeb categorically stated that there was no Plan B as approaching the IMF clearly indicates that the lender of last resort would be approached to stabilise the economy. “Talks with the IMF are going in the right direction,” he said. The quality of foreign exchange reserves which could hardly meet two weeks imports requirement has now increased to $9 billion which were quite sufficient to meet two months of imports bill, he said.

He said the power sector’s leakages of over Rs500 billion would be overcome. The Track and Trace System (TTS) failed in a spectacular manner and now it would be fixed. He said the next fiscal year’s ambitious tax collection targets would be achieved through enforcement and taxation measures. It was the discretion of the government to include or exclude development projects. He said the SDGs Achievement Programme was restored despite the fact that these were abolished by the caretaker government.

Dwelling upon the economic performance for the outgoing fiscal year, Minister for Finance Mohammad Aurangzeb described the agriculture sector as “survivor”. This helped the country come out from the last year’s negative growth trajectory of -0.2 percent to positive growth rate of 2.38 percent for 2023-24 mainly because of agri sector performance. The agriculture sector has shown a growth of 6.25 percent in 2023-24 compared to 2.27 percent last year. Specifically, there was a significant growth of 16.82 percent in the production of major crops. Wheat production witnessed a record growth of 11.6 percent, reaching 31.4 million tonnes compared to 28.2 million tonnes last year. Cotton production, which was severely damaged by floods and rains last year, recorded 10.2 million bales compared to 4.9 million bales last year, growing by 108.2 percent. Rice production also saw a significant increase, reaching 9.9 million tonnes compared to 7.3 million tonnes last year, representing a growth of 34.8 percent. In contrast, sugarcane and maize production declined by 0.4 percent and 10.4 percent, respectively, with sugarcane production at 87.6 million tonnes compared to last year’s 88.0 million tonnes, and maize production at 9.8 million tonnes compared to 11.0 million tonnes last year. The negative growth in sugarcane and maize has been offset by the substantial growth in wheat, cotton and rice.

The large-Scale Manufacturing (LSM) remained in negative territory at -0.1 percent during July-March FY2024, an improvement compared to the -7.0 percent growth in the corresponding period last year. During this period, 11 out of 22 sectors witnessed growth, including food, wearing apparel, leather, wood products, coke & petroleum products, chemicals, pharmaceuticals, rubber products, machinery & equipment, furniture, and other manufacturing (e.g. footballs). On a year-on-year (Y-o-Y) basis, LSM increased by 2.0 percent in March 2024 against a contraction of 26.4 percent in the same month last year. However, on a Month-on-Month (M-o-M) basis, LSM declined by 9.4 percent in March 2024 compared to a decrease of 3.1 percent in February 2024.

The services sector achieved a growth rate of 1.21 percent in the outgoing fiscal year.

The FBR net provisional tax collection grew by 30.6 percent to Rs7,361.9 billion in July-April FY2024, compared to Rs5,637.9 billion last year. The domestic tax collection registered a 32.3 percent increase, reaching Rs6,464.3 billion up from Rs4,886.1 billion last year. Considerable improvement in tax collection has been observed, supported by various tax-enhancing measures implemented under the Finance Act 2023. Despite significant challenges, the fiscal performance during the first nine months of FY2024 is a testament to the government’s resolve to continue consolidation efforts to strengthen revenue mobilization and control expenditures. The government is making intensive efforts through various reforms and initiatives on both the revenue and expenditure sides. They will not only reduce dependency on borrowing and mitigate debt-related risks but also create sufficient space for social assistance and development spending.

The CPI inflation for July-April FY 2024 was recorded at 26.0 percent as against 28.2 percent during the same period last year. The other inflationary indicators like Sensitive Price Indicator recorded 30.2 percent as against 31.7 percent last year. Wholesale Price Index recorded at 22.4 percent in July-April FY 2024 compared to 34.1 percent same period last year.

Total public debt was recorded at Rs67,525 billion at end-March 2024. Domestic debt was recorded at Rs43,432 billion while external public debt was recorded at Rs24,093 billion (US$86.7 billion). Public debt portfolio witnessed various positive developments during the first nine months of the outgoing fiscal year. Around 88 percent of financing of fiscal deficit was carried out through domestic markets, whereas 12 percent from external sources.