Pakistan's economy contracts for first time in 68 years

For the first time in 68 years, Pakistan's economy has marginally contracted by 0.38% in the outgoing fiscal year due to adverse impacts of novel coronavirus coupled with economic stabilisation policies that had hit the industrial sector much before the deadly pandemic.

Except for the agriculture sector that grew 2.7%, the industrial and services sectors witnessed negative growth rates, pulling the overall growth rate down to negative 0.38% in the fiscal year 201920, ending on June 30.

The per capita income in dollar terms has also dipped to 1,366 - a contraction of 6.1%, but it increased in rupee terms to Rs214,539.

The National Accounts Committee approved the provisional gross domestic product (GDP) growth rate for the outgoing fiscal year besides a downward revision of the economic growth rate for the first year of the PTI government. For fiscal 2018-19, the NAC cut the provisional growth rate of 3.3% to 1.9%, which is the lowest in 11 years.

The SBP's quest for hot foreign money has adversely hit the industries even much before the Covid-19 started impacting the economy. In the end, neither the hot foreign money stayed in Pakistan nor the country achieved sustainable economic growth. There is a need to investigate the sources of hot foreign money inflows in Pakistan that created an artificial sense of economic stability.

Former finance minister Dr Hafiz Pasha had disputed the PTI government's claim of a 3.3% growth rate and instead claimed a year ago that the growth in the first year of the PTI government was 1.9%. His assessment has become true and finally admitted by the government.

The Planning secretary chaired the National Accounts Committee meeting, which has representation of all the federal and provincial departments concerned, including the SBP.

It is for the first time since 1951-52 that Pakistan's economy contracted, although the pace of contraction was far lower than -1.5% growth rate predicted by the IMF, the

World Bank, the finance ministry and the SBP.

The GDP - the monetary value of all goods and services produced in a year - is projected to have a negative growth rate of 0.38% during the fiscal year 2019-20 ending on June 30, according to the NAC. These estimates are based on six to nine months provisional data projected for the whole year and adjusted for the impact of Covid-19 followed by the lockdown, it added.

The economic contraction coupled with currency devaluation has caused the size of the economy in the US dollar terms - to slip to around $265.6 billion from $280 billion a year ago. At the end of the PML-N govt's term, the size of the GDP in dollar terms was $313b.