Imran govt decides to revise downward all macroeconomic targets

The Imran Khan government has decided to revise downward all the macroeconomic targets through the upcoming mini budget, including slashing down the real GDP growth target while allowing upward revision in the budget deficit for the current financial year. The government has decided to unveil a five-year macroeconomic framework along with the mini budget before the parliament expected to be unveiled within this month, probably in the third or fourth week in which the fiscal consolidation will be envisaged in the first two years in 2018-19 and 2019-20.

This will impact the GDP growth rate negatively.

“So, the economic slowdown is on the horizon through this difficult period of fiscal consolidation where the GDP growth will remain in the range of 3.9% to 4.4% of GDP,” says one top official of the government.

The budget deficit, which is considered as mother of all economic and financial ills, will be revised upward for the current fiscal year, keeping in view the performance of the revenue and expenditure fronts in the first half of the current fiscal year. The Pakistan Tehrike-Insaf (PTI)-led government wanted to keep the budget deficit at over 5.5% to 5.6% of GDP against earlier envisaged target of 5.1% of GDP. Without additional tax measures and adjustments into expenditures, the budget deficit might exceed 7% of GDP for the current fiscal year.

The real GDP growth rate would be slashed down from earlier projection of 6.2% to below 4% for the current fiscal year after passing the first half (July-December) period of the current fiscal year where Large Scale Manufacturing (LSM) had not performed well.

The country had achieved GDP growth rate of 5.8% last fiscal year under dispensation of Pakistan Muslim League-N-led regime.

The PTI led government had presented its mini budget in September last after winning the July elections on the pretext that the PML-N led regime had presented the budget for 2018-19 on the basis of wrong projections.

However, the macroeconomic targets were never revised downward despite declaring projections on the economic front based on wrong projections.

“With the revision of macroeconomic projections, the government plans to launch renewed efforts to keep the twin deficits, the budget deficit and current account deficit, at manageable levels,” a top official confirmed. Initially, the growth of GDP was targeted at 6.2% with contributions of 3.8% from agriculture, 7.6% from industry and 6.5% from services sector. Investment target for the year 2018-19 was kept at 17.2% of GDP in order to achieve sustained and inclusive growth. Fixed investment is expected to grow by 15.6% of GDP in 2018-19.

Nationals Savings as percentage of GDP are targeted at 13.1%. One top official of the Finance Division said that the government was envisaging a decline in GDP growth in the first two years but then it would start picking up and could touch six per cent in preceding years.

Inflation is envisaged at over 6% for the current fiscal year. The Planning Commission is in the process of finalising the 12th Five Year Plan envisaging average GDP growth rate of 5.8% in five years. Starting from 4.2% in 2018-19, it could touch 7% of GDP in last year of 2022-23.

“The Ministry of Finance and Planning Commission are going to hold consultations for evolving a consensus on macroeconomic projections for five years period,” concluded the official.