Prime Minister Imran Khan’s adviser on Finance says the government had inherited an economy deep in debt, with depleting foreign reserves and a default looking like a possibility.
The growth seen in the past government’s tenure, said Hafeez Sheikh, was being achieved by taking loans from abroad and then spending it in the country.
Speaking on Thursday during a press conference to unveil the Pakistan Economic Survey 2019-20, Sheikh revealed that the PTI-led government’s projection of a 0.38pc contraction in growth are still not as grim as the 2.6pc projected by the IMF and World Bank.
Commenting on the difference between these projections, the PM’s adviser said the IMF and World Bank were making bleaker assumptions keeping in view the severity and duration of the coronavirus pandemic.
The provisional GDP growth rate for fiscal year 2020 estimated at negative 0.38 per cent is against a revised target of 2.4pc.
“In my view, we will have a better estimation when this year ends on June 30.”
The former IMF executive added, “the current account deficit that we inherited was around $20 billion but we have reduced that to around $3 billion”.
According to the economic survey released on Thursday, the significant reduction in the current account deficit “mainly reflected the impact of macroeconomic stabilization measures undertaken over the past year, which have significantly curtailed the import demand of a wide range of non-energy and energy products”.
The fiscal deficit as a percentage of GDP has gone down but the government warned that by the end of the fiscal year on June 30, this deficit could more than double when the true impact of Covid-19 and government’s expenditures on that front are taken into account.
Sheikh, during his presser, emphasized that the government has been controlling state expenses.
“This was the first time, I think, in the country’s history, that our primary balance — meaning our expenses were less than our earning — went into surplus.”
Sheikh said the government’s “philosophy” was to reduce its expenses and spend what it saves on the masses — a “dollar-saved-dollar-earned” mantra the PTI government has been following along with austerity.
However, despite efforts to turn around the economy, the threat of a recession looms. Pandemic has delivered a brutal blow to an already bleak economy.
Based on reports in Dawn, Express Tribune and Economic Survey 2019-2020