The government had set an ambitious GDP growth rate of 3.94% for the fiscal year which surprised everyone and raised accusations by the opposition that the figures were fudged. Now the government is setting even higher standards for economic growth, inflation, fiscal and primary deficits for the next fiscal year.
It is less than two weeks since the government tables the federal budget on June 11 and preparations are already underway to bring solutions to achieve price stability, economic growth, and a favourable balance of payments. The government is now setting a growth rate of five percent for the next year after an apparent understanding with the IMF.
Experts have noted that the Rs2 trillion stimulus provided during the pandemic has revived the economy which is now on a solid path and has the potential to grow at a much higher rate for the next five years. This has surely emboldened the government who has decided to increase development expenditure and will earmark Rs900bn under the PSDP in the upcoming budget.
Finance Minister Shaukat Tarin has claimed Pakistan will go for an even more ambitious six percent economic growth target in the next two years as the IMF has shown willingness to renegotiate tough conditions for the $6bn bailout package. If this can be achieved, it is certain that the country is out of the woods and our economic woes are over. Pakistan will certainly be on the path to economic stability after receiving a battering due to the coronavirus pandemic.
However, Pakistan has not managed to contain inflation and energy prices. The inflation rate is anticipated to increase by 8.2% instead of 8%. Likewise, the overall budget deficit has been pitched at 6.3% of GDP instead of the earlier 6%. The government is certainly focusing on expansion this year while maintaining overall fiscal discipline but needs to ensure price control.
Prime Minister Imran Khan brought a new economic team to revive the economy. It needs to be seen whether it will deliver a people-friendly budget and whether good times are really ahead. The effects of the improved economic environment need to be observed so they can impact the lives of citizens.