March 7, 2017

Not Government, Oil Glut and Workers’ Remittances Galloped Pakistan Economic Survival

By: Azhar Azam

Pakistan’s GDP is gauged at PKR 29,598bn ($282.6bn) for the FY2016 (July to June) and is projected at $319.7bn for FY2017 as of December 31, 2016; according to latest economic data released by State Bank of Pakistan (SBP) on March, 3, 2017.

Central government posted a fiscal deficit of PKR 799.1bn ($7.6bn) in first six months of FY2017 (July to January); with an expenditure of PKR 2,789.7bn ($26.6bn) and a revenue of PKR 1,990.6bn ($19.0bn).

The government made up the fiscal deficit by domestic financing of PKR 558.2bn ($5.3bn) and foreign borrowing of PKR 240.9bn ($2.3bn).

Generally, people are deluded that military eats up the major chunk of the federal budget, which is purely an adulterated claim. According to Ministry of Finance statistics, just over 12% (PKR 336.3bn) is incurred on account of Defence Affairs and Service during July to December 2016; nearly half of total debt servicing of PKR 647.5bn (23.2%) including domestic (PKR 587.7bn) and external (PKR 59.8bn) debt servicing.

Current account deficit also menaced to $4.7bn for the period as exports of goods ($12.3bn) and services ($2.9bn) summed $15.2bn while imports of goods ($25.5bn) and services ($4.9bn) valued at $30.9bn. The growth of current account deficit has been mainly confined by Workers’ Remittances of $10.8bn.

Balance of trade also bungled by $17.4bn for July to January 2017; according to revised data by Pakistan Bureau of Statistics (PBS).

Domestic and external debt and liabilities as of December 31, 2016 totaled $212.9bn; $138.8bn and $74.1bn respectively. It comprised central government debt of $187.6bn including short-term domestic and external debt of $135.5bn and $1.4bn respectively.

Direct Investment neared $1.2bn whereas Portfolio Investment equaled $0.7bn for the same period. Official Reserve Assets soured to $21.2bn as of January 31, 2017 though per capita income rose to PKR 162,568 ($1,552) for FY2016.

GDP (current market price) & Debt and Liabilities 2013-16


According to official statistics, Pakistan GDP for FY2017 is forecasted at $319.7bn (+$81.5bn). It largely varies with the World Bank forecast for 2015 (-$11.1bn), 2014 (-$29.0bn), and 2013 (-$7.0bn).

For 2013-16, external debt grew by $13.3bn and domestic debt also increased by $40.2bn; an overall surge in total debt and liabilities of $53.5bn (PKR 5,604.3bn).

Balance of Trade (Goods) 2013-16


Between 2013-16, Exports continued to plunge while imports were comparatively higher; largely due to oil glut internationally that shrank mineral, fuels, oil etc. bill by $6.2bn over the period of four years.

Textile exports, the mainstay of the economy, fell from $13.5bn in 2013 to $12.5bn in 2016. United States ($3.6bn), China ($1.6bn), United Kingdom ($1.6bn), Germany ($1.2bn), and Afghanistan ($1.2bn) were the major exports partners of Pakistan in 2016.

Petroleum products ($9.0bn), Machinery and Appliances ($3.8bn), Electrical Machinery ($2.4bn), Iron and Steel ($2.4bn), and Organic Chemicals ($1.9bn) have been the most imported items in Pakistan for 2016.

Pakistan imports were dominated by China ($8.6bn), UAE ($6.0bn), Singapore ($3.2bn), Saudi Arabia ($2.0bn), United States ($1.6bn), Japan ($1.6bn), and India ($1.5bn).

Reserves and Foreign Remittances 2013-16


Thanks to trimmed oil imports and increased workers’ remittances by $6.2bn and $5.5bn respectively supported by loans, Pakistan foreign exchange reserves boosted to $23.3bn for 2013-16.

However, workers’ remittances growth has been torpid; just 2.6% to $19.7bn in 2015-16 against 11.6% to $19.2bn and 21.1% to $17.2bn in 2014-15 and 2013-14 YoY.

Nearly 64% ($12.5bn) of the remittances came from Middle East; Saudi Arabia ($5.8bn), UAE ($4.3bn), and other GCC countries ($2.4bn). Expatriates from United States and United Kingdom sent home $2.4bn each during 2016.

Foreign Direct Investment 2013-16


Direct investment inflow has been nothing exceptional during 2013-16 though investment outflow has been cut-back, improving on net foreign direct investment to $2.0bn.

In 2014-16, leading investments arrived from China ($2.7bn), United States ($740mn), UAE ($734mn), United Kingdom ($712mn), and Netherlands ($540mn). A total of $8.6bn has been invested directly in Pakistan during 2014-16; 2014 ($3.6bn), 2015 ($2.4bn), and 2016 ($2.6bn).