Pakistan Economic Survey 2010-2011

The current fiscal year unemployment rate remained at 5.6 percent, while the per capita income amounted to $1264, says the Economic Survey 2010-11.

Islamabad released statistics said that Pakistan’s local debts amounted to Rs5463 billion, while the foreign loans stood at Rs4726 billion, which adding up to make the total loans amount peaked at Rs10189 billion.

Pakistan’s population during comprised of 89.6 million male and 83.8 million female, according to the economic survey.

The survey further said that a sum of Rs700 billion was borrowed locally during the current fiscal year.

The Economic Survey 2010-11 covers the period July-April only, as stated in the salient features of the Survey. Sources said that the detail report of the economic survey would be released on June 2.

Economic Survey 2010-11 launched

Associated Press of Pakistan

The Economic Survey of Pakistan for the year 2010-11 was launched here on Thursday. Federal Minister for Finance Dr.Abdul Hafeez Shaikh launched the pre-budget document, highlighting the overall performance of economy during the out-going fiscal year, providing a realistic feedback and basis for planning.

The survey covers the development of all the important sectors of economy, including growth and investment, agriculture, manufacturing, mining, fiscal development, money and credit, capital markets and inflation and debt and liabilities.
The survey also highlights the performance of education, health and nutrition, besides showing the overall population, labour force and employment, poverty, transport and communication.
It also assesses the issues of environment, contingent liabilities, tax expenditure as well as economic and social indicators.
The government has approved Rs.730 billion Public Sector Development  Programme (PSDP) for the year 2011-12. The federal component of the PSDP is Rs.300 billion, while the component of provinces is Rs.420 billion.
Rs.10 billion have been  approved for the Earthquake Reconstruction and Rehabilitation Authority (ERRA).
According to the survey, the GDP for year 2010-11 was fixed to grow  at 4.5 percent, however due several challenges including the devastating floods that hit the economy badly; the growth rate reduced to 2.4 percent.

Floods, oil prices pushed growth rate down to 2.4 percent

Federal Minister for Finance, Dr. Abdul Hafeez Shaikh Thursday said the devastating floods, increase in international oil prices and security situation are the three main factors that hit the country’s economy and subsequently resulted in slowdown in growth rate during the fiscal year 2010-11. Addressing a press conference at the launching ceremony of Economic Survey, he said despite these challenges, the growth rate stayed positive.

The Finance Minister was flanked by Secretary Finance, Dr.  Waqar Masood, Chairman Federal Board of Revenue, Salman Siddique, Deputy Chairman Planning Commission of Pakistan, Dr. Nadeem-ul-Haq and other officials of the ministry.
The GDP for year 2010-11 was fixed to grow at 4.5, however due to the devastating floods that hit the economy badly; the growth rate reduced to 2.4 percent.
“We face challenges but this is the time when all political parties and civil society are determined to lead the country out of these crises,” he said adding that “with joint efforts we would lead the country out of these crises”.
Despite all these challenges, the Minister said the several sectors of economy including exports and remittances have shown considerable growth during the outgoing fiscal year.
Federal Minister for Finance, Dr. Abdul Hafeez Shaikh while addressing a press conference at the launching ceremony of Economic Survey said that the overall agriculture sector registered growth of 1.2 percent.
However, he added that due to devastating floods the growth in major crops, witnessed negative growth of 4 percent.
The manufacturing sector also grew by 3 percent despite increase in oil and energy prices while the services sector witnessed positive growth of 4.1 percent.
He said that the investment to GDP ratio was recorded at 13.4 percent during the year against 15.4 percent last year adding that security and high input rates were the main hurdles in investments.
He said that the Federal Board of Revenue has set the revenue collection target of Rs. 1588 billion during the current year, out of which the Board has already collected Rs. 1316 billion.
He said that the Board was confident that it would be able to collect the remaining Rs. 272 billion by the end of June.
During May 2011, the Board collected Rs. 160 billion against Rs.110 billion collected during the same month of last year, showing an increase of Rs. 50 billion.
Hafeez Shaikh said that the exports have witnessed historic growth of 28 percent by increasing from $18.8 billion last year to $ 20.2 billion during July-April (2010-11).
He said that the export figures are expected to cross the $24 billion figure this year.
The remittances also witnessed a considerable growth during July-April (2010-11) by growing from $7.3 billion during the same period of last year to $9.1 billion.
He said that government’s bank barrowings have declined by Rs. 16 billion during the current year as compared to last year.
Minister for Finance, Dr. Abdul Hafeez Shaikh said that the overall economy was in very bad condition when the current government took the power in 2008.
However, tough decision and the prudent policies helped in putting the economy on the path of stability.
Several measures were taken by the government including cutting down its own expenditures, enhancing revenues and reducing the fiscal deficit to maintain economic stability, he added.
He said a major setback to economy was done by the floods of 2010 that affected about 1.6 million families having 20 million members besides causing damages to infrastructure, agriculture and other properties worth $10 billion.
He said security situation was also taking toll on economy as business activities in some areas have curtailed while the name  of the country is also being defamed abroad that causes decline in investments.
He said that the third major challenges that the economy faced during the outgoing fiscal year was the increase in international oil prices which have also affected the performance of the industrial and manufacturing sector.
The Finance Minister said the government has taken several measures to make the situation better and highlighted the importance of becoming self-sufficient.
He said that for becoming self-sufficient, the government has taken certain steps to broaden the tax base and bring into the tax net those who are not paying taxes.
Besides, several sectors including fertilizer, tractors, textile, carpet, leather and sports would be taxed to broaden the tax net, he added.
He said that the fiscal deficit for the year 2010-11 was expected to remain 4 percent of GDP, however, due to unfavorable circumstance, it grew to 5.1 percent.
Besides, the Finance Minister said that government has  taken initiatives to involve private sector more in the business as  doing business was not the job of the government adding that it was  also making efforts to get access for the Pakistani products in the international market, particularly in the European Union.

Core inflation estimated at 9.5 percent in FY 2010-11

The core inflation (non-food, non-energy measure)estimated at 9.5 percent during the year 2010-11 remained subdued over corresponding increase of 11.2 percent on the back of tight monetary policy, weaker economic activity and base impact.  The Economic Survey 2010-11 released here Thursday said that Pakistan’s domestic structural problems and global commodity price movement collectively provided momentum to inflation in recent months.

The cumulative inflation rose to 14.1 percent in July-April 2010-11.
During most of the period, food remained the major driver of inflation on the  back of major supply disruption owing to flood.
The category-wise analysis of the CPI basket shows that food inflation  has worked as stimulant in the index with its 18.4 percent increase. The non-food category is categorized in further sub- groups.
The highest increase among these sub-groups at 16.5 percent has been observed in transport group followed by energy group 14.9 percent, medicine  group 14.5 percent and textile group 11.7 percent.
These three groups have an impact of pass through of higher global fuel and commodity prices.
Another important contributing factor has been the higher prices in the crop sector of agriculture, which injected additional cash of Rs.444 billion in the rural areas in a single year 2010-11 as against increment of just Rs.415 billion in eight years (2000-08) and during last three years cumulative injection of Rs.906 billion.
This is translating into creation of additional demand for goods and services in the rural areas.
This factor combined with excellent growth in the remittances of 22  percent has caused real growth of 7 percent in private consumption and huge growth in import and production of durable.
During the current fiscal year 2010-11 an upward trend persisted in all indices used to measure various kind of inflation. CPI inflation averaged at 14.1 percent, WPI 23.3 percent and SPI inflation increased at 18.2 percent for July-Apr 2010-11 which is higher than the corresponding period of last year.

Per capita income rises to $1254

Pakistan’s per capita income rose to $1254 in 2010-11 from $1073 during last year, showing tremendous increase of 16.9 percent, according to Economic Survey of Pakistan. The enhancement in per capita income is mainly because of stable exchange rate as well as higher growth in nominal Gross National Product (GNP).

The per capita real income has risen by 0.7 percent in 2010-11 as against 2.9 percent last year

The real private consumption rose by 7 percent as against 4 percent attained last year, it added.
However, gross fixed capital formation lost its strong growth momentum and real fixed investment growth contracted by 0.4 percent as against the contraction of 6.1 percent last year.
The total investment has declined from 22.5 percent of GDP in 2006-07 to 13.4 percent of GDP in 2010-11. The National Savings rate has decreased to 13.8 percent of GDP in 2010-11 as against 15.4 percent of GDP last year.
Domestic savings also declined substantially from 16.3 percent of GdP in 2005-06 to 9.5 percent of GDP in 2010-11.

Social safety areas targeted for reduction of poverty

The Government has prioritized 17 pro-poor sectors through the Medium Term Expenditure Framework (MTEF) from 2008-09 to 2010-11 as contained in the Poverty Reduction Strategy Paper.   The MTEF provides a link between policy priorities and budget realities.  Expenditures incurred in these sectors are in line with  the Fiscal Responsibility and Debt Limitation Act, 2005  which stipulates that expenditures on social and poverty  related spending would not be less than 4.5 percent of GDP  in any given year and that budgetary allocations for health  and education would double as a percentage of GDP over the next  10 years ending in 2012-13, according to  Economic  Survey 2010-11 launched by Minister for Finance Abdul Hafeez Shaikh on Thursday.

During 2009-10, total federal and provincial budgetary expenditures in these sectors amounted to Rs 1110.8 billion representing 7.6 percent of the GDP against the projected target of Rs 660 billion.
An amount of Rs.482.6 has been spent on these areas during July-December 2010 which is 15.8 percent higher than in the comparable period of last year.
The following are the social safety nets as major initiatives to reinforce the Government’s efforts to reduce the adverse effects of poverty on the poor.
The Benazir Income Support Programme (BISP) envisages cash grants of Rs 1,000 every month to the females of each qualifying household having a monthly income of less than Rs 6,000 through banks/post offices with the aim to ameliorate the conditions of the poorest of the poor by directly accessing them and supplementing their sources of income.
In the short to medium term BISP will also serve as a platform for complementary social assistance programs, the main being health insurance for the poor and the vulnerable.
An amount of Rs 15.3 billion was disbursed during 2008-09 while Rs 32 billion was disbursed in 2009-10.
An allocation of Rs 50 billion has been kept during the current financial year for this purpose, the Survey says.
Waseela-e- Haq was another component of BISP which was launched in October 2009. A total number of 750 registered beneficiaries of BISP under the current targeting mechanism are selected through a monthly draw.
Each of them are provided with an interest-free loan worth Rs. 0.3 million, repayable in installments over a period of 15 years.
A total of Rs 2,261 million was disbursed in 2009- 10 against 3,432 millions in last 2008-09 (registering a decline by 34 percent in disbursements and increase in beneficiaries by 82 percent from 1.16 million to 2.11 million).
The main reason behind this sharp decline in overall disbursement was the closure of PBM’s Food Support Program (FSP) in 2009-10 as the FSP was merged in Benazir Income Support Programme.
While the Peoples’ Works Program (PWP) I & II covers implementation of schemes under PWP-I & II entailing roads, electricity, gas, telephones, education, health, water supply & sanitation and bulldozer hours. PWP-I & II incurred expenditures of Rs. 3.3 billion and Rs 28 billion in 2008-09 and Rs. 8.4 billion and Rs. 31.8 billion during 2009-10, respectively.
Owing to committed efforts of the government, microcredit demonstrated an upward trend both in terms of active borrowers, which increased by 11 percent and Gross Loan Portfolio (GLP), which recorded a growth rate of 23 percent during 2009- 10 as compared to the 2008-09.
In terms of savings (both voluntary and compulsory programs), 32 percent growth was recorded compared to the previous fiscal year.
As regards microfinance services, micro insurance grew upward significantly. The number of policy holders and sum insured increased by 83 percent each during 2009-10 as compared to 2008-09.
The State Bank of Pakistan has launched three microfinance initiatives: the Microfinance Credit Guarantee Facility, the Institutional Strengthening Fund, and Improving Access to Finance Services Fund.
The initiatives are part of the Financial Inclusion Program, a joint venture between SBP and the UK Department for International Development.
The objective of the three microfinance initiatives is to provide liquidity to the microfinance providers in response to tighter liquidity conditions and spikes in inflation.
Microfinance Credit Guarantee Facility (MCGF) will provide incentives to banks and development financial institutions (DFIs) to provide funds to microfinance institutions which will then be used to provide credit to the MFI’s borrowers.
Lenders will lend to the MFIs at the State Bank of Pakistan policy discount rate plus 2 percent.

The incentives include a guarantee on repayment of 40 percent of the funds provided by banks and DFIs to MFIs. In addition to the guarantee, banks and DFIs may deduct the funds loaned to MFIs from their Poverty 173 demand and time liabilities when calculating their statutory liquidity and the cash reserve requirements for regulatory purposes.
The objective of the Institutional Strengthening Fund is to increase the capacity of MFIs by providing grants for them to make advances in their human resources, management, governance, internal controls, business development, cost reduction mechanisms, product innovation, and technology implementation.
With good performance and resubmission of their proposal, MFIs may be recipients of grants several years in a row.
The fund will primarily focus on institutions that are already regulated, or are in the process of seeking a license, or have solid plans for restructuring in the near future.
Improving Access to Financial Services (IAFS) also is designed to enhance the capacity of MFIs with the additional goal of promoting financial literacy.
The fund was established with a USD 20 million endowment from the Asian Development Bank (ADB) supported Improving Access to Financial Services Program.
In addition to promoting an increase in capacity in many of the same ways as the ISF, the IAFS places some added focus on increasing capacity in remittances and Islamic financial services.
It will also train government and regulatory authorities on supporting the development of an inclusive financial system enabling financial services providers to launch financial and basic literacy programmes for their clients.
As far as the monitoring of Poverty Reduction strategy is concerned, the government has put in place a stringent results-based M&E system through the institution of a project financed jointly by Ministry of Finance and UNDP called  Strengthening Poverty Reduction Strategy Monitoring Project.
The objective is to strengthening institutional capacities for results based monitoring and evaluation of PRSP at the federal, provincial and district levels.
It may also be noted that the credits/grants received by the government as budget support are always as result of certain pre-negotiated/agreed policy parameters linked to disbursement.
These parameters are then stringently measured/monitored both by the donors and the government for successful implementation, the report contained in Survey concludes.

Govt’s steps showing concrete results to resolve circular debt

The government is taking solid steps to resolve issue of circular debt, bringing down its volume to Rs 103,939 million. According to economic survey report released at press conference by Finance Minister Abdul Hafeez Sheik as result of remedial measures the position of overall circular debt is witnessing a declining trend during July-April 2009-10.

The Survey says as the end-month net position of overall circular debt declined from Rs 190,953 million in July 2010 to Rs.  103,939 million in the month of April 2010.
It adds the circular debt problem plaguing the power sector stems from a disparity between cost and tariffs of Energy.
The inability to increase the consumers’ energy tariff prior to fiscal year 2007-08 even though generation cost kept increasing gave rise to substantial cost-tariff differential.
This situation was further complicated by the increase in the international price of oil during 2008, a major input in the generation of electricity.
As the subsidy element (difference between cost and tariff) grew, large amounts of circular debt were created whereby power producing companies were unable to receive payments from distribution companies, in-turn the power producers could not make payments to the fuel suppliers.
Currently the government is regularly revising the power tariffs in line of international oil prices changes to recover the cost of power.
As evident from the rising furnace oil prices thereby increasing the electricity prices.
Giving some details the Survey said assumption of Rs. 301.0 billion by Power Holding Company will complete soon. Markup payments of loan are being made regularly and Rs. 40.0 billion paid.
Government has picked up entire past liability of FATA of Rs 85.0 billion, similarly Office of Government Adjuster has been activated to improve recoveries from provinces.
PEPCO is being persuaded to pro-actively recover the dues from defaulting private consumers.
Power tariff are being reviewed regularly to recover the cost of power.
It said energy Summit was convened on 19-20 April, 2010 to resolve Power Sector issues.
It adds an amount of Rs. 116.0 billion will be provided to the system under a plan submitted by Finance Division.
Out of which Rs. 66.0 billion will be disbursed by Federal Government and the rest by the Provincial governments.

LSM grows 1.7 percent; Economic Survey

The Large Scale Manufacturing (LSM) managed to register positive growth of 1.71 per cent during the period July-March  2010-11. According to Economic Survey 2010-11, launched here on Thursday, main contributors to this modest growth include leather products 30 per cent, automobile (14.6 per cent), food, beverages and tobacco 9.3 per cent, paper and board 2.9 per cent, chemical 1.4 per cent, fertilizer 0.8 per cent, pharmaceutical 0.5 per cent and textiles 0.2 per cent.

Some groups, however, dragged index down with negative growth include; engineering product 15.4 per cent, steel products 13.1 per cent, electronic 12.9 per cent, non-metalic minerals 9.6 per cent, and petroleum products  4.2 per cent.
The mining and quarrying sector is estimated to grow by 0.4 percent in 2010-11 as against 2.2 percent growth registered during last year. Natural  gas, crude oil and dolomite posted positive growth of 1.9 percent, 1.1 percent and 5.9 percent, respectively during the current financial year.
Most of the minerals, however witnessed negative growth rate during the period under review, the growth of coal declined by 4.0 percent, followed by chromite 39.3 percent, Magnesite 60.9 percent and barites 32.6 percent, respectively.
The performance of the Large Scale Manufacturing (LSM) sector during July-March remains victim of operational constraints on account of energy  and gas shortages and devastating effects of flood 2010.
It is evident from the fact that the momentum in growth was upset  in the initial months of current fiscal year.  The construction, petroleum refining, cotton textile and agro-based industries were strongly affected.
Textile sector suffered heavily from the loss of cotton crop and other industries heavily dependent on gas such as  fertilizer industry adversely affected by shortage in gas supply.

Around 3.05 mln unemployed people in country

According to the labour force survey 2009-10 around 3.05 million people unemployed in the country while total labour force 54.92 million including male 42.44 million and female 12.48. According to the economic survey of 2010-11, announced by the Finance Minister, Hafeez Sheik here he said that about 51.87 million people are employed in the country whereas 55.5 percent male and 13.5 percent female participation in the labour force.

The volume of labour force increased in Punjab and Sindh while decreased in Khyber Pukhtoonkhawa and Balochistan.
According to Employment status by sex data was collected in the labour force survey 2009-10,  male employers 1.6 % and 0.1% female, self employed male 40 % and female 13.6 %, unpaid family helpers 18 % male and 66.3 % female, employees 39.7 % male and 20 % female respectively.

Production of crude oil increased by 1.15 pc

The country’s energy sector has witnessed growth as production of crude oil per day increased to 65,996.50 barrels per day during July-March 2010-2011 from 65,245.69 barrels per day during the same period last year, showing an increase of 1.15 percent.

The average production of natural gas per day stood at 4050.84 million cubic feet during the same period as compared to 4,048.76 million cubic feet over the period last year showing an increase of 0.05 percent.
According to Economic Survey 2010-11 briefed at a press conference by Finance Minister Abdul Hafeez Sheikh here on Thursday, the transport sector consumed 47.82 per cent of petroleum products, followed by power sector 42.84 per cent, industry 6.66 percent, other government 1.93 percent, household 0.49 and agriculture 0.26 percent during July-March 2010-11.
About the natural gas consumption, the report says the power sector consumed 23.81 percent of the gas followed by industrial 20.15 percent, household 16.75 percent, fertilizer 15.04 per cent, commercial 2.45 per cent and cement sector 0.05 per cent during July-March 2010-11.

KPT handled record cargo

The Karachi Port Trust (KPT) has established an annual cargo handling record of over 41.4 million tons during July-March 2010-11, indicating an increase of 6.9 percent over last year. According to Economic Survey 2010-11 announced by the Finance Minister Hafeez Shaikh, there has also been remarkable increase in all types of cargo handling including bulk, break bulk and containers.

The consolidated revenues of Pakistan National Shipping Corporation group for the quarter ended March 31, 2011 were Rs 2,552 million (including Rs. 1,043 million from PNSC), making a total of Rs. 6,772 million (including Rs. 1,805 million from PNSC) for the nine months under review as against Rs. 5,583 million for the nine months ended march 31, 2010.
The earnings per share for the 9 months period ended March 31, 2011 were Rs.5.96 as against Rs. 5.28 last year.
The net profit after tax was Rs. 787 million as against Rs. 697 million last year. PNSC has acquired four Bulk Carriers (one Panamax, one Handymax, one Supramax and one Handysize) at a total price of US$ 124.25 million, managed through commercial loan, which PNSC contracted Transport and Communication 179 with a consortium of commercial banks.
The first vessel was delivered to PNSC on 25th October, 2010 at Kashima-Japan and is named as “Chitral” and second vessel “Malakand” was delivered to PNSC on 27th December 2010 at Dalian-China, Third vessel “Hyderabad” was delivered to PNSC on 21st April 2011 at Guangzhou China, while delivery of fourth vessel was scheduled on 15th May 2011, named as “Sibi”.
The global shipping industry has been going through a lean patch and it is anticipated that the recovery period yet to come however PNSC during the tough time in global shipping remained profitable during the nine month of FY 2010-11.  The Corporation has developed a Five Years Fleet Development Plan (2010-15), which envisaged induction of 13 vessels.
While PNSC is pursuing inductions, this development plan is kept under continuous review and is revised/updated on the basis of trade & freight market trends in global shipping industry.

PIA earns Rs.107 billion

Pakistan International Airline (PIA) has earned the revenue of around Rs.107 billion as compared to last year of Rs. 94.6 billion.  According to Economic Survey 2010-11 announced by the Finance Minister Hafeez Sheikh here on Thursday he said passenger business with Rs. 95.7 billion of revenue (2009: Rs. 84.5 billion) contributed around 89 percent of total revenue.

Available Seat Kilometers (ASKs) increased to 21,219 million from 19,859 million in 2009 demonstrating increased capacity with existing fleet while Passenger Yield has also increased by 0.3 percent.
In order to achieve further operational and financial efficiency, management is in process of taking steps involving organizational, financial and route restructuring, penetration in new markets and enhancing moral of employees.
Air travel increased by seven percent in the year 2010. Frequencies to various destinations such as Jeddah and New York have increased whereas new destinations of Barcelona and Chicago have been introduced during the year 2010.
The cargo business generated Rs. 6.4 billion (2009: Rs. 4.98 billion) revenue, constituting six percent of the Corporation’s total revenue. The cargo capacity has also increased by 8.8 percent.
However, despite positive year-on-year growth in revenue of 13 percent, the overall financial position did not improve materially as compared to last year due to a host of reasons – most important amongst them being the rising oil prices in global markets.

Agriculture sector grew by 1.2 per cent

The agriculture sector in the country registered 1.2 percent growth during the financial year 2010-11 as against the growth target of 3.8 percent and previous year’s performance of 0.6 percent.  According to the Economic Survey 2010-11 launched here Thursday agri-sector has lost significant growth momentum as its growth slowed down to 2.7 percent in the decade of 2000s as against 4.4 percent in 1990s and 5.4 percent in the 1980s.

Major crops remained the victim of natural calamities during the last few years and three out of last four years witnessed negative growth in the major crop sector.
The unprecedented floods in July 2010 destroyed two major crops including rice and cotton. As reported by SUPARCO an area of 2.364 million hectares under Kharif Crops 2010 was damaged.
Major crops accounting for 31.1 per cent of agriculture value added, registered a negative growth of 4.0 per cent for second year in a row mainly because of decrease in production of rice and cotton 99.9 and 11.3 percent respectively.
Minor crops accounting for 10.9 percent of overall  agriculture value addition grew by 4.8 percent as against the negative growth of last two years.
The livestock sector recorded growth of 3.7 percent as against 4.3 percent growth of last year. Fishery sector grew by 1.9 percent as against last year’s growth of 1.4 percent.
Forestry has experienced negative growth of 0.4 percent as against last year’s positive growth of 2.2 percent.