The expert view on the Economic Survey 2023-24

Finance Minister Muhammad Aurangzeb presented the Economic Survey 2023-24 on Tuesday, highlighting a growth in the national gross domestic product (GDP) of 2.38%, beating the expectation of 2%.

Agricultural sector growth, the highest in 19 years, was the main driver of economic growth in the 24th year. This sector grew by 6.25% in 2014, on the back of 16.82% growth in staple crops such as wheat, rice and cotton, the paper said.

With a high revenue collection of Rs 9.8 trillion (41% higher y-o-y), the fiscal deficit was contained at 3.7% of GDP in 9M1FY24 against a deficit of 3.6% in the corresponding period last year.

To achieve fiscal consolidation in the 25th budget, the government will try to maintain prudent expenditure policies and focus on increasing revenue through policy reforms.

Moreover, in the medium term, the inflation rate for 25 and 26 is expected to normalize due to improvements in the agricultural sector and expected favorable global and domestic conditions.

We reached out to experts for their thoughts on the research:

Introduction of real estate into the tax net

Alpha Beta Core CEO and financial analyst Khurram Shehzad, speaking to Geo Newssaid the finance minister’s lobbyist has hinted at what will happen in tomorrow’s budget and how much improvement should be expected in the 2025 financial year.

Shehzad said while referring to the government’s plans to revamp the Federal Bureau of Revenue (FBR) he said, “After digitization, two outcomes are expected: one is to simplify the tax system and secondly, no harassment to our tax payers to collect with a centralized approach”.

“The measure has come as those who pay taxes are harassed and those who do not pay are not even informed in the system. The minister also stressed that everyone should pay tax, which shows that the sectors that have emphasized such as real estate, agriculture, wholesale, retail and trade shows that they will come into the tax net.

The CEO also said that among the two key sectors highlighted by FinMin are technology and agriculture.

“There will be efforts to increase the exports of these sectors as we see that agriculture and technology have led the exports. It shows that there will not be many taxes on these sectors. Or maybe they don’t tax exports at all. Giving an example of China as what our neighbor needs”.

“Beijing should be supplied with agricultural producers so we could export our technology,” the analyst said.

“He [finance minister] pointed out about the creation of debt-free reserves, which means that the inflow of remittances was bought from the market by the State Bank to enable our reserves to be built up, the rating agencies to review our position and our outlook to improve so that the our chances with the IMF are getting better with good conditions.”

Shehzad also added that all these indications point to a balanced budget.

The public sector is capable of doing wonders, the analyst said, while acknowledging the opinion shared by Minister Aurangzeb during the press conference, adding that because the government has only one responsibility, which is to provide a friendly environment and a level playing field. all actors regardless of who the investor is.

Limited CAD, remittance record

Economist and analyst Sana Tawfik at Arif Habib Limited said Geo.tv that real GDP has seen positive growth, mainly due to the agricultural sector. If we compare the same with last year we were in negative territory.

“Well, this is a positive development on the economic development front.”

We also noticed that in the current account, the deficit has been reduced by almost 95% in 10 months, he said, the reason is the reduction of the trade deficit by almost 22%.

The economist also added: “We were also supported by remittances which are currently $3.2 billion in May, a record monthly high. With this basic total for the 10-month year, the main contributors were Saudi Arabia and the UAE. With the current balance deficit decreasing, the national currency appreciates by 2.8%.

He said total reserves also increased, among which the State Bank’s reserves were $8.9 billion as of June 5.

“If we talk about the outlook, the government expects the export outlook to be promising due to improved global trade conditions and strengthening of supply chains.”

He pointed out that there are expectations that imports will also be boosted due to growing domestic demand, adding that it is also expected that Pakistan will hopefully succeed in securing a long-term loan from the IMF.

The analyst opined: “On the growth front, the government is trying to stabilize the economy by prioritizing exports and investment, to reach the target of 5.25% by 2027.

Revenue collection was 9.8 trillion and the fiscal deficit was contained at 3.75% in nine months, however, increased surcharge payments remain a concern and the rate cut shows promise in this regard.”

Highlighting the recent excessive rise in prices, Tawfik said, “Inflation has come down and is on a downward trajectory due to the significant fall in prices of various food items. We also saw that the interest rate has also been cut by 150 basis points.”

Providing an assessment on the budget, he noted that the goal will be to achieve fiscal consolidation and the budget of 25 and the government will try to adopt a prudent spending policy and focus on increasing revenue through policy reforms.

Slowing inflation, easy monetary policy

Additionally, Senior Economist Khaqan Hassan Najeeb also highlighted the important points and indications from the Economic Survey 2023-24.

In conversation with Geo.tv, said the survey showed the country has been through a “hypo-inflation (slow economic growth coupled with sticky inflation) year of the 24th year”. An increase of 2.3% after negative growth of 0.2% in the 23rd year is the provisional figure for the 24th year.

The economist, talking about the growth rate of different sectors, pointed out that this was supported by a higher growth supported by increased growth of 6% in agriculture, but only 1% growth each for industry and service sector.

In addition, another important part was judged high inflation, which is definitely falling, according to the economist.

However, it is following a slow pace, according to the analyst, which saw inflation of 29% in 2023 and now around 24.5% on average in 2024.

He also added that against this backdrop, with a high fiscal deficit and a monetary policy that remains tight, “we are now in the 24th year and the current account balance has been found to be definitely falling as the economy has slowed.”

The analyst also shed light on a stable exchange rate due to several administrative measures, including curbing the smuggling of Afghan transit trade and actions on illicit trade.

In conclusion, he revealed some expectations for economic growth next year, saying the outlook looks a bit healthier due to some industrial growth, with slowing inflation and easier monetary policy of 4.4% and 3.6% overall growth.