Finance Minister Dr Abdul Hafeez Sheikh who released the Economic Survey along with other members of the economic team described the country''s economic health as not in good position because growing energy deficit has been hurting growth and exports. The minister admitted that the economic team has failed to perform satisfactory especially in the area of energy sector.
The growth in agriculture sector was recorded at 3.13 per cent against 3.4 per cent target and services sector registered a growth of 4 percent against the target of 5 per cent. The government borrowing from the banking system for budgetary support and commodity operation stood at Rs 1003.3 billion during July-11 May, 2012 as compared to Rs 506 billion for the same period of last year with around six weeks of the current fiscal year to go. National Savings stood at 10.7 per cent of the GDP against the target of 13.2 per cent and foreign direct investment sank to $666.8 million as compared to $1.292 billion during last year.
Hafeez Sheikh said both external and internal factors as well as governance problems in the power sector have been responsible for prevailing economic situation but claimed that the economic team has been successful in setting the growth trend right the highest in the past three years. The minister said that this year is a beginning of coming years and growth trend set would help realise 5 to 6 per cent growth rate essential to meet the growing requirement of employment.
The minister said that the provinces are also required to bear the differential between generation and recovery cost of electricity because there are five governments in the country. The minister said that governance issues, leakages and theft as well as non payment by the provincial governments'' public sector organisations as well as influential private sector owe Rs 300 billion of generation companies.
Inflation was another challenge for the government as well as for the common man, but decline in average CPI inflation to 10.8 per cent was positive sign. The minister said that all the three inflation indicators have shown decrease in the current fiscal year. The increase in taxes and cut in expenditure, he said is critical for enhancing expenditure on social sector and reducing inflation. The minister said that there are signs of decline in energy prices in the global market that would further lead to decrease in inflation. Hafeez Sheikh termed 25 per cent growth in tax collection as historic and stated that the government efforts to bring rich people into the tax net would reduce dependence on external resources. The minister underlined the need for two taxes, income tax and sale tax and expressed the hope that tax authorities would achieve revenue collection target for the current fiscal year.
The Finance Minister said that major chunk of tax collection about more than 65% has been going to the provinces after the 7th National Finance Commission (NFC) Award and federal government was trying to manage within a little fiscal space the responsibilities of debt servicing, and defence expenditure as well as massive subsidies for power sector.
The federal government has also spent Rs 300 billion on Public Sector Development Programme (PSDP), provided cash grant of Rs 50 billion through Benazir Income Support Programme (BISP) and Rs 50 billion subsidy for fertiliser from fairly small fiscal space. Replying to a question, he said that war on terror chapter was not included in the Economic Survey because it has been damaging country''s perception about investment.