The Pakistani economy shrank by 0.95% in the fiscal year 2022-23, according to the Economic Survey released by the Ministry of Finance on Friday. This is the first time in the last nine years that Pakistan’s economy has contracted.
The contraction was mainly due to a decline in agriculture, manufacturing, and services sectors. The agriculture sector contracted by 2.6%, the manufacturing sector by 0.8%, and the services sector by 0.5%.
The government’s fiscal deficit also widened to 8.6% of GDP in the fiscal year 2022-23, from 6.1% in the previous year. This was mainly due to an increase in expenditures, which rose to 15.2% of GDP from 13.7% in the previous year.
The current account deficit also widened to $13.8 billion in the fiscal year 2022-23, from $10.1 billion in the previous year. This was mainly due to a decline in exports, which fell to $25.3 billion from $27.3 billion in the previous year.
The government has taken a number of measures to revive the economy, including increasing taxes, reducing expenditures, and floating a $1 billion Eurobond. However, it remains to be seen whether these measures will be enough to turn the economy around.
Impact of Economic Contraction
The economic contraction is likely to have a number of negative impacts on Pakistan. These include:
Increased unemployment: The contraction in the economy is likely to lead to an increase in unemployment. The unemployment rate in Pakistan is already high, at around 6%.
Reduced investment: The contraction in the economy is likely to lead to a reduced investment. The economic growth would be further slowed down by this.
Increased poverty: The contraction in the economy is likely to lead to an increase in poverty. The poverty rate in Pakistan is already high, at around 24%.
Way Forward
The government needs to take a number of steps to revive the economy. These include:
Improved governance: The government needs to improve governance and reduce corruption. This will create a more conducive environment for investment and economic growth.
Increased productivity: The government needs to increase productivity in the agriculture, manufacturing, and services sectors. This will support economic expansion.
Reduced trade deficit: The government needs to reduce the trade deficit. This might be achieved by increasing exports while reducing imports.
Improved foreign exchange reserves: The government needs to improve foreign exchange reserves. This can be done by attracting foreign investment and increasing exports.
The government needs to take urgent action to revive the economy. If the economy continues to contract, it will have a devastating impact on the country.
