GDP growth rate of over 5.5pc to hurt economy: Shaukat Tarin

[hydrabadi_arab]

KARACHI: Folks may not realise it, but the economy is growing fast. It’s growing so fast that the country’s finance tsar is afraid he may have to cap it at 5.5 per cent this year. A higher economic growth rate will hurt the country, according to Shaukat Tarin, adviser to the prime minister on finance and revenue.

Speaking at the annual dinner of CFA Society Pakistan on Friday, Mr Tarin said he and the International Monetary Fund (IMF) want the GDP growth rate to stay in the range of 5pc and 5.5pc for 2021-22. “But I’d not like to see 6pc (growth) this year. That’s going to be damaging for our economy,” he told the annual meeting of finance professionals.

In response to a question, Mr Tarin said the IMF programme is not going to impede the targeted 5pc growth rate. “Our growth is not slowing down,” he said, adding that he’s held a “very healthy kind of discussion” with the Fund about which people will “find out pretty soon”.

He took pains to emphasise that the IMF programme won’t kill growth — a claim that’s in contrast to the typical IMF prescription involving reduced government spending and higher interest rates that slow down GDP growth.

Finance adviser says IMF programme not to impede targeted growth rate

“Let me tell you that we’re not very far away from what the IMF wants us to do,” he said while noting that IMF-prescribed policy actions include ending tax exemptions, higher revenue generation and reforming income and other taxes. “We told them we don’t believe in pyramiding. We believe in broadening... They also want us to grow but they don’t want us to grow in an unsustainable manner,” he said.

As evidence of the higher-than-targeted growth rate of 5pc for 2021-22, the finance adviser said motorbike sales are at a record-high level, large-scale manufacturing growth is in double digits and tax collection is Rs230 billion above its target. “At this speed, we’ll cross Rs6 trillion. It’s not because of imports. Income tax is also up 32pc. It’s all-around growth. The use of electricity is up 13pc.”

As for the rising current account deficit, Mr Tarin said its numbers are “balanced as of now”. He said the government will clamp down on imports if the current account deficit keeps growing because it doesn’t want unsustainable growth.

“The export coverage of imports has to go up. In three to four years, the export cover must go up to 70-80pc. We’re giving incentives to IT sector so that it can grow 100pc.”

He criticised the financial sector for not being responsive to the needs of the economy. About 85pc credit is disbursed in nine cities while three-quarters of it goes to the corporate sector, he said. “It’s dysfunctional. We’ve got to fix it.”

He said it takes 10 to 20 years of consistent growth for trickle-down economics to work. “Trickle-down doesn’t follow four-year growth (spurts). That’s why we’re adopting a bottom-up approach,” he said, adding that the government will provide poor 4m households with interest-free loans for agriculture, business and housing purposes, besides ensuring healthcare and technical education for them at a cost of Rs1.4tr.

“We’ll have large banks wholesale finance to NBFIs (non-bank financial institutions) and microfinance NGOs... Now is the time to roll out loans,” he said.

Published in Dawn, November 6th, 2021

GDP growth rate of over 5.5pc to hurt economy: Shaukat Tarin

Finance adviser says IMF programme not to impede targeted growth rate.

www.dawn.com

This is why any PM should have minimum understanding of how economy works. Tareen made fool out of Imran Khan to get a job and now he is back to ground reality once CAD run out of control.

 

[Blacklight]

@Jungibaaz Bhai what is the finance minister saying?

First this:
Rupee fall benefits expats’ families: Baqir

Now this:
GDP growth rate of over 5.5pc to hurt economy: Shaukat Tarin

?

 

[Maula Jatt]

@Jungibaaz Bhai what is the finance minister saying?

CAD issues I believe

 

[Norwegian]

It’s growing so fast that the country’s finance tsar is afraid he may have to cap it at 5.5 per cent this year. A higher economic growth rate will hurt the country, according to Shaukat Tarin, adviser to the prime minister on finance and revenue.

Funny how high economic growth hurts Pakistani economy. One of a kind in the world because it's import based
@ziaulislam @Patriot forever @farok84

@Jungibaaz Bhai what is the finance minister saying?

First this:
Rupee fall benefits expats’ families: Baqir

Now this:
GDP growth rate of over 5.5pc to hurt economy: Shaukat Tarin

?

Because Pakistan's economy is import based. Calculations show any gdp growth above 4 percent lead to CAD crisis

 

[Pandora]

@Jungibaaz Bhai what is the finance minister saying?

First this:
Rupee fall benefits expats’ families: Baqir

Now this:
GDP growth rate of over 5.5pc to hurt economy: Shaukat Tarin

?

He is talking about Reigning in on the imports which boosts GDP growth but also increases our CAD. So by forcing growth to stay in range of 5-5.5% they can also keep down imports and in turn also keep down CAD.

 

[Pak Nationalist]

@Jungibaaz Bhai what is the finance minister saying?

First this:
Rupee fall benefits expats’ families: Baqir

Now this:
GDP growth rate of over 5.5pc to hurt economy: Shaukat Tarin

?

What he is saying holds merit. @Norwegian

Overheating the economy is never good. Building up aggregate demand could pull up demand-side pressures resulting in inflation.

He is talking about Reigning in on the imports which boosts GDP growth but also increases our CAD. So by forcing growth to stay in range of 5-5.5% they can also keep down imports and in turn also keep down CAD.

Precisely, higher growth means higher disposable incomes too (wage rise). Demand-pull arising out of higher disposable incomes would fuel imports in an economy likes ours that produces little domestically. Import substitution is the answer but it is a time-consuming process, OR exports need to cover most of the import bill, only then high growth could be sustained. Pakistan cannot "afford" high growth until the exports do not begin covering a major chunk of the import bill.

 

[Pandora]

What he is saying holds merit. @Norwegian

Overheating the economy is never good. Building up aggregate demand could pull up demand-side pressures resulting in inflation.

Precisely, higher growth means higher disposable incomes too (wage rise). Demand-pull arising out of higher disposable incomes would fuel imports. Import substitution is the answer but it is a time-consuming process, OR exports need to cover most of the import bill, only then the growth could be sustained. Pakistan cannot "afford" high growth until the exports do not begin covering a major chunk of the import bill.

Higher growth rate is OK if it is led by high exports but that is not the case with Pakistan. We are an imports led economy all thanks to consistent efforts of Ishaq dollar. This exactly what he did by increasing imports which increased our CAD to record level and increased external financing need from 5-6 Billion to almost 15 billion.

 

[Norwegian]

He is talking about Reigning in on the imports which boosts GDP growth but also increases our CAD. So by forcing growth to stay in range of 5-5.5% they can also keep down imports and in turn also keep down CAD.

That won't be enough. Only 4 percent Gdp growth is possible without getting into a new CAD crisis

 

[Jungibaaz]

@Jungibaaz Bhai what is the finance minister saying?

First this:
Rupee fall benefits expats’ families: Baqir

Bro, this guy is the governor of the SBP. Central bankers are powerful and influential, and they are meant to be apolitical.
Every single week without fail, thousands of financial analysts, traders, portfolio managers, researches and financial reports tune in to hear statements from the Fed's governors or ECB governing council members. Every statement of theirs is recorded and reported because it is seen as being an important indicator of the central bank's policy. When Fed chair Jerome Powell or ECB President Christine Lagarde speak, every word they say, literally, is measured and calculated. Last week, a researcher at my organisation as a part of his job reported that Fed Chair Jerome Powell who used to say that "inflation is transitory" in prior months, is now saying that "inflation is expected to be transitory". That subtle difference was picked upon, recorded, and then reported as news worthy.

This is just to show you how important every word from SBP governors should be.

What this man has said about PKR devaluation benefitting families is absolute tripe, and incredibly stupid. I'm amazed that he went with this. Even if he were making an excuse for PKR devaluation, there are plenty of less laughable comments to make. He could have said, "PKR devaluation is nothing new, PKR devaluation is a trend that has persisted over the decades", he could have said that it "boosts export competitiveness", etc. What he decided to say about expats benefitting is a garbage.

We live abroad, we send money home, and yes we've noticed how much more we get in PKR terms when we send money. But how many expats are there and how much remittances do they send home? When PKR falls, the dollar terms purchasing power of every single Pakistani falls in equivalence, it's that simple. And IMO, some small amount of managed devaluation is okay in the long run. But if say PKR falls 10% in less than a year, who does that impact more? Do 10 million Pakistani expats, who send home some USD 30bn a year benefit more than 220 million Pakistanis whose GDP is a total of roughly USD 300bn? Furthermore, even if I accept the technical point that expats benefit, how much are they benefitting in real terms? Inflation in Pakistan is super high, so are they really able to buy much more with their money?

Now this:
GDP growth rate of over 5.5pc to hurt economy: Shaukat Tarin
?

This statement is okay IMO, it may sound mad but what he's actually saying needs to be given context. Basically, if the government decides to borrow lots more money or lower taxes (higher fiscal deficit), or if we see an expansion of CAD leading to a boom in economic terms, it may not be sustainable beyond a certain time.

Basically, given the current structure of Pakistan's economy, very fast growth rates (>6% as a rough example), may not be sustained without a cost. We'd have to burn reserves and expand CAD, or we'd need no fiscal restraint, and on top of that we'd need favourable conditions in the global economy. In order to sustain these kind of growth rates we need better savings and investment ratios, higher FDI, greater volume of exports as a % of GDP. In the PMLN era, we briefly managed 5%+ GDP growth, but it was predicated upon short term policies which eventually crashed.

I think I explained it elsewhere that all else equal, if we were to suddenly accelerate to 6% growth, it would be like someone driving his old beaten Ford Escort that is on its last legs and driving it at high-speed as if it were a Ferrari. Eventually the car will probably give up, or sustain some damage if pushed enough. I think the Finance Minister did not properly express his thoughts here, but his main issue is with dollar outflows and CAD at the current rate of growth.

 

[Norwegian]

And IMO, some small amount of managed devaluation is okay in the long run. But if say PKR falls 10% in less than a year, who does that impact more?

Macro economy is not run on your opinions. It's based on facts on the ground. Pakistan has no extra dollars to spare like China so that it could artificially control price of USD. That's why it should be left to the free market. SBP should only intervene if USD gets too cheap naturally according to real effective exchange rate and should never artifically support a fix dollar price. Keep the dollar flying. It's the only way to develop Pakistani economy from import based to export based. Good luck

Keep the dollar flying

The fear of flexibility in the exchange rate has been shared by most, if not all, our finance ministers.

www.dawn.com

 

[ziaulislam]

Tarin open flood gates for import first few months and realized its unsustainable.

Now they have adjusted it..

Hence wht asian countries like taiwan and vietname subsidze exports so they can afford imports


What we do is susbsidize imports and kill exports

Its called reverse educated patwari logic
But guess what i like it

I am loving it..a whole fish 4kg cooked and deliveres hime just cost me 3000rs..every ate ir in my family gathering and i was thinking damn..this is less then tip i pay in USA

So my vote is for nawaz sharif..as he govt will benefit me the most like him, zardari & ayyan malik my dollars are out of pakistan

Geo maryum nawaz
Zardari imran bhai bhai..no i mean zardari mery bap key tarah hein

Funny how high economic growth hurts Pakistani economy. One of a kind in the world because it's import based
@ziaulislam @Patriot forever @farok84

Because Pakistan's economy is import based. Calculations show any gdp growth above 4 percent lead to CAD crisis

Bro, this guy is the governor of the SBP. Central bankers are powerful and influential, and they are meant to be apolitical.
Every single week without fail, thousands of financial analysts, traders, portfolio managers, researches and financial reports tune in to hear statements from the Fed's governors or ECB governing council members. Every statement of theirs is recorded and reported because it is seen as being an important indicator of the central bank's policy. When Fed chair Jerome Powell or ECB President Christine Lagarde speak, every word they say, literally, is measured and calculated. Last week, a researcher at my organisation as a part of his job reported that Fed Chair Jerome Powell who used to say that "inflation is transitory" in prior months, is now saying that "inflation is expected to be transitory". That subtle difference was picked upon, recorded, and then reported as news worthy.

This is just to show you how important every word from SBP governors should be.

What this man has said about PKR devaluation benefitting families is absolute tripe, and incredibly stupid. I'm amazed that he went with this. Even if he were making an excuse for PKR devaluation, there are plenty of less laughable comments to make. He could have said, "PKR devaluation is nothing new, PKR devaluation is a trend that has persisted over the decades", he could have said that it "boosts export competitiveness", etc. What he decided to say about expats benefitting is a garbage.

We live abroad, we send money home, and yes we've noticed how much more we get in PKR terms when we send money. But how many expats are there and how much remittances do they send home? When PKR falls, the dollar terms purchasing power of every single Pakistani falls in equivalence, it's that simple. And IMO, some small amount of managed devaluation is okay in the long run. But if say PKR falls 10% in less than a year, who does that impact more? Do 10 million Pakistani expats, who send home some USD 30bn a year benefit more than 220 million Pakistanis whose GDP is a total of roughly USD 300bn? Furthermore, even if I accept the technical point that expats benefit, how much are they benefitting in real terms? Inflation in Pakistan is super high, so are they really able to buy much more with their money?



This statement is okay IMO, it may sound mad but what he's actually saying needs to be given context. Basically, if the government decides to borrow lots more money or lower taxes (higher fiscal deficit), or if we see an expansion of CAD leading to a boom in economic terms, it may not be sustainable beyond a certain time.

Basically, given the current structure of Pakistan's economy, very fast growth rates (>6% as a rough example), may not be sustained without a cost. We'd have to burn reserves and expand CAD, or we'd need no fiscal restraint, and on top of that we'd need favourable conditions in the global economy. In order to sustain these kind of growth rates we need better savings and investment ratios, higher FDI, greater volume of exports as a % of GDP. In the PMLN era, we briefly managed 5%+ GDP growth, but it was predicated upon short term policies which eventually crashed.

I think I explained it elsewhere that all else equal, if we were to suddenly accelerate to 6% growth, it would be like someone driving his old beaten Ford Escort that is on its last legs and driving it at high-speed as if it were a Ferrari. Eventually the car will probably give up, or sustain some damage if pushed enough. I think the Finance Minister did not properly express his thoughts here, but his main issue is with dollar outflows and CAD at the current rate of growth.

We need to print dollars so we can control rupee
As we dont want to earn dollars (we shun exports and we shun foreign pakistanis by calling them racists)

See how badly nawaz sharif is treated who TT so many dollars from outside

 

[Pakistan Space Agency]

...We are an imports led economy all thanks to consistent efforts of Ishaq dollar. This exactly what he did by increasing imports which increased our CAD to record level and increased external financing need from 5-6 Billion to almost 15 billion.

Nonsense. No one is stopping the incompetent PTI Government from imposing ban on imports. If imports are so bad, stop them, not keep increasing them.

FY 2020-2021
Exports: $25.3 billion
Imports: $56.3 billion
Diffrence: $31.1 billion
Total Trade: $81.6 billion

FY 2017-2018
Exports: $23.2 billion
Imports: $52.9 billion
Difference: $37.7 billion
Total Trade: $76.1 billion

After three-years in power, the incompetent PTI Government has managed to increase exports by only $2.1 billion and reduced trade deficit by a mere $6.6 billion at the cost of massive devaluation of the currency, imposing poverty on the nation, stock market tumbling, runaway inflation, external debt increased by $26.9 billion and demoted to frontier economy from developing economy (to list a fraction of disasters imposed on the country).

 

[Norwegian]

Tarin open flood gates for import first few months and realized its unsustainable.

Why was he made finance minister when he didn't know Pakistani economy could not grow more than 4 percent without falling into another CAD crisis?

 

[ziaulislam]

Nonsense. No one is stopping the incompetent PTI Government from imposing ban on imports. If imports are so bad, stop them, not keep increasing them.

FY 2020-2021
Exports: $25.3 billion
Imports: $56.3 billion
Diffrence: $31.1 billion
Total Trade: $81.6 billion

FY 2017-2018
Exports: $23.2 billion
Imports: $52.9 billion
Difference: $37.7 billion
Total Trade: $76.1 billion

After three-years in power, the incompetent PTI Government has managed to increase exports by only $2.1 billion and reduced trade deficit by a mere $6.6 billion at the cost of massive devaluation of the currency, imposing poverty on the nation, stock market tumbling, runaway inflation, external debt increased by $26.9 billion and demoted to frontier economy from developing country (to list a fraction of disasters imposed on the country).

WTF
If imports are banned inflation will go so high..
I mean people are already crying on inflation due to partial ban....a complete ban will cause panic..but i guess not a bad idea..a complete ban will make people like us do more propoganda on inflation and we can bring our glorious leader back sooner then 2023

 

[Norwegian]

Nonsense. No one is stopping the incompetent PTI Government from imposing ban on imports. If imports are so bad, stop them, not keep increasing them.

FY 2020-2021
Exports: $25.3 billion
Imports: $56.3 billion
Diffrence: $31.1 billion
Total Trade: $81.6 billion

FY 2017-2018
Exports: $23.2 billion
Imports: $52.9 billion
Difference: $37.7 billion
Total Trade: $76.1 billion

After three-years in power, the incompetent PTI Government has managed to increase exports by only $2.1 billion and reduced trade deficit by a mere $6.6 billion at the cost of massive devaluation of the currency, imposing poverty on the nation, stock market tumbling, runaway inflation, external debt increased by $26.9 billion and demoted to frontier economy from developing country (to list a fraction of disasters imposed on the country).

You Patwaris are the last one to be talking about economy. Shut up yourself