The government has revised the economic growth rate after rebasing the economy. As a result, the size and growth of Pakistan’s economy has increased significantly during the fiscal year, making it the second highest recorded growth rate in last 14 years.
GDP rebasing is the process of replacing an old base year with a more recent one, usually every five years, to keep pace of the price changes and economic structure to capture the current economic conditions. This time around the national accounts and price statistics were adjusted after ten years, thus the initiative was much-need to understand the state of the economy.
After the revised figures, the growth rate improved to 5.4 percent while the size of the economy has increased to $346.76 billion. The per capita income has been recalculated at Rs266,614 from earlier projections of Rs246,414. In dollar terms, the per capita income jumped to $1,666 from $1,543 in the fiscal year. The revision has added Rs3.1 trillion value to the economy, making Pakistan the 35th largest in the world.
The government is reaping the rewards of the improved performance and the prime minister has congratulated the economic team. However, the decision has reduced public debt burden but tax-to-GDP has dropped to a mere 8.5%. Taxation is a key source of revenue and important to economic wellbeing but despite the government’s assertions, it has failed to widen the tax base.
The PTI government has been in the crosshairs over the current economic situation which has been exacerbated by the pandemic. Any assertion that the government fudged national accounts to paint a rosy picture of the economy will certainly draw political ire.
Rebasing simply doesn’t improve conditions or makes the country richer but rather provides policymakers updated data to make informed economic and investment decisions. This government needs to improve public confidence and promote a taxpaying culture to improve the economic conditions.
