Pakistan’s investment ratio has fallen to a 50-year low or 13.1 percent of GDP in the current fiscal year. Both investment and savings as percentages of GDP fell short of targets.
The investment-to-GDP ratio target was 15.1 percent, but it fell to 13.1 percent, the lowest since the fiscal year 1973-74, reported Express Tribune.
The International Monetary Fund (IMF) has asked the federal government about its investment expectations for the current and next fiscal years. There has been no significant increase in foreign or domestic investment. The 13.1 percent investment-to-GDP ratio remains below that of regional peers and last year’s 14.1 percent.
Pakistan anticipated a $5 billion investment from Saudi Arabia, but nothing concrete has materialized so far. The fixed investment-to-GDP ratio also decreased to 11.4 percent while private sector investment fell to 8.7 percent, the lowest in almost 25 years. Public sector investment dropped to 2.8 percent, the lowest in four years, due to fiscal constraints.
Frequent changes in taxation policies and biases toward the manufacturing sector have further reduced investment. Economic growth is largely driven by consumption, accounting for about 88 percent of the increase in GDP. The government’s failure to meet investment targets limits its ability to address infrastructure and social sector issues, increasing reliance on loans for development projects.
The savings-to-GDP ratio slightly decreased to 13 percent, also missing the official target. The national economy’s estimated size for the fiscal year is $373.6 billion, however, it remains lower than the $375.6 billion two years ago due to subsequent PKR devaluations. In rupee terms, the economy reached Rs. 106 trillion in 2023-24.
The per capita income increased a bit to $1,674 this year, but this is based on the outdated population figure of 236 million reportedly used by the Pakistan Bureau of Statistics. Using the correct population figure of 248 million would reduce per capita income by about $90.
