Sailing on high-tide

Sailing on high-tide


Rebasing of GDP adds Rs3.1 trillion in the economy, props up growth to 5.57%

Sailing on high-tide

ISLAMABAD: The government’s decision to rebase the economy from the fiscal year 2005-06 to 2015-16 has added Rs3.1 trillion in its value and jacked up last year’s GDP growth to 5.57 from 5.37 per cent.

The change in the base-year was welcomed by stakeholders and experts, however, they said that it also exposed the structural problems and imbalances in the economy.

Pakistan readjusted the methodology and coverage scope after a gap of nine years. The old base year methodology was implemented in 2013. The rebasing exercise has enhanced the coverage of economic activities and improved the estimation methodologies and sources of the data.

Former finance adviser and senior economist Dr Ashfaque Hassan Khan said that this rebasing exercise was overdue and should have been done a year ago.

“Developed countries usually rebase their economies after every five to six years, but in developing countries such as Pakistan, which has capacity issues and bigger informal economy, this should have been done at least after every 10 years,” he said.


The National Accounts Committee (NAC) has reviewed and approved the rebased series from 2015-16 to 2020-21 on the prices of 2015-16.

The Pakistan Bureau of Statistics during 2014-15 to 2016-17 has conducted around 45 censuses, surveys and studies to properly capture the economic activities in the country. The results of these censuses, surveys and studies have already been reviewed by local and World Bank experts.

Under this exercise, efforts have been made to include new economic activities, through dedicated surveys and studies to capture their share. The input/output ratios of various industries have been updated, which resulted in a better reflection of their contribution to the economy.

After rebasing, the change in the economic indicators shows a mixed trend. The GDP size increased to $347 billion in FY21 against $298 billion earlier, while the per capita income rose to $1,666 against $1,543.

The fiscal deficit improved one per cent to 6.1 per cent, but the tax-to-GDP ratio worsened to 9.5 per cent against 11 per cent.

Due to the improved coverage and better estimation of input/output structure of industries, the gross value addition increased Rs3.1 trillion in the base-year 2015-16 from Rs27.4 to Rs30.5 trillion, showing an increase of 11.3 per cent in the Gross Value Added (GVA) for the base year 2015-16.


This shows that previously the economy under the base-year of 2005-06 was underestimated 11.3 per cent. Agriculture showed an increase of 8.3 per cent to Rs7.3 trillion from Rs6.7 trillion, industry sector grew 11.9 per cent to Rs5.9 trillion from Rs5.3 trillion and services enhanced 12.5 per cent to Rs17.3 trillion from Rs15.3 trillion. The latest decision also resulted in a reduction in the public debt, which reduced from 100 per cent to 86 per cent and the tax-to-GDP ratio further declined to 9.5 per cent from 11 per cent.

Dr Ashfaque said that in his own view the size of Pakistan’s economy is over $500 billion but because of the capacity issue it is not measured properly. “People say that the size of the Bangladesh economy is bigger than us, which is totally wrong because we are unable to fully cover our economic and industrial activities.”

The government should enhance its coverage of economic activities and document them to increase the revenue base, he added.

Head of economic think tank, Prime Institute, Ali Salman also sees rebasing of the economy as a right decision. The rebasing was overdue and the argument that the economic activities of the country are not completely documented now holds a lot of weight, he said, adding that the size of the informal economy is over 50 per cent and now with rebasing some part of it will be covered.

“Though the unemployment ratio is 5 to 6 per cent of GDP, at the same time, 35 to 40 per cent of the population is self-employed and their economic input was hardly mentioned in the GDP.”

Because of the lack of coverage, the size of the economy could only be judged on consumption and expenditure patterns.


“When you see inflationary pressure on food to luxury goods, then one can easily assume or perceive that the economy is growing,” he said.

However, Salman said that the government should brief the economists and other stakeholders about the criteria for the methodology and also conduct technical workshops so that people can understand it in a better way.

Despite a substantial jump in the size of the economy, the structural problems remain a threat to the economic sustainability of the country, he said.

“Economic growth can only be sustained if we enhance our productivity and efficiency and not by increasing production, which we are doing right now.”

The inefficiency in the government and private sector organisations is hindering an increase in the income of average Pakistanis, he added.

Due to rebasing, there is a national dip in the spending on health and education that was already on the lower side, compared with the global standards.


Former finance minister and PML-N leader Miftah Ismail also termed the change in the base year a good decision but reminded that with rebasing, the GDP growth in 2017-18 has now been recorded over 6 per cent, which shows that the performance of the PML-N in its last year was much better than the PTI.

“Through rebasing, the industrial sector’s share has shrunk to just 19.5 per cent from 20.9 per cent, showing de-industrialisation in the country and it should be a cause of concern for the government,” he said.

The share of the services sector has increased from 56 to 56.6 per cent. Also, there has been an over 16 per cent reduction in the net primary income, to which the State Bank of Pakistan (SBP) had objected to during the meeting, he added.

Energy Minister Hammad Azhar in a media briefing explained the contours of rebasing and said that despite various challenges, including the pandemic, all economic indicators were positive.

The government has achieved impressive growth at a lesser cost than the previous Pakistan Muslim League-Nawaz government, he said.

Azhar admitted that inflation was hitting the salaried class and said that the government will ensure measures to minimise its impact on the middle-class.


“Prices of various commodities witnessed increase at international market resulting inflation, which was also a challenge for us. The inflation has affected the middle class particularly salaried one. However, the government will provide relief to them,” he said.

Minister for Planning Asad Umar took to Twitter and celebrated the economic growth. “This is the second-highest growth in the last 14 years. The upward revision in growth figures was due to very strong industrial growth in the fourth quarter of the last year,” he said.

Hammad Azhar said that the government’s prudent policies bring down Pakistan’s circular debt by Rs130 billion annually.

The ban on new gas connections was enforced across the country and not specific to any province, he said, adding that the exporters were getting uninterrupted gas supply.

Although rebasing enhances the value of the economy, over $9 billion of current account deficit and the upcoming debt payments will remain the major hindrances in the growth momentum of the PTI government, which it achieved last year.

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