Pakistan investment to GDP ratio remained stagnant during the current fiscal year as the government failed to achieve another key economic target despite efforts to attract foreign investment and improve economic stability. Official provisional figures showed that investment stayed at 14.4 percent of the national economy while savings declined further to 14 percent.
According to data prepared by the planning ministry based on National Accounts results, the investment to GDP ratio remained unchanged from last year. However, it still fell short of the official target of 14.7 percent. The figures highlighted the government’s continued struggle to boost investment activity at a time when economic growth and job creation remain weak.
The savings to GDP ratio also missed the official target of 14.3 percent. Savings dropped to 14 percent because of an expected current account deficit during the fiscal year. The ratio also remained lower than last year by 0.9 percent of GDP.
Economic experts believe that weak investment levels continue to slow infrastructure development and social sector progress. The government is increasingly relying on borrowing to meet its financing needs because exports also declined by more than 6 percent during the first ten months of the fiscal year.
Officials have started internal discussions about whether the second phase of trade liberalisation should be implemented from July. Policymakers fear that the first phase increased imports rapidly without helping exports grow.
The government had launched the Sovereign Wealth Fund three years ago to attract foreign investment into Pakistan. However, the initiative remained inactive this year after the International Monetary Fund raised objections over its legal framework. The government has now tabled an amendment bill in the National Assembly to address IMF concerns. The Senate Standing Committee on Finance delayed voting on the bill and postponed the matter until its next meeting.
The Special Investment Facilitation Council also failed to attract major foreign investment during the fiscal year. However, the council continued addressing procedural issues faced by local investors and businesses.
The fixed investment to GDP ratio remained at 12.7 percent, missing the official target of 13 percent. Private sector investment slightly increased to 9.6 percent of GDP but stayed below the target of 9.8 percent. These figures are expected to be officially released in the upcoming Economic Survey of Pakistan.
Public sector investment also weakened. The public investment to GDP ratio declined to 3.1 percent after the federal government reduced its development budget by nearly Rs200 billion. For the next fiscal year, the government has proposed a development budget of Rs1.126 trillion. However, actual spending will depend on whether revenue targets are achieved.
Economists warn that failure to increase investment limits the government’s ability to improve roads, energy infrastructure, education, and healthcare using domestic resources. This situation increases dependence on domestic and foreign loans for development projects.
Finance Minister Muhammad Aurangzeb is currently visiting China to secure a 250 million dollar loan by accessing Chinese debt markets. The government is seeking support through guarantees from the Asian Infrastructure Investment Bank and the Asian Development Bank. Pakistan’s current credit rating remains too weak to independently raise debt from Chinese markets.
The government also failed to achieve its broader economic growth target during the fiscal year. Pakistan’s economy expanded by only 3.7 percent, which economists say is insufficient to generate employment opportunities for the growing youth population.
A recent report warned that Pakistan’s population may rise by 62 percent to 389 million people by 2050. The report estimated that nearly 255 million people would fall within the working age category. Analysts say this population trend increases pressure on the government to accelerate investment and economic reforms.
Despite the overall weak performance, some sectors recorded investment growth. Private investment in agriculture rose by 8.7 percent due to increased imports of machinery and livestock. Small scale investment, including slaughtering activities, increased by 25 percent.
Investment in electricity, gas, and water supply increased by 7.6 percent. Surprisingly, the construction sector recorded growth of more than 60 percent despite a broader slowdown in the industry. Hotels and restaurants saw investment growth of 12.8 percent, while transportation and storage increased by 6.2 percent.
The information and communication sector showed the highest growth with investment jumping by 110 percent during the fiscal year.
Public sector investment also improved in selected industries. Manufacturing investment increased by 97 percent because of projects linked to the National Radio Telecommunication Corporation. Mining investment rose by 25.9 percent because of spending by Oil and Gas Development Company Limited.
Investment in electricity, gas, and water supply grew by 5.1 percent due to projects undertaken by WAPDA. Public investment in transport and storage rose by 51.2 percent because of spending by the Civil Aviation Authority and the Pakistan National Shipping Corporation.
In the construction sector, public investment increased by 7.4 percent due to development work by the Lahore Development Authority, the Gwadar Development Authority, and the Federal Government Employees Housing Authority. Public investment in communication increased by 31 percent because of purchases by Ufone and preparations linked to the 5G spectrum auction.