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Pakistan may not achieve GDP growth rate of 7pc

ISLAMABAD —The decline in wheat and cotton crops have marred the chances of achieving 7 per cent targeted GDP growth rate in 2005-06, officials said. They said that the government would be lucky if it achieves even 6 per cent GDP growth rate which has otherwise been predicted to fall below 6 per cent due to substantial shortfall in the agricultural output.

"The country may not be able to achieve even six per cent growth rate if the estimates finalised by the Federal Committee on Agriculture are correct", said a senior government official.

He said the government had revised last month the GDP (Gross Domestic Product) growth rate to 6.5 per cent from original target of 7 per cent due to reduction in expected share of major crops to 1.9 per cent instead of original 6.6 per cent but now it seems that even the six per cent growth may not be realised.

He said the GDP target was revised due to reduction in cotton output target and factoring all other crops but the government had expected to witness a bumper wheat crop. The wheat has a major share in the GDP as it contributes over 13 per cent to value added and about 3.2 per cent in the GDP.

He said that 20.5 million tons of wheat output means that share of value added in agriculture would be zero and a definitely sizable impact on GDP. "One should ask the government as to what has been the outcome of support price", a finance ministry official said. A shortfall of about 1.5 million tons would have a significant impact on growth rate, said the official but warned that it was just a first estimate and would be updated twice in May and June.

The finance ministry officials question the wheat output figures at 20.5 million tons on the ground that even two days ago the prime minister was informed about a bumper crop and resultantly price crash in Sindh. He said if the crop was not good, there was no need for the prime minister to announce: "If required, the government will buy the entire wheat crop and export the surplus".

"There was no magic disease that wiped out more than 1.5 million tons of wheat in just 24 hours", the official said and added the economic targets may have to be revised after calculating the impact of wheat output.

He said the United States Department for Agriculture (USDA) last week had also predicted more than 21 million tons of wheat in Pakistan based on satellite imaginary of crops. He alleged that the ministry of food and agriculture (Minfal) had deliberately understated the wheat output as a strategy to pre-empt collapse of wheat prices in Punjab where harvesting is to start by end of this month. "If there was shortfall of wheat, why the prices have collapsed in Sindh to Rs360-370 per 40 kg against a support price of Rs415", said an

official at the planning commission.

He explained that wheat prices in Sindh crashed to Rs360 per 40 kg when the provincial authorities estimated wheat output between 2.8-3 million tons. The crop in Punjab was even better, he said.

He said the MINFAL was following a price-centric policy, which has met with complete failure. He said historically, Pakistan's wheat output has hovered around 19-20 million tons and if there was a good rain in March, the output increased by one million tons.

He said last year, the Minfal had set a target of 10.7 million bales of cotton, which was revised to 11.1 million bales, then 12.2 million bales, followed by 13.2 million bales and finally settled at 14.6 million bales. The cotton output estimates were gradually increased last year to maintain high prices of cotton. This year the same policy is being followed in wheat.

The government has been increasing the wheat support price for the last three years to encourage growers to bring more areas under cultivation but the result has been the same.