Economy showed remarkable growth in past three years: SBP

KARACHI: The country’s economy exhibited a remarkable growth during the past three years, but its negative portrayal is hurting the investor sentiments, the central bank’s governor said on Thursday.  

“The international community is appreciating the (economic) performance,” Ashraf Mahmood Wathra, governor at the State Bank of Pakistan (SBP) told media at a press briefing on misconceptions about the SBP’s data.

He, however, said the projection of the country’s negative image is hurting the sentiments of the local and foreign investors.  “The overall domestic economic activities are gaining momentum, as energy and security situation improved,” he added.

The governor said real GDP growth reached to 8-year high of 4.7 percent in the fiscal year of 2015/16. Inflation came down to decades-low of 2.9 percent. Besides, current account deficit significantly shrank and foreign exchange reserves doubled during the last the three years. Budget deficit narrowed at 4.3 percent from 8.2 percent in 2012/13.

The current account deficit narrowed to average one percent during FY14-FY16 as compared with the deficit of four percent during FY09-FY13. Remittances peaked at $19.9 billion as compared with $13.9 billion. The foreign exchange reserves reached to a record level of $23.1 billion as against $11.1 billion.

Wathra said the fall in remittances in July was due to 10- day non-working days during the month. The governor said in the previous month the central bank had received record remittances. 

The governor said the country posted the strongest growth during the past five years and surpassed the target of the past fiscal year. “Outlook remains positive as number of Pakistanis who proceeded abroad increased 16.3 percent in FY16,” he added.

Wathra said exports fell 12.1 percent in FY16 due to various reasons, including lower global demand. Besides, lack of diversification of products was also a major factor behind the export fall, he added. 

The central bank projected a positive outlook for exports in the coming years on the basis of improved security situation and smoothening of power and gas supplies. The SBP governor said there is need to understand the difference between domestic and external debts.

Pakistan’s total debt and liabilities were at Rs22.5 trillion at end of June and not all of the debt falls under the government’s obligation. The country’s total public debt was Rs19.7 trillion; of this, the domestic component was Rs13.6 trillion and external component was Rs6.1 trillion. 

“The country is in a comfortable position in repayment, which is an average $5 billion per annum until 2020,” said Wathra. The governor, praising the Federal Board of Revenue, said its revenue collection increased 60 percent during the past three years, helping the government to avoid additional borrowing of Rs4 trillion.

On monetary policy, he said the central bank brought down the policy rate to 5.75 percent, which was the lowest level since 1970s. The lower cost of borrowing and improved business environment led to a substantial increase in credit to private sector. He said political instability does not bode well for the economic growth. “History of Pakistan reveals the political uncertainty has affected the economy,” he added.