Govt all set to launch Sukuk, Eurobond on Nov 29

ISLAMABAD: At a time when Pakistan is all set to launch Sukuk and Eurobond simultaneously for generating $3 billion next week from international market, Ministry of Finance on Wednesday took stance that the recent pressure on external account was transitory, which would peak out this year as various energy and infrastructure projects would be completed by June 2018.
The current account deficit widened by 122 percent to $5.01 billion just in first four months (July-Oct) period of the current fiscal against $2.26 billion in the same period of the previous financial year. In order to ward off concerns on rapidly depleting foreign currency reserves, the government has decided to move ahead with generating $2 to $3 billion inflows by November 29, 2017 when these transactions of bonds would be matured. Now the road shows are underway and finally the transaction will be accomplished at New York. Prime Minister’s Special Assistant on Economic Affairs Miftah Ismail is leading Pakistani team for holding road shows in different destination of the world including Dubai, Singapore, London, Houston and New York because of absence of Finance Minister Ishaq Dar.
According to Finance Ministry’s statement issued here on Wednesday stating that there has been some criticism lately, mentioning weakening of macroeconomic stability in the context of current and fiscal accounts' deficit in 2017.
In this regard, it is necessary to remind that the present government inherited a fragile economy characterised by low investments, high inflation, low GDP growth, high fiscal deficit, low Tax to GDP, low level of foreign exchange reserves and a looming external debt default with rising power sector circular debt and severe energy crisis.
The government soon after assuming responsibilities, launched a home grown programme of economic reforms and in the period of four years achieved a remarkable economic turnaround which is recognised by international community.GDP growth of 5.3% last fiscal is the highest in the last ten years. Tax-to-GDP ratio has increased from 10.1% in 2013 to 12.5% in 2017.
Fiscal deficit has been reduced from 8.2% in 2013 to 4.6% in 2016. Fiscal deficit in FY17 increased to 5.8%. Fiscal deficit 2016-17 increased by 1.6% of GDP (from 4.2% to 5.8%). Major contributors were provincial deficit 0.9%, higher project aid 0.4% and lesser FBR revenue collection 0.5% of GDP.
FBR tax collection registered a cumulative growth of 77% between FY2013-2017. Size of Development spending has increased by 300% in four years. Inflation has been brought down in the range of 4 - 5% in FY2017 from the average of 12 percent between 2008-2013. Policy rate is at a historic low of 5.7% down from 9.5% in FY2013. Pakistan’s foreign exchange reserves which were $11.02 billion while SBP reserves were $6 billion in June 2013, presently reserves are at a healthy level of about $19.8 billion with SBP reserves at $13.6 billion.
Current account deficit was recorded at $12.4 billion during FY17 as compared to $4.9 billion in FY16. It was mainly due to increase in imports of machinery, industrial raw material and petroleum products. These imports are enhancing productive capacity of the economy for higher output and exports in future.
As for stagnancy in exports, it was largely due to global economic conditions, low commodity prices and severe bottlenecks in the energy and infrastructure sectors of the economy as well as adverse security conditions in the country. Workers' remittances which remained stagnant last year due to adverse economic conditions in the Middle East, stringent USA regulations and impact of Brexit, have returned to growth zone.
The security situation has significantly improved, uninterrupted energy is now being provided to the industrial sector and global economic outlook is positive.