Trade balance helps overcome external account challenges: FM

ISLAMABAD: Pakistan’s economy is moving on the growth trajectory as recovery in exports, curtailment in imports and surge in manufacturing are bolstering economic activities, state finance minister said on Thursday.

“Despite challenges the economy is gaining momentum and growth in large scale manufacturing, improved exports and good management of imports are helping in overcoming difficulties,” Minister of State for Finance Rana Afzal Khan said in a statement. “Future would bring new and better opportunities for Pakistan.”

The minister met with an outgoing International Monetary Fund’s (IMF) Resident Representative for Pakistan Tokhir Mirzoev.

Mirzoev informed the minister that his term would be expiring in March and he would be carrying home good memories of working in Pakistan. He also congratulated Khan on assuming his responsibilities as the minister of state.

Pakistan’s economy attained a decade-high growth rate of 5.3 percent for the last fiscal year of 2016/17. Foreign financial institutions, including IMF and the World Bank, projected the growth between 5.5 to 5.6 percent for FY2018.

“Strengthening the economy’s resilience will be important to maintain Pakistan’s favorable growth momentum and ensure sustainable private investment and job creation in the medium-term,” IMF said in a statement following the first post-program monitoring in December last year. “While economic growth has been accelerating and inflation remains subdued, Pakistan is facing important near-term economic challenges. Surging imports have led to a decline in international reserves despite higher external financing.”

The government slapped five to 30 percent of regulatory duties on 731 non-essential products to contain rising import bill, which is a major drain on the country’s foreign exchange reserves. The government officials expected to save two to three billion dollars due to the import duties during the current fiscal year ending June 30, 2018.

Besides, government’s trade enhancement initiative, unveiled in January 2017, incentivised exporters to arrest decline in exports. Five percent rupee depreciation in the consecutive three sessions in December also encouraged exporters to improve their competitiveness.

Growth in large scale manufacturing sector, which accounts for 80 percent of manufacturing and 10.7 percent of GDP, was recorded at 9.64 percent for July-October FY2018, much above the annual target of 6.3 percent.

In the first half, exports posted more than 11 percent recovery, giving a silver lining to the government that is near its end of electoral term in the midyear to achieve $23 billion by the fiscal yearend.

The improved exports will give a much-needed succor to external account affected by growing imports and burdened by debt repayment obligations.

The current account deficit sharply widened to $12.4 billion during FY2017 from $4.9 billion in FY2016 mainly because of swelling imports – an outcome of capital-intensive machinery imports.

Pakistan has recently seen growing investments in infrastructure developments under China-Pakistan Economic Corridor (CPEC) projects. CPEC, envisaging an investment of more than $55 billion, comprises a series of infrastructure projects to improve connection of the region with the western world.

State finance minister said CPEC projects would prove to be window of economic prosperity for Pakistan and benefit the whole region.