‘Economic challenges emerge on stabilisation measures’

ISLAMABAD: Pakistan is facing economic slowdown, low pace of job opportunities and resultant impact on the lowest income groups of the society due to stabilisation measures, finance division said on Thursday.

“Keeping in view the painful impact of these policies, the government has initiated reforms in key sectors of the economy encompassing agriculture, industrial and services sectors,” the finance division said in a statement. “The government is committed to correcting fundamentals of the economy through effective policy making and targeted reforms with an aim to achieve sustainable and inclusive growth trajectory.”

The ministry of finance said the country embarked upon a sustainable and inclusive growth and all the economic indicators and recent developments signify the strength and reliability of overall economic performance of the government in reinvigorating the economy, spurring growth, maintaining price stability, providing jobs to the youth and rebuilding key infrastructure of the country.

The finance ministry said the government initiated structural reforms rather than taking the usual route of pricing and fiscal adjustments. “The measures are focused on establishing and strengthening the economy which is not only self-reliant but also capable of competing globally.”

The external sector has been stabilised as the current account deficit narrowed 77.9 percent during FY2020. Exports were performing better till February 2020 than most of its competitors despite the challenging external environment.

Remittances increased to a historic high level of $23.1 billion as compared to $ 21.7 billion last year, with a growth of 6.4 percent. Foreign direct investment increased 88 percent and reached to $2.6 billion during FY2020 as compared to $ 1.4 billion in FY2019.

The finance ministry said the second phase of the Pak-China free trade agreement was implemented to further strengthen the external sector. This will provide an opportunity to Pakistani manufacturers and traders to export around 313 new products to the Chinese market on zero duty.

During FY2020, fiscal deficit was contained at 8.1 percent of GDP against 9.1 percent of GDP in last year. The decline in fiscal deficit was due to growth in total revenues (28 percent) relative to the growth in total expenditures (15.6 percent). Non tax revenues posted a growth of 257 percent while tax revenues grew 6.1 percent in FY2020 over the last year.

Similarly, the primary balance which remained in surplus during first nine months of FY2020 converted into deficit by the end of FY2020 but still contracted to 1.8 percent of GDP compared to 3.6 percent of GDP last year.

The Federal Board of Revenue’s (FBR) tax collection grew 4.4 percent to stand at Rs3.9 trillion in FY2020 against Rs3.8 trillion in FY2019. FBR collected Rs91 billion more than the revised target set for FY2020 even when economic activities were suffering from lockdown due to COVID-19.

The government announced a national agriculture emergency program under which 13 mega projects at the cost of Rs277 billion are under execution.

The economy suffered from COVID-19 outbreak. Prior to pandemic, GDP growth was estimated at 3.24 percent for FY2020, with agriculture 2.85 percent, industry 1.95 percent and services 4.04 percent. However, FY2020 posted a negative growth of 0.4 percent (provisional) against 1.91 percent recorded in FY2019 on the basis of 2.67, -2.64 and -0.59 percent growth in agricultural, industrial and services sectors, respectively.

The improvement in economic activities can be seen since the start of new fiscal year FY2021. After four months of decline, export from Pakistan registered an increase of 25 percent month-on-month in July and 6 percent year-on-year indicating a rebound in export-oriented industries, while Imports was reduced 2 percent to $ 3.6 billion as against $3.7 billion last year. Consequently, trade deficit was reduced 10.2 percent to $1.6 billion against $1.8 billion last year.