Govt decides to increase growth, job creation in remaining tenure

ISLAMABAD: After achieving macroeconomic stability, the government has decided to focus on increasing growth and job creation during the remaining tenure of the incumbent regime.

The Federal Minister for Finance, Senator Mohammad Ishaq Dar, chaired the ‘Monetary and Fiscal Policies Coordination Board’ meeting here on Tuesday.

The secretary finance briefed the meeting that headline inflation (CPI) has been contained at 1.86% during the first five months of the current fiscal year as compared to 6.45% of the corresponding period last year. Effective monetary policy along with better supply of commodities coupled with decline in international oil and commodities prices helped in containing the inflation.

The current account deficit has been narrowed to $532 million during the four months of the current fiscal year as compared to $1.8 billion in the corresponding period last year.

The LSM has witnessed up-tick in its growth during the first quarter of the current fiscal year at 3.9% as compared to 2.6% last year on account of better electricity generation and gas production. The remittances continued its upward growth at 5.2% during the first four months of the current fiscal year.

The foreign direct investment during the first quarter increased by 7.7% but in July-October it declined by 24% whereas the foreign public investment increased during the period and helped in improving foreign investment by 18.5% over the last year. The reserves as on 4th December, 2015, were reported at above $20 billion. The FBR tax collection is showing an improvement at 16.8% during July-Nov. of the current fiscal year as compared to the last year. It was informed that during November, the FBR collections remained higher at 27%. The fiscal deficit has been contained at 1.6% as compared to 1.7% last year. The meeting noted that an improvement was observed in most of the public debt sustainability indicators during the last two fiscal years.

The SBP briefed the meeting about the money supply. The NFA has increased by Rs105 billion. The NDA, however, declined by Rs65 billion during July 01-Nov 20, FY16, mainly due to a decline in other assets scheduled banks. Higher SBP-NDA along with higher SBP-NFA subsequently increased the reserve money by Rs462 billion during July 1-Nov 20, FY16 compared to an increase of Rs176 billion in the corresponding period last year. Credit to private sector witnessed an increase of Rs40 billion during Jul 1-Nov 20, FY16, as compared to an increase of Rs58 billion in corresponding period last year.

Encouragingly, fixed investments continued to expand in Q1-FY16 for the fourth consecutive quarter since Q2-FY15. Moreover, the impact of easy monetary policy (since November 2014) has started to reflect in the weighted average lending rates on fresh and outstanding loans. With current credit cycle entering in uptake phase, borrowing on account of both working capital and fixed investment is likely to increase.

The Ministry of Commerce briefed the meeting about import and export trends. It was informed that a decline in exports is mostly due to adverse terms of trade triggered by massive reduction in commodity prices and a weak global demand.

The minister said that the government was taking all steps to enhance the exports and removing structural bottlenecks. The minister also highlighted the government was taking measures for facilitation of doing business and enhancing competitiveness. He also suggested that macro framework module should be integrated to capture the changing economic realities in establishing an effective nexus between output, aggregate demand, expenditure, revenues, foreign trade, money and prices. The minister also suggested a committee to work on developing a blueprint for the growth and job creation. He also expressed the hope that an improvement in electricity and gas supply as well as lower policy rate will bring further improvement in productivity and growth.

The meeting was attended by the secretary finance, senior officers of the Finance Division, deputy governor SBP, representatives of the Ministry of Commerce, Dr. Ishrat Hussain, Director IBA, and Dr. Asad Zaman, Vice Chancellor PIDE.