Karachi June 01’2021: State Bank of Pakistan has provided aggressive monetary stimulus of PKR2,067 billion equivalent to 5.0% of GDP to provide support to the economy for fighting slowdown created by COVID. Monetary stimulus along with targeted fiscal measures has helped to recover growth to 3.96 percent compared to negative 0.5 percent of last year.
As per SBP, PKR470 billion stimulus has been provided through rapid reduction in policy rate by 625bps to 7 percent despite surge in National Consumer Price Index to provide cheaper financing to businesses. This is likely to increase further as SBP continues with accommodative stance of monetary policy to ensure the recovery till growth becomes firmly entrenched and self-sustaining. This is especially so given the renewed heightened uncertainty created by the on-going third wave of Covid in Pakistan and the fiscal consolidation expected this fiscal year. SBP feels that given the Covid-related uncertainties, the cost of withdrawing monetary stimulus too soon exceeded that of withdrawing too late.
PKR657 billion support is provided through introduction of loan principal deferment program to ease cash constraints of individual and borrowers. SBP has provided support of PKR 254 billion through loan restructuring to facilitate viable borrowers to continuation of business operation.
In order to prevent layoffs by financing wages and salaries of employees due to economic slowdown, SBP has provided assistance of PKR238 billion to businesses.
Temporary Economic Refinance Facility (TERF) is a concessionary refinance facility aimed at promoting investment both new and expansion and/or Balancing, Modernization and Replacement (BMR). Financing under the facility is available through banks/DFIs to all sectors across the board except power sector where SBP’s refinance facility for renewable energy projects already exists. Under this head SBP has provided PKR448 billion equivalent to 1.1% of GDP.
Pakistan Bureau of Statistics projected GDP growth for FY21 at 3.9 percent as post-Covid recovery underway since last summer has strengthened. This was based upon growth of 2.8 percent from agriculture, 3.6 percent form industrial and 4.4 percent of services sectors. Total GDP size was now reached Rs47.7 trillion in fiscal year 2021 versus PKR41.6 trillion for fiscal year 2020. Per capita income increased by 13.4 percent from USD1,361 in fiscal year 2020 to USD1,543 in fiscal year 2021. However, growth for fiscal year 2021 was revised downward from -0.4% to -0.5%. This outcome for fiscal year 2021 is a significantly above from Gov’t forecast of 2.1 percent and SBP forecast of 1.5-2.5 percent.