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Economic Recovery In Pakistan’s Main Trading Partners Is Encouraging Sign For Exports And Remittances: Ministry Of Finance

admin-augaf by admin-augaf
August 30, 2021
in Business
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Economic Recovery In Pakistan's Main Trading Partners Is Encouraging Sign For Exports And Remittances: Ministry Of Finance

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Islamabad August 30, 2021: The global economic recovery, especially in Pakistan’s main trading partners, is healthy sign for stimulating Pakistan’s export growth and workers remittances. On the other hand, the rise in international commodity prices, especially oil prices, brings some risks in terms of inflation and of high import values.


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Real Sector:

The latest agriculture inputs situation remained favorable. The tractors production increased by 38.3 percent in July FY2022, while its sales also increased by 19.9 percent. Credit disbursement to the agriculture sector increased to Rs 1,366 billion in FY2021, witnessing a growth of 12 percent over an amount of Rs 1,215 billion in FY2020.

Although, Cotton crop is at varying growth stages, however, overall, its condition is satisfactory. Large Scale Manufacturing (LSM) shows a remarkable
performance during FY2021 and posted a growth of 14.9 percent, against the negative growth of 9.8 percent in FY2020. Inflation declined to 8.4 percent in July 2021 compared to 9.7 percent of the previous month and 9.3 percent of the corresponding month last year (July, 2020).

Fiscal, Monetary & External:

Fiscal sector performance during FY2021 remained satisfactory owing to effective revenue mobilization and careful expenditure management. On the revenue side, improved tax collections have been realized both at the federal and provincial level, whereas, effective expenditure management helped in containing the current expenditures to the lower side. During FY2021, Money Supply witnessed expansion of Rs 3,394.6 billion (growth of 16.2 percent) as compared to expansion of Rs 3,109.5 billion (growth of 17.5 percent) in FY2020.

The Current Account posted a deficit of $ 773 million (2.8 percent of GDP) for July FY2022 as against
a surplus of $583 million (2.4 percent of GDP) last year. Current account deficit widened due to growing import volume of energy and non-energy commodities, along with a rising trend in the global prices of oil, Covid-19 vaccines, food, and metals. Exports on fob grew by 19.7 percent during July 2021 and reached $ 2.3 billion in July 2021 ($ 1.9 billion last year). On August 23, 2021, SBP reserves became historical high at $20.3 billion due to IMF (SDR) reallocation of $ 2.8 billion.

Economic Outlook:

The revival of economic activities along with accelerated vaccination process, are promising for achieving a strong economic growth. On the other hand, the risk of pandemic upsurge, along with increase in international commodity prices still exist. In this regard, the government’s measures to build strategic reserves, especially related to food, along with measures to enhance exports will definitely mitigate the associated risks.

▪ In recent months, the YoY inflation rate is on a declining trend. It is expected that, ceteris paribus, YoY inflation is expected to fluctuate around 7.6 – 9.2 percent in
August 2021.

▪ In July 2021, The MEI is showing continued strong growth, thus, a strong YoY
growth of LSM is expected in July on the basis of continued cyclical uptrend of CLI
in the main trading partners and domestic growth momentum.

▪ It is expected that trade deficit in goods and services could stabilize to approximately $ 3 billion in August. The current account deficit is expected to remain in manageable levels taking into account the monthly average of remittances flows around $ 2.5 billion and other secondary and primary income flows.

Recent developments in Pakistan’s macroeconomic indicators are therefore positive. In the absence of any major unexpected negative shocks, the economy is smoothly moving to balanced and sustainable growth path.


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Tags: BUSINESSfinancePakistanPTIPTI effortsSBP
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