KARACHI: SBP Governor Tariq Bajwa has said that recovery in exports that started in the second half of FY17 and continued in the current fiscal year bodes well for country’s economy.
“Exports have shown positive growth during the last six months,” he elaborated adding, “In fact, during the last three months, exports have grown by 13.2 per cent, which shows that the decline in exports seems to have finally reversed.”
He was addressing a delegation of Pakistan Business Council that called on him and the senior management at SBP headquarters today.
Governor SBP said the data of first two months of the current year points to a recovery in key external indicators, particularly remittances, exports and FDI.
“Workers’ remittances grew by 13.2 per cent to $ 3.5 billion in Jul-Aug 2017 and inflows from all major corridors were higher as compared to Jul-Aug 2016.”
Bajwa elaborated that the country’s economy is increasingly becoming attractive for investment with the continuation of supportive economic policies. “I believe at this juncture, it offers a lot of opportunities for businesses to grow and expand,” he said.
The governor said that the pace of expansion in the economy accelerated for the third consecutive year in FY17 amid improving the security situation and better energy supply. It grew by 5.3 per cent in FY17, compared to 4.6 per cent last year. The growth was not only the highest during last ten years but also broad-based. All the three major sectors – agriculture, industry, and services – contributed to the acceleration in growth.
Bajwa pointed out that the accommodative monetary policy has played a key role in providing a boost to private sector credit demand. Policy Rate has come down from 10 per cent in October 2014 to only 5.75 per cent. Historic low-interest rates were instrumental in taking the private credit growth of 16.8 per cent in FY17, over and above 11.2 per cent a year ago.
The overall expansion in private credit stood at Rs 747.9 billion during FY17. “Remarkably”, said the Governor, “About 40 per cent of the expansion in credit was meant for fixed investment.” On the supply side, a healthy deposit growth improved the liquidity of the banking system.
The latest data shows the trends in private sector are continuing in FY18. A much lower net retirement in private sector credit of Rs 75.5 billion from July 1, to September 1, 2017, compared to a net retirement of Rs 224.3 billion in the corresponding period last year indicates that private sector has borrowed more credit during FY18 so far. This with a robust growth of 40pc in the import of machinery group in 2016-17 augurs well for future growth.
“In terms of agriculture,” said the governor, “We are a low productivity economy and SBP is doing whatever it takes to improve that.” Availability of credit is one aspect. The government had set a target of Rs 1001 m but that was a broad target. Though the last year target was largely met, the number of borrowers has actually gone down. It implies that the money was going towards processing but it was not going towards production. The governor said that agriculture sector is now specifically focused on availability of pesticides and fertilizers. The governor said that the SBP is also contacting private sector for agricultural extension services in order to boost productivity.
Prior to governor’s address, Pakistan Business Council Chief Executive Officer Ehsan Malik spoke on the contribution of members of the council which includes 24 of the largest multinational corporations from 12 foreign countries. Malik informed the participants that listed market value of the member companies has reached Rs 8.4 trillion and that in addition to contributing to Pakistan’s GDP, exports and taxes significantly, these companies provide 400,000 direct jobs and 2.0 million indirect jobs.
In the end, the governor reiterated that economic conditions in the country continue to remain favourable and offer a unique opportunity for businesses to grow and expand and take their role by participating as an economic agent to serve our country in its best interest.
