ISLAMABAD: The Ministry of Finance has said that the government’s extensive measures have helped the economy move progressively along the adjustment path and stabilization process, adding that economic recovery was expected by the end of FY20.
“The government is focused on bringing improvements in the real sector through inclusive growth in agriculture, industrial and services sectors,” said a statement issued by the Finance Division with reference to a World Bank report on ‘2020 Global Economic Prospects’.
The World Bank had slightly lowered Pakistan’s growth rate projections for the current fiscal year and next two years owing to the continuation of tight monetary policy and fiscal consolidation coupled with external factors.
“The government is cognizant of the challenges and is stringently focused on reducing inflation, creating job opportunities and achieving a higher growth rate. Keeping in view the positive developments on major economic indicators, we expect that the economy will likely to achieve better growth prospects as against the projections of the World Bank,” the finance ministry stated.
The WB had forecasted Pakistan’s current year growth rate at 2.4pc, before touching 3pc next year and 3.9pc in FY2022. The bank had also mentioned that growth had decelerated an estimated 3.3pc in FY2018-19, reflecting a broad-based weakening in domestic demand.
“It may be pointed out that during FY2019, the slowdown in the economy was largely attributed to various policy measures to manage the twin deficit crisis. Consequently, these measures helped contain demand pressures and contributed to import compression. However, the outcomes of these measures were realised in the industrial sector, particularly the large-scale manufacturing sector, which witnessed negative growth.
“At the same time, high input costs along with water shortages weakened agriculture sector’s output and hence, the drag in the commodity-producing segments spilt over to the services sector as well. Resultantly, the real GDP growth recorded at 3.3pc.”
For growth in the agriculture sector, the target production of wheat is 27 million tonnes given by FCA in last meeting held in October. In addition to uplift agriculture sector, a ‘National Agriculture Emergency Programme’ has been introduced while 13 mega projects at a cost of Rs287 billion have been approved. Agriculture credit disbursement target for CFY20 has been set at Rs1,350 billion.
“In order to boost the industrial sector, the government is providing a series of subsidies and incentives to the sector. These include subsidies to industry for electricity and gas, export development package and continue to provide Long-Term Trade Financing (LTFF) and Export-Refinancing Scheme (ERS) at a subsidized rate,” the statement read.
“Similarly, PSDP release process is simplified and up to 3rd January 2020, Rs301.4 billion have been released to encourage construction-related industries, especially cement abd steel. In addition, cement dispatches registered a growth of 6.55pc (24.8 million) during July-Dec FY20 as against 23.2 million last year. This development would likely stimulate the growth in LSM in the coming months.”
To control expenditures, the MoF said, the government is following austerity measures with a complete restriction on supplementary grants. For export promotion, several initiatives have been announced such as support duty structure on raw materials and intermediate goods, improved mechanism for tax refunds, electricity and gas at a competitive cost, and making Pakistan part of the global value chain.
According to the statement, “The government’s various measures to stabilize the economy have already started to reap benefits in the form of sustained adjustment in current account deficit (CAD) and continued fiscal prudence. CAD reduced by 72.9pc, fiscal deficit was contained at 1.6pc of GDP (Rs686 billion), primary balance posted a surplus of Rs117 billion (0.3pc of GDP) and FBR revenues rose to Rs2,08 trillion (+16.4pc) during July-December, FY20.