Finance ministry says economy on path of stabilisation

ISLAMABAD: Mid-course corrections are taking in the macroeconomic framework, but there is no reversal from the path of stabilisation, a finance ministry’s spokesman said.  

“The government is aware of the challenges going forward and is firmly committed to maintaining macroeconomic stability while achieving pro-poor inclusive higher economic growth of seven percent in the medium term,” the spokesman said in a statement. 

Government projected growth for the current fiscal year at six percent in view of improved industrial sector, better crop output and increasing foreign inflows.  “The early indicators of the economy such as strong growth of LSM (large scale manufacturing) sector during July-August 2018, better crop production estimates and increasing exports, remittances and FDI (foreign direct investment) all indicate towards improvements in macroeconomic conditions,” the spokesman said. “Despite challenges, Pakistan’s economic fundamentals remain strong.”

The finance division’s official said the World Bank recognises economic achievements of the past four years. “To continue with an upward growth trajectory and sustain the hard earned achievements, Pakistan will need to continue with economic reforms and pursue pro-growth policies,” the official added, citing the World Bank’s twice-a-year ‘Pakistan Development Update’ report.

The ministry’s spokesman said an overview of the country’s macroeconomic indicators clearly speaks of economic resilience despite the slowdown in the global economy.  “Our current account deficit widened to $12.1 billion during FY17 as compared to $4.9 billion in FY16… mainly due to increase in imports of machinery, industrial raw material and petroleum products,” the spokesman said. “These imports enhance productive capacity of the economy for higher outputs and exports in future.” 

Export performance has returned to growth zone due to stabilising security environment and un-interrupted power supplies. Exports during July-September FY2018 posted a healthy growth of 12.4 percent as compared to the same period last year. Imports have started to taper off due to corrective measures of the government. 

Workers’ remittances have also returned to growth zone. In July-October, workers’ remittances grew 2.3 percent. FDI inflow during July-October also rose 57 percent. The ministry’s official further said the recent pressure on external account is only short-term and will peak out this year as various energy and infrastructure projects are completed.   “S&P (Standard and Poor’s) has also acknowledged that Pakistan's external account challenges are short-term and will recede within two years’ time,” the official said, referring to Pakistan’s ‘B’ rating with stable outlook. 

The division’s spokesman said inflation is likely to increase on account of increase in aggregate demand and linked to bullish economic prospects. Likewise, the aggregate consumption will grow on account of recovery in remittances. Services sector will grow due to healthy contribution from its sub-sectors whereas industrial sector will continue to grow due to improved power supplies and China-Pakistan Economic Corridor projects. The agriculture sector will also expand.  External public debt as percentage of GDP continues to decline. The official exchange rate remained stable in FY2017 and credit to private sector picked up, the spokesman added.