News Analysis |
The State Bank of Pakistan (SBP) has issued a statement that the prospects for economic growth remain strong, noting that the economy is poised to achieve the growth target of six percent for 2017-18. In its first quarterly report on the state of the economy, the SBP said rising income levels of consumers are fuelling retail sales and commercial activities.
However, there was an urgent need for finding more avenues for foreign exchange earnings and realigning policies favouring exports growth by addressing long-term structural impediments.
“For the external sector, recent gains in exports growth and foreign direct investments (FDI) while significant were not enough to contain the overall balance-of-payments deficit,” said the report. It added that the widening of the current account deficit associated with increased economic activity is a recurrent phenomenon in Pakistan and has undermined maturing growth cycles in the past.
Small business loans were also disbursed to SME beneficiaries across Pakistan, covering Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan, Azad Jammu and Kashmir and Federally Administered Tribal Areas (FATA).
While the report expressed satisfaction over the increased revenue in the first quarter of 2017-18, it said that earlier efforts aimed at increasing the tax base need to be more concerted and perhaps require new, innovative methods. The report says recent gains in exports are ‘not enough to contain’ the Balance of payment deficit.
The report also raised the question on whether the economy is doing well enough to sustain the virtuous equilibrium of high growth-low inflation into the medium and long terms. The report stressed the need for addressing the long-standing structural reforms in the fiscal and the external sectors for sustainability.
Read more: State Bank of Pakistan performing despite obstructions
The report analyzed the recent growth in exports and identified three reasons for it. Uninterrupted energy supplies to the manufacturing sector, increasing global demand and commodity prices and the recent exchange rate deprecation.
The Prime Minister’s ‘Youth Business Loan’, for young entrepreneurs between the age group of 21 – 45 years, is designed to provide subsidized financing to beneficiaries.
What stands out is the role of a benign inflationary environment for some time now that has helped spur the expansion in economic activities. Low and stable prices have facilitated and eased the process of economic decision-making.
“More tangibly, falling inflation along with healthy agriculture output and stable exchange rate has resulted in higher real rural incomes and urban wages. The resultant boost in consumption forms an integral part of the current economic growth paradigm,” said the report.
Low inflation has also allowed the SBP to cumulatively cut the policy rate by 425 basis points since autumn 2014. It also suggested that average inflation in 2017-18 would remain below its annual target of 6 percent.
Read more: What is cryptocurrency and how can it help Pakistan?
However, there are two major risks to this inflation forecast: first, recent exchange rate depreciation through expectations channel and, after some lag, through the higher imported goods’ price can seep into domestic prices; second, uncertain global oil prices pose both upside and downside risks.
According to official updates, a total of 20,499 beneficiaries availed this opportunity. It has a 50 percent quota for women and 5% quota for families of Shaheeds, widows and disabled persons, according to the sources.
The report said in the first quarter, the fiscal deficit was 1.2 percent of gross domestic product, lower than 1.4 percent recorded in the corresponding period of the last year. Total revenue recovered strongly, showing an 18.9 percent increase in the three-month period against an 8 percent decline in the same period a year ago.
“Against this, consolidated federal and provincial expenditures grew 12.8 percent compared to 2.8 percent increase in the same period last year,” said the report. As recently as last week, an amount of Rs. 20.52 billion disbursed under Prime Minister’s Business Loan Scheme, of which the recovery rate is 91 percent.
According to official updates, a total of 20,499 beneficiaries availed this opportunity. The Prime Minister’s ‘Youth Business Loan’, for young entrepreneurs between the age group of 21 – 45 years, is designed to provide subsidized financing to beneficiaries.
Read more: Why is Pakistan helping Indian farmers?
Small business loans were also disbursed to SME beneficiaries across Pakistan, covering Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan, Azad Jammu and Kashmir and Federally Administered Tribal Areas (FATA). It has a 50 percent quota for women and 5% quota for families of Shaheeds, widows and disabled persons, according to the sources.