Pakistan's sustainable economic growth being globally recognised: Dar

ISLAMABAD: Finance Minister Senator Mohammad Ishaq Dar on Saturday said the government has put the country on the path of sustainable economic growth which was being internationally recognized and reflected in the improved ratings by all major rating agencies including Moody’s, S&P and Fitch.

“Pakistan has successfully completed its reform programme. During this period difficult key structural reforms in the country have been implemented. Completion of the programme has strengthened confidence of the international community in government’s economic agenda,” he said while chairing a meeting of the Monetary and Fiscal Policies Coordination Board at the Ministry of Finance.

He said researchers at the Center of International Development (CID) at the Harvard University have predicted that Pakistan’s annual growth rate over the next 10 years would be nearly 6 percent.

“This is a one point GDP growth rate increase compared to their earlier projections whereby Pakistan GDP growth rate was set to grow at 5 percent by 2025,” he said.

The minister also remarked that sharp deterioration of PKR – US exchange rate in the interbank market led to speculation and anxiety in the foreign exchange market. However, due to prompt action by the State Bank of Pakistan resulted in stabilization and averted the high risk of speculation, he said.

The minister stated that the macroeconomic indicators were showing a positive trend. GDP has grown this year by 5.3% which is a 10-year high, he added.

“Foreign exchange reserves are at a comfortable level, tax revenues have increased by 74% over the last four years, credit to private sector has increased by over five times, gas availability has improved, and load-shedding for industry has been eliminated and substantially reduced for commercial and domestic sector,” he said.

“For the first time the size of the economy has surpassed $300 billion. On average, income of each Pakistani has increased by 22% since fiscal year 2012-13. Per capita income today stands at $1,629 as compared to $1,334 four years ago. Inflation was on average 12% between 2008-13. The inflation has been contained at 4.16% much below the target of 6%. Policy rate of SBP has come down from 9.5% in June 2013 to the current 45 year low of 5.75%,” he added.

Briefing the meeting on economic situation, the finance secretary said the GDP growth of the outgoing fiscal year 2017 recorded at 5.3 percent was the highest in ten years. The impressive growth was on account of growth in services and agriculture sector. The turnaround in agriculture growth was due to government’s supportive policies and high credit disbursements.

The meeting noted that external public debt to GDP has reduced from 21.4 percent in FY 2013 to 20.8 percent while net domestic debt increased from 38.8 percent in FY 2013 to 40.5 percent in FY 2016. As of July-March 2017, the net public debt stood at 59.3 percent below the threshold of 60 percent as prescribed in FRDL Act.

Ishaq Dar informed that the government was adhering to the Medium Term Debt Management Strategy to make public debt portfolio more sustainable. “The government is focusing on extending the average time to maturity of domestic debt. The debt sustainability indicators of domestic and external debt have improved compared to FY 2013,” he said.

The meeting was informed that the current account deficit widened to $10.64 billion due to fall in exports and remittances during July-May 2017. The decline in exports is more due to exogenous factors as the decline in exports was also witnessed in other regional countries.

The meeting noted that negative effects of exports are bottoming out as during the outgoing fiscal year six months have witnessed positive YOY growth with highest in June 2017 at 16 percent.

The minister expressed the need for necessary measure to address the widening current account deficit. He said, the government has already initiated a number of measures for exports enhancement. There is no load shedding for the industrial sector. The tariffs have been slashed. He stressed to look into the competitiveness aspect and stressed upon a multi-pronged approach at federal, provincial and local level.

The governor SBP informed that monetary expansion during FY 2017 remained aligned with the overall improvements in macroeconomic indicators with substantial contribution stemming from pick-up in private sector credit.

The Ministry of Commerce informed that trade deficit widened to 32.3 percent compared to last year. Exports have continued to decline at a subdued rate of 1.63 percent and while imports increased by 18.7 percent.

“Pakistan’s exports have increased to EU countries where it is enjoying GSP plus unilateral concessions. The negative effects of the exports are bottoming out, and it is expected that exports will improve in coming months. In this regard the Minister for Finance stated that to help export proceeds, duty-drawback claims would be honored and assured that claims will be cleared alongwith sales tax refunds, at the earliest,” said the ministry.