ISLAMABAD: Minister of Finance (MoF0 has stated on Wednesday that based on current economic, fiscal, monetary and exchange rate policies, and on prospects for the international environment, economic activity is expected to rebound strongly within the first quarter of fiscal year 2021 after the Covid-19 pandemic.
The ministry's monthly "Economic Update and Outlook for August 2020" uploaded on its website noted that given current information, economic activity in the first quarter of fiscal year fiscal year 2021 would recover at least around the level observed in first quarter of fiscal year 2020.
The trade balance on goods and services will converge to the level seen in the first three months of the previous fiscal year, and would therefore be manageable in terms of its financing.
Additionally, year-on-year basis, inflation is expected to stabilise in the first quarter of the current fiscal year based on current information and in absence of unexpected shocks or policy measures, at around current levels.
However, inflation in Pakistan, which has been due to international and domestic commodity prices, especially for food and oil products as well as value of the USD/PKR exchange rate, monetary as well as fiscal policies and indicated by growth of broad money and the policy interest rate may exert temporary pressure.
Among additional factors affecting inflation, the policy interest rate remained unchanged in July. These factors may exert a tempering effect on inflation and inflation expectations.
The CPI level and inflation react to all aforementioned factors with a time-lag of at least one month, implying that they contain relevant information for short-term inflation prediction.
On the basis of this information, headline inflation is expected to remain within a range of 8.4 to 9.7 percent in August 2020.
Manufacturing LSM has started to rebound after the damage inflicted by the Covid-19 outbreak, and monthly snapshot of manufacturing on month-on-month basis, 9 out of 15 sub-sectors of LSM have witnessed positive growth in June 2020.
Textile, having the highest weight in LSM, grew by 34 percent in June 2020.
Other major sectors such as electronics (18.4 percent), iron and steel products (15.9 percent), and automobile (229.5 percent).
The overall fiscal deficit stood at 8.1 percent of the GDP in fiscal year 2020, due to rise in total revenues (28 percent) and control in total expenditures.
Non-tax revenues witnessed a remarkable growth of 257 percent, and stood at Rs1,524.4 billion against Rs427.3 billion for the same month a year before.
The increase stemmed from a sharp rise in the SBP profit (Rs935.5 billion), the PTA profit (Rs127 billion), and Rs105.2 billion from mark-up (PSEs and others).
On the expenditure side, total expenditures grew by 16 percent to Rs9,648.5 billion in FY2020.
Out of the total, the current expenditures increased by 20.1 percent against 21.3 percent recorded in fiscal year 2019.
Within development expenditures, the PSDP expenditures (federal and provincial) grew by 8.1 percent during 2020 fiscal year in contrast to a sharp decline observed over the previous year.
In absolute terms, the total PSDP expenditures stood at Rs1,089.7 billion during fiscal year 2020 against Rs1,008.2 billion in the fiscal year 2019.
The FBR tax collection grew by 4.7 percent to reach Rs290.5 billion in the month of July against Rs277.3 billion comparable to the same month a year before due to gradual pickup in economic activity and the FBR's various administrative measures.
During the period 1st July- to 7th August fiscal year 2021, money supply (M2) witnessed contraction of Rs224.5 billion compared with contraction of Rs172.8 billion last year.
The contraction in money supply is largely attributed to decline in the Net Domestic Assets (NDA). The economic update maintained that the government adhered to its commitment of avoiding any fresh issuance of MRTBs from the central bank, in compliance with the SBP Act as well as the agreement with the IMF.
From scheduled banks, the government has borrowed Rs198.7 billion against the borrowing of Rs1,410.7 billion last year.
Current account deficit during July posted a surplus of $424 million (1.9 percent of GDP) against a deficit of $ 613 million last year (2.8 percent of GDP).
Exports declined by 14.6 percent to $ 1.9 billion during July, however, on month-on-month exports increased by 19.7 percent to $ 1.9 billion in July.
The easing of lockdown in the North American and European countries will help revive the exports.
The SBP has also announced additional support of Rs190 billion for exporters and investors in the export-oriented sectors, while imports declined by 13.3 percent to $3.6 billion consequently, trade deficit reduced by 11.8 percent to $1.7 billion.
The Foreign Direct Investment (FDI) increased by 61 percent and reached $114.3 million during July as compared to $71.1 million for the same month of the last fiscal year, and Foreign Private Portfolio Investment has registered a net outflow of $73.2 million.
During July 2020, remittances rose to $2,768.1 million against $2,027.9 million last year, with a growth of 36.5 percent.
Till 22 August 2020, Rs175.5 billion has been disbursed to 14.5 million beneficiaries, while new target is 16.9 million beneficiaries.
For fiscal year 2021, allocation for Ehsaas programme has been increased from Rs187 billion to Rs208 billion.
"Single National Curriculum" for Improvement in education systems has been finalised to be implemented by March, 2021.
Agriculture performance is mainly dependent on weather conditions and inputs. Presently, Kharif crops are in the process of cultivation.
On the basis of 81.3 percent urea off-take and 11.5 percent of DAP off-take over same month last year, along with sufficient availability of water and satisfactory situation of seeds are expected to have positive impact on cultivation, yield and productivity of important crops as well as on other crops.
Copyright Business Recorder, 2020
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