activities to boost economic growth: SBP

ISLAMABAD: The second phase of China Pakistan Economic Corridor (CPEC) would enhance the export oriented production capacity that would lead to economic development of the country.

"The CPEC has now entered its second phase, with the planned emphasis shifting from infrastructure development to industrial development, agriculture mechanization, tourism, high-tech finance, and social development," the Central Bank said in its quarterly report of State of Pakistan Economy.

It said several Special Economic Zones (SEZs) were going to be established that could enhance the country’s productive capacity, expand the exports base, and provide a major impetus for economic and social development through their backward and forward linkages with the rest of the domestic economy.

The report added that the government has carried out several reforms under the International Monetary Fund (IMF)’s Extended Fund Facility (EFF) program to enhance trade and investments by improving business climate.

Significant improvement has been made in simplifying the registration processes, automating land records, introducing online/electronic tax payments, and facilitating cross-border trade by improving electronic submissions and processing of trade documents.

Resultantly, Pakistan is now ranked 108th out of 190 countries in the Ease of Doing Business ranking in 2020, up by 28 places as compared with 2019.14. The SBP has also simplified the procedure for repatriation of profit and disinvestment proceeds and made the process more convenient for foreign investors.

Under the new mechanism, the cross-border payments can be made directly by the commercial banks without first referring to the SBP.

The report further added that with the start of the Covid pandemic, emerging markets (EMs) witnessed a massive outflow of portfolio investment.

The investors started shifting their portfolios to safe assets like the US dollar and gold from equities, to hedge against expected volatility in the equity market.

Although the markets in emerging economies somewhat recovered from the lows observed in the early days of the pandemic, the portfolio investment outflows by the foreign investors continued due to uncertainty over new waves of infections.

In the meantime, the US dollar started weakening against the major currencies, which further increased the demand for gold and put upward pressure on its price.

Moreover, the central banks were also aggressively cutting interest rates during the pandemic to stimulate domestic economies.

The lower yields may have created disincentive for debt market investors, as the bond prices started to rise and thereby reduced yields.