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ISLAMABAD: The fiscal deficit for the first seven months (July-January 2020-21) of the current fiscal year stood at 2.9 percent of the GDP (Rs1,309 billion), according to the Ministry of Finance’s (MoF’s) monthly Economic Update and Outlook for the month of March 2021 released on Friday.

The MoF said that the prospects of economic growth are showing visible signs of improvement; however, the third wave of the pandemic is posing some risk to economic growth.

Additionally, downside risk to cotton production will hamper targeted growth in the agriculture sector.

The third wave of the Covid-19 spell in Pakistan has raised the daily cases to around 3,500 with 2.2 percent death rate.

In response, the government has started “smart lockdown” strategy to ensure the public to observe SOPs strictly which will be helpful in continuation of economic recovery along with decelerating inflationary pressure and preserving external balance.

The expectations of economic recovery are strengthening on the basis of improvement in business confidence evident from industrial growth. The State Bank of Pakistan in its recent Monetary Policy statement projected higher growth in fiscal year 2021 compared to its previous anticipation.

Fiscal deficit stood at 2.9 percent of GDP (Rs1,309 billion) during July-January 2020-21 compared to 3.2 percent (Rs1,430 billion) for the same period a year before.

The primary balance continues to remain in surplus and increased by 0.9 percent of the GDP to reach Rs416 billion in July-January 2021 as opposed to Rs153 billion, 0.3 percent of the GDP for the same period of last year. There has been a growth of 24.1 percent in remittances during July-February 2020-21, but exports declined 2.3 percent to $16.1 billion from $16.4 billion, whereas imports increased 8.6 percent to $32.1 billion from $29.6 billion.

Current account balance stood at 0.5 percent during the period under review as opposed to -1.5 for the same period a year before, the foreign direct investment declined 29.6 percent to US$1.3 billion from US$1.854 billion and portfolio investment to -US$132.2 million from US$2.161 billion.

Total foreign investment, the FDI and portfolio, declined 77.1 percent.

The Federal Board of Revenue recorded a growth of six percent during July-January 2021 to Rs2,915 billion compared to 2,750 billion for the same period a year before while non-tax revenue consolidated decreased 1.7 percent to Rs941 billion in the current fiscal year as opposed to Rs957 billion during the same period of last fiscal year.

Public Sector Development Programme (PSDP) authorisation was Rs479.2 billion from 1st July, 1 to 5th March 2020-21 year compared to Rs466 billion during 1st July to 5th March 2020-21 a year before.

The ministry maintained that the fiscal performance from July-January, 2021 shows that the fiscal consolidation policy helped in preserving fiscal discipline, increasing revenues, and controlling expenditures. On the revenue side, the FBR tax collection continues to improve, having exceeded the eight-month target by Rs17 billion.

Eight months performance indicates that it will remain on track and the current fiscal year would end up meeting the set target. However, the increase in Covid infection and related containment measures may pose certain challenges; especially the expenditure side may come under pressure.

Copyright Business Recorder, 2021

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