Core consumer price inflation for Pakistan will rise by 4.2 percent - to 12.4 percent of Gross Domestic Product (GDP) in 2020 against 8.2 percent in 2019.
This was revealed in the International Monetary Fund (IMF) report, "Regional Economic Outlook: Middle East, North Africa, Afghanistan, and Pakistan." Consumer price index (CPI) has been projected at 13 percent for the current year and the differential between core and CPI is 0.6 percent for the current year.
In 2019 core inflation was higher than CPI at 8.2 percent while CPI was 7.3 percent, as per the IMF report.
The report projects exports of goods and services at $32 billion for 2020 compared to $30.2 billion in 2019. Further, an increase of 0.2 percent in non-performing loans i.e. 8.2 percent for 2020 against 8 percent in 2019 has been projected.
The Fund has projected an increase of 5.6 percent in gross external debt, i.e, to 43.7 percent in 2020 against 38.1 percent in 2019.
The Fund has projected imports of goods and services at $59.5 billion for 2020 against $62.9 billion in 2019, broad money growth at 12.1 percent for 2020 against 10.7 percent in 2019, government revenue at 16.1 percent in 2020 against 12.7 percent in 2019, government net lending at -8.4 percent for 2020 against -8.9 percent in 2019, gross official reserves at $11.1 billion for 2020 against $6.8 billion in 2019.
The report, however maintained the same projection for consumer price inflation i.e. 13 percent for 2020 against 7.3 percent in 2019, GDP growth rate at 2.4 percent for 2020 against 3.3 percent in 2019, gross debt at 78.6 percent for 2020 against 76.7 percent in 2019, net debt at 75.2 percent for 2020 against 72.5 percent in 2019, government revenue at 16.3 percent in 2020 against 12.8 percent in 2019, expenditure at 23.6 percent in 2020 against 21.6 percent in 2019, fiscal balance at 7.4 percent for 2020 against 8.8 percent in 2019 and current account balance at -2.6 percent in 2020 against -4.6 percent in 2019 as was in the recently launched World Economic Outlook.
IMF report maintained that median net capital flows to countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) and those in the Caucasus and Central Asia (CCA) have increased since the global financial crisis. Oil exporters have typically been acquiring foreign assets resulting in net outflows. Only in 2015-17, as they slowed foreign assets accumulation and attracted inflows to finance fiscal deficits, did the median oil exporter have net capital inflows.
Resilient capital inflows to oil importers ensured that net capital flows have been consistently positive and higher, as a share of GDP, compared to other emerging market economies. Gross capital inflows to the MENAP and the CCA region declined in the aftermath of the global financial crisis along with other emerging market peers, although they were less volatile during the tightening of global financial conditions.
The composition of inflows has changed with FDI falling and portfolio and other (bank) inflows rising. Nearly two-thirds of these increased portfolio and bank inflows went to five countries (Lebanon, Morocco, Pakistan, Qatar, and Saudi Arabia).
Declining FDI was offset by the rising importance of portfolio inflows (for oil exporters) and bank flows (for oil importers). A sizable share of these inflows (at least one-third in 2018) went to the official sector, helping finance fiscal deficits not only in oil-importing countries (Egypt, Lebanon, Pakistan), but also in oil exporters (Bahrain, Oman).
Capital outflows from the Middle East, North Africa, Afghanistan, and Pakistan region and the Caucasus and Central Asia have declined since the mid-2000s. As oil prices fell, net purchases of foreign assets by oil exporters reached their minimum in 2015-16 owing to disposal of foreign assets by Algeria, Iraq, and Saudi Arabia.
Oil importers have also significantly reduced their foreign asset acquisition, with the median falling from 3.6 percent of GDP in 2000-09 to 1.5 percent of GDP in 2010-18. This trend was the result of nearly continuous reduction in foreign assets in Lebanon and more sporadic declines in, for example, Egypt and Pakistan, where domestic vulnerabilities have increased. Besides official reserves, private assets can also be a buffer if there is a sudden stop in capital inflows or other shocks to the balance of payments.
Copyright Business Recorder, 2019
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