‘Stable’ micro financing environment could end Pakistan's economic woes: Finance advisor

• Advisor said rising fiscal deficits have hampered govt's ability to make capital available in development sectors.
• Microfinance with its outreach and capacity to enhance the scope of its activities can help with the documentation of the economy, says Shaikh.

Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh has urged on the need of preserving a ‘stable’ micro financing environment to tackle the economic issues of Pakistan.

The advisor said that rising fiscal deficits have hampered government's ability to make capital available in the development sectors. “This combination of microfinance can help in tackling the issues of low savings, low investment, problem of financial inclusion, documentation and above all it’s a good instrument for uplifting the poor,” said Shaikh while talking about Pakistan economy on Wednesday.

Speaking about the economic challenges, the advisor said that Pakistan have had a low savings rate of about 10 percent, whereas the rate of investment have also been low at 15pc as compared to other regions that have reached investment rate of 30pc.

“So that’s the area that we need to do well, and I think microfinance can help at the same time in our tax policies especially documentation, which has been an area we haven’t done good job. Microfinance with its outreach and capacity to enhance the scope of its activities can help with the documentation of the economy,” said Shaikh.

He said that due to government reform Pakistan is making its transition away from being a large import oriented economy to one with the focus on exports and earning dollars. “We are beginning to see the turnaround and we are beginning to see the economic environment getting more stable,” said the advisor.

Earlier on Tuesday, Shaikh said that economic indicators have shown significant improvement in last five months and are being acknowledged by international financial institutions. He said that current account deficit reduced by 35 percent and has seen more improvement in the last five months. He said portfolio investment and Foreign Direct Investment (FDI) are also seeing an upward trajectory.

He added that the IMF team during its visit reviewed the economic performance and expressed satisfaction on not only meeting the targets but also surpassing these. Consequently, they recommended their board to release the $500 million tranche to Pakistan on immediate basis.

Shaikh said that world renowned rating agency Moody's has upgraded Pakistan's credit rating from negative to stable. He said that Bloomberg, IMF and World Bank have also appreciated the improvement in country's economy. He mentioned that during the past few months, country's debt has decreased which is a welcoming sign.