The global economic recovery, especially in Pakistan’s main trading partners, is a healthy sign for stimulating Pakistan’s export growth and workers remittances; however, the rise in international commodity prices, especially oil prices, brings some risks in terms of inflation and of high import values.
This was stated by the Finance Division in its Economic Update and Outlook for August.
According to the report summary, the revival of economic activities along with accelerated vaccination process, are promising for achieving a strong economic growth. On the other hand, the risk of pandemic upsurge, along with increase in international commodity prices still exist. In this regard, the government’s measures to build strategic reserves, especially related to food, along with measures to enhance exports will definitely mitigate the associated risks.
It said the latest agriculture inputs situation remained favourable. The tractors’ production increased by 38.3 percent in July FY2022, while its sales also increased by 19.9 percent. Credit disbursement to the agriculture sector increased to Rs1,366 billion in FY2021, witnessing a growth of 12 percent over an amount of Rs1,215 billion in FY2020. Although, cotton crop is at varying growth stages; however, overall, its condition is satisfactory.
The report said that large scale manufacturing (LSM) showed a remarkable performance during FY2021 and posted a growth of 14.9 percent, against the negative growth of 9.8 percent in FY2020. Inflation declined to 8.4 percent in July 2021 compared to 9.7 percent of the previous month and 9.3 percent of the corresponding month last year (July, 2020).
The report said that fiscal sector performance during FY2021 remained satisfactory owing to effective revenue mobilisation and careful expenditure management. On the revenue side, improved tax collections have been realized both at the federal and provincial level, whereas, effective expenditure management helped in containing the current expenditures to the lower side.
During FY2021, money supply witnessed expansion of Rs3,394.6 billion (growth of 16.2 percent) as compared to expansion of Rs3,109.5 billion (growth of 17.5 percent) in FY2020. The current account posted a deficit of $773 million (2.8 percent of GDP) for July FY2022 as against a surplus of $583 million (2.4 percent of GDP) last year. Current account deficit widened due to growing import volume of energy and non-energy commodities, along with a rising trend in the global prices of oil, Covid-19 vaccines, food, and metals.
According to the report, exports on fob grew by 19.7 percent during July 2021 and reached $2.3 billion in July 2021 ($1.9 billion last year). On August 23, 2021, SBP reserves became historical high at $20.3 billion due to IMF (SDR) reallocation of $2.8 billion.