Daily Times

Though the government is making tall claims of economic recovery, the poverty-stricken and inflation-ridden masses are unlikely to get any relief as inflation is expected to remain in double digits in the coming month.

The Economic Advisor’s Wing (EAW) of the Ministry of Finance, in its Monthly Economic Update and Outlook for January issued on Thursday said Pakistan’s inflation rate is still under pressure like other countries due to the rise in international commodity prices and economic agents’ expectations.

It stated that it expects the already high inflation to remain in double digits year-on-year (YoY) in the coming month. According to the document released by the Finance Ministry, the economy of the country continues to show healthy value-added creation as its cyclical position is largely balanced and the trend growth rate of potential output remains strong. The report showed that although this path was expected to continue, a number of risk factors were also present at the horizon.

It noted that a first risk factor was the surge of the Omicron variant of the Covid-19 disease which, as experienced in other countries, showed that this variant was far more infectious than previous variants.

A second risk remains the stress on the external balance, it said, adding though the current account deficit remained high, the baseline scenario remained that the excess of imports over exports would gradually ease in the coming months. “This expected tendency is enforced by government measures designed to stimulate exports and moderate import demand. The monetary policy decisions are also supportive in this respect,” the report added.

Thirdly, inflation is high and on year-on-year (YoY) it is expected to remain in double digits in the coming month, it added. It said that the government measures, accompanied by the support of monetary policy, were directed to protect consumers’ purchasing power in the future.

The overall LSM posted a growth of 3.3 percent during July-November FY2022 against the growth of 6.9 percent in the same period of last year. During the period, 11 out of 15 subsectors of LSM have witnessed positive growth.

According to the report, the fiscal deficit during July-November FY2022 stood at Rs951 billion against Rs822 billion in the same period of last year. In terms of GDP, the fiscal deficit has been contained at 1.5 percent, the same level as in the comparable period of last year, whereas the primary balance posted a deficit of Rs36 billion (0.1 percent of GDP) during July-November FY2022 against the surplus of Rs 216 billion (0.4 percent of GDP) last year.

Meanwhile, the net provisional tax collection by the FBR increased by 32.5 percent to reach Rs2919.7 billion during the first half of FY2022 against Rs2204.1 billion in the same period of last year. Keeping in view the overall macroeconomic environment, the SBP has maintained the policy rate at 9.75 percent. During 1st July–31st December, FY22 money supply (M2) witnessed growth of 4.5 percent (Rs1,104.1 billion) as compared to growth of 5.6 percent (Rs. 1,162.8 billion) last year.

Within M2, Net Foreign Assets (NFA) witnessed a contraction of Rs 211.4 billion as compared to an increase of Rs 579.8 billion in last year.

The foreign direct investment in July-December reached $1056.6 million ($ 879.7 million last year) increased by 20.1 percent whereas the workers’ remittances during the period reached $ 15.8 billion ($ 14.2 billion last year), which increased by 11.3 percent. Workers’ remittances continued their unprecedented streak of above $ 2.0 billion for the 19th consecutive month in December 2021.

The country’s total liquid foreign exchange reserves increased to $23.1 billion on January 19, 2022, with the SBP’s reserves now standing at $16.8 billion, commercial banks’ reserves remained at $6.3 billion.