By Asghar Ali Mubarak
ISLAMABAD: Despite challenges at internal and external fronts, especially owing to the outbreak of coronavirus pandemic, the prudent strategy adopted by the government helped to put the country’s economy back on a growth trajectory as indicated by many economic indicators.
The industrial sector, which was badly affected due to coronavirus, rebounded and witnessed a considerable positive growth as the Large Scale Manufacturing Industries (LSMI) production grew by 5.02 per cent on a year-on-year basis during the first month of the current fiscal year compared to the corresponding month of last year, according to Pakistan Bureau of Statistics (PBS).
On a month-on-month basis, the industrial growth witnessed increase of 9.54 per cent in July 2020 when compared with the indices of June 2020.
The highest increase of 2.25 per cent was witnessed in the indices monitored by the Ministry of Industries, followed by 1.77 per cent increase in indices monitored by the Provincial Board of Statistics and 1 per cent increase in the products monitored by the Oil Companies Advisory Committee (OCAC).
On the external front, the country’s exports also witnessed positive growth during the month of September and grew by 6 per cent on a year-on-year basis as compared to the same month of last year. According to official sources, the exports are expected to grow further during the month of October. During the first two months of the current fiscal year (July-August) the country’s merchandise trade deficit witnessed reduction of 7.48 per cent as compared to the deficit of the corresponding period of last year.
According to official sources, the Foreign Direct Investment (FDI) into the country also witnessed an increase of 39.9 per cent during the first two months of the current fiscal, recorded at $226.7 million against the direct investment of $162 million during July-August (2019-20), according to latest figures of State Bank of Pakistan (SBP). In absolute terms, the FDI into the country increased by $64.7 million during the first two months compared to the last year. On a year-on-year basis, the direct investment increased by 23.5 per cent to $112.3 million during the month of August 2020 as compared to the investments of $90.9 million in the same month of 2019.
The portfolio investment into the country increased by 310.1 per cent to $76.3 million during July-August (2020-21) against the investment of $36.3 million during the corresponding period of last year. During the month of August 2020, the portfolio investment increased 112.6 per cent from $2.4 million in August 2019 to $3.1 million in August 2020.
The Federal Board of Revenue (FBR) has also done remarkably well in the 1st quarter of the current fiscal year and collected revenues of Rs1,004 trillion, exceeding the given target of Rs. 970 billion by a margin of 34 billion. The Income Tax collection for the quarter stood at Rs358 billion while the collection of Sales Tax, Federal Excise Duty and Customs Duty remained at Rs426 billion, Rs56 billion and Rs164 billion respectively.
This is for the first time that FBR managed to cross the figure of 1 trillion in gross as well as net collection in the first quarter of a fiscal year. The gross revenue stood at Rs1052 billion. The surplus collection was despite the issuance of refunds of Rs48 billion and sluggish performance of the economy in the wake of on-going Covid-19 pandemic.
The State Bank of Pakistan has also kept the policy rate unchanged at 7.0 % due to improved business confidence and growth outlook. It had predicted average inflation to fall within the previously announced range of 7 – 9 per cent during the fiscal year 2020-21.
The Pakistani rupee also hit three and a half month high at Rs 164.5 against US dollar in the interbank market during last week. The experts are attributing this positive development mainly to the reduction of oil prices in the international market besides increasing inflow of remittances by the overseas Pakistanis.
During previous two working days, the rupee recovered more than Rs 1.20, according to latest data of State Bank of Pakistan.
The rupee has appreciated due to a number of reasons including overseas Pakistanis opening accounts in local banks under the SBP’s Roshan Digital Account initiative.
Meanwhile, SBP sources said that about 1000 overseas Pakistanis were opening their accounts in the local banks under Roshan Digital Account Initiative and this development would help to boost dollar inflows into the domestic economy.
Through their accounts in the local banks, the overseas Pakistani are eager to invest in the capital market and construction sector.
Furthermore, according to reports, the industries of the textile exporters were also running at full capacity and they would also be selling dollars or about to sell in the interbank market.
Meanwhile, the current account balance is also showing positive trend as according to the SBP, current account surplus cumulatively reached to $805 million during first two months (Jul-Aug) of the current fiscal year compared to a deficit of $1.2 billion in the same period last year.
The remittances sent by overseas Pakistanis have also witnessed record increase during the last three months as the inflow reached an unprecedented level of $7.3 billion showing 37.2 per cent higher than the same period last year.
It is pertinent to mention here that the government has been following macroeconomic fundamentals through effective policymaking and targeted reforms to achieve sustainable and inclusive growth. The government through its Monetary and Fiscal Policies Coordination Board has been engaged in reviewing overall economic situation and coordinate policy actions in an effective manner to achieve desired targets of key economic indicators.