Economy maintains its growth momentum: SBP report


KARACHI, June 30 (APP): The economy has maintained its growth
momentum, says State Bank of Pakistan (SBP) third quarterly report
on state of Pakistan’s economy released here on Friday.
The growth in real GDP remained at its upward trajectory, and
increased to a decade-high of 5.3 percent in FY17, it said adding
that economic indicators like private sector credit and investment
also posted encouraging picture, whereas inflation remained below
the target.
The report also highlighted the revival in the agriculture sector
during the fiscal year 2017 (FY17), which was supported by favorable
policy measures, including subsidy on fertilizer, reduction in sales
tax on tractors, and increased access to finance.
Better agriculture had, in turn, positive spillover for trade and
manufacturing sectors, argued by the report. Further, Public Sector
Development Programme (PSDP) and China-Pakistan Economic Corridor
(CPEC)-related activities also continued to boost construction related
The overall improvement in business sentiments along with supportive
policies (historic low interest rate, high infrastructure spending and
better law and order) has encouraged a number of firms to pursue expansion
plans, as observed by the SBP report.
This was reflected in a significant surge in private sector credit
off-take during FY17, with a sizable share of fixed investment loans. At
the same time, an increase in machinery imports was also noted.
The report also mentions the decline in exports and worker remittances,
which along with the increase in imports led to a higher current account
deficit as compared to the last year.
On the financing side, the official external inflows in Jul-Mar FY17
stood around the same level as last year, while both FDI and FPI inflows
increased. Although SBP’s foreign exchange (FX) reserves declined during
this period, these are sufficient to comfortably finance more than four
months of imports.
Regarding fiscal situation, the Report observes an increase in the
fiscal deficit to 3.9 percent of GDP during Jul-Mar FY17. The expenditure
side of the fiscal operations remained well-managed with a contained
growth in current expenditure and a robust growth of about 15 percent in
the development expenditures. However, growth in tax revenues remained
less than the target.
The report also underscores the importance of sustainable levels of
current and fiscal accounts in order to maintain the prevailing growth
momentum, and hard-earned economic stabilization.