Fiscal stimulus improves economy, strengthens recovery prospects

Economy on track to achieve set growth target for FY22: Economic Outlook

Fiscal stimulus improves economy, strengthens recovery prospectsISLAMABAD, Apr 14 (APP): The government’s fiscal stimulus has succeeded in improving economic as well as social outlook, strengthening the prospects of the country’s economic recovery as indicated by various indicators.

“The expectations of economic recovery are strengthening on the basis of improvement in business confidence evident from industrial growth,” official sources said adding the State Bank of Pakistan (SBP) in its recent Monetary Policy Statement was now projecting higher growth in Financial Year 2021 compared to its previous anticipation.

Although the third wave of the COVID-19 pandemic was posing downside risk, however added that the government’s timely measures combined with the observance of SoPs by the general public would be helpful in continuation of economic recovery along with decelerating inflationary pressure and preserving external balance.

Official data on performance of various sectors of economy revealed that the Large Sclae Manufacturing (LSM) had surpassed its pre-COVID level of production in February Fiscal Year 2021, witnessing 4.85 percent growth on Year-on-Year (YoY) basis.

While accumulative LSM growth during July-February FY 2021, was recorded at 7.45 percent compared to the corresponding period of last year.

Meanwhile, the consumer Price Index (CPI) has recorded an increase of 9.1 percent on YoY basis in March 2021 as compared to 10.2 percent in March 2020.

The remittances dispatched by the overseas Pakistani Workers’ extended their unprecedented streak of above $2 billion for the 10th consecutive month in March as the remittances rose to $2.7 billion in the month posting 43 percent increase than same month of last year when the inflows were recorded at $1.9 billion.

The remittances in March 2021 also increased by 20 percent compared to the last month (February) when the inflows were recorded at $2.226 billion.

For the first 10 months of this fiscal year (Jul-Mar FY21), remittances reached $21.5 billion and have risen by  26 percent over same period of last fiscal year.

The country’s total liquid foreign exchange reserves increased to $20.679 billion by the second week of April 2021 including $13.527 billion reserves of SBP and $7.152 billion in commercial banks.

The Federal Board of Revenue (FBR) has collected net revenue of Rs.3394 billion during Jul-March of 2020-21, which has exceeded the target of Rs.3287 billion by more than Rs.100 billion.

This represents a growth of about 10% over the collection of Rs.3076 billion during the same period of last Fiscal Year 2019-20.

Meanwhile, on fiscal side, the first, seven months of FY2021 witnessed considerable improvement as substantial increase in net federal revenue receipts and effective management of expenditures helped in containing the fiscal deficit at 2.9 percent of GDP during July-January, FY2021.

The primary balance continues to remain in surplus and increased by 0.9 percent of GDP to reach Rs 416 billion in July-January, FY2021.

On the expenditure side, total expenditures increased by 0.2 percent to Rs 3665 billion during July-January FY 2021 against Rs 3658 billion last year.  Within the total, current expenditures grew by 3.2 percent to Rs 3401 billion in Jul-Jan, FY2021 (Rs 3297 billion last year).

Meanwhile, during July 1 to March 5, FY2021 Money Supply (M2) observed an expansion of Rs 962.4 billion against Rs 946.9 billion last year. Within Money Supply, Net Foreign Assets (NFA) of the banking system increased by Rs 597.3 billion against Rs 1,152.6 billion last year).

The Net Domestic Assets (NDA) witnessed the expansion of Rs 365.1 billion against a contraction of Rs 205.7 billion last year whereas the private sector credit increased by Rs 365.9 billion against Rs 244.9 billion last year.

The Current Account posted a surplus of $ 0.9 billion (0.5 percent of GDP) for Jul-Feb FY2021, it added.

In July-February FY2021, FDI recorded at $ 1,300.4 million against $ 1,854.5 million last year while total foreign portfolio investment registered an outflow of $ 388.5 million during July-February FY2021.


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