ISLAMABAD, Dec 30 (APP):The economic growth for the fiscal year 2022-23 is likely to remain below the budgeted target due to devastation created by floods, finance ministry said in a recent report released here Friday.
“This combination of low growth, high inflation and low levels of official reserves is particularly challenging for policy makers,” says the Monthly Economic Update and Outlook for December 2022.
It says, as in many other countries, Pakistan’s economic activity remained currently below potential, implying a negative output gap. At the same time, again as in many other countries, inflation remained substantially above targets.
Furthermore, as is also the case in several other emerging economies, the global energy crises, which has pushed up global commodity prices, also puts downward pressure on international official reserves.
According to the report, in the short run, demand management policies by Pakistan’s central bank and government were designed to fight inflation and protect official reserves and protect inclusive growth.
During first five months of FY2023, Pakistan’s economy showed signs of resilience to domestic and global challenges. Despite facing inflationary pressures, trade and current account deficits are continuously showing improvement, which is a sigh of relief for financing challenges.
On fiscal front, fiscal consolidation is topmost priority to achieve targeted fiscal deficit despite government is facing the unprecedented challenge of providing relief to people in flood-hit areas.
But in the long run, the government aims to stimulate the supply side to elevate the long run potential growth rate of the economy.
Increasing the long run growth trends of output, per capita real incomes and employment can only be achieved by stimulating investments in new production capacities and improving overall productivity.
According to the report, the inflationary pressure has started easing out as the Month-on-Month (MoM) Consumer Price Index (CPI) inflation declined from massive high of 4.7 percent in October 2022 to 0.8 percent in November.
The same trend is witnessed in Sensitive Price Indicator (SPI) which decelerated for three consecutive weeks in December that would also be transmitted into CPI inflation of the current month.
Moreover, the recent government’s decision to provide relief to the masses by slashing the prices of petroleum products is expected to translate into lower cost of food and non food for general public.
SBP has announced the increase of 100 bps in policy rate in order to curtail the inflationary expectation while the declining international commodity prices are expected to offset the inflation spikes that emerged due to domestic supply shocks.
On agriculture productivity, the report says, standing water due to recent floods may create problem in achieving the assigned wheat sowing target, however, the federal and provincial governments are working hard and committed to enhance wheat productivity.
The Large Scale Manufacturing (LSM) output came in somewhat lower than expected on the basis of a baseline scenario.
It says, Foreign Direct Investment (FDI) reached $ 430.1 million during July-November FY2023 against $ 884.9 million last year, showing decrease of 51.4 percent. On MOM basis, FDI was recorded at $ 81.8 million in November 2022 as against inflow of $ 94.9 million in October 2022.
The net FBR revenues increased by 9.2 percent to Rs 1317 billion during Jul-Oct FY2023 against Rs 1205 billion last year. Tax collection grew by 16.8 percent to reach Rs 2139 billion in the first four months of FY2023 up from Rs.1830 billion in the comparable period of last year.
In Jul-Nov FY2023, workers’ remittances recorded at $ 12.0 billion against $ 13.3 billion last year, a decrease of 9.6 percent.
Pakistan’s total liquid foreign exchange reserves increased to $ 12.0 billion on December 21, 2022, with the SBP’s reserves stood at $ 6.1 billion. Commercial banks’ reserves remained at $ 5.9 billion
The KSE-100 index closed at 42,349 points as on 30 November 2022 while market capitalization settled at Rs 6,768 billion.
