ISLAMABAD, July 1 (APP): Pakistan’s economy maintained its growth momentum during fiscal year 2016, despite suffering from heavy losses in the agriculture sector, State Bank of Pakistan said.

According to State Bank of Pakistan (SBP)’s Third Quarterly Report for FY16 on the state of Pakistan’s Economy released on Friday said particularly highlighted the acceleration in industrial and services sectors’ growth on the back of better energy supply and improvement in security situation in the country.

The SBP report further noted that other key macro economic
indicators also improved during FY16.

Citing examples, the SBP report said that average Consumers Price Index (CPI) inflation was almost half the level seen last year.
“In the meanwhile, inflationary expectations also subdued,”
the report said.

This ease in inflation, SBP said that primarily came on the back of continued low commodity prices in the global markets and its swift pass through to domestic consumers, particularly for POL products, comfortable supplies of key food items, and stable exchange rate.

The SBP report further said that another positive for the economy, as mentioned by the Report, was the surplus in the external account during first nine months of the year, which was led by largely contained oil payments, a modest rise in worker remittances and foreign currency loans.

Hence, SBP’s reserves reached US$ 16.1 billion (aggregate
reserves including banks) by end March 2016 this amount was
sufficient to finance four months of the country’s import bill, and
more than twice the short term payments, the report said.

It further said that Fiscal indicators also witnessed broad
improvement, as noted by the Report: the budget deficit reduced to
3.4 percent of GDP in Jul Mar FY16, from 3.8 percent in the same
period last year.

More importantly, the country recorded a primary surplus
during this period. Higher revenues, contained expenses and larger
surplus from provinces led to this improvement in the fiscal
account, the SBP report said.

According to the Report, besides subdued commodity prices
(particularly oil) in the global market, the policy support also
played a key role in improving macro fundamentals.

An expansionary monetary policy for the last one and a half
year, development focus of fiscal spending (particularly on
infrastructure projects which also encouraged construction and
related activities), better energy management, and CPEC related
initiatives, are case in point.

The Report also identified low investment rate, continued
weakness in exports, slowdown in remittances, and narrow tax base
despite stop gap measures by the government to increase tax
collection as some of the key challenges for the economy, which
needs to be tackled through structural reforms so that the recent
improvement in macro fundamentals can be sustained.