A meeting of the Monetary and Fiscal Policies Co-ordination Board was held under the chairmanship of Federal Minister for Finance, Revenue, Economic Affairs, Statistics and Privatisation Senator Mohammad Ishaq Dar here on Saturday. The meeting was attended by Minister for Planning, Development and Reforms, Secretary Finance, Secretary Commerce, Governor State Bank of Pakistan, Former Governor SBP Dr Ishrat Hussain, Vice Chancellor PIDE, Dr Asad Zaman, and other senior officers of Finance Division. The Finance Secretary briefed the meeting on economic situation. The economic indicators are moving in right direction, he said.
The growth momentum in LSM was continuing, mainly supported by better energy supplies, lower commodity prices and accommodative polices. The sector was able to record a growth of 3.21percent during FY 2016. The industry specific data shows that a number of sectors performed well during FY 2016, such as automobile grew by 16.11 percent, fertilisers 13.81percent, chemicals 8.13 percent, rubber products 7.16 percent, Non-Metallic Mineral products 10.02 percent, pharmaceuticals 6.54 percent, leather 7.76 percent, Food Beverages 0.92 percent and textiles 0.42 percent. The current trend of import of machinery in construction, textile and power sector bode well for further improvement in LSM sector. The inflation has been contained due to government’s supportive policies. The current trend suggests that inflation will remain below the target of 6 percent during current fiscal year. Remarkable increase in foreign exchange reserves was noted. During July 2016, current account deficit expanded by $591 million due to fall in exports and remittances. The trade balance improved to $1.5 billion compared to $1.8 billion of last year on YoY basis.
The FBR revenues are continuously rising along with the number of taxpayers. During July 2016, FBR tax collection posted a growth of 6.6 percent. The meeting was informed that foreign direct investment during July 2016 declined by 14.6 percent, but portfolio investment remained strong which helped in increasing total foreign investment by 125 percent. The Finance Minister suggested that Board of Investment should monitor the flow of FDI regularly. The capital market performance is remarkable and our PSX index is better than many capital markets of the world.
The meeting noted that external public debt to GDP has reduced from 21percent in FY 2013 to 20 percent in FY 2016 indicating reduction in external public debt burden. The debt sustainability indicators of domestic and external debt have improved compared to FY 2013.
The meeting showed concern on the falling exports. It was observed that competitiveness is also one of the reasons in export decline. The finance minister opined that the government has already initiated a number of measures for exports enhancement. There is no load shedding for the industrial sector. The tariffs have been slashed. He stressed to look into the competitiveness aspect and suggested that meetings of Cabinet sub-committee n Production and Exports should be held regularly and a multi-pronged approach at federal, provincial and local level be followed.
The Governor SBP informed that monetary expansion during FY 2016 remained aligned with the overall improvements in macroeconomic indicators with substantial contribution stemming from pick-up in private sector credit. The credit to private sector recorded strong growth of 11.5 percent to reach Rs 460.6 billion during FY 2016. Overall, there has been a broad-based increase in credit demand during FY 2016 with impetus coming from textiles, garments, chemicals and services sectors.
Reserve money growth decelerated to 2.8 percent during 1stJul to 26th August 2016 as against a growth of 8.0 percent in corresponding period of last year. Currency in Circulation (CIC) growth remained positive throughout FY 2016. During 1st Jul to 26th August 2016, CIC decreased by Rs 50 billion compared with an increase of Rs 1 48 billion in the corresponding period of FY16. The currency-to-M2 ratio increased to 26.2 on 26th August 2016 compared 24.4 a year earlier. The Finance Minister desired that all ministries and organisations should keep a close watch on essential economic indicators so that remedial action is initiated as and when required.-PR