ISLAMABAD   -  Federal Minister for Economic Affairs, Makhdum Khusro Bakhtyar, Sunday said that Key economic indicators are showing strong performance despite challenges posed by the second wave of COVID-19 and depressed economic conditions in many regions globally. 

In a statement issued here, the minister said that current account imbalances inherited from a previous government stand firmly addressed. This economic performance is remarkable in the context of sharp growth contraction worldwide. The government remains confident that GDP will even surpass the growth target by June 2021, setting the stage for much higher growth the following year. The economy is expected to maintain this strong momentum and gather more steam going forward. The Minister said that this economic turnaround is underpinned by the following:

Current Account Balance for first 4-months of FY2020-21 registered a surplus of $1.2 billion as against a deficit of $1.4 billion in the same period of last year. This strong performance of current account balance has been achieved after 17-years. 

Worker’s remittances during the first four months of FY2020-21 stood at $9.4 billion as against $7.5 billion of the last year. Workers’ remittances registered a strong growth of 26.5 per cent which augurs well for the external account stability. Such excellent growth in workers remittances has been achieved by a combination of policy measures that include anti-money laundering regulations and incentives for the promotion of financial transactions through the formal banking system. 

Foreign Direct Investment has witnessed 150 per cent YoY Increase in October 2021. FDI during October 2020 was $317 million as compared with $126 million recorded in the same months last year. Increase in FDI reflects return confidence of international investors and growing optimism about the economic future of the country.

Large Scale Manufacturing (LSM) continues to rebound, expanding by 4.8 per cent YoY in FY21 Q1, against a contraction of 5.5 per cent in the same quarter last year. Evidence of momentum returning can be seen from growing production of cement, textile, automobile and home appliances. Growth in LSM is largely supported by PM’s package for the construction industry and special measures announced by the Government for the industrial sector to fend off additional costs caused by COVID-19.

Federal Board of Revenue (FBR) has also achieved the target of revenues by collecting  Rs. 1.69 trillion during the July-November period of the current fiscal year against the target of Rs1.67 trillion. The revenue collection is higher by Rs69 billion or 4.2 per cent as compared to Rs1.62 trillion collected in the same period of last fiscal year.

The pace of inflation further eased to 8.3 per cent in November 2020. Average inflation rate in the first five months of the current fiscal year stood at 8.8 per cent.

Official External Inflows during the first 4-months of FY2020-21 are $3.2 billion as against $2.5 billion the same quarter last year. This 28 per cent increase in external inflows would help strengthen the forex reserves.

Foreign Exchange Reserves held with the SBP have increased to $13.11 billion as against $8.24 billion in the corresponding period of last year. Foreign exchange reserves have shown growth of 59 per cent. Improved forex reserves would further stabilise the exchange rate and build a buffer against any external shocks. Pak Rupee has shown strong performance as it appreciated about 4.9 per cent in the last five months. Pak rupee has been declared the third best-performing currency in Asia.

Pakistan’s external account stability is supported by major improvements in key economic indicators and confidence of international financial markets. 

Looking ahead, the government’s planned external inflows are more than sufficient to cover upcoming payments. The recent announcement by G-20 for the second round of debt relief coupled with favourable capital market conditions for the launch of a sovereign transaction and enhanced inflows on account of improvements in trade, remittances and FDI will give further strength to the external account position of the country.

During a recent meeting of the Board of Directors, ADB management had also acknowledged that the government’s ongoing efforts to ensure stability have started showing encouraging results despite the COVID-19 challenge. The Asian Development Bank disbursed $300 million on 4th December 2020 for budgetary support under Trade & Competitiveness Program. It reflects international financial institutions’ confidence in the government’s reform agenda for sustainable growth.

The Minister stated that despite the challenges posed by the second wave of COVID-19, Pakistan macroeconomic indicators are showing resilience and strong performance viz-a-viz the regional economies.