Monthly economic update: Pushing current growth to higher level termed 'big challenge'

ISLAMABAD: The Ministry of Finance has identified export of sufficient proportion of additional production and satisfying the needs of domestic consumers as challenges for moving from balanced and sustainable growth to a higher level.

The monthly economic update of Finance Ministry shared with media on Sunday stated that the economy is moving on a balanced and sustainable growth trajectory.

The challenge remains to elevate this sustainable growth path to a higher level.

Finance Ministry further stated that this requires extending Pakistan's production capacity and ensuring that a sufficient proportion of this additional production is exported, besides satisfying the needs of domestic consumers. Enhancing production capacity and increasing its efficiency is not possible without directing a larger proportion of the available and future income towards investments, instead of consumption, it added. Finance Ministry is of the view that recent geopolitical situation would help Pakistan to grab more market share through exports.

As the government has increased reliance on import of sugar, wheat, crude oil, and other essential commodities, coupled with considerable slide in rupee against dollar, it would have serious repercussion on inflation, as well as on the current account: Official on condition of anonymity

Finance Ministry also revealed that there was a 30.1 percent decline in Foreign Direct Investment (FDI) during the last fiscal year (2020-21) as compared to a year before and upsurge in international food prices amid coronavirus pandemic as one of the factors for increase in inflation in the country because there was 44.4 percent increase in sugar price, 52.2 percent in palm oil price, 78.8 percent in soybean price and 18 percent in wheat price in global market during the last one year.

Economic rebound to continue, says finance ministry

The price of sugar has increased in the international market from $270 metric ton in July 2020 to $390 metric ton in July 2021, reflecting an increase of 44.4 percent, palm oil price from $694 metric ton in July 2020 to $1057 metric ton in July 2021, showing an increase of 52.3 percent, stated Finance Ministry while quoting the World Bank pink sheet.

Likewise, the ministry stated that wheat price has increased from $212.7 MT in July 2020 to $250.9 MT in July 2021 after an increase of 18 percent and soybean price from $821 MT in July 2021 to $1468 MT, reflecting an increase of 78.8 percent.

An official on condition of anonymity said that as the government has increased reliance on import of sugar, wheat, crude oil, and other essential commodities coupled with considerable slide in rupee against dollar, it would have serious repercussion on inflation, as well as on the current account.

As per economic update, Pakistan is the net importer of key food items such as wheat, sugar, edible oil and pulses and the current upsurge in international food prices amid the coronavirus pandemic makes it imperative to build strategic reserves of essential commodities to bring stability in prices of daily-use items.

A meeting of the Economic Coordination Committee(ECC) of the cabinet presided over by Finance Minister Shaukat Tarin on August 26, 2021 has decided to import 200,000 tonnes sugar and 400,000 tonnes wheat. On the same day a meeting of the monetary and fiscal policies coordination board (MFPCB), Governor State Bank of Pakistan (SBP) highlighted the increase in commodities prices in the global market will have implications for higher import bill and inflation.

Finance Minister during the meeting has stressed the need to design and execute policies to achieve economic targets and overcome the possible risks.

Copyright Business Recorder, 2021