A Business Recorder staff reporter has written a report carried by Business Recorder dated 09-01-2017 with reference to Dr Hafiz A Pasha speaking at AAJ TV program "Paisa Bolta Hai" in which he has highlighted that foreign exchange reserves are falling. While quoting the former Finance Minister Dr Hafeez A Pasha, the reporter has stated that foreign exchange reserves have started declining.
Pasha is of the view that according to the balance of payment and trade statistics by the SBP, increase in import was due to petroleum products and not on account of machinery, import of power generation machinery was around $350 million and even lower about $200 million in the first quarter of the current year. He has further stated that the fiscal deficit during the first quarter was 3.1 percent.
First of all it is worth mentioning that reserves level are continuously rising from the level of $ 7.57 billion of which SBP reserves were $ 2.829 and Banks reserve were $ 4.748 billion as on 10 February 2014 to a historical level above US $ 23.203 billion as on 10th January, 2017 of which SBP reserves stood at $ 18.345 billion and scheduled banks reserves at $ 4.858 billion compared to $ 20.766 billion of which SBP reserves were $15.830 billion and banks reserves were $4.936 billion as on 11 Jan,2016 despite repayments of foreign loans amounting over US$ 12 billion which was obtained by the previous governments. It is equally important to note that in FY2014 the total reserves were $14.14 billion which increased to $18.69 in FY2015 and $ 23.01 in FY2016,respectively.
Dr Pasha has also stated that up to 70 percent increase in imports during last five month was due to petroleum imports and not on account of machinery as well power generating machinery. The data of import of both petroleum product and machinery negate the claim made by Dr Pasha.
During first quarter of FY2017 the import of machinery in value terms stood at US$ 1498.0 million as compared to US$ 1330.9 million of corresponding quarter of FY2016, thus registered a growth of 12.6 percent. The import of machinery is continuously rising as during July-November, FY2017 the imports of machinery increased to US$ 2565.2 million as compared to US$ 2367.7 million during the corresponding period of last year thus registered a growth of 8.3 percent. Of which the import of power generating machinery is US$ 396.4 million as compared to US$ 351.6 million during the corresponding period of last year registering a growth of 12.7 percent. Textile machinery import remained at US$229.6 million as compared to US$200.7 million registering a growth of 14.4 percent while construction & mining imports is US $ 43.8 million against US $ 29.6 million with growth of 48 percent and other machinery imports remain higher by 44 percent over last year. This reflects the buoyancy in productive activities.
With regard to the imports of petroleum product, it is for the information of the reporter that the import of petroleum group declined by 13.4 percent while petroleum crude declined by 49.5 percent during the first quarter of FY2017 and during July-November,FY2017 petroleum group registered a nominal growth 0.4 percent whereas petroleum crude declined by 28.1 percent over the last year. So the reporter is not correct in stating that increase in import was due to petroleum products and not on account of machinery.
It is further added that during July-December, FY2017 credit to private sector flows have seen an expansion of 28.3 percent and on YOY basis it has registered a growth of 12.3 percent. The expansion in credit to private sector indicates that there is continuous increase in the economic activities in industrial, agricultural and other sectors which bode well for the economic growth The foreign direct investment during FY 2016 reached around US $ 2 billion. During Jul-Nov, FY 2017 FDI decline by 45.2 percent but FPI shows phenomenal increase of 298.7 percent on account of strong growth in equity market. Recent reclassification of MSCI Emerging Market Index in June 2016 is changing the dynamics of the Pakistan equity Market and bode well in attracting more foreign portfolio investments. The CPEC program will also attract foreign direct investment going forward.
The reporter has mentioned that fiscal deficit for the first quarter (July-September) FY2017 was 3.1 percent of GDP, which is totally incorrect. According to State Bank of Pakistan's Quarterly Report for July-September 2016-17 as well as the fiscal operations available on the website of Finance Division, the figure for fiscal deficit has been indicated as 1.3 percent of GDP for the July-September first quarter of current fiscal year.
The reporter has compared the net revenue receipts of the federal government with the total debt-servicing requirement of the entire federation including federal and provincial governments. As a result the debt servicing appears to be higher. For an appropriate comparison, if the total debt servicing of the government (including federal and provincial governments) is to be taken then the consolidated revenues receipts need to be included for making an apple-to-apple comparison.
Normally, the provincial surpluses during the first quarters of every financial year remain low due the fact that spending by the provincial governments is higher than the receipts. However, government is expecting higher tax collections in the remaining period of the current financial year. As a result, more fiscal transfers will be provided to the provinces. This would increase the provincial surpluses.
The government is aware that tax and non-tax receipts have been low. Nevertheless, it has consciously taken measures on the current expenditure, as a result of which the current expenditure shows a negative growth. However, no compromise is made on the development expenditures.
Comments
Comments are closed.