Positive indicators

As the financial year 2016-17 nears its end, there are positive indicators of sustainable economic growth and progress. These are duly being appreciated and commended by various international financial institutions and donor agencies from time to time though with some occasional reservations and cautions here and there.
Positive updated macroeconomic and continuous implementation and deepening of structural reforms in a committed manner positively reflect the seriousness of the efforts of the present government towards creation of room for higher, inclusive and sustainable growth, jobs creation and poverty reduction.
Pakistan for the first time in its history has quite successfully completed the Extended Fund Facility (EFF) with the International Monetary Fund (IMF) which has put the economy on solid footing and after the recovery period is over, the national economy is now ready for sustained and inclusive growth. Pakistan is now eligible for IBRD loans which will provide the government much needed fiscal space for development projects.
In the post Programme period, the government is continuing its efforts towards strengthening of macroeconomic stability and generating higher and inclusive growth. Successful completion of consultations with the IMF in Dubai recently is also a positive indication of the government's continued commitment for carrying out structural reforms in the areas of energy, monetary , financial and public sector enterprises.
In real terms, Gross Domestic Product (GDP) has continued to maintain its growth momentum above 4 percent consecutively for third year in a row. During the outgoing financial year, the government is quite confidently expecting a growth above 5 percent, which will be the highest in the last nine years.
Similarly, the overall economic environment of the country is quite conducive backed by an accommodative monetary policy as the policy rate at 5.75 percent is the lowest in last few decades.
During March 2017, inflation increased slightly to 4.9 percent compared to 3.9 percent during this month last year. On the whole, during first nine months of current financial year (July 2016 to March 2017), inflation was recorded at 4.01 percent compared to 2.64 percent of the last year's corresponding period, reflecting a higher domestic demand and an increase commodity prices internationally.
Furthermore, credit expansion to the private sector has increased to Rs 393 billion during July 2016-March 2017 period, there has been a surge in import of machinery of over 42 percent and raw materials pointing to robust industrial activities in the country and build up of future productive capacity of the national economy. LSM also continues to grow at 3.5 percent with increase in production of cement, steel, pharmaceuticals, automobiles, paper and board and electronics. With appropriate interventions for Agriculture sector in the Finance Bill 2016, agriculture sector growth is also expected to rebound on account of better production of cotton, sugar, maize and increased prospects for wheat production. Increase in production of commodities will also have a spillover effect on the services sector.
On the fiscal side, the budget deficit which stood at 8.2 percent of GDP in financial year 2013-14 has been quite appreciably been brought down to 4.6 percent during financial year 2016 and is projected to be further down to 4.1 percent of GDP by the end of current financial year. The government is also committed to reducing net public debt which was 60.2 percent at close of fiscal year 2016 in order to lay the foundations for sustained economic growth.
As regards balance of payments, the current account deficit had increased to 5.5 billion dollars during first eight months of current financial year ie July 2016 to February 2017 largely due to a sizeable increase in imports of capital goods along with delayed receipts of Coalition Support Fund (CSF). The rise in overall import payments was mainly due to increased purchases and higher prices of fuel. However, the significant increase in capital goods imports is seen as leading the national economy to a higher growth path.
Pakistan's foreign exchange reserves presently are hovering around 22 billion dollars which is more than four months of the country's import bill. Foreign exchange reserves expected to reach over 23 billion dollars by end of June 2017.
The government continues to diversify financing from both domestic and external sources lengthening the maturity profile of domestic debt and improving the balance between domestic and external debt. For achieving these objectives, the government already published Medium Term Debt Management Strategy and is monitoring its implementation through preparation of risk reports on debt management.
These positive macroeconomic achievements and continued implementation and deepening of structural reforms duly reflect the determination of the government for creation of room for higher inclusive and sustainable growth along with creation of more and more employment opportunities for the people and thus making considerable contribution to poverty reduction.
(The views expressed in this article are not necessarily those of the newspaper)