The government seems to be justified in expressing optimism over the country’s economic out-look as the key indicators were showing improvement as fiscal discipline was maintained through stronger revenue mobilization and prudent expenditure management. In its economic update and outlook for November, the Ministry of Finance said the industrial activity continued to strengthen amid implementation of reforms. It said the higher remittances and expanding Large-Scale Manufacturing (LSM) sector and IT exports strengthened the economic outlook. Backed by healthy realization of State Bank of Pakistan’s profits due to record interest rates, the Ministry said the public debt declined by over Rs1.371 trillion, marking the first quarterly reduction in more than five years.
There is no doubt that the credit for this improvement goes to the hard work of the government’s economic team, led by Finance Minister Muhammad Aurangzeb, which has successfully stabilized the economy enabling it to absorb domestic and foreign shocks as confirmed by regional tension and large-scale damage caused by floods and incessant rains. It is because of the visible progress and improvement in different sectors that the global creditors are expressing complete faith in the policies of the government and more and more countries are showing willingness to strengthen cooperative engagement with Pakistan.
More important are the policies and strategies being adopted to reduce the otherwise alarming debt of the country. Its decline reflects strategic use of surplus funds for early retirement of costly debt, thereby reducing refinancing and rollover risks and strengthening macroeconomic stability. A satisfactory arrangement has also been worked out to bring down the circular debt, which will surely help address one of the major challenges of the power sector. Trade deficit is surely a matter of concern but there are indications that one of the factors attributing to this phenomenon is import of machinery and plants that should ultimately lead to increased industrial output. It is encouraging that the LSM output rose 4.1% during July-September of the current fiscal year with 15 sectors recording positive growth, including textile, wearing apparel, non-metallic mineral products, food, coke & petroleum products, electrical equipment, automobile and tobacco. Federal revenues increased marginally by 2.4% but importantly the FBR’s collection rose 11.4% to Rs3.835 trillion. However, expenditure is outpacing revenue collection and there is, therefore, a need to address this challenge in a realistic manner along with more measures to check inflation, which is rising due to various factors.
