Pakistan economy on the path to recovery


Mohammad Jamil

IN THE first week of October 2019, there were at least 39 news items that had a lot of potential to hit headlines. However, none of these were neither highlighted in print media nor discussed in talk shows by the so-called analysts and panelists. Perhaps, influenced by the opposition parties’ propaganda accusing the PTI government of the economic mess, they conveniently forgot that it was created during the last ten years. It has to be mentioned that the dismal economic situation was due to poor performance of PPP and PML-N governments in their tenures. During the fifth year of PML-N’s last tenure (2017-2018), exports amounted to $19 billion and imports $57 bn; hence trade deficit of $ 38 bn. After taking into consideration remittances of $19 bn from Pakistani expatriates, current account deficit was $ 19 bn – the highest ever in Pakistan’s 70 year history.
Pakistan’s external debt had mounted to around $90 billion; economic reserves (including SBP and commercial banks) had declined to $12 bn, not enough for even three months imports. Prime Minister Imran Khan had to approach Pakistan’s friends Saudi Arabia and the UAE who were generous to deposit $2 bn each in State Bank of Pakistan in addition to supply of oil on a deferred payment basis. Thus Pakistan averted the default due to Imran Khan’s efforts. The PTI government has indeed taken measures to reverse the economic downslide during the last ten years of previous governments. The PTI government measures include documentation of economy to increase tax revenue, reduce imports and increase exports to control trade deficit. The interbank market rupee has stabilized around Rs. 155 per US dollar; and during the last few weeks, the KSE-100 index has crossed 39000 points, which shows confidence of investors.
The Federal Board of Revenue (FBR) collected Rs. 960 billion in the first quarter of current fiscal year 2019/2020, which is about 90% of the target for the quarter, Syed Shabbar Zaidi, Chairman, FBR said on the completion of first quarter. In a message on social media, he said that tax collection up to 90 percent of highly aggressive target for quarter ended September 30, 2019 has been achieved.
The Chairman added that the imports had been contracted by $3 billion during the period, which is no mean achievement. It is important to recount the achievements and measures by the PTI government to put economy on an even keel and to increase employment opportunities, which includes Pakistan Post launching of National Internship Program with 35000 vacancies. Textile industry showed 26% growth in quantitative terms according to APTMA. Remittances in Sept 2019 increased by 17.5% compared to September 2018.
New tourism zones are being formed in KP; 20 new tourist spots have been identified in KP. Industrial Sectors profit year ending 30th June 2019: Banking Rs. 147 bn, Cement Rs. 31bn, Auto sector Rs. 121bn; Oil & Gas Rs. 221bn; Fertilizer Rs. 68bn; and Power Rs. 27bn. PIA completes overhauling of Boeing 777 indigenously; government awards license to foreign firms for renewable energy projects. FBR struck a deal with the UAE government for exchanging details of Pakistani asset owners; issue of Aqama abuse is also being handled. Global investors bought Pakistan’s local currency bonds for $342 million i.e. Portfolio Investment. Total export quantity increased by 12%, in 2019 YoY basis; textile exports cross $13 bn due to 26% increase in quantity. Imports fall by 20.5% and exports increased by 2.7% FQ FY, trade deficit shrinks by 35% to $5.72 billion and telecom sector revenue will be Rs. 338 bn.
There is a marked improvement in balance of payments from July 2019 to October 2019, as Pakistan posted $99 million current account surplus in October after a gap of more than four years. This is reflective of the recovery from long-prevailing deficits. The four-month current account position showed a deficit of $1.5 billion, and if this trend continues the current account deficit for the current year would be around $ 4.5 bn compared with trade deficit of $19 bn in 2018 – the last fiscal year of PML-N government. In the first year of PTI government, however current account deficit was $11 bn, but down 40 per cent from the previous year. The latest data released by the State Bank of Pakistan (SBP) showed the government has succeeded in bringing down the current account deficit, which shows that economy is on the path to recovery.
During the cumulative July-Oct period, the current account deficit reached to $1.474bn compared to $5.6bn last year. The deficit sharply reduced in the last four months reflected significant improvement on the economy’s external front. The details showed the deficit fell drastically due to sharp decrease in imports, which fell to $14.65bn from $19bn in the same period last fiscal year.
However, exports of goods increased to $8.22bn compared to $7.9bn in the last fiscal year. Exports of services during the four months were recorded at $1.749bn compared to $1.709bn during last fiscal year. Imports of services, on the other hand, reached to $3.117bn compared to $3.076bn in FY18. Anyhow, trade and fiscal deficits have been brought under control during the first quarter, both key indicators have shown improvement by approximately 35%, as announced by Adviser to the Prime Minister on Finance Dr. Abdul Hafeez Shaikh.
—The writer is a senior journalist based in Lahore.