ISLAMABAD: Advisor to the Prime Minister on Finance, Dr Abdul Hafeez Shaikh has said that while primary balance continues to remain in surplus during the current fiscal year, during July-March, FY2020, fiscal deficit has been reduced to 4.0 percent of GDP, while current account deficit reduced by 71 percent during July-April, FY2020.
He said that gross domestic product (GDP) is expected to contract by 0.38 percent in the outgoing fiscal year 2019-20.
The finance advisor said this while presenting the Pakistan Economic Survey 2019-20 on Thursday.
Highlighting the state of the Pakistani economy in the outgoing fiscal year,
Shaikh said that economy is ravaged considerably by the COVID-19 pandemic in the last quarter of the year.
Shaikh revealed that the GDP is expected to contract 0.38 percent in FY 2020 despite 2.67% growth in the agricultural sector, as the industrial and services sectors see growth of -2.64% and -0.59% respectively this year.
Talking about measures taken by the government to arrest ballooning internal and external imbalances, Shaikh praised Prime Minister Imran Khan and Army Chief Gen Qamar Javed Bajwa for their role in managing expenditures.
Noting that the state had cut down its expenditures, he highlighted that at the same time, public spending had been increased.
Shaikh highlighted that the government did not take any loans from the State Bank of Pakistan the entire year and did not give any supplementary grant to any department as it wanted to ensure the public’s money is spent carefully.
The advisor credited the successful policies of the government for an improvement in key indicators, taking note of “a stable exchange rate, healthy growth in FDI (126.8%), improved ranking in World Bank’s ease of doing business index, and ‘Stable” credit outlook to B3 from ‘Negative’ by Moody’s.
The advisor said that the government has returned loans worth Rs5,000 billion over the course of the year. He said that Pakistan’s revenue has declined due to a decline in its exports, and that the government has doubled the money for the coronavirus fund despite the economy is suffering from setbacks due to the pandemic.
Speaking about the coronavirus pandemic, Shaikh said that it is not possible to ascertain when the pandemic would end. He said that the government has tried to maintain a balance between saving people’s lives and at the other end, protecting the economy as well.
The report made note of several developments in the global economy in FY 2020 which reverberated around the world. It noted that protests in Hong Kong triggered the worst crisis in Asia’s biggest financial center. Likewise, Indian attempts at annexation of Kashmir led to suspension of trade between Islamabad and New Delhi, while the UK’s exit from the EU changed the European market irrevocably.
Meanwhile, the US-China trade war continues to cast a pall on the global economy, while global oil prices slumped. As global players navigated these challenges, the novel coronavirus engulfed the entire world, disrupting supply chains and bringing economic activity to a standstill.
The report noted that the COVID-19 pandemic has essentially wiped out any economic performance of any economy due to the financial and health crises it sparked, not to mention the resultant collapse of commodity prices.
Shaikh talked about the government’s measures related to the current account deficit, recalling that steps had been taken to reduce the deficit by 30 percent to $13.4 billion in FY19.
He disclosed that the pre-COVID-19 current account deficit (July-March, FY20) had reduced further by 73 percent to $2.8bn (1.1 percent of GDP) against $10.3 billion (3.7 percent of GDP) in the same period the previous year.
Blaming the “changed situation” on the coronavirus pandemic, Shaikh said that FBR’s tax collection has declined after showing 17 percent growth.
“We were confident to reach the Rs4.8 trillion collection target but the situation changed due to the coronavirus. Still, we expect when things change and people are better off, they will pay their taxes,” he said.
“As the new fiscal year FY2020 began, the economy started to witness a remarkable turnaround which confirmed that the government has taken appropriate policy actions to address the macroeconomic imbalances,” the report stated.
The stabilization efforts paid off in terms of sustained adjustment in current account deficit and continued fiscal prudence. For the first time in many years, the current account deficit posted a surplus in October, FY2019.
“In addition, stable exchange rate, healthy growth in FDI (126.8 percent), improved ranking in World Bank’s ease of doing business index, and ‘Stable’ credit outlook to B3 from ‘Negative’ by Moody’s, reaffirmed the successful policies of government in stabilizing the economy and laying a foundation for robust growth,” it stated. – TLTP