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Snapshot of economy of Pakistan

Real sector

Agriculture: Out of Rs 1,240 billion fiscal package on COVID-19, Rs 100 billion is allocated for the agriculture and Small and Medium-size Enterprises (SME) sector. An amount of Rs 15.7 billion was initially allocated for nitrogenous fertilizers that now has been diverted to phosphate and potash fertilizers. A subsidy of Rs 1.5 billion for tractors and markup of Rs 6.8 billion on all loans for land holdings up to 12.5 acres has been disbursed by Zarai Taraqiati Bank Limited (ZTBL).

Manufacturing: LSM sector (Large Scale Manufacturers) has started to rebound after the damage inflicted by COVID-19 outbreak. The monthly snapshot of manufacturing activity indicated 16.8% growth in June FY 2020 (19.1% May FY 2020).

Inflation: Consumer Price Index (CPI) inflation in July recorded at 9.3% and on month-on-month basis, inflation registered 2.5% in July over June. The spike in the CPI during the month of July 2020 is on account of an increasing trend in the prices of perishable items.

Fiscal: The overall fiscal deficit stood at 8.1% of GDP in FY 2020 against 9.1% of GDP recorded in the previous year. The fiscal deficit has been contained due to the significant rise in total revenues (28%) that outpaced the growth in total expenditures (16%).

Monetary : During the period 01st July-07th August FY2021, money supply (M2) witnessed contraction of Rs 224.5 billion (negative growth of 1.1%) compared with contraction of Rs 172.8 billion (negative growth of 1.0%) last year. The contraction in money supply is largely attributed to decline in the Net Domestic Assets (NDA).

 

External sector

During July FY2021, current account posted a surplus of $424 million (1.9% of GDP) against a deficit of $613 million last year (2.8% of GDP). Exports declined by 14.6% to $ 1.9 billion ($ 2.2 billion last year) during July FY2021. The easing of lockdown in the North American and European countries- top export destinations for Pakistani textile goods- will help revive the exports. Imports declined by 13.3% to $3.6 billion ($4.2 billion last year). Consequently, trade deficit reduced by 11.8% to $1.7 billion ($2.0 billion last year).

Foreign Direct Investment: FDI increased by 61% and reached to $114.3 million during July FY 2021 as compared to $71.1 million last year. The inflows of FDI reached to $169.1 million during July FY 2021 compared to $165.1 million last year, with a growth of 2.4%. The outflows of FDI during July FY 2021 decreased by 41.7% and reached to $54.8 million compared to $94.0 million same period last year.

Taxes: Net taxes and duties collected during the first two months of the FY 21 i.e. July and August 2020 stood at PKR 593 billion, as compared to the target of PKR 551 billion. The net revenue collection for the corresponding period in FY 20 stood at PKR 582 billion, indicating an increase of 1.9% YoY.

Foreign Exchange Reserves: The country’s total liquid foreign exchange reserves reached $19.84 billion for the week ended August 28, 2020, indicating an increase of $120.4 million WoW. The increase was driven by the rise in foreign exchange reserves held by the State Bank of Pakistan (SBP), which grew by $71.9 million WoW to reach $12.71 billion and the rise in reserves held by commercial banks, which increased by $48.5 million WoW to reach $7.13 billion.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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