Interview with Mr. Shaham Ahmad — Honorary Secretary, ICMA Pakistan
Year 2021 will be a year of ‘economic recovery’ for Pakistan
Govt must chalk out pragmatic strategy to deal with challenges with success
PAGE: Tell me something about yourself, please?
Shaham Ahmad: I am a Fellow member of ICMA Pakistan and as a result of the recent elections I have been elected as a member of the current National Council of the Institute for the three-year term 2021 to 2023. The Council has nominated me as the ‘Honorary Secretary’ of the Institute in which capacity I am responsible to look after the affairs of the Institute as envisaged in the CMA Act and Regulations.
I held the office of the Chairman of the Karachi Branch Council (KBC) of ICMA Pakistan during 2013 and 2014 and have also been heading the CPD Committee of KBC for quite a long time. In this role, I took several initiatives to promote and strengthen Institute’s relationship with the corporate sector.
Currently, I am visiting faculty at several renowned business schools and academic institutions like SZABIST, MAJU, and PAF-KIET and playing role in imparting professional education to the younger generation. The CMA professional degree coupled with my practical experience of working for almost over twenty years in the private sector has helped me to perform the role of teacher and mentor.
I am presently working at a senior finance position in Pakistan’s leading automobile manufacturing company where I have been employed since 2002.
PAGE: How would you comment on the Roshan Digital Accounts introduced recently by the government?
Shaham Ahmad: Roshan Digital Account (RDA) is a flagship initiative of the State Bank of Pakistan, launched in September 2020 for the first time in history in collaboration with the commercial banks. These accounts provide innovative banking solutions for millions of Non-Resident Pakistanis (NRPs) and resident Pakistanis with declared offshore assets, who need a secure and convenient facility to undertake banking-payments, fund-transfers, and investment activities in Pakistan, remotely, from abroad. It is reported in newspapers and also acknowledged by the Prime Minister that RDA received USD 500 million inflows from NRPs in five months with the number of accounts having reached 87,833 opened from 97 countries around the world. Similarly, the remittances from overseas Pakistani workers rose 24 percent to USD 16.5 billion in seven months of the current fiscal year. I think that this is a unique initiative by the government that would help strengthen Pakistan’s economy and pave the way for enhancing the volume of foreign investments into Pakistan. The government has recently taken measures to simplify the taxation regime, which is also likely to give a further boost to the RDA Scheme. I also believe that the biggest advantage of RDA would be that it would help overseas Pakistan to directly invest in the stock market, which they could not do before. This would certainly give a big boost to the stock market business in Pakistan.
PAGE: Your views on the current account during the current fiscal year?
Shaham Ahmad: The current account balance is the difference between the government’s foreign income and expenditure. For the last many decades, the unsustainable current account deficit has remained one of the binding constraints on the economic growth of our country. It is reassuring that over the last 18 months, the current account deficit has narrowed down and shown distinct signs of remaining in a reasonable range. This has been possible on account of the recent appreciation of Pak Rupee, after having fallen to an all-time low; recovering exports and robust remittances, especially through banking channels.
According to the latest statistics released by the SBP, the current account deficit has shrunk by 55% year-on-year to USD 229 million in January 2021 as against USD 512 million in January 2020. In the first seven months [July-Jan] of the current fiscal year, the current account posted a surplus of USD 912 million, compared to the deficit of USD 2.54 billion in the same period last fiscal year. This is an encouraging development made possible due to growth in our exports and remittances; though imports of wheat and sugar by the government have increased to address domestic shortages. At the same time, significant growth in machinery imports is also witnessed, reflecting economic recovery.
The current account deficit is expected to widen to an average of 1.5% of GDP over FY 2021-22 with imports and exports gradually picking up as domestic demand and global conditions improve.
PAGE: What is the current state of the economy?
Shaham Ahmad: Obviously, due to the adverse impact of COVID-19 and the already weak economic indicators of the country, even before the pandemic, we cannot term the current state of the economy as resilient. Undoubtedly, the government and policy makers have a challenging and daunting task ahead to take bold and smart measures to revise the economy and stimulate industrial productivity and exports. However, the macro-economic data coming out from the key regulators depicts a mixed trend of few improvements and some negative growth. Let’s have a look at some of the positives and negatives:
Positives:
- FBR revenue increased by 6% from Rs. 2426 billion in July-Jan 2019-20 to Rs. 2572 billion in July-Jan 2020-21.
- Remittances have gone up from $13.3 billion in July-Jan 2019-20 to $16.5 billion in July-Jan 2020-21 – an increase of 24.1 percent.
- Current Account Balance as percentage of GDP has improved from -1.6% in July-Jan 2019-20 to 0.6% in July-Jan 2020-21.
- Forex reserves stood at $19.694 billion as of 22nd Feb 2021 as against $18.743 billion on 21st Feb 2020.
- Credit to Private Sector increased by 63% from Rs. 179.2 billion in July-Jan 2019-20 to Rs. 291.9 billion in July-Jan 2020-21.
- Large Scale Manufacturing (LSM) growth has improved from -2.7% in July-Dec 2019-20 to 8.2% in July-Dec 2020-21.
Negatives:
- Fiscal Deficit increased to Rs. 1137.9 billion [2.5% of GDP] in the first half [July-Dec] of FY 2020-21 as against Rs. 994.7 billion [2.3% of GDP] in July-Dec 2019-20.
- Exports (FOB) have declined by 3.8% from $14.4 billion in July-Jan 2019-20 to $13.9 billion in July-Jan 2020-21.
- Imports (FOB) have increased by 6.1% from $26 billion in July-Jan 2019-20 to $27.6 billion in July-Jan 2020-21.
- Foreign Direct Investment (FDI) has gone down from $1577 million in July-Jan 2019-20 to $1145.3 billion in July-Jan 2020-21 – a decline by 27.4 percent.
- Exchange rate stood at Rs. 159.07 to USD on 22nd Feb 2021 as against Rs. 154.21 on 21st Feb 2020.
PAGE: What do you anticipate in 2021?
Shaham Ahmad: It is my perspective that the year 2021 would be a blend of both opportunities and challenges and it all depends upon the policies and initiatives of our government and more importantly on the overall political scenario of our country that would decide as to whether we face these challenges squarely and make the most the emerging opportunities or not. Anyhow, being optimistic, I foresee that the year 2021 would be a year of ‘economic recovery’ for Pakistan, with improving economic indicators; though in some areas we would be facing tough grounds such as growth in GDP; LSM productivity; attracting foreign investments; debt retirement; bridling the rising inflation, etc. In these areas, the Government needs to focus more so that the common man is provided some relief.
The most important challenge Pakistan would be facing in 2021 is the combination of the highest inflation and lowest economic growth in the region. Asian Development Bank (ADB) and the IMF estimates respectively suggest that Pakistan is expected to have an economic growth rate of 2 percent and 1 percent in 2021, against an average growth rate of 7.1 percent for South Asia. Another big challenge is to control the rising cases of COVID-19 and vaccinate a major segment of the population. The government needs to chalk out a pragmatic strategy to deal with all these challenges with success.