KARACHI: The overall economic environment continues to remain conducive to growth thanks to an accommodating monetary policy, increased development spending and activities related to the China-Pakistan Economic Corridor (CPEC), the Bank of China said on Friday. State of Pakistan (SBP).
In its second quarterly report 2016-2017 on the state of the economy, the SBP said that improving investor confidence is translating into increased credit to the private sector, especially for fixed investment purposes. , foreign interests in Pakistani companies and an increase in production. of durable consumer goods.
Likewise, a sharp increase in imports of machinery and raw materials also indicates robust industrial activity and the build-up of future production capacities. Large-scale manufacturing (LSM) growth picked up in the second quarter with increased production of food, cement, steel, pharmaceuticals, automobiles and industries, according to the report. electronic.
Growth in the agricultural sector is also expected to rebound due to increased production of cotton, sugarcane and maize and better prospects for the wheat harvest. The report points out that the current account deficit has almost doubled compared to last year. This was due to a sharp increase in growth-inducing imports as well as the non-fulfillment of the Coalition Support Fund (CSF) and a drop in exports and remittances.
The report acknowledges that foreign inflows – foreign direct investment (FDI), loans and sukuk issuance – were barely more than enough to finance a larger current account deficit. The report stresses the need to contain the current account deficit to manageable levels to maintain the stability of the external sector.
It also notes that the budget deficit has increased due to low income generation against a background of increasing development and security spending. While he described the sustained increase in development spending as laudable, he also underlined the need to improve revenue collection.
The report shows that average CPI inflation fell from 2.1% in the first half of 2015-16 to 3.9% in the comparable period of 2016-17, reflecting higher domestic demand and an increase in world commodity prices. However, he points out that, on a year-over-year basis, CPI inflation has fluctuated within a narrow range during this period.
The report expects growth to maintain the upward trajectory while inflation is expected to remain below target in 2016-17.
Posted in Dawn, April 1, 2017