deficit

The Pakistan Economy Watch (PEW) on Monday lauded the government for efforts to contain external deficit which has resulted in a surplus after four years.

Earlier this month, Prime Minister Imran Khan took to twitter to praise the government for achieving a $99 million current account surplus according to statistics provided by the State Bank of Pakistan.

The government reduced the import bill while simultaneously forming a stimulus for sustainable economic growth by improving the competitiveness and efficiency of export oriented businesses, and reducing the anomalies and cost of doing business in general.

Macroeconomic policies for adjustment such as monetary tightening, exchange rate adjustments and cuts in development spending started paying dividend.

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Government took several initiatives to increased home remittances in FY2018-2019, which contributed heavily to a shrinking deficit. The measures taken include an extension in home remittance services, incentive schemes for financial institutions, rationalization of M-Wallet Scheme, and the Second Pakistan Remittance Summit.

Measures taken by the government such as aggressively cutting unnecessary imports by raising the benchmark interest rate and raising exports earning higher remittances made possible by a depreciation in the rupee contained the deficit but adversely impacted the Gross Domestic Product.

Apart from government efforts, there are other important reasons which have played their role in improving the situation which include the highest interest rate in the region which is luring some foreign investors, it said.

The foreign investors will lose interest once the government decide to trigger economic growth by reducing interest rates, said Dr. Murtaza Mughal, President PEW.

Macroeconomic policies for adjustment such as monetary tightening, exchange rate adjustments and cuts in development spending started paying dividend.

He said that telecom companies have also paid heavy fees for the renewal of licenses while discouraging imports, a contraction in the economy and sight improvement in exports have also played their role.

Dr. Murtaza Mughal said that contraction in the economy has also reduced demand for oil which has saved foreign exchange used to buy the oil which has helped the government overcome the current account deficit.

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A dip in oil imports has helped constrict the trade deficit more than anything else which also indicate the economic situation which is far from satisfactory, he noted.

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