Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh claiming positive development on the economic situation from all sides said Pakistan was headed in the right direction finally as the country’s current account witnessed a record surplus of $317.4 million in the first quarter of the current fiscal year.
Dr Shaikh said the federal government has overcome the current account deficit due to effective economic policies made difficult decisions to allow benefited those involved in export business.
What is the Current Account Deficit?
Current Account Deficit or CAD is the loss between the money flowing in on exports, and the money flowing out on imports. Current Account Deficit (or Surplus) steps the gap between the money received into and sent out of the country on the trade of supplies and services and also the transfer of money from domestically-owned factors of production overseas.
A nation’s Current Account maintains a record of the country’s transactions with other nations, in terms of trade of supplies and services, net earnings on abroad investments and net transfer of payments over a period of time, such as remittances. This account goes into a deficit when money sent outward exceeds that coming inward.
Current account-A record surplus of $792 million
The Adviser said Pakistan was headed in the right direction finally as the country’s current account witnessed a record surplus of $317.4 million in the first quarter of the current fiscal year, citing the data released by the State Bank of Pakistan.
The finance advisor said that the Foreign Direct Investment (FDI) has risen by 151% to $317.4 million in October this year compared to October 2019.
While during the first four months of the current fiscal year (July-Oct 2020) the FDI was recorded at $733.1million, 9.1% higher than the same period last year during which it stood at $672 million. In July-Oct 2020, FDI was $733.1 million, 9.1 percent higher than the same period last year.
To further strengthen investors’ confidence, the government is promoting ease of doing business with reforms in the investment regime, the advisor tweeted.
According to the latest figures of the State Bank of Pakistan, in absolute terms, the FDI increased by $61.1 million during the first four months compared to the last year.
The major direct investments, during the period under review, were received from China, wherefrom the net investments were recorded at $332.3 million. The trend was followed by Malta with $74.1 million net FDI, Netherlands with $51.5 million and Hong Kong with $46.4 million.
The sector-wise data showed the most of the investments coming in the power sector, standing at $352.3 million followed financial business $118.5 million and oil and gas exploration at $83.1 million and electricity machinery $36.5 mln.
On a year-on-year basis, the direct investment increased by 150 percent to $317.4 million during the month of October 2020 as compared to the investments of $126.5 million in the same month of 2019.
Pakistan headed in the right direction
Dr Abdul Hafeez Shaikh said the economy was picking up as evident from both the external and internal indicators. Good news is pouring in from all four sides and we need to defend it from COVID-19 and build on it, the Advisor said.
The finance adviser said all basic economic indicators have moved in the right direction and there is a feel-good factor in the market as evident from the stock market, foreign direct investment and large-scale manufacturing (LSM) data.
No shortage of wheat across the country
Shaikh said there was no shortage of wheat across the country and its prices were now on a decline due to government efforts. He said wheat stocks now plunked at 4.2 million tonnes and were being ramped up with 1.9m tonnes of wheat at present on the way, putting total availability at about 6.1m tonnes.
He said the government had condensed its expenditures and there was no borrowing from the State Bank of Pakistan (SBP). No additional funding outside the budget had been issued.
The adviser said that unlike in the past the government’s income was more than its expenditures due to which it was not borrowing from the SBP and had, in fact, repaid Rs five trillion of past lends and interest since PTI came to power in the country.
He said the PTI government had achieved primary balance and as a result government’s debt stood unchanged at Rs36.4tr between July 1 and October 31 in 2020. He said the basic aim of the government efforts was to increase economic activity, create jobs and provide maximum relief to the people.
Inflation remained a major challenge
The advisor agreed that inflation remained a major challenge for the federal government which was trying to control the prices of commodities, particularly wheat and sugar.
He said the government had to import wheat to counter scarcity across the country but now the stock situation was completely under control as there was no shortage of any grain at this time.
In a positive development, the government had decided to boost the beneficiaries of the ‘Ehsaas’ program from the current 4.5 million to 7 million to whom the government would pay cash on a permanent basis he informed.
Steps need to overcome inflation
PTI after a few months in power, people must start to notice positive trends. And certainly, after two-year, those positive trends have seen in the economy despite huge challenges like the COVID-19 epidemic and enormous debts.
Pakistan’s economy is shifting towards import-substitution industrialization via supporting the domestic businesses and export-led sectoral development.
Stabilization measures of the current government are yielding results and their results will be visible in the coming years. Macro stabilization and success in the external sector are evident from the economic stats.
However, the biggest problem for the poor is not remittances or current account deficits, but inflation and employment, which the PTI promised to control in the 2018 general elections.
Prime Minister Imran Khan along with his economic team must understand the problems of the people and provide them jobs as well as overcome the monster of inflation.
