After two years in power it seems that the Pakistan Tehreek-e-Insaaf (PTI) government has finally overcome the financial crisis it inherited from the outgoing Pakistan Muslim League- Nawaz (PML-N) government. A sizeable surplus in current account and a resurgence of the Rupee against the Dollar indicate that the Imran Khan’s government’s efforts to stabilize the economy are finally bearing fruit.
When the PTI government took over the current account deficit hovered around $20 billion – which is now in surplus by $792 million. Another key economic indicator is the foreign exchange reserves of the State Bank of Pakistan, which in last two years have increased by $3 billion to reach $13 billion.
The major contributor in curtailing the imbalance in current account is a phenomenal increase in the remittances. Despite sluggish economic activity worldwide Pakistan received remittances of $9.4 billion in the last four months; showing an increase of 26.5 percent.
Similarly, while the country struggled with limited economic activity, exports increased steadily and imports are continuously showing a declining trend.
In the July to October period of FY21 Foreign Direct Investment (FDI) reached $733 million whereas in the same period last year it was $672 million; showing an increase of $61 million. The inflow of foreign investment in same period increased by 5.6 percent and outflow declined by 3.3 percent.
However, in first four months of this fiscal year, investment in Equities and Debt market received massive battering with a net outflow of $243.7 million, whereas last year it witnessed an increase of $115 million. This can be explained by the pandemic however, it has had similar effects on other markets across the globe.
According to Advisor to Prime Minister on Revenue and Finance Dr Abdul Hafeez Shaikh the government right now is in a stable place financially. “Last year our total debt was Rs 36.4 trillion which even after four months of this financial year is at the same level,” he said while talking to the media on Tuesday.
He said that the PTI government approached the IMF because there was no other option left to overcome or avert the crisis. He said that the PTI government incurred 48 percent lower external liabilities in first nine quarters compared to PML-N’s last nine quarters while doing 78 percent more debt servicing. Hafeez Shaikh further said that despite the challenges posed by COVID-19, the country’s industrial sector is thriving. Large-scale manufacturing, textile production and auto sales are on the rise, he added.
On the fiscal side, he said the FBR had collected Rs1,340 billion in the last four months, up 4 percent despite COVID-19’s impact, and higher than the target for the period. In addition, the FBR cleared Rs128 billion refunds in four months on top of Rs250bn in refunds last year. He said the government had reduced its expenditures and there was no borrowing from the State Bank of Pakistan. No supplementary grants outside the budget have been issued.
The Advisor to Prime Minister took to Twitter to share improved economic metrics.
Economic expert Samiullah Tariq said that phenomenal increase in the remittances is mainly because of ban on travelling. He said people are now forced to bring money from overseas through banking channels. Apart from this, anti-money laundry measures taken by the State Bank reduce smuggling of foreign currency especially of dollars.
Sami said the appetite for dollars reduced mainly because of restrictions on Umrah and other pilgrimages. He added that Pakistan is less affected by COVID-19 compared to other regional countries due to which it received more export orders. He said because of lesser demand dollar lost its value by almost Rs 10 and it is trading at 25-month low level of Rs 158.
“Depreciation in Dollar value by any mean is good sign for economy,” he observed.