Economy of Pakistan has remained under turmoil most of the period under different rulers either from political parties or establishment. Hence it is the time; we should refrain from defending or opposing any institution in Pakistan on allocation of funds. This is a country for everyone and nobody is innocent in absolute manner. We should only care for the betterment of country’s economy in spite of different odds.
On 25th May, 18 monetary policy for the next two months has been announced. Monetary policy announced by SBP is meant to lower inflation, create growth prospects and employment. For the next two months SBP has decided to increase the policy rate by 50bps to 6.50 percent effective from Monday 28th May 2018.
"Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), Former Head of FSCD SBP, Former Head of Research Arif Habib Investments and Member IFSB Task Force for development of Islamic Money Market, Former Member of Access to Justice Fund Supreme Court of Pakistan
Why! Because, Pakistan’s economic growth was provisionally estimated to achieve a thirteen-year high level of 5.8 percent for FY18. Concurrently, headline inflation remains moderate and is expected to stay well below the annual target of 6.0 percent. However, the balance-of-risks to the sustainability of the healthy-growth-low-inflation nexus have now shifted due to the various reasons. First, the balance of-payments picture, despite an increase in exports and some deceleration in imports, has further deteriorated due to a sharp increase in international oil prices and limited financial inflows to date. Second, the revised estimate for fiscal deficit stands at 5.5 percent of GDP as compared to initial target of 4.1 percent for FY18, reflecting a significantly higher level of fiscal expansion than previously anticipated. These twin deficits- depicting the elevated aggregate demand in the country are adversely affecting the near-term macroeconomic stability. On the external front, the current account deficit widened to US$ 14.0 billion during the first ten months of FY18, which is 1.5 times the level of deficit realized during the same period last year. SBP’s liquid FX reserves saw a net reduction of US$ 5.8 billion to reach US$ 10.3 billion as of 18th May 2018. Reflecting the increasing pressures in the external sector, PKR has depreciated by 9.3 percent against the USD up till 24th May 2018.
Before this, our Parliament has already approved Federal Budget for 2018/19 giving sketch of economic scenario in the coming months.
[caption id="attachment_29796" align="alignleft" width="480"] enewspaper.com.pk/PEW[/caption]Fiscal budget for 2018-19 amounting Rs 5,932 trillion has been announced with half of the total money going to debt and defence sectors, allocating around 23% of it to the defence needs while another 30.7% for debt servicing. Rs 1.607 trillion will go to debt repayments. The debt servicing cost increased by 17.8% from last year’s value of Rs 1.364 trillion. Rs 1.1 trillion have been approved for the defence budget. After adjusting salaries it was revised upward to Rs 998 billion from last year’s value of Rs 920 billion. Additional Rs 100 billion will go to Armed Forces Development Programme (AFDP) as well.
The current budget deficit stands at a record value of Rs 2.029 trillion. Rs 800 billion have been allocated for federal development budget with a decrease of Rs 201 billion from last year. Rs 445 billion have been allocated for running the civilian government. However, the government revised this amount and allocated Rs 426 billion instead. Rs 342 billion has been approved for pensions as compared to last year’s figure of Rs 248 billion. Rs 36 billion have been allocated upfront for the first time ever to cover these increments. Minimum 10% increase in salaries, 10% increase in pension to new retirees and 20% increase in pensions to old retirees will be given in the upcoming fiscal year. Rs 624 billion have been approved for grants and other expenditures. Rs 179 billion have been allocated for subsidies that government offers. An unrealistic target for the collection of Rs 4.435 trillion through taxes has been set for FBR as well. The government has also reduced the net lending to Rs 78 billion from last year’s value of Rs 123 billion. Rs 14 billion has been allocated for health and Rs 98 billion for Education.
Budget Strategy Paper states that the 5.3% budget deficit of total GDP will be covered through domestic and external loans. The current government has relied heavily on loans instead of generating a sustainable revenue stream. The government has borrowed a record, over $40 billion, in loans from local and international lenders in during its tenure. The country is planning to borrow another record-breaking $13 billion next year to cover the expenses.
[caption id="attachment_29797" align="alignleft" width="290"] enewspaper.com.pk/PEW[/caption]At a time when security assistance from the US is dwindling, Pakistan has raised its defense spending for the year 2018-19 by around 19.6 per cent, the highest increase during the PML-N government’s current tenure.
The increase is also seen as significant amid the PML-N’s uneasy relationship with the military leadership following a series of political controversies stemming from the disqualification of former prime minister Nawaz Sharif in July last year. In 2013-14, the total outlay of defense budget was around Rs 600 billion which has now jumped up to Rs1.1 trillion, showing an increase of 83 per cent in the last 5 years during PML N period.
Now we are heading towards elections in July 2018 with lot of programs, meetings and rumors.
However for any government coming after elections following issues existing already would require planning, legislation and implementation strategy.
It seems as if Pakistan’s economy is stuck in a state of multiple equilibrium and in order to get out of this exceptional adjustment needs to be made. Political coalitions must be strengthened, as they are required to push reform. Any reform that is passed must be accompanied by legislative reforms by provincial governments. There must also be a clear political calculus on how to change and bring reform. All of this needs to be strategically thought out by the parliament. (Enewspaper.com.pk WhatsApp +923132434567)
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Country | PKR |
24K/Gram | 20830.14 PKR |
24K/Tola | 242879.47 PKR |
24K/Kilo | 20830143.33 PKR |