All Round View (Islamabad): Adviser to the Prime Minister on Finance and Revenue Dr. Abdul Hafeez Shaikh emphasized upon the need for better coordination among the stakeholders to arrive at consensus on macro-economic targets and the required policy actions to achieve them. The adviser was chairing a meeting of the Monetary and Fiscal Policies Co-ordination Board held here according to press statement issued by the Finance Ministry yesterday.
The adviser said that all organs of the state should play their role in these difficult times and fully capitalize their potential to achieve the set macro-economic targets as per their mandate.
Other members of the board present in the meeting were the Adviser to PM on Commerce and Investment, Razak Dawood, Deputy Chairman Planning Commission, Jehanzeb Khan, Finance Secretary, Naveed Kamran Baloch, Governor State Bank of Pakistan (SBP), Dr. Raza Baqar and Economist, Dr. Asad Zaman while Chairperson Federal Board of Revenue (FBR), Nausheen Javaid also attended the meeting on special invitation.
The adviser stated this high powered board facilitates the policy makers to review and coordinate in an effective manner to adopt a comprehensive set of policy actions to overcome the economic challenges that the country had been facing at internal and external fronts.
On the occasion, Secretary Finance informed the board that the government had embarked on a journey towards stability and sustainable inclusive growth through various structural and policy adjustments that have paid off in the form of decline in current account deficit, fiscal deficit, buildup of foreign reserves, stable exchange rate etc.
He said that for the first time, the primary balance posted surplus of Rs. 104 billion during July-March, financial year 2020 (0.2 % of GDP) as compared to deficit of Rs 474 billion (1.2 % of GDP) during same period last year. He also presented the pre-COVID-19 and post-COVID-19 overview of the economy and stated that the pandemic had brought multiple challenges for the country’s economy.
Prior to corona virus, the GDP growth was estimated at 3.24% for 2019-20 and after pandemic it may decline significantly, he added. The government has timely initiated a Fiscal Stimulus Package worth Rs. 1.24 trillion encompasses emergency response, support to businesses and relief to citizens, he said, adding that couple of other schemes approved by Economic Coordination Committee and the cabinet was also in place to minimize the adverse impact of the COVID-19.
On the occasion, the Governor SBP appreciated the efforts of Ministry of Finance for curtailing fiscal deficit and achieving positive primary balance in first three quarters of current fiscal year. From monetary perspective, he briefed that SBP had given the stimulus to economy through cut in policy rate (425 bps) and increasing quantity of money by injecting additional liquidity. SBP has introduced number of measures and some concessional refinance schemes to address both the demand and supply side conditions for businesses, he said.
The measures, he said, include Temporary Economic Refinance Facility (TERF), Refinance Facility for Combating COVID-19 (RFCC) and Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns.
These measures are aimed at facilitating the businesses to remain afloat during the crisis times. On the demand side, a cumulative reduction of 425 bps in the policy rate is expected to address the high cost of borrowing issue.
Deputy Chairman Planning Commission apprised the meeting that corona virus had declined the confidence of both consumer and investors. Thus both aggregate demand and supply had been disrupted and the society was following risk aversion behaviour. The government should provide further support in terms of simplification of processes and lowering administrative burden on businesses and help SMEs find some ways to cope with emerging situation.
However, accommodative fiscal and monetary policies adopted by the government would be helpful in stimulating economic activities. Adviser for Commerce and Investment was of the view that in prevailing situation exports would be around $21 to $22 billion, while imports would fall to $42 billion mainly due to decline in international commodity and oil prices. There is a risk of decline in remittances, however, due to decline in imports current account deficit may not be adversely affected.
Even in these testing times, Pakistan’s exports to Africa and Middle East have remained positive and are growing which has been a direct outcome of the government efforts to explore new avenues in export markets.
Dr. Asad Zaman emphasize upon the need for enhancing the capacity of institutions like Federal Bureau of Statistics for timely dissemination of authentic data that would be helpful to reset policy direction in the post COVID-19 changing environment by setting realistic targets and to monitor and analyse the performance of relevant stakeholders.