Global Rice News

The State Bank of Pakistan (SBP) has projected that Pakistan’s real GDP growth will fall between 2-3% in the current fiscal year, according to its annual economic report released on Monday. The report suggests that various demand compression measures implemented over the past two years may slow down the pace of economic recovery. The SBP highlights that there have been some early signs of improvement in the economic situation after a turbulent year. It attributes this improvement to the $3 billion Standby Arrangement with the IMF, along with bilateral inflows, which have helped reverse the declining trend in foreign exchange reserves. The report also mentions positive global economic growth prospects and eased non-energy commodity prices as factors that could have beneficial implications for Pakistan’s economy.

The SBP report anticipates that the withdrawal of import prioritization guidance, along with improvements in the foreign exchange position, will ameliorate the supply chain situation and boost growth in large-scale manufacturing and exports. The report also predicts a rebound in cotton and rice production, which will support agricultural growth. Additionally, the expansion of commodity-producing sectors is expected to have a positive impact on services. In terms of inflation, the report suggests that monetary tightening and contractionary measures will keep domestic demand in check, while improvements in the supply situation and lower commodity prices should moderate inflationary pressures.

The report estimates that the fiscal deficit will range from 7-8% for the current fiscal year. It expects revenue collection to improve due to a tepid recovery in economic activity, while non-interest expenditure is anticipated to remain contained. The current account deficit is projected to fall between 0.5-1.5% for the year. The report attributes the improved outlook for the external account to the finalization of the IMF Standby Arrangement, which has revived confidence among creditors and investors. It also anticipates increased foreign exchange earnings from exports of goods and services, although import volumes may rise moderately. Workers’ remittances are expected to be slightly lower compared to the previous year.

The SBP emphasizes the need for broad-ranging reforms to ensure resources are available for economic growth and development. It recommends expediting tax policy reforms, implementing governance reforms in public sector enterprises, creating a conducive environment for foreign direct investment, encouraging technology transfers, and undertaking agriculture sector reforms. These reforms are deemed necessary to achieve sustainable economic growth and improve the general standard of living in Pakistan. The report concludes by acknowledging the challenges faced by the economy in the previous fiscal year and the importance of addressing structural impediments that pose risks to macroeconomic stability.

Source: https://www.dawn.com