Rising CAD, imports pose threat to economy

By Staff Reporter | DAWN Aug 26, 2021

ISLAMABAD: Pakistan’s economic managers on Wednesday noted rising international commodity prices, higher import bill and current account deficit (CAD) as key risks to macroeconomic outlook and decided to have closer coordination and vigilance for policy adjustments to support higher growth.

At a meeting of the Monetary and Fiscal Policies Coordination Board (MFPCB) presided over by Finance Minister Shaukat Tarin, State Bank of Pakistan Governor Dr Reza Baqir pointed out that the increase in commodities prices in the global market would have implications for higher import bill and inflation.

The finance minister asked “for designing and executing policies to achieve economic targets and overcome the possible risks” and advised to MFPCB more effective for maintaining better coordination of policies to achieve the planned macroeconomic goal.

Other members of the board present in the meeting were the Adviser to the PM on Commerce & Investment Abdul Razak Dawood, Deputy Chairman Planning Commission (PC) Dr Jehanzaib Khan and Private Member Dr Asad Zaman.

SBP governor highlights the increase in commodities prices will have implications for higher import bill

The finance minister briefed the board on the current economic situation of the country and highlighted the major incentives given in the budget due to which business confidence is improving and economy is moving on strong economic recovery path. He said all key economic indicators relating to real sector of the economy, fiscal sector, monetary and external sectors were going well and the government was proactively executing all policy measures to achieve the major socio-economic targets of the current fiscal year.

The minister “also highlighted the possible risks to the economic activities and strategy to counter these risks which were appreciated by the members of the board”, an official statement said.

An official said CAD is anticipated to go up as imports rise with higher international commodity prices.

Secretary Finance explained budgetary allocations for various activities and the ways and means to maintain the fiscal discipline and how steps were in place to contain the non-development expenditure with the focus on optimal utilisation of resources to improve the service delivery at large for the common man.

Governor SBP explained the monetary policy stance already announced a couple of weeks ago. While sharing the analysis of the SBP on policy rate, credit availability, exchange rate movement and inflationary situation, he explained that policy mix was supporting the growth momentum. He, however, “highlighted the increase in commodities prices in the global market which have implications for higher import bill and inflation”.

At the same time, he said it was encouraging that exports were picking up along with increase in import of machineries which will enhance productive capacity of the economy and create exportable surplus. He told the forum that SBP was executing policy measures to encourage business activities in various sectors of the economy. He said there were ample opportunities for investors and exporters and youth of the country to take benefits from SBP’s schemes to extend or initiate their business.

PC deputy chairman updated the meeting about the execution of development activities and the possible options for resource mobilisation and to utilise them effectively for development of potential sectors of the economy.

Mr Dawood briefed about the structure of trade of the country along with major destinations and the steps in process to enhance exports in potential areas. He also noted various categories of imports which could be rationalized by focusing on their substitutes.

According to the official statement, Dr Zaman appreciated the major fiscal and monetary measures of the government in supporting the business activities and highlighted potential areas where Pakistan has comparative advantages in export market and should be treated as low hanging fruits for import substitution. He advised that the goal of well-coordinated monetary and fiscal policies should be to achieve full employment

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