Govt takes proactive measures to stabilize economy: Shamshad
ISLAMABAD (APP): Caretaker Minister of Finance, Revenue and Economic Affairs Division, Dr Shamshad Akhtar on Thursday said the caretaker government has taken proactive measures to stabilize the economy and build market confidence.
The government’s stabilization efforts are anchored around the IMF stabilization package, he said in a briefing to the Senate Committee on Faience and Revenue which met in the Parliament House, said a press release issue here.
The Minister said that the IMF disbursed $ 1.2 billion in July 2023.
She said this has also led to the disbursement of $ 3bn in bilateral assistance (KSA $ 2bn, UAE $ 1bn).
As a result, the SBP FX reserves have increased to $ 7.6bn (1.5 months of import cover) in September, from $ 4.5bn (0.9 months of import) in June.
She said the government has normalized trade and investment flows.
“We have removed the import ban that badly impacted the availability of raw materials for the industry. The government has relaxed import restrictions, leading to the opening of L/Cs for imports and the backlog of import payments (Jan-Jul) has now been cleared.”
Similarly, foreign investors have been allowed to repatriate profits (withheld since 2022), with $ 49.2 million repatriated during Jul-Aug, an increase of 74 percent.
The caretaker government has taken appropriate actions to stabilize the volatility and speculation in the exchange rate market.
Actions taken by SBP on exchange companies and crackdown against illegal transactions have helped to reduce the spreads between interbank and open market, she said.
As a result, the PKR has strengthened to 289 against the US$ in the interbank market, an appreciation of 6.4 percent from 307.1 (05th Sep). In the open market, PKR has strengthened 13 percent by 290.
She said the spread between the interbank and open market has declined to less than 1 percent (from over 9 percent).
The caretaker government has worked to fast-track the concessional project and program loans from the multilateral institutions (WB, ADB, IsDB, AIIB).
“We have a pipeline for $ 6.3 billion in the current fiscal year, She said.”
The government is working to bring back remittances through the banking channels and have launched the SohniDharti initiative, providing Rs 80bn budget allocation to banks to increase remittances, of which Rs 20bn has been disbursed. We are targeting $ 32 billion in remittances in FY24 (from $ 27bn in FY23).
The Minister said the SBP has issued approvals for 5 Digital Banks, while the RAAST person to merchant (P2M) online payment system has also been launched in Sept. These steps will enhance financial inclusion and support growth.
She said that PSX has rallied 3 percent in the month of September 2023, with record profits by banks and energy companies.
Steps are being taken to tackle inflation, with the government not passing the entire burden of increase in power and gas tariffs to the public. Around Rs 1 trillion in subsidies is budgeted in FY2024, she informed.
Dr Shamshad Akhtar said the inflation has declined to 27.3 percent in August, down from peak levels of 38 percent in May 2023. SBP forecasts inflation to decline sharply in 2024 due to the improved agricultural output, and administrative measures taken to curb volatility in the FX markets. SBP has projected 20-22 percent average inflation for FY24 from 29.2 percent in FY23.
In the current fiscal year, BISP coverage expanded to 9.3 million households (from 8mn), and cash assistance enhanced to Rs 8,750 per quarter (from Rs 7,500).
The caretaker government has adopted the whole of the government approach to doing business and has strengthened institutions to tackle multiple challenges.
She said that The Ministry of Finance has been assigned the responsibility to coordinate policy and actions across all Economic Ministries for the Economic Revival Plan.
The minister said that the Economic Coordination Committee of the Cabinet (ECC), ECNEC, Cabinet Committee on SOEs, and CC Privatization has all become operational.
Cabinet meetings are held on a regular basis and all decision-making rests with the Cabinet.
The federal government is working closely with the provincial governments to enhance coordination and reduce overlap of responsibility and resources, she said.
Meanwhile, talking on Inflationary measure, she said that ECC also oversaw and monitored the prices of essential food items and the Independent Monetary Policy Committee implementation of the inflation targeting mechanism was also adopted.
The recent reforms made to the Exchange companies have helped to reduce volatility in the markets, which is positive for the inflation outlook, she said.
However, the main cause of inflation is the structural problems (Public Debt, Energy Circular Debt, Trade deficits). It is imperative that corrective fiscal action is taken on an urgent basis to reduce inflation.
The Minister said that during FY2024, significant enhancement in budget allocation for Social safety nets including cash transfers under BISP.
