Economic recovery to translate into productive investment expenditures: Finance Ministry

January 27, 2021: The economic recovery, which has started since the beginning of the current fiscal year (2020-21), is expected to translate into more productive investment expenditures, Finance Ministry said here Wednesday.

The Ministry, in its monthly Economic Update and Outlook for January 2021, stated that the country’s economy had consecutively suffered from the Balance of Payment (BOP) crisis and COVID-19 pandemic and had kept the economy below its potential level.

However, according to the report, since the start of the current FY, the economy had started recovering while the government was also committed to monitoring external balance and its financing closely.

The government had also taken policy and administrative measures to monitor the supply and market functioning wherever necessary to mitigate inflationary pressure, it said adding that the restoration and acceleration of Pakistan’s productive capacity was a necessity to ensure high and sustainable growth in the near and longer-term.

“In the near future, the economic recovery is expected to translate into more productive investment expenditures,” it said adding that the government was committed to motivating investments in crucial sectors of the economy to enhance productive capacities and to stimulate economic growth, the report added.

The current outlook ensures economic revival on the basis of continued recovery seen in recent months, but there is the possibility of slower economic activities especially in the services sector depending on the intensity and duration of a pandemic.

According to the report, the recent developments show that both year-on-year (YoY) and Month-on-Month (MoM) inflation were on a downward trend while the prospect for growth in agriculture was encouraging on the basis of major Kharif crops.

Industrial activity, measured by the LSM index has shown positive developments in recent months and was continuously recovering from the COVID-19 crises that caused industrial output to fall significantly in March and April last fiscal year.

Meanwhile, the sudden surge in imports due to the increase in international oil prices and import of additional food products enhanced imports by $ 1.2 billion alone in Dec 2020 ($ 5.0 billion) compared to Dec 2019 ($ 3.8 billion). However, there was no pressure on foreign reserves as the Current Account remained in surplus for H1 FY 2021.

Fiscal performance remained satisfactory and the actions taken by the government were primarily concentrated on relief measures to support businesses stay afloat and to protect vulnerable segments of society.

At the same time, the government is focused on containing the fiscal deficit at a manageable level and keeping the primary balance at a sustainable level, it said.

APP