Finance Minister chairs meeting to review external account position

Islamabad: 21 August 2017

Finance Minister, Senator Mohammad Ishaq Dar, chaired a meeting at the Ministry of Finance on Monday to review the external account position, including the current account, trade account, exports, imports, remittances and financing. The meeting was attended by Minister for Commerce, Mr. Mohammad Pervaiz Malik, Finance Secretary, Secretary Commerce, Secretary Textile Industry and senior officials of the Ministries of Finance, Commerce, Textile Industry, as well as the State Bank of Pakistan.

The Finance Secretary gave a briefing to the meeting and explained that the recent increase in the current account deficit was largely driven by a sharp increase in imports of machinery for power generation, textile construction and import of petroleum products. He said that these were healthy imports which will increase the production capacity of the economy, and enable higher growth and exports in the future. He also stated that the decline in exports in the last few years was mainly due to global economic conditions, energy shortages for industrial and agriculture sectors, and reduced availability of exportable surplus. The Finance Secretary informed that, due to improvement in the global economic outlook, uninterrupted supply of electricity and gas to industrial sector and increased output, the export decline had begun to bottom out as exports during Jan-June 2017 registered a growth of 0.52% compared to the same period last year. He highlighted that exports in July 2017 posted a healthy growth of 10.5% compared to July 2016. He also highlighted that workers' remittances, which had remained stagnant due to global conditions, have shown an impressive growth of 16% in July 2017 compared to July 2016.

A detailed discussion on various options to give an immediate boost to exports, manage imports and build on the recent month's growth in remittances was held during the meeting. The Finance Minister said that a significantly higher export target should be achieved to improve the trade deficit. He said that the export incentive package announced by the government earlier this year was fully endorsed by the industry, and all effort should be made to achieve the growth targets set under this package. The Finance Minister directed the Finance Secretary, Secretary Commerce and Secretary Textile Industry to remove any impediment that may hinder the achievement of this target. Comprehensive proposals to incentivize remittances were also discussed in detail. In this regard, the Finance Secretary said that several meetings have been held with the stakeholders, and various measures have been identified including the proposed remittance scoring card, road shows in major corridors, transaction efficiency and settlement of TT charges. Finance Minister emphasized that remittances were an important foreign exchange stream for the country, and directed that the proposed initiatives in this regard should be finalized immediately. He also highlighted the need to incentivize overseas Pakistanis to invest in Pakistan.

The meeting was also briefed on various financing measures to finance the current account deficit in the short term. It was explained that increased inflows of Foreign Direct Investment and other investments under CPEC will largely fill this gap. Other options such as tapping of capital markets and trade finance facilities were also discussed.

The Finance Minister said that the economy was passing through an expansionary phase, and the resultant dividends for the country will be much higher than the cost presently being borne as a result of widening of trade deficit which is only a short-term phenomenon.