Finance Minister reviews fiscal and monetary policies, room for further fiscal tightening observed

January 30, 2019: A meeting of Monetary and Fiscal Policies Coordination Board with Finance Minister Asad Umar in the chair in Islamabad has reviewed the fiscal and monetary policies of the country. 

During the meeting, the ongoing adjustment plan for fiscal consolidation was presented to the Board.

While reviewing the fiscal policy, the Board observed that there is further scope for tightening of the fiscal stance.

The corrective measures taken by the government, both on the fiscal and quasi-fiscal deficit were also discussed during the meeting.

The meeting observed that fiscal consolidation is a key element of the adjustment plan and necessary for ensuing macroeconomic stability.

The Board emphasized ensuring that revenue targets both on tax and non-tax side are met and expenditure controls continue to remain well in place.

Moreover, the key economic variables for the first half of FY 19 were deliberated in detail

It was concluded that the direction of external trade data is encouraging and points to the fact that fiscal and monetary tightening are having an impact on correcting the imbalances. Additionally, the growth in remittances was also acknowledged and appreciated.

The meeting appreciated the fact that there was substantial participation in the last auction of PIB’s. They observed that real interest rates are positive and would help manage aggregate demand and reduce the output gap.

On the monetary front, SBP reported that M2 in FY19 is growing at higher pace while NFA has contracted. Turning to private sector credit, its growth momentum continued and is explained by increased input prices, the continuation of the investment cycle and ample liquidity with banks.

Other than that, analysis shows that subsidized and non-subsidized credit to export-orientated sector has increased.