Alarm bells ring on fiscal deficit as govt borrowing from SBP shows massive spike
ISLAMABAD: The Monetary and Fiscal Policies Coordination Board on Thursday expressed serious concern over the growing budget deficit and inflation, increasing government borrowing from the State Bank of Pakistan (SBP) and sluggish revenue performance.
The board was also worried over the poor show by manufacturing sector and called for earliest possible course correction and advised the government to immediately finalise its medium-term strategy paper for macroeconomic stabilisation.
Finance Minister Asad Umar presided over the meeting and assured the board of government’s commitment to improving the fundamentals of economy and achieving sustainable and balanced economic growth.
“Fiscal consolidation remained a challenge during the first quarter of the current fiscal year as fiscal deficit increased to 1.4 per cent, from 1.2pc in comparable period last year,” Secretary Finance Arif Ahmed Khan was quoted in an official statement. The FBR’s revenue rose by 6.4pc and “if gains traction, it may bridge up the fiscal deficit going forward.”
The Ministry of Finance reported last week that defence and current expenditure surged significantly while development spending dropped drastically in the first quarter of the current year as consolidated fiscal deficit widened to 1.4pc of the gross domestic product (GDP).
It said the total defence spending in first three months (July-September) rose to 0.6pc of GDP, compared to 0.5pc in same period last year. In absolute terms, the defence expenditure increased by 21pc to Rs219.4bn.
The current expenditure also grew by 19pc to Rs1.48 trillion in the first quarter versus Rs1.24 tr of corresponding period last year. As percentage of GDP, current expenditure was up 3.9pc this year, from 3.5pc of last year. Public Sector Development Programme (PSDP), on the other hand, plunged 35.5pc to Rs106.6bn in 1QFY19 as against Rs165bn in comparable period last year. In other words, PSDP spending was down to 0.3pc of GDP, from 0.5pc of last year.
The saving grace came from four provinces who together offered a rare cash surplus of a record Rs246bn.
The board is required to set the direction of government with a mix of public and private sector advice. Led by the finance minister, the board is represented at the highest level by ministries of finance, commerce and planning, SBP and two independent private sector economists.
SBP governor discussed monetary aggregates along with views on the economy. Broad money (M2) witnessed a rise of Rs35bn from July to Nov 16 as compared to a decrease of Rs67bn in same period last year, which was entirely contributed by net domestic assets of the banking system as net foreign Assets continued to contract.
Despite rising interest rate overall private sector credit remained higher than last year. The government borrowed Rs2.859tr from SBP, versus Rs195m in same period last year. On the other hand, it retired Rs2.619tr to scheduled banks as against a borrowing of 201.5m. As a result, net government borrowing from the banking system reached Rs186.5bn, to Rs383.5bn over the previous year.
The private sector credit surged to Rs304bn during the period, as compared to Rs69bn last year with expansion seen largely in working capital and fixed investments.
Khan told the meeting that external balance had improved in the first four months of this fiscal year, as current account contracted by 4.6pc due to significant increase in workers’ remittances, containment in imports and increase in export growth. He said the headline inflation was increasing on the back of non-food inflation above 8pc, whereas food inflation was rising moderately by 2.7pc on account of smooth supply of commodities in the market and better price monitoring system.
He also updated the board about the economic reforms approved by the Economic Advisory Council. The meeting further discussed export credit facility offered by Saudi Arabia, envisaging the purchase of crude oil and or other petroleum product(s) of up to $3.24bn per annum on a 12-month deferred payment basis, a statement said.
Published in Dawn, November 30th, 2018
Alarm bells ring on fiscal deficit as govt borrowing from SBP shows massive spike - Newspaper - DAWN.COM
Atleast he didn't went there with a begging bowl like your Desi Murgi-Andewala PM. He went there to attend G20 summit of top 20 industrialized and rich nation. You people are not even invited for any important world sumitts except maybe for world terrorist sumitts in maybe ISIS land and soon Pakistan too will become one when your economy tanks completely. Below are links just go through list of apologies issued by Argentina. And that TV channel is junk channel run by junkies who make fun of their president too.
To begin with, I thought most of the CAR nations were energy rich & if not they can collaborate with each other for it. Why do they need KSA & more importantly Pakistan to meet this need?Pakistan leverages CPEC to launch 2 auxiliary corridors: SPEC & RPEC
January 11, 2019
Jan Achakzai |
Pakistan has successfully launched two auxiliary corridors to CPEC by engaging Saudi Arabia and Russia to leverage its geostrategic location ultimately opening Moscow’s access to the Indian Ocean and Riyadh’s reach to Euro-Asian markets potentially circumventing long route of Suez Canal for Gulf Cooperation Council (GCC) giant.
As Saudi Arabia has embarked on an ambitious economic plan to reduce its dependence on oil exports, offset the potential loss of the US and EU markets to Shell, it is looking to expand its investment in other sectors and regions to enhance trade volume and meet the demand of oil-hungry economies of Asia in coming decades.
Russia wants to export gas by laying this offshore pipeline through Gwadar Port to Pakistan and India.Therefore, Riyadh has indicated to invest a massive $15 billion in renewable energy in Pakistan and putting an oil refinery in Gawadar. It is also looking to launch 3 airlines, and utilize the CPEC and BRI infrastructure for further access into China and Central Asia, respectively, for future trade and energy supplies
The formal announcement is likely to be made in coming weeks following the high profile visit of Saudi Crown Prince Mohammad Bin Salman to Pakistan. Almost 12 Memorandums of Understanding (MoUs) are ready to be inked: Oil, sports, agriculture, media among other areas will be earmarked for investment. Saudi Ambassador to Pakistan Nawaf bin Said Al-Malki has been instrumental behind these initiatives shuttling between Islamabad, Riyadh, and Gawadar leading various delegations from KSA.
Read more: Economic crisis hurting CPEC?
There is already a proposal by KSA to link Gawadar with Oman via a seabed railway tunnel or bridge potentially connecting the proposed Israeli Railway Corridor with GCC Countries: Tel Aviv via Jordon and Saudi Arabia encompassing Oman. Since Iran has bad relations with GCC countries and Israel, it will be Saudi Pakistan Economic Corridor (SPEC) which will greatly benefit from any Mediterranean/Gulf Railway links and enhanced trade preceding new geopolitical realignments.
Thus the SPEC will be complementing the CPEC and the Mediterranean Corridor. Coupled with the SPEC, the second auxiliary corridor Pakistan has succeeded to launch is the new Russia Pakistan Economic Corridor (RPEC). Russia’s access to the Indian Ocean/Arabian Sea through the ports of Gwadar or Karachi and further to the Strait of Hormuz makes the shortest route.
Riyadh has indicated to invest a massive $15 billion in renewable energy in Pakistan and putting an oil refinery in Gawadar.Pakistan is located at the crossroads of the East-West and North-South trade corridors, including the new Silk Road project in South Asia, or China’s BRI; as such it ’s would-be-expanded railroad will be crossing the Trans-Siberian Railway, Turksib (Turkestan-Siberia Railway), the Trans-Asian Railway from China to Europe and hence securing the Eurasian Union. The RPEC with Russia’s engagement exploiting Islamabad’s geostrategic location complementing the CPEC, have already got underway.
Pakistan leverages CPEC to launch 2 auxiliary corridors: SPEC & RPEC - Global Village Space
CPEC, RPEC, SPEC, APEC, TPEC, DPEC., no matter what EC , Pakistanis have an unique ability to mess up anything. Give it 10 years all the ECs will be in various states of disintegration and pakistan will have moved on to the next “money making” plan.
Escuse me, but the main interest of the Pakistani army for CPEC was to line their pockets. Hence the secrecy. It was only recently that even some idea of the terms of the Chinese loans were made kind of public. The terms were not favorable to Pakistan...no surprise there.... The Army forced khan to u turn because again they (the army)stands to make money.May not be. Although their track record so far has been indicative of the outcome as suggested by you, understand that their policy is driven by Pakistan Army and not a bunch of politicians in this particular regard.
It is the insistence of PA to stick to the provisions of CPEC which saw Imran Khan undertake a massive u-turn from his position on the need to re-negotiate terms and conditions of the same. A policy continuum if a necessity to ensure sustained economic development within a nation. PA understands the gap being generated with India on the base of economy; they also understand that India can afford to massively upgrade their armed forces in a short span if a push comes to a shove, but their economic condition is such that they can ill afford the same - hence the push for "peace" - only difference is that GoI is no more as gullible as history has shown it to be.