The month of October has given the government ample reasons to breathe easy about the economy. According to the SBP data, foreign direct investment (FDI) hit a 10-month high of $317.4 million during October; remittances from expat workforce during the same month rose 14.1% year-on-year to $2.3 billion, clocking in above the $2 billion mark for the fifth consecutive month; and the volume of exports in October grew 29% month on month and 6.12% year on year.
These foreign inflows in the shape of FDI, exports and remittances — coupled with the foreign currency receipts under Roshan Digital Account introduced by the central bank for non-resident Pakistanis — have served to strengthen the value of rupee against the US dollar, besides reducing the cumulative current account deficit further. For the first time in six months, the dollar fell below 160 to a dollar at the beginning of the ongoing month and slid further to Rs158.91 against the rupee in the interbank market. As regards the current account, there has been rather a surplus of $792 million in the first quarter of the current fiscal year. And this is the first quarterly surplus in the current account in more than five years.
Besides, government efforts to push economic growth have also been proving successful. The construction package provided by the government has resulted in record cement sales. Fiscal stimulus packages offered by the central bank to businesses in order to offset the Covid impact are also paying dividends, bringing about the revival of the large-scale manufacturing sector. That our stock market has surpassed others in South Asia is worth taking pride for.
However, sustaining the growth momentum is the real challenge for the government given the fact that: losses incurred by state-owned enterprises continue to accumulate; circular debt keeps ballooning; expansion in tax base remains a concern; the public debt is rising and rising; and the food inflation remains out of control. All these areas require structural reforms — something that Prime Minister Imran Khan has paid little attention to since taking over nearly two and a half years back. The government cannot afford to waste any more time.
Published in The Express Tribune, November 18th, 2020.