ISLAMABAD: Ministry of Finance (MOF) has issued clarification about an article appeared in a section of press with arbitrary and selective financial comparison between the current government and the previous regime. The article compares apples with oranges without taking into account a holistic picture. The writer termed the tenure of a previous regime as a period of high growth, low inflation, increased per capita GDP, low interest rates, increasing tax revenues and higher investments.
The fact of the matter is that in FY 2018 Pakistan faced multiple fiscal, external and real sector challenges. For instance, the trade deficit was 9.8% of GDP, an overvalued exchange rate had consumed precious foreign exchange reserves, and twin deficits had reached a record level. Consumption led growth had created a balance of payment crisis as well as fiscal imbalance. The current rise in inflation could be traced back to the delay in policy adjustments required in the FY-2018.
As a result, the present government had to impose a strict financial discipline, curtail excessive government expenditure, increase revenue collection, introduce market driven exchange rate, remove large tax exemptions, discourage imports and stop borrowing from the State Bank of Pakistan.
As a consequence of these prudent policies, Pakistan witnessed remarkable improvement in fiscal and current account deficits. Similarly, Pakistan registered a primary surplus which is unprecedented and a great achievement despite the COVID-19 pandemic. Pakistan also had an upward trend in foreign remittances and FDI during first quarter of FY 2020-21.
The government was also able to give the largest ever Fiscal Stimulus Package of Rs.1240 billion to cover emergency response, support businesses and provide relief to citizens in the crisis created by the pandemic.
The government has also taken several initiatives to accelerate economic recovery. A relief package for Small Medium Enterprises (SMEs) has shielded against insolvency and joblessness. Similarly, a special package has been announced to boost Construction sector, which includes amnesty scheme, tax exemptions and subsidies to stimulate economic growth. The COVID-19 pandemic has disrupted supply chains which added to food inflation. However, the Government has taken effective policy and administrative measures to minimize inflation. At present, there is a consistent decline in prices of essential commodities.
The government is firmly committed to correct the fundamentals of the economy through effective policy making and targeted reforms. The objective is to achieve sustainable and inclusive economic growth in the long run.