Economic review of Pakistan in h1-fy2020.

Byline: S. Kamal Hayder Kazmi

Before the Covid-19 infections commenced to be detected in Pakistan, the country's economy the economist of Pakistan revealed, had clearly moved out of the crisis-management mode. The current account statistics were getting better every month, and foreign exchange reserves were shoring up progressively. Furthermore over the upcoming 24 months, headline inflation was predicted to revert to the medium-term target of 5 to 7 percent. Nevertheless, attaining this year's real GDP growth rate target of 4.0 percent was improbable, as the agriculture sector's condition was lower than predictions.

According to the officials of Pakistan, significantly the current account deficit has shrunk, the primary budget balance has moved into surplus, and core inflation has lately eased and even foreign exchange reserves have boosted markedly. Furthermore, export-led manufacturing has gained additional traction and signs of a pickup in construction activities have emerged presently, suggesting the economy is on the path of slow recovery. Also, presentation under the ongoing International Monetary Fund (IMF) programme remains strong, and foreign rating agencies for Pakistan, sustained a stable outlook. More recently IMF has accepted to give a 1-year relief to Islamabad, keep in in view the country's struggle against the coronavirus pandemic.

The experts revealed that during the past one year, these gains mainly reflect the cumulative effect of stabilization and regulatory measures taken. For instance, the reduction in the current account deficit to a 6-year low level in H1-FY2020 was facilitated through demand management measures, transition to a market-based exchange rate system, and regulatory attempts to curb non-essential imports and to raise the inflow of workers' remittances by formal channels.

The improvement in the fiscal position similarly, also reflects the impact of tax and non-tax measures to raise the revenue stream, and an important restraint on expenditures through the Government of Pakistan. In this stabilization process, local production and retail trade activities were adversely affected. While the economic activity has commenced to show signs of a recovery, it is significant to consolidate gains on stability front.

More specifically towards sustainable growth, progress in some areas stays susceptible and more work is needed to put the economy on a firm path. In particular, fall in the current account deficit has...