LAHORE: The optimistic Monetary Policy Statement (MPS) for March 2015 on the government’s economic performance issued by the State Bank of Pakistan (BPS) has ignored the shortfalls, which would hinder economic performance in next three months.
As per the MPS, the growth rate will exceed FY14 outcome of 4.1 per cent. It is not clear how this growth rate will be achieved as in the first seven months, large-scale manufacturing showed sluggish growth rate while the agricultural sector has been hit by floods (albeit less than originally anticipated), says a reading from a fact-sheet released by the Institute for Policy Reforms (IPR).
According to IPR, it will be surprising if the agricultural sector registers a growth rate of more than three per cent in 2014-15. According to MPS, the inflation has come down from 8.2pc in June 2014 to 3.2pc in Feb 2015. However, this is mostly because of precipitous decline in international oil prices.
The inflation rate will rise in the next few months since international oil prices have risen by 20pc in February and because of higher gas prices, accompanied by high procurement price of wheat.
The MPS fails to highlight the high level of government borrowings from commercial banks in FY15, which has led to a ‘crowding out’ of credit to the private sector.
The MPS highlights the decline in the current account deficit in the first eight months of 2014-15. The decline in exports has been more than compensated by the buoyancy of home remittances, fall in imports, large CSF payment, and other inflows like the Ijara-Sukuk bond flotation and releases from the IMF. FDI has stopped growing. Net external concessional assistance from traditional donors too has decreased.
