KARACHI: The State Bank of Pakistan (SBP) released its first quarterly report on the state of Pakistan’s economy for the fiscal year 2020-21 covering the period July – September 2020.
According to a detailed report issued by the SBP, there were encouraging indications during Q1-FY21 that Pakistan’s economy was regaining its pre-Covid trajectory. The recovery in economic activities was evident across the agriculture, industry, and services sectors.
Importantly, external and fiscal sector indicators also remained favorable, indicating that the emerging recovery was being achieved while keeping macroeconomic stability intact. The report notes that a timely and well-calibrated economic policy response to the Covid crisis from the government and the SBP helped to prevent a deeper fallout from the crisis and lay the foundations for economic recovery.
Specifically, in the external sector, the current account posted a surplus, primarily due to robust workers’ remittances, rebound in exports, and lower services imports. Continued policy measures under the Pakistan Remittance Initiative and the promotion of formal and digital channels played a major role in driving remittances up.
The Covid-related international air travel restrictions also helped divert remittances from informal to formal channels, while dampening the level of Pakistan’s services imports at the same time.
Import payments were relatively lower during the first quarter compared to last year due to a sharp fall in global oil prices.
Meanwhile, export receipts recovered from the lows in last quarter of the last fiscal year but were somewhat lower compared to the Q1-FY20, with demand remaining soft among key trading partners. Nonetheless, Pakistan’s export performance was relatively better compared to a number of other emerging markets, partly due to the early resumption of economic activity.
As a result, exports regained their pre-Covid trajectory in September, helped by higher export receipts for textiles, cement and pharmaceuticals.
In agriculture, all major crops, except cotton, surpassed their production targets during the Kharif season.
On the inflation front, the slight increase in headline inflation during Q1-FY21 compared to the preceding quarter was predominantly attributable to food inflation, with prices of non-perishable and perishable items driven up by supply-side factors.
