KARACHI: The central bank has reported improvement in the country’s macroeconomic environment during the third quarter of calendar year 2014-15.
According to the State Bank of Pakistan (SBP), the external sector improved during January-March. Benefiting from robust growth in workers’ remittances, higher inflows under the Coalition Support Fund and a sharp reduction in oil prices, the country’s current account posted a notable surplus in the third quarter.
The SBP’s liquid foreign exchange reserves more than doubled from a year ago, which is enough to finance three months of the country’s import bill, it said in a press release.
“The resulting stability in the exchange rate, together with the government decision to pass on the benefit of the fall in international oil prices to domestic consumers, and the prudent monetary management not only pushed year-on-year CPI inflation down to a decade’s low, but also eased inflation expectations as shown by IBA-SBP’s Consumer Confidence Survey,” it said.
The reduction in inflation is broad-based, the SBP said, adding that all measures of core inflation – non-food-non-energy, trimmed, and Relatively Stable Component of the CPI – posted noticeable declines during the period of analysis.
The report added that the budget deficit during the Jul-Mar period slightly narrowed to 3.8% of GDP, compared with 3.9% in the same period last year. The Federal Board of Revenue (FBR) tax collections grew 12.7% during the quarter, which were well below the 17.9% growth recorded in Jul-Mar of 2013-14.
Unlike the revenue side, government’s efforts to control spending supported fiscal consolidation. Overall expenditures grew by 8.3% during Jul-Mar against 8.7% in the same period of the preceding fiscal year. “It is also encouraging to note that lower growth in expenditures was not at the expense of development spending, which grew by over 20% year-on-year during the review period.”
According to the report, the financing of budget deficit indicates that the government did not resort to inflationary borrowing from the SBP. Instead, it retired a huge sum of Rs674.4 billion on a cash basis during Jul-Mar.
