In its annual report, the State Bank of Pakistan has describedthe overall economic performance during the fiscal year 2013-14as betterdespite the fact that most of the targets set for the year could not be achieved. Though the government has the reasons to boast of narrowing gap of fiscal deficit than the target, the report indicates that the arrangement to bring down the ratio of the fiscal deficit to 5.5 percent was artificialafter it had failed to pay the due amount in the fiscal year.
The report says that the government did not settle Rs235 billion circular debt and treated a one-off grant of Rs157billion as a statistical discrepancy which reduced the overall deficit by the same amount. However, the fiscal gap has increased to 7.5 percent of the GDPafter one-off utilisation of Rs 67.7billion from the universal service fund. The report also indicates that no fiscal target has been achieved as the real GDP growth remained 4.1 percent against the target of 4.4 percent, agriculture remained 2.1 percent against the target of 3.8 percent, services remained 4.3 percent against the target of 4.6 percent and inflation remained at 8.6 percent against target of 8 percent.
However, tangible improvement has been noted in foreign exchange reserves, appreciation of rupee in March, lower than expected inflation rate and improvement in the private sector credit.Various international financial institutions started to take interest in Pakistan’s economy after the government’s understanding with International Monetary Fund, giving a gradual boost to foreign exchange reserves. The report noted with concern that the inadequate planning and development of the energy infrastructure and lack of reforms in generation and distribution companies have continued to block economic development. However, inflow of $5.1 billion development fund into the country and other financial transactions helped consolidate the rupee value.
It is important to note that Pakistan falls in the group of middle income countries and despite all odds, its volume of economy and trade is expanding day by day. The new situations and new realities call for coordination between the financial managers at the ministry of finance and the State Bank as one of the prime institutions in the country. The policy matters needs to be discussed before gearing them to implementation stage.
