Viewing fiscal year 2013-2014 as a better year for the country’s macro-economic conditions, the central bank sees the loss-making state-owned companies as a “burden” on the federal government.
“The SBP views the public sector enterprises (PSEs) continue to be a fiscal burden on the federal government,” reads the annual report the central bank issued on Wednesday on Pakistan’s state of economy in FY14.
FY14, the report said, was a better year for the macro-economy. The most notable developments, the SBP report cited, include a tangible improvement in the country’s foreign exchange reserves; the unprecedented appreciation of the PKR in early-March; reduction in fiscal deficit; a lower than expected inflation rate; improvement in private sector credit; and the relatively contained current account deficit.
“With the start of a new IMF program, external inflows from other international financial institutions (IFIs) also began after a gap of almost three years,” the report observed. This helped stem the gradual depletion of SBP’s foreign exchange reserves.
Moreover, the $ 1.5 billion inflow into Pakistan Development Fund (PDF) in February-March (2014) contributed in releasing the pent up inflows which helped in stabilising the PKR.
The positive sentiments this generated also instilled a view that the government was finally gearing up for a growth phase. The SBP viewed the fiscal deficit at 5.5 percent of GDP was significantly lower than the FY14 target of 6.5 percent and when compared to trends in the past three years, said the report.
“In our view there was a concerted effort on the part of government to contain expenditures and generate additional revenues, but the one-off factors like the inflow into the PDF and the government delay in paying off the circular debt in FY14 also played their role,” the report said.
“In the bigger picture, the stand out performer in the external sector were expatriate Pakistanis,” the report said. What is more interesting, however, is the fact that while Pakistan’s export revenues have remained almost stagnant since FY10, the remittances have continued to grow strongly, said the report.
During FY14, the worker remittances were higher by $ 1.9 billion than last year exhibiting an increase of 13.8 percent. The strong growth in remittances partially offset the impact of a rise in trade deficit and other factors on the current account balance.
