ISLAMABAD: The government on Monday conceded that Pakistan economy was confronted with pressures on inflation and the external sector mainly because of currency depreciation, macroeconomic policies and external factors.

“External pressures have begun to materialise mostly due to the compound impacts of increased economic activity, an expansionary macroeconomic policy mix, and rising international commodity prices”, said Economic Adviser’s Wing (EAW) of the Ministry of Finance in its Monthly Economic Update & Outlook.

In its November Update, the EAW explained that Pakistan’s inflation was driven by the demand factors, international commodity prices, exchange rate, seasonal factors and economic agents’ expectations concerning the future developments of these indicators.

Uptrend in agriculture, industrial sectors to help achieve growth target

It said the year-on-year inflation had accelerated in the last two months, but this may be moderated by the seasonal profile while financial and economic support from friendly countries will ease out pressure on the external sector.

The government’s efforts to monitor the functioning of the retail markets especially in essential food products is ongoing and is being strengthened to counter the inflationary pressures, the report claimed.

The report noted that exports of goods and services recorded approximately $3 billion in October and expected the exports would keep rising in the coming months, helped by the momentum in domestic economic dynamism, and specific government policies to stimulate exports.

It said the 0.8pc fiscal deficit recorded in first quarter (July-September 2021) was lower than last year’s 1.1pc, it would further go down with continued fiscal discipline through an effective revenue mobilisation strategy and better expenditure management.

The report said the economy was on track to achieve the growth target for FY22 as the second estimates of the cotton crop along with the latest performance of high frequency variables were encouraging and set an optimistic baseline scenario.

During 4MFY22, the agriculture credit disbursement increased by 6.5pc to Rs381.3bn compared to Rs358bn of same period last year. The urea off-take in October was 514,000 tonnes which increased by 24.4pc over October 2020. DAP off-take also increased by 49.2pc to 342,000 tonnes in October.

The Large-Scale Manufacturing (LSM) posted a growth of 5.15pc in the first quarter of FY22 against 4.53pc in the same period last year.

During the period, 12 out of 15 sub-sectors of LSM have witnessed positive growth. The EAW expects the industrial sector to follow an upward trend and help achieve the overall growth target.

Published in Dawn, November 30th, 2021