Ministry of Finance issued a clarification regarding an article comparingthe tenure of the current government with the previous regime withoutspecifying the article in concern. The statement read:
An article appeared in a section of the press with an arbitrary andselective financial comparison between the current government and theprevious regime. The article compares apples with oranges without takinginto account a holistic picture.
The writer termed the tenure of a previous regime as a period of highgrowth, low inflation, increased per capita GDP, low-interest rates,increasing tax revenues, and higher investments.
The fact of the matter is that in FY 2018, Pakistan faced multiple fiscal,external, and real sector challenges. For instance, the trade deficit was9.8 percent of GDP, an overvalued exchange rate had consumed preciousforeign exchange reserves, and twin deficits had reached a record level.
Consumption led growth had created a balance of payment crisis as well as afiscal imbalance. The current rise in inflation could be traced back to thedelay in policy adjustments required in FY 2018.
As a result, the present government had to impose a strict financialdiscipline, curtail excessive government expenditure, increase revenuecollection, introduce a market-driven exchange rate, remove large taxexemptions, discourage imports, and stop borrowing from the State Bank ofPakistan (SBP).——————————
As a consequence of these prudent policies, Pakistan witnessed a remarkableimprovement in fiscal and current account deficits. Similarly, Pakistanregistered a primary surplus, which is unprecedented and a significantachievement despite the COVID-19 pandemic.
Pakistan also had an upward trend in foreign remittances and FDI during thefirst quarter of FY 2020-21. The government was also able to give thelargest ever Fiscal Stimulus Package of Rs. 1240 billion to cover emergencyresponse, support businesses, and provide relief to citizens in the crisiscreated by the pandemic.
The government has also taken several initiatives to accelerate economicrecovery. A relief package for Small Medium Enterprises (SMEs) has shieldedagainst insolvency and joblessness. Similarly, a special package has beenannounced to boost the Construction sector, which includes an amnestyscheme, tax exemptions, and subsidies to stimulate economic growth.
The COVID-19 pandemic has disrupted supply chains, which added to foodinflation. However, the government has taken effective policy andadministrative measures to minimize inflation. At present, there is aconsistent decline in the prices of essential commodities.
The government is firmly committed to correct the fundamentals of theeconomy through effective policymaking and targeted reforms. The objectiveis to achieve sustainable and inclusive economic growth in the long run.