Major economic indicators, not FDI, showed healthy growth in FY2020-21

The Nation  |  Aug 01, 2021

ISLAMABAD - All major economic indicators have shown healthy growth in fiscal year 2020-21 apart from the decline in foreign direct investment (FDI).

The major economic indicators have recorded growth in the previous fiscal year. The surge in economic growth is expected to continue in FY2021-22 on account of reopening of economic activities and acceleration in vaccination process. The inflow of foreign remittances have gone up to $29.4 billion in FY2020-21 from $23.1 billion in the preceding year 2019-20, showing an increase of 27 percent. Similarly, exports have enhanced by 13.7 percent to $25.6 billion in FY2020-21 from $22.5 billion. Meanwhile, the country’s imports have massively increased by 23.2 percent to $53.8 billion in previous financial year as compared to $43.6 billion in the corresponding period. Rise in imports is one of the major threats for the government. Pakistan’s balance of payment (BoP) position has been worsening in the wake of rising import pressures. 

Gov't decides hike in existing prices of petroleum products The massive increase in foreign remittances has helped in controlling the current account deficit. The current account deficit was recorded at $1.9 billion (0.6 percent of the GDP) in FY2020-21 as against $4.4 billion (1.7 percent of the GDP) in preceding year. The foreign exchange reserves have gone up to $24.858 billion in July this year due to the massive borrowing and control in current account deficit from $18.913 billion in the same period of the last year. 

Surge in economic growth expected to continue in FY2021-22 on account of reopening of economic activities and acceleration in vaccination process

The country’s budget deficit was recorded at Rs2.197 trillion during eleven months (July-May) period of FY2021 as compared to Rs2.418 trillion in the corresponding period of the FY2020. Primary balance remained at surplus of Rs139 billion during the period under review as compared to deficit of Rs339 billion in the same period of the FY2020. Tax collection of the Federal Board of Revenue (FBR) was recorded at Rs4.732 trillion in FY2020-21 as compared to Rs3.997 trillion in the preceding year, showing an increase of over 18 percent. However, non-tax revenue has declined by 6.2 percent to Rs1.281 trillion as compared to Rs1.365 trillion. 

Shop till you drop at Ideas azadi online sale Meanwhile, inflation rate has declined in the period under review. Inflation rate wass recorded at 8.9 percent in FY2020-21 as compared to 10.7 percent in the preceding year. In recent months, the inflation rate is on a declining trend. It is expected that this declining trend will continue in the absence of any major shock.

In FY2021, FDI has massively declined by 28.9 percent. The FDI was recorded at $ 1.847 billion in FY2020-21 as compared to $2.597 billion last year. Meanwhile, total foreign portfolio investment registered an inflow of $ 2,766.8 million during FY2021. FDI received from China was recorded at $757.9 million (41.0 percent of total FDI), Hong Kong $157.2 million (8.5 percent) and UK $143.5 million (7.8 percent). Power sector attracted highest FDI of $ 906.1 million (49.0 percent of total FDI), oil & gas exploration $ 242.8 million (13.1 percent), financial business FDI $235.5 million (12.7 percent) & electrical machinery $114.3 million (6.2 percent). The FDI had been hit hard globally by the pandemic. The advanced economies are largely affected as compared to developing countries. In Pakistan, pandemic as well as the challenging foreign investment environment caused difficulties in attracting FDI flows. To make more conducive business environment, the present government has provided relief to manufacturing and taken many measures on ease of doing business like reduce withholding tax and rationalized import duties.

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