Report praises liquidity flow during pandemic

LAHORE:

It is no surprise that the Pakistan Bureau of Statistics has revised fiscal year 2020- 21’s real GDP growth rate to 5.57% following receipt of updated economic data, stated a research report. A fact sheet, issued by the Institute for Policy Reforms (IPR) on Tuesday, noted that the government took positive action by injecting liquidity in the economy as it led to rise in demand and production.

“Despite the fact that the economy grew nearly 5.5% in fiscal year 2018-19, it left severe macroeconomic imbalances that needed a period of stabilisation through tightening of monetary policy, adjustment of exchange rate and decline in public spending,” it said. “The pandemic made the situation more complex.”

Some key decisions taken during that period helped stimulate economic activity. Citing examples, it said that introduction of fiscal stimulus package worth Rs1.24 trillion in April 2020, tax refunds to exporters and subsidised loans for small and medium enterprises (SMEs) and agriculture sector significantly aided the economy.

It noted that the State Bank of Pakistan (SBP) injected liquidity in the economy through several concessional credit windows such as Temporary Economic Refinance Facility (TERF) which stimulated production. Other measures also helped save jobs at a time when lockdown had slowed down production. The credit to the private sector, a major indicator of economic activity, grew consistently since 2020.

Emergency cash transfers under Ehsaas also played a major role. A campaign to attract workers’ remittances through banking channels improved the current account balance. After a period of correction in public investment, government boosted public investment in key areas to stimulate economic growth and create jobs. All these developments boosted aggregate demand, which increased by 15.6% in fiscal year 2020-21 on a yearon-year basis. In fiscal year 2019-20, aggregate demand grew 6.6%.