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PR No.57 ECC Briefed on Economic Situation Islamabad: March 7, 2016

Economic Coordination Committee of the Cabinet in its meeting chaired by the Finance Minister, Senator Mohammad Ishaq Dar here on Monday reviewed the economic situation and also accorded approval for extension of reduced withholding tax rate for non-filers.

Ministers for Commerce, Water & Power, MOS IT, Chairman Privatization Commission, SAPMs on Revenue, Law and Human Rights and concerned secretaries of ministries attended the meeting.

At the outset of the meeting the ECC directed that more consultations at inter-ministerial level on the Auto Policy be carried out and that the Policy should be brought for its (ECC) consideration in the next meeting.

The meeting approved extension of reduced withholding tax rate of 0.4% on banking transactions of non-filers under section 236P of Income Tax Ordinance 2001 up to March 15, 2016.

The meeting thereafter received a comprehensive briefing from Secretary Finance on the current economic condition. The key aspects of the briefing were as under:

Prices

Almost all price indices pointed to lowest inflation in more than a decade;

• The average inflation during Jul-Feb was recorded at 2.48%, with year-on-year inflation at 4%;

• The low inflation is likely to persist as Government has passed on lower prices for the month of March to consumers as well the production outlook of agriculture appears stable;

• The world commodity prices outlook also points in the direction of stable and low prices as prices of key commodities such as sugar, wheat, rice, tea, soyabean, palm oil, crude oil, urea and DAP fertilizers have all registered significant reductions in the Jul-Feb period.

Stocks Position

The position of stocks of key commodities was satisfactory.

• The current wheat stocks amounted to 5.1 million tons against 5.4 million tons last year.

• Stocks of sugar were registered at 2.9 million tons against 2.5 million tons last year;

• Petroleum product stocks averaged 12 days compared to 11 days last year, with stocks of HSD standing at 25 days against 23 days and stocks of petrol standing at 15 days against 9 days last year.

Production

Large Scale Manufacturing (LSM) registered a growth of 3.9% during Jul-Dec 2015 as against 2.7% for same period last year.

• The leading sectors were automobiles (32%), fertilizer (15%), chemicals (11.6%), rubber products (9.8%), pharmaceutical (6.8%), petroleum products (6.8%), non-metallic mineral products (6.7%), leather (1.2%) and textiles (1.0%).

• The generation of electricity during January 2016 was 11% higher than last year for the same month.

• Gas supply was higher by 1.5% during January 2016 compared to the same period last year.

Tax Revenues

Tax Revenues have registered an outstanding performance as during Jul-Jan 2015-16 the FBR revenues were up by 18.4%.

Trade Account

• Imports during Jul-Jan 2015-16 were down by 6.8% while exports were down by 11.4%, compared to the same period last year. However, trade balance for the same period improved by 1%.

External Account

• Foreign Exchange reserves stood at $20.52 billion, as on 4th March 2016. SBP reserves were $15.66 billion and commercial banks’ reserves were $4.86 billion.

• The SBP reserves had fallen to $2.8 billion in February 2014 and since then they have continuously risen to $15.66 billion, indicating a net official reserves build-up of about $12.9.

• Remittances, despite a high base of $18.7 billion during 2014-15, have risen by 6% during the period Jul-Jan 2015-16, which is well within the target set for the year.

• The current account for the period Jul-Jan 2015-16 stood at $2.04 as against $2.64 billion during the same period last year, showing an improved external position of the country.

• Foreign Direct Investment increased by 4.6% during the period Jul-Jan 2015-16 compared to the same period last year.

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