PR No.73 Finance Minister Chairs Monetary And Fiscal Policies Coordination Board Meeting Islamabad: December 8, 2015

The Federal Minister for Finance, Senator Mohammad Ishaq Dar chaired the Monetary and Fiscal Policies Coordination Board meeting here on Tuesday.

The Secretary Finance briefed the meeting that headline inflation (CPI has been contained at 1.86% during first five months of current fiscal year as compared to 6.45% of the corresponding period last year. Effective monetary policy along with better supply of commodities coupled with decline in international oil and commodities prices helped in containing the inflation. The current account deficit has been narrowed to $ 532 million during four months of current fiscal year as compared to $ 1.8 billion in corresponding period last year. The LSM has witnessed uptick in its growth during first quarter of current fiscal year at 3.9% as compared to 2.6% last year on account of better electricity generation and gas production. The remittances continued its upward growth at 5.2% during first four months of current fiscal year. The foreign direct investment during first quarter increased by 7.7% but in July-October it declined by 24% whereas the foreign public investment increased during the period helped in improving foreign investment by 18.5% over last year. The reserves as on 4th December 2015 was reported at above $ 20 billion. The FBR tax collection is showing improvement at 16.8% during July-Nov. of current fiscal year as compared to last year. It was informed that during November FBR collections were remained higher at 27%. The fiscal deficit has been contained at 1.6% as compared to 1.7% last year. The meeting noted that improvement was observed in most of the public debt sustainability indicators during last two fiscal years.

The SBP briefed the meeting about the money supply. NFA has increased by Rs.105 billion. The NDA however, declined by Rs.65 billion during July 01-Nov. 20, FY 16, mainly due to the decline in other assets scheduled banks. Higher SBP-NDA along with higher SBP-NFA subsequently increased the reserve money by RS.462 billion during Jul 01-Nov 20, FY16; compared with an increase of Rs.176 billion in corresponding period last year. Credit to private sector witnessed increase of Rs.40 billion during Jul 01-Nov 20, FY16; compared with an increase of Rs.58 billion in corresponding period last year. Encouragingly, fixed investments continued to expand in Q1-FY16 for the fourth consecutive quarter since Q2-FY15. Moreover, the impact of easy monetary policy (since November 2014) has started to reflect in the weighted average lending rates on fresh and outstanding loans. With current credit cycle entering in uptake phase borrowing on account of both working capital and fixed investment is likely to increase.

The Ministry of Commerce briefed the meeting about imports and exports trends. It was informed that the decline in exports is mostly due to adverse terms of trade triggered by massive reduction in commodity prices and weak global demand.

The Minister said that informed that government is taking all steps to enhance exports and removing structural bottlenecks. The Minister also highlighted that the government is takingh measures for facilitation of doing business and enhancing competitiveness. He also suggested that macro framework module should be integrated to capture the changing economic realities in establishing an effective nexus between output, aggregate demand, expenditure, revenues, foreign trade, money and prices. The Minister also suggested a committee to work on developing a blue print for the growth and job creation. The Minister also expressed hope that improvement in electricity and gas supply as well as lower policy rate will bring further improvement in productivity and growth.

The meeting was attended by the Secretary Finance, senior officers of Finance Division, Deputy Governor SBP, representative of Ministry of Commerce, Dr. Ishrat Hussain Director IBA and Dr. Asad Zaman Vice Chancellor PIDE.