Economy shows signs of recovery, says finance minister

Caretaker Finance Minister Shamshad Akhtar has said that the country’s economy is showing signs of recovery due to the steps taken by the interim government.

She made the remarks a day after the State Bank of Pakistan (SBP) kept the interest rate unchanged at 22% for the next couple of months. The Monetary Policy Committee (MPC) decided to maintain the policy rate at 22%. This decision takes into account the latest inflation outturn reflecting the continuing declining trend in inflation from its peak of 38% in May to 27.4% in August 2023.

Addressing a joint press conference flanked by caretaker Minister for Information and Broadcasting Murtaza Solangi and Minister for Energy, Power and Petroleum Muhammad Ali on Friday, Akhtar said: “The macroeconomic indicators, if you view them, you can find some betterment. There are some signs of economic recovery. Even if it is just starting.”

While deliberating upon the indicators showing positive development, the finance minister said the Consumer Price Index (CPI) has shortly declined from over 38% in May to 27.2% now, adding this was an important indicator to show betterment.

She said the caretaker setup had inherited several challenges, however, it was not frightened by them and tried to deal with them one by one, adding that the government’s strategy was to prudently manage the challenges, make efforts to control expenditure and enhance revenues, which would help improve the situation.

She said the country had come out of some difficulties and the situation would improve further when ‘we go forward.’ Akhtar said the productive sectors witnessed betterment, including agriculture, which is expected to yield good output in both minor and major crops that would have a positive impact on the economic growth prospects of the country.

The minister said the industrial sector was also showing improvement, citing growth in the cement industry adding that as soon as the activity picks up gradually the industry would also grow.

Talking about the services sector, the minister said it is a very vibrant sector and has been linked with every sector.

In addition, she said, the SBP had kept interest rates stagnant which would also help improve the situation by reducing the cost of borrowing by industry and help its revival. She said the government had also talked to donors, expressing the hope that in addition to the normal flows from them, funding in some areas would be fast-tracked.

The finance minister said the government was expecting around $2 billion in assistance on a fast-track basis. “The Asian Development Bank (ADB) is expected to keep its funding under Revitalising Informal Settlements and their Environments (RISE) on fast track.”

Akhtar also said the government was focusing on reforms in those sectors which are beneficial for people and help build the confidence of investors to attract Foreign Direct Investment (FDI).

She said the government was working on different initiatives to improve the FDI and ensure self-sustaining growth. For remittance, she said, Rs80 billion has been allocated for initiatives to improve remittances through formal channels, adding that Rs20 billion out of this amount has been released to banks for this purpose. She said the foreign exchange reserves position is also stable adding that Exchange Companies Reform and anti-smuggling operations stabilized the rupee.

“This stability came without any bank intervention.” The minister said the export-import bank was also being operationalized. She said there were many other initiatives that showed the government was making efforts to bring about positive change.

 — Additional input from APP