Islamabad, May 28, 2014 (PPI-OT): A meeting of the Monetary and Fiscal Policies Coordination Board was held under the chairmanship of Federal Minister for Finance, Economic Affairs, Statistics and Privatization Senator Muhammad Ishaq Dar here today.
Other members of the Board present in the meeting include Federal Minister for Planning, Development and Reform, Federal Commerce Minister, Governor SBP, Secretary Finance, Dr Ishrat Hussain Director IBA and Dr Asad Zaman, Vice Chancellor PIDE.
The Finance Minister, highlighted the importance of the Coordination Board Meeting that it is an important body for bringing consistencies in monetary, fiscal and exchange rate policies. He said that, the meeting also provides to share assessment of the current economic situation and bring consistencies in economic targets and see how we can adopt optimal policy measures for economic stability and growth.
He also noted that despite its significance in policy coordination, in the past the meetings of the Board were not held regularly. While expressing satisfaction on revival of the Board after a gap of five years he stressed that meetings should be held in each quarter of fiscal year.
Finance Secretary presented an overview of the current economic situation and informed that due to better policies of the government the 4.14 percent GDP growth is achieved which is the highest level achieved during last 6 years, inflation was also contained in single digit.
It was observed that industrial sector recorded growth of 5.8 percent, construction 11.3 percent, wholesale and retail trade 5.2 percent, electricity 3.7 percent which are highest in recent years. It was also noted that IMF after every review scaled up the GDP growth and adjusted downward its inflation forecast.
Budget deficit reduced to 3.2 percent during July-March FY 14 which is lower than 4.7 percent in the same period last year. Government gradually reduced its borrowing from SBP with an aim to adhere to the zero limit borrowing.
FBR tax revenues have reached to Rs.1744.8 billion during July-April FY 14 as compared to Rs.1505.5 billion during same period last year showing a growth of 16 percent. Remittances have grown by 11.4 percent and reached to $12.9 billion against $11.6 billion in the same period last year. Foreign exchange reserves have reached to $13.7 billion and Pak Rupee also appreciated significantly.
Finance Minister informed that this year was fire fighting year and after period of consolidation and reforms we have to look Out Of the Box and shift in different modes to bring consistencies in the policies for betterment of the economy.
He said that effective debt management has been the prime challenge as composition of debt portfolio has itself under gone from high dominance of long term debt to an increasing dependence on short term floating which was a source of vulnerability as it entailed high roll over and re-financing risks.
We have now focused on lengthening the maturity profile to reduce the re-financing risk along with sufficient provision of external inflows to help in reducing the pressure on domestic resources. The government has also launched secondary market trading of government debt securities at the stock exchanges in the country which will also be helpful in obtaining long term financing for the government in future.
Minister for Planning, Development and Reform informed that government policies have brought stability in the system and now focus is on structural changes to boost growth by TIE i.e. achieving; trade, investment and exports in the country.
In particular he stressed more focus on agriculture and asked the provinces to pick up the investment issues in this sector as it is there responsibility after devolution. Dr. Ishrat Hussain emphasized to introduce high yielding varieties of seed in agriculture particularly BT cotton and pro-active role of public private partnership.
Minister for Commerce briefed on exports and imports and also explained the facilitations which are needed to address the structural bottlenecks in the enhancement of exports and suggested the important role of sectoral organizations in this regard.
He further elaborated for enacting the legislation for creating Land Port Authority to deal with all agencies and to have matching facilities on the borders to facilitate regional trade. A limited target market focus for exports was also emphasized.
The Governor State Bank informed that SBP kept the policy rate at 10 percent. Given the real GDP and inflation target, M2 was projected to grow at around 13 percent in FY14. However, it grew by 7.3 percent during July –May 09 FY14 as against 10.3 percent in the corresponding period of last year.
NFA expanded by Rs. 263 billion and NDA by Rs.411 billion. The credit to private sector points in the direction of improved economic activity, the flow was almost two and a half times more as compared to last year. He briefed the impact of monetary policy on growth, investment and balance of payments.
The Finance Minister expressed the hope that the deliberations of the Board will lead to better economic coordination and the goals of the government will be achieved in a coordinated manner by all the institutions involved.
He urged the members to have special groups within their ministries/departments to discuss more in line with objectives of the Board so that in future we may setup goals and focus on its implementation on regular basis.
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