Moody's Expects Pakistan's New Mini Budget to Foster Exports and Import Substitution

[RiazHaq]

Pakistan's new government led by Prime Minster Imran Khan has inherited large twin deficits. The new "mini budget" announced by Finance Minister Asad Umar "will support Pakistan’s manufacturing sector, fostering exports and import substitution, and help narrow the current-account deficit", says a January 31, 2019 report by Moody's investor service. The report adds that the tax incentives given to manufacturing and exports-oriented industries "will keep Pakistan’s budget deficits wider for longer, potentially eroding the credibility of government efforts to achieve fiscal consolidation."

Pakistan Mini Budget Announced January 23, 2019. Source: Shajar Capital

Here's an excerpt of Moody's report on the immediate downsides of the measures announced by Umar on January 23, 2019: “We expect the deficit to widen to 6% of GDP in fiscal 2019 because revenue growth is likely to be below government projections, given slower economic growth and the new revenue-based incentives, before gradually narrowing to 5% of GDP by fiscal 2021 as the economy picks up. While we believe the government remains committed to fiscal consolidation, a wider for longer deficit could raise questions over the credibility of its fiscal policy."

Remittances from Pakistan diaspora rose by 10% year on year to $10.71 billion in the first half of fiscal 2019, while goods imports slowed sharply to around 3% year on year as non-energy imports contracted.

Moody's expects "the current-account deficit to narrow to 4.7% of GDP in fiscal 2019 and to 4.2% in fiscal 2020 from 6.1% in fiscal 2018, it will remain sizable and wider than in 2013-16, driving Pakistan’s external financing needs. The government has secured $12 billion in financing from Saudi Arabia and the United Arab Emirates – in each case amounting to $6 billion and divided equally between deposits and deferred oil payments – which is likely to largely cover the country’s net financing needs for fiscal 2019".

Beyond fiscal 2019, however, a net financing gap remains large because of the still sizable current-account deficit. Pakistan remains in negotiations with the International Monetary Fund over a new program that would provide a stable additional source of external financing, as well as technical support and assistance on macroeconomic rebalancing and structural reform policies.

https://www.southasiainvestor.com/2019/01/moodys-says-pakistans-new-mini-budget.html

 

[miafridi]

Next 2-3 years are tough for Pakistan, and hopefully things will improve afterwards because of honest leadership..

 

[pkpatriot]

All fears may vanish if we het a boom in one of our local sector like agriculture or foreign tourism.
Mining has scope but due to poor contracts like rekodik in last tenures it difficult to earn from there.

 

[Aslan]

First couple of years will be tough but after next three years Pakistanis will witness a big change.Many CPEC projects will be completed then.Direct foreign investment will increase many fold.Many countries are keen to invest in Pakistan.Saudi Arabia will be the biggest investor.UAE,Qatar,Turkey ,Malaysia and many European countries are also keen to invest.The perception of Pakistan is changing now.Nawaz dakoo was an indolent moron.He did nothing for the country.He was busy making money from corruption or maligning the army.Pakistan had no foreign policy because of him.Let us hope that he and Zardari can never come into power again.

 

[Aamir Ayoub]

good times ahead for Pakistan

 

[RiazHaq]

SBP: #Remittances from #Pakistani #diaspora up 12% to $12.77 billion in first 7 months of Fiscal Year 2018-19. http://www.sbp.org.pk/press/2019/Pr-11-Feb-19.pdf

Overseas Pakistani workers remitted US$ 12774.02 million in the first seven months of FY19
as compared with US$11383.47 million received during the same period in the preceding
year.
During January 2019, the inflow of workers’ remittances amounted to US$ 1743.25 million,
which is 0.3% lower than December 2018 and 6.4% higher than January 2018. The country
wise details for the month of January 2019 show that inflows from Saudi Arabia, UAE, USA,
UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries amounted
to US$ 403.92 million, US$ 352.12 million, US$ 272.32 million, US$ 295.13 million, US$ 166.50
million and US$ 42.89 million respectively compared with the inflow of US$ 383.91 million,
US$ 351.58 million, US$ 223.94 million, US$ 235.10 million, US$ 186.33 million and US$ 56.4
million respectively in January 2018. Remittances received from Malaysia, Norway,
Switzerland, Australia, Canada, Japan and other countries during January 2019 amounted to
US$ 210.36 million together as against US$ 201.46 million received in January 2018.
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