ADB approves $200 million for Pakistan's social welfare programme
The amount will be utilised for social protection and help of 855,000 women under the BISP.
ISLAMABAD (Dunya News) – The Asian Development Bank (ADB) has approved additional funds of $200 million for Pakistan under the social welfare programme and the Benazir Income Support Programme (BISP).
The amount will be utilised for social protection and help of 855,000 women under the BISP.
Pakistan’s economy decelerated in FY19
Earlier in September, the ADB’s Asian Development Outlook 2019 (ADO) affirmed that Pakistan economy was expected to grow slower than last year, with GDP growth projected at 2.8 per cent in fiscal year 2020.
The ADO noted that growth in Pakistan had decelerated during fiscal year 2019 and reflected "lower investment amid policy uncertainty and persistent macroeconomic imbalances".
"Sizeable currency depreciation accelerated inflation but helped substantially narrow the current account deficit," it observed.
The report stated that Pakistani authorities are implementing a "comprehensive programme of fiscal consolidation and monetary tightening to stabilise the economy and address structural weaknesses".
According to the report, provisional estimates found that GDP growth slowed from 5.5pc in FY2018 to 3.3pc in 2019.
Regarding the supply side, all sectors had "contributed substantially less" to GDP growth than a year prior, whereas on the demand side, private consumption has accounted for 82pc of the GDP "despite higher inflation and borrowing costs".
The report projected that inflation which was 9.4pc in July and August would rise to 12pc in FY2020 due to "a planned hike in domestic utility prices, taxes introduced in the FY2020 budget and the lagged impact of currency depreciation".
"Pressure from inflationary expectations can be relieved by the government’s commitment to refrain from directly financing the budget deficit by borrowing from the central bank as monetary policy continues to tighten."
"The economic reform program supported by the IMF envisages a multiyear strategy for revenue mobilization to pare public debt to a sustainable level. The budget assumes tax revenue increased to equal 14.3pc of GDP. With nontax revenue projected at 2.3pc of GDP in FY2020, total revenue is expected to increase to 16.6pc of GDP."
"To strengthen fiscal discipline, the government has recently adopted the Public Financial Management Act in the context of the FY2020 finance bill."
"With further narrowing of the trade deficit and a continued positive trend in workers’ remittances, the current account deficit is projected to narrow further to 2.8pc of GDP in FY2020. Import payments will remain subdued, reflecting weak economic activity and the pass-through of past rupee depreciation against US dollar."
"The real effective exchange rate is now thought to be near equilibrium, and a lower and more stable rupee is expected to improve export competitiveness."
Additionally, the report noted that the foreign capital inflows are expected to increase.
"Foreign direct investment should revive as investors’ confidence is restored with implementation of the IMF stabilisation and reform program.”
"This should also help bring additional finance from multilateral institutions and other international partners […] the activation of a Saudi oil facility with a potential disbursement in the current fiscal year, were expected to raise foreign exchange reserves to over $10 billion by the end of FY2020.”
