Monetary and Fiscal Policies Coordination Board (MFPCB) has noted with satisfaction that the measures taken by the government for fiscal consolidation, external sector and monetary policy have set the direction for positive improvements.
The meeting of the Board was held in Islamabad on Friday with Finance Minister Asad Umar in the chair.
While reviewing fiscal policy, the Board noted that fiscal deficit for the first quarter of FY19 turned out to be 1.4 percent of GDP. The Board appreciated the authorities’ adjustment plan for fiscal consolidation whose impact would be visible from the second quarter of the current financial year.
It emphasized the need for continued effort to ensure revenue generation and expenditure controls. The meeting was told that the financing mix is expected to record a substantial improvement as most of the external financing would be realized from January next onwards, which will result in lesser reliance on banking sector borrowing.
The meeting was informed that in the first four months of current financial year, non-oil imports witnessed a decline of 4% compared to high growth of 25% over the same period last year. Remittances have recorded a substantial growth in FY19, while exports have shown growth of 4%.
On the exchange rate front, the Board was of the view that the present developments are mainly explained by market demand-supply gap of dollar liquidity on the one hand and more underlying structural impediments on the other. Availability of deferred oil facilities and the recent decline in the international oil prices is expected to reduce pressures in the Pakistan foreign exchange market in the near-term.
On recent changes in monetary policy, the Board agreed that the stance is appropriate at current levels given the projections for inflation in FY19 and FY20.