ISLAMABAD: The government expects a strong economic rebound during the current quarter on the basis of prospects of international environment and the prevailing economic, fiscal, monetary and exchange rate policies at home.

In its monthly economic update and outlook, the economic advisory wing of the finance ministry said the economic recession, following the impact of the Covid-19 pandemic was coming to the end. Based on high frequency indicators, summarised in the monthly economic indicators, economic growth has resumed in June and July.

The trade balance on goods and services would converge to the level seen in the first three months of previous fiscal year and therefore would be manageable in terms of its financing. The finance ministry said the government’s swift and timely actions on the economic front were helpful. It said the CPI inflation in July recorded at 9.3 per cent and on month-on-month basis, it increased by 2.5pc in July over June. The spike in the CPI during the month of July was on account of an increasing trend in the prices of perishable items, it noted.

The average weekly YoY growth rate of M2 stabilised at around 17.7pc. "After showing a declining trend during the peak of Covid-19 pandemic, the weekly YoY growth rate of credit to the private sector seems to be bottoming out" as average growth rate in July was 3.2pc. While international food prices continued to remain fairly stable, price of oil tends to recover from recent lows and exchange rate has been rising gradually.

Among additional factors effecting inflation, the policy interest rate remained unchanged in July. Furthermore, some relief has been given to indirect taxes, not only to industry but also to consumption in the Federal Budget 2021. These factors may exert a tempering effect on inflation and inflation expectations.

On the basis of this information, headline inflation is expected to remain within a range of 8.4 to 9.7pc in August. Recent developments in SPI inflation tend to confirm this outlook, it said.

On the basis of 81.3pc Urea offtake and 11.5pc DAP offtake over same month last year, along with sufficient availability of water and satisfactory situation of seed will have positive impact on cultivation, yield and productivity of important crops as well as on other crops.

Published in Dawn, August 27th, 2020