By Muskan Naveed ISLAMABAD, Feb 22 (INP-WealthPK): The Ministry of Finance has issued its monthly outlook report for January 2022, which portrays a positive outlook for the country in the near future despite some economic challenges. Inflation indicators – Consumer Price Index (CPI) & Sensitive Price Index (SPI) – both show marginal decline; however, the Ministry of Finance expects the country-wide yearly inflation to rise in the upcoming months while the month-on-month figures may further decline. The revival of the International Monetary Fund’s Extended Fund Facility (IMF-EFF) has placed plenty of constraints on Islamabad in terms of its public spending in order to curb the growing external imbalances. The government is aware of the increasing burden on the middle and lower-income groups which is why the Prime Minister’s Office has asked the Finance Division to create fiscal space for a disbursement of Rs200 billion solely for the support of vulnerable income groups. The contractionary policies of the government are in full effect. The policy rate has remained constant at 9.75%. The money supply growth has shrunk from 5.6% during July-December FY2021 to 4.5% during the same time frame of the current fiscal year. However, Pakistan continues to suffer from balance of payment challenges. The current account deficit stands at $9.1 billion – or 5.7% of the Gross Domestic Product (GDP). During Jul-Dec FY2022, exports grew by 24.9%. The rise in exports was mainly attributed towards the increasing share of value-added products; however, the increase was not enough to match the import growth of nearly 70%. To tamper the growth of imports, the government is pursuing high import duties on motor vehicles. External imbalances may stabilise soon as Pakistan has witnessed an increase of 20% in the foreign direct investment (FDI) during Jul-Dec FY2022. Moreover, workers’ remittances continue above $2 billion and see a YoY growth of 11.3%. The foreign exchange reserves of the State Bank of Pakistan (SBP) have recorded an increase of $1,609.2 million on a weekly basis – during the week ending 4th February on account of recent IMF disbursement and Sukuk bond issue. The fiscal deficit during the first quarter of FY2022 stood at 1.5% of the GDP and has remained constant at this level year-on-year basis. The federal revenue has also experienced a growth of 7% during the time period due to a sharp increase of 35% in tax collection. However, non-tax revenue had declined by 22% as the incumbent government decreased collection in the form of levy on various oil products. The decrease in levy was decided amidst rising global oil commodities’ prices to cushion the general public from higher rates of inflation. The net borrowing of the government has declined to Rs283.6 billion from Rs360.3 billion during the second half of CY2021. This ensures that there is high liquidity for private lending and has resulted in a surge of private sector borrowing of Rs1,013.9 billion as compared to Rs344.2 billion last year. The growth in private sector borrowing is a positive indication for any economy and suggests a healthy revival of economic activities.