7pc GDP growth may not be achieved

By Ihtasham ul Haque

ISLAMABAD, Dec 13: The government is unlikely to achieve its 7 per cent GDP growth rate in 2005-06 due to a decline in cotton and sugarcane crops and is banking more on increased electricity production and improved performance of the banking sector to achieve the desired results.

Informed sources told Dawn here on Tuesday that the government was depending more on better than the expected rice production, good minor crops and Wapda’s less dependence on Independent Power Producers (IPPs) for generating enhanced hydel electricity to meet, what is being termed a “somewhat difficult 7 per cent GDP growth target”.

The government is expecting 12.5-13 million cotton bales this year compared to 14.3 million of the last year. The target for the cotton production during the current year is 15 million bales, which, the sources said, was very difficult to achieve due to various reasons.

The reduction in cotton production will be managed by importing roughly 2 million bales. Textile mills, which used to consume around 9.5 million bales, are now consuming 14-15 million bales.

However, sources said that cotton prices were likely to remain firm in the market, for which the Trading Corporation of Pakistan (TCP) will not be interfering and that the shortfall will be met by importing 2 million cotton bales as early as possible. There is no duty on the import or export of cotton.

Wheat target of 22 million tons will, hopefully, be met despite certain water shortage, which is now being augmented through the availability of more water in dams. The government is expecting 5.6 million ton of rice production this year against the initial estimate of 5 million tons.

When contacted, Economic Adviser to the Ministry of Finance Dr Ashfaque Hasan Khan, admitted that cotton and sugarcane production would be less than the previous year. However, he said that minor crops especially onion and potato and other agricultural value- added products, which have 12 per cent share in overall agricultural production, were expected to help meet 7 per cent GDP growth rate during the current financial year.

“It is slightly a difficult situation but, I am sure, eventually, we would make it and get 7 per cent targeted growth rate”, Mr Khan said adding that Wapda’s reliance on IPPs has reduced, which is helping to generate more hydel electricity.

Other factors, like finance, banking and insurance, Mr Khan, who is also the Director General of Debt Coordination Office said, were showing a good potential to help meet the government’s GDP growth target. Similarly, he said the government was getting increased gas production.

The profitability of the banking sector, he pointed out, has improved due to the widening of gap between the average lending and deposit rates. Also, the profits of the State Bank of Pakistan were likely to be more as a result of higher yield on Treasury bills.

“The growth in cellphones has increased from 0.5 million to 1.5 million phones per month and this will also help us to meet our 7 per cent GDP growth target”, the adviser to the ministry of finance said.

He further said that the October 8 earthquake was very unlikely to affect the government’s growth target. He said since there was no major industry and agriculture in Azad Kashmir and quake hit parts of NWFP, the government would not be experiencing any serious problem in any sector of the economy.

The real GDP, he said, grew by 8.4 per cent in 2004-05 as against 6.4 per cent of last year and surpassed the target (6.6 per cent) by a wide margin. “This was the third year in a row when Pakistan overshot its growth targets by a big margin”, he added.

The sharp pick in last year’s growth, Dr Khan recalled, was aided by a star performance in large-scale manufacturing, impressive recovery in agriculture and a strong growth in services sector. “This growth was truly broad-based as each sub- sector had recorded strong growth”, he said.

http://www.dawn.com/2005/12/14/ebr1.htm
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