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Default Pakistan: Economic Progress

Pakistan: Economic Progress

This thread is to be used to report on articles & news concerning Pakistan's economy.
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Pakistan now a robust economy: PM

By Our Reporter

ISLAMABAD, Dec 13: Prime Minister Shaukat Aziz said on Tuesday that wide-ranging structural reforms, prudent macro-economic policies, fiscal discipline, consistency and continuity in policies have transformed Pakistan into a stable and resurgent economy.

He stated this while talking to a Young Global Leaders’ delegation who called on him at the Prime Minister House on Tuesday.

He said the country had a sense of direction, political stability, an active parliament and vociferous press. “We want peace with all neighbours, which is critical for sustainable peace in the region”.

Our policies of liberalization, deregulation and privatization couple with transparency have increased investors’ confidence and investments today are the biggest in the history of Pakistan, the prime minister said.

He briefed the delegation on the ongoing reconstruction and rehabilitation efforts in the earthquake affected areas. He said the entire work was being done by civil administration, army and elected representatives in close coordination. NGOs have also been contributing in government’s relief, reconstruction and rehabilitation efforts.

He said the government was focusing on evolving transparent methods for fund collection and utilization. The government has laid down a procedure for double audits and constituted committees for oversight.

Expats asset of country: Prime Minister Shaukat Aziz has said Pakistanis living abroad are an asset for the country.

He was talking to a ten-member delegation of Kuwait-based Pakistanis who called on him at the PM House on Tuesday.

The delegation led by Sardar Mohammad Bashir Khan briefed the prime minister about the relief efforts carried out by them after the October 8 earthquake.

Mr Aziz said the Kuwait-based Pakistanis were setting up 500 shelter homes in Azad Kashmir to cater to the needs of the homeless.

He appreciated their contribution for such a noble cause and said the community should keep up the good work of helping their brethren at such trying times.

He said due to consistency in policies, high growth rate and transparency at all levels, Pakistan had become an attractive country for foreign investors.

http://www.dawn.com/2005/12/14/nat7.htm
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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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Wednesday, December 14, 2005

Pakistan’s economy doing well: Moody

LONDON: Pakistan's economy has continued to ‘perform strongly’ and its 8.4 percent growth is the fastest in two decades, said a report released by Moody here on Tuesday.

“Pakistan's economy has continued to perform strongly with real GDP growth accelerating to 8.4 percent in 2004/05 (fiscal year ending June), its fastest rate in two decades,” said Moody's report.

In its report Moody said that “key reforms include privatization and restructuring of the banking sector, liberalization of the trade and exchange rate regime, and the ongoing disinvestment of several loss-making public enterprises.

These policies have contributed to a marked improvement in productivity and in consumer and investor confidence, which should help to support growth at a robust level over the medium term.”

Agriculture accounts directly for around 22 percent of total output and indirectly for a further 12 percent, with around two-thirds of Pakistan's manufacturing out put related to cotton and other agricultural inputs, it said.

Meanwhile, textiles make up around 60 percent of total exports. An improvement in weather conditions since the drought of 2000-02 has been a significant driver of the recent economic recovery
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Wednesday, December 14, 2005

Inflation down to 7.89% in November

ISLAMABAD: Pakistan’s headline annual inflation rate slowed down in November compared to October due to a decrease in domestic food prices, according to official data Tuesday.

The consumer price index rose 7.89 percent on year, compared with a rise of 8.27 percent in October, the state-run Federal Bureau of Statistics said.

The heavily-weighted food and beverages component rose 5.84 percent on year in November, down from a 6.41 percent rise in October. That component has a weighting of more than 40% on the index.

House rent - another important component of CPI - rose 10.76 percent on year in November, slower than the 11.12 percent increase in October.

In the first five months of the fiscal year that began July 1, consumer prices rose an average 8.41 percent, slower than 9.10 percent a year earlier.

Analysts said the slowdown in inflation was mainly due to administrative measures taken by the government in recent months to improve food supply to reduce domestic food prices.

“The decline in food inflation is basically having a positive impact on the overall inflation rate,” said Asif Qureshi, head of research at Invisor Securities.

“Both the major components of the CPI basket have showed a decline, which is a positive sign,” he added.

In July, the government allowed duty-free imports of essential items like wheat and sugar to improve the supply-side situation and reduce domestic prices. “Declining inflation is a very good trend. The government's full-year inflation target seems to be achievable now,” Qureshi said.

In the current fiscal year, the Pakistan government aims to keep inflation below 8%.

In the last fiscal year that ended June 30, inflation was 9.28% compared with 4.6% the previous year. Pakistan's central bank has been tightening monetary policy in recent months to curb inflation. Inflationary pressure forced the central bank to raise its key discount rate to 9.00 percent from 7.50 percent in April 2005.
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Economy gaining strength: PM

KARACHI, Dec 16: Terming the private sector as the real engine of growth and development, Prime Minister Shaukat Aziz has asked the business community to take full advantage of investment-friendly policies and enabling environment provided by the government.

He also called upon them to make efforts to project Karachi as the hub of commercial activities at the regional and international level.

The prime minister was talking to a delegation of the Karachi Chamber of Commerce and Industry at the Governor’s House here on Friday.

Sindh Governor Dr Ishratul Ibad Khan and Chief Minister Dr Arbab Ghulam Rahim also attended the meeting.

“Wide ranging structural reforms, prudent economic measures initiated by the government during the last six years and consistency and continuity of economic polices have not only helped the country achieve macroeconomic stability, but also propelled Pakistan along high growth-trajectory,” said the prime minister.

Shaukat Aziz said he was hopeful that despite the devastation caused by the earthquake and unprecedented increase in oil prices internationally, the economy was gaining strength and the country would be able to achieve its growth target.

“The growth continues to be robust. Pakistan has 19 million cell-phone users, teledensity is 17 per cent and growth in the mobile sector is the second highest in Asia.”

He pointed out that at present the government was focusing on bridging the skills gap and would provide short and long-term training skills development programmes.

The prime minister said a stable economy and a functioning democracy had transformed Pakistan’s image at the international level.

The prime minister asked the delegation to make efforts for projecting Karachi as a viable commercial centre and a place suited ideally to investment.

Answering a question, he said the government being aware that industrial land was critical for development of industries, had finalized a policy to provide land on subsidised rates to potential investors and entrepreneurs.

The prime minister said the government was focusing on making Karachi a business-friendly city and it had been trying to provide all necessary facilities and remove hurdles in trade and business activities.

“Karachi is the heart of country’s economy and we are determined to make it even more suitable for the promotion of trade and investment. The transparency and continuity of government policies have encouraged domestic and foreign investors and investments in Pakistan are all time high,” the prime minister added.

—APP

http://www.dawn.com/2005/12/17/ebr5.htm
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ISLAMABAD, Dec 19: Prime Minister Shaukat Aziz on Monday said that the gross domestic gross product (GDP) of the country would grow between 6 to 8 per cent during the current fiscal despite the challenges posed by the higher oil prices and the last year’s overheating in the economy.

“The investment level is strong and the economy is moving in the right direction, though we are facing the challenges of inflation, external account deficit and higher international oil prices”, said Mr Aziz while speaking at the inaugural session of the 21st Annual General Meeting and Conference of the Pakistan Society of Development Economists here.

“There must be a philosophy for the development of a nation’s economy. We have this philosophy now in the form of liberalization, privatization and deregulation. Now, it is not the business of the government to do business”, the prime minister said.

Six years ago, Mr Aziz said, the country faced challenges of different nature: it was in debt trap, technical defaults in its balance of payment, poor credit rating and lack of credibility in the eyes of the international donors. At that time, he said, when he took over as the finance minister the economy was in “crisis management”. There was need for good governance and structural reforms.

“We were living from crisis to crisis six years back”, Mr Aziz added.

He said reforms at macro level were never enough for improving social indicators but sustained, credible, deep and broad based reforms were needed to trickle down the economic growth to the gross roots level. He said that many of the programmes implemented by international donors had failed to build ownership because those programmes were implemented under “cookie cutter” approach. He said that the government had now told those financial institutions that they must create ownership while implementing their programmes in Pakistan.

KNOWLEDGE GAP: He said Pakistan was suffering from sever knowledge and skill gap, and, with the passage of time it was becoming harder and harder for the country’s labourer to survive the knowledge-based economies. He said no one could deny the importance of PhDs for a country like Pakistan, but there was also an urgent need to provide the people the skills needed by the market and essential for industrial growth.

Mr Aziz said that from banking to industry various sectors in Pakistan faced shortage of skilled workers. Pakistan had a huge human capital and to utilize it properly the government must foster out of the box thinking and reform secondary and higher education system, he added.

“We recognize efficient and innovative economy as a real key to higher productivity and value addition”, the prime minister said.

PRIVATIZATION: He said that despite opposition the government had vigorously pursued a transparent privatization process and there was not even a single sector that was now a taboo for privatization. He said these days it was the worst option when governments thought which percentage of shares it should posses in a company after privatization.

Now, he said, capital crossed geographical boundaries in search of profit and Pakistan had proven to be one of the better options for investment. He said data showed that the newly opened businesses in Pakistan were earning more profit compared to the old ones.

http://www.dawn.com/2005/12/20/ebr5.htm
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Dependence on cotton threat to economy: experts

By Our Reporter

ISLAMABAD, Dec 21: The continuous dependence of Pakistan’s economy on cotton and the lack of skilled work force and innovative ideas, depth and diversity has put the country’s economy in a constant threat of collapse in the free trade regime.

These apprehensions were voiced by experts at the concluding session of the three-day 21st annual general meeting and conference of the Pakistan Society of Development Economists here on Wednesday.

“Cotton-based industries served Pakistan well in its early stages of industrialization. However, in this process the economy became too much dependent on cotton sector that is not a growing one in the global economy,” said Rashid Amjid, Director Policy Planing, Employment Sector of the ILO, Geneva, while delivering the Iqbal memorial lecture.

He said the time had come to break this low equilibrium trap and develop new skills in the light of the changing global circumstances. He emphasized the need for improving the quality of technical and vocational training, dignity at work and respect for workers’ rights.
Mr Amjid recommended regulatory reforms in the labour market.

Dr Talat Anwar of the UNDP and Centre for Research on Poverty Reduction and Income Distribution, Islamabad, in his paper argued that poverty could not be reduced unless we reduced deep-rooted inequality in the socio-economic structure of the country.

Delivering the Quaid-i-Azam memorial lecture on “The green revolution and the gene revolution in Pakistan: policy implications”, Prof Robert E. Evenson of the department of economics, Yale University, USA, said Pakistan was successful in achieving the green revolution in wheat and rice.

It had improved food situation in Pakistan despite rapid population growth. In fact, the overall performance of Pakistan in adopting the green revolution was the best in South Asia, he said.

However, he said, Pakistan could not achieve the gene revolution that was based on genetic engineering techniques and used to produce high-yielding crops at low cost. Pakistan could not achieve the gene revolution due to absence of food and environmental safety regulations required for the purpose.

Speaking on “Reforms productivity and efficiency in banking: the Indian experience”, Dr Rakesh Mohan, Deputy Governor Reserve Bank of India, said the impact of Indian banking sector productivity on the rest of the economy was very positive.

He said banking sector reforms in his country and trends in productivity and efficiency in the banking sector had played a major role. Deregulation has brought positive changes in banks’ productivity.

The session was presided over by former State Bank of Pakistan governor Dr Ishrat Hussain.

Dr Mohan said financial development was positively related with economic growth. Comparing Indian banks with those in other countries, he said real deposit and loan growth of Indian banks were noticeably higher than in other Asian countries like China and Korea.

He underlined the role of technology in productivity and efficiency improvement. However, he said, technological penetration in India was found to be modest and there was room for improvement.

http://www.dawn.com/2005/12/22/nat11.htm
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Tuesday, December 27, 2005

Pakistan to achieve export target of $17b: Humayun

ISLAMABAD: Pakistan will achieve its exports target of $17 billion for the current financial year, said Humayun Akhtar Khan, commerce minister.

Talking to journalist after a press conference here on Monday, the minister highlighted the trade performance during July-Nov 2006, in which the country’s exports registered 23 percent growth.

“The trade deficit position is not so alarming,” the minister replied. The exports, which were previously stagnating between $8 – $9 billion mark, crossed the US$12 billion for the first time in the year 2004-05, he added.

Since then, we are looking forward to increase our exports to new record, the minister said. In this regard, we has set a new target of $17 billion for the year 2005-06. The export growth that we have achieved so far during the first five months (July-November 2005) indicated that we would be able to achieve the target.

He said the exports, which were previously stagnating between $ 8 and $ 9 billion, had crossed the $ 10 billion mark for the first time in the year 2003.

Mr Khan said during the first five months of 2005-2006, exports increased significantly by around 23 percent to $6.6 billion from $5.4 billion during same period of last year, thereby registering an increase of $1.2 billion in absolute terms. Export growth was driven mainly by substantial rise in volume, he added.

During July-November 2005-06 exports from textile sector increased to $4.03 billion from $3.16 billion during the same period of last year, showing a remarkable increase of 28 percent, he added.

Export of cotton cloth increased by 33 percent, readymade garments by 72 percent, cotton yarn by 43 percent, and towels by 12 percent in value during the period under review, the minister said.

The export of primary commodities during July-November 2005-06 increased to $553 million from $437 million registering an increase of 27 percent.

All the major primary commodities increased in the range of 12 percent to 45 percent except raw cotton and fruits, which declined by 24 percent and 7 percent respectively during the period, he said.

He said imports during July-Nov 2005-06 increased to $11.2 billion from $7.2 billion of the corresponding period last year, an increase of 54 percent.

Major contributors to increase in the import bill, he said, were machinery group ($1.08 billion), petroleum ($1.04 billion), metal group ($322 million) and chemicals ($170 million) in absolute term, he added.

Import of non-food, non-oil items increased by 52 percent during July-Nov 2005, Mr Khan observed.

He said the increase had been in those sectors, which give impetus to the growth in exports. Increase in imports was an indicator of expansion in the economy and it would ultimately help in achieving a sustainable GDP growth rate, he remarked. Replying to a question, he said that balance of payments position of Pakistan was very healthy. staff report

dailytimes.com.pk
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SBP trims GDP growth forecast to 6-6.6pc: Quarterly report

By Shahid Iqbal

KARACHI, Dec 30: The State Bank of Pakistan sees slower economic growth of 6-6.6 per cent against the target of seven per cent in the fiscal year 2005-06.

The central bank in its first quarterly report for the current year issued on Friday suggested that the inflation should be curtailed further even at the cost of sacrificing some growth in the short-term. The bank also warned that the potential emergence of large fiscal and external imbalances pose threats to the sustainability of these positive trends.

Curtailing the inflation is essential, “as a fall in inflation will allow for an easing of monetary policy supporting long-term growth and countering any cyclical down trend,” said the report. The consumer price index (CPI) reached 7.9 per cent on year-on- year by end November 2005.

The data provided by the SBP shows that the first quarter performance put the economy on a negative side as fiscal deficit, trade deficit and current account deficit were higher than the first quarter of the previous year.

The fiscal deficit (July-Sept) reached 0.5 per cent of the GDP against 0.4 per cent in the corresponding period of last year. Similarly, trade deficit (July-Oct) was 2.65 per cent of GDP and current account deficit was minus 1.60 per cent against the previous year’s figures of 1.16 per cent and minus 0.11 per cent respectively.

The SBP expressed concern over very high growth of import (54 per cent) and warned that the higher trade deficit ($3.37 billion) and current account deficit ($2.04 billion) will substantially raise the pressure for a corrective action.

The bank sighted sharp decline in the growth of large scale manufacturing (LSM) sector and low agriculture production for Kharif crops. The report said that the country’s economy during FY06 will be weaker than in the preceding year.

However, it added that much of this slowdown is not unexpected, as is reflected in 7 per cent real GDP growth target set in the Annual Development Plan for the year, against the 8.4 per cent growth achieved in FY05.

The SBP predicted that the value-addition by major crops is expected to fall well below the target and expressed the hope that it could be compensated with better production of minor crops.

The central bank says that the industrial production may remain below target but expects higher activity with possible recovery by LSM in succeeding quarters “as credit demand by the private sector remained strong.” The bank also pinned hope in the growth of services sector.

The SBP warns that the increasing dependence for tax revenue on just few sectors poses serious threat to the economic stability and suggested widening of the tax base.

“The increasing dependence of overall revenues on just a few sectors of the economy poses serious risks to fiscal stability (as shocks to these sectors can derail the fiscal discipline), and may constraint the growth of the sectors which currently carry the tax burden of the whole economy,” said the report.

The 21 per cent growth in CBR revenues during the first quarter is mainly due to a massive increase in international trade taxes (approximately 76.5 per cent of the total increase in CBR tax collections during the said quarter). This would suggest that the CBR will have to gear up its efforts to meet the annual target of Rs690 billion and focus on tax compliance and expanding the tax net.

The SBP report says that the provisional data on major Kharif crops suggests that value addition by these may not only fall below targets but even below the levels seen in FY05.

The index of industrial production indicates that the industrial growth weakened during the quarter, registering a single digit growth of 6.1 per cent, in contrast to 19 per cent growth witnessed during the same quarter of the previous year.

This slowdown is mainly attributed to a distinct deceleration in large scale manufacturing growth. LSM grew by 8.7 per cent in Q1-FY06, substantially lower than 24.9 per cent YoY growth recorded during the corresponding period of previous year, and also below the 13 per cent YoY annual growth target.

http://www.dawn.com/2005/12/31/ebr1.htm
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