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June 04 - 10, 2001

GDP target not to be achieved

The State Bank says Pakistan is set to lose $927 million in the next fiscal year as a result of the drought and its GDP is to grow below 3 per cent against targeted 4.5 per cent. "Therefore the per capita income is likely to remain stagnant," says the central bank in its third quarterly report on the state of the economy.

In carefully-chosen words, the report states that the IMF programme has so far not helped Pakistan in reviving investment nor has it facilitated the economy in picking up. The report, covering economic developments of the first three quarters of this fiscal year, was released on Thursday.

The report estimates the impact of the drought on the balance of payments in detail, examining the possible loss of foreign exchange in terms of lower exportable surplus of major crops and additional fuel oil imports. It estimates a total loss of $747 million due to availability of lower export surplus coupled with an additional oil import of $180 million as a result of the drought. Fuel oil import goes up in drought as it reduces hydel power generation thereby increasing the country's reliance on thermal power generation that requires additional import of crude oil.

The report confirms that GDP (gross domestic product) would grow below 3 per cent in the current fiscal year against the original target of 4.5 per cent mainly due to the drought and water shortage. The report frankly admits that Pakistan has missed the revenue target for both end-December 2000 and end-March 2001 set by the IMF despite the fact that tax collection as such has gone up. Naturally, the country "will have to request a waiver for end- June target."

The report says though the State Bank easily met in end-March the revised target of net domestic assets set by the IMF it had to made heavy buying of foreign exchange from open market to meet the target of net foreign assets. The SBP purchased $1.56 billion from the open market in the first nine months of this fiscal year against $1.37 billion in the year-ago period.

Budget deficit to miss 5.3% target

The government is unlikely to achieve 5.3 per cent GDP budget deficit as prescribed by the International Monetary Fund (IMF) during the current financial year.

"Perhaps we will end up having 5.4 per cent fiscal deficit instead of 5.3 per cent for a variety of reasons," said Secretary General Ministry of Finance Mr Moeen Afzal.

Speaking at a one-day conference on Debt Committee's report on Monday, he said the present government had decided to achieve economic stability by bringing about discipline in all the ministries and other government departments.

"Every small and big development project now has to be approved by the Executive Committee of the National Economic Council (ECNEC) and the Central Development Working Party (CDWP) and nobody can bypass these organisations," the secretary general said.

Jute industry on verge of collapse

The jute industry the third largest organised industry after textile and sugar is on the verge of collapse due to a sudden and unilateral ban imposed by Punjab government on sale of jute bags to anyone except for its food department, industry sources said on Monday.

"Five out of 12 jute mills Amin Fabrics, Crescent Jute, Latif Jute and Alipur Jute have either already been closed down or are struggling due to a sudden ban by the Punjab government a week ago while the rest are running at 50 per cent capacity," the sources in the jute industry said.

Rs 30bn for provinces in PSDP

The Ministry of Finance has allocated Rs30 billion for the provinces in the new Rs120 billion Public Sector Development Programme (PSDP) for year 2001-2002.

According to official sources, the ministry had refused to allocate more than Rs 120 billion for the next PSDP saying that there was no considerable fiscal space available for increased funding due to unexpected shortfalls in revenues.

While the share of the provinces has been kept at Rs30 billion, Wapda and National Highway Authority (NHA) will get Rs 15 billion and Rs 18.3 billion, respectively, in the new PSDP.

New oil refinery being set up at Hub

A new oil refinery in the private sector is being set up at Hub, Balochistan, at a cost of $50 million. The refinery will produce six petroleum products.

The plant, being set up by Bosicor Pakistan Limited (BPL), has the refining capacity of 30,500 barrels per day, but in first six months it will have the capacity of 28,000-30,000 bpd, said director BPL, Amir A. Abbassciy at a press conference on Saturday.

The cold commissioning of the refinery will take place from the first week of October this year while the full-fledged commercial operation will start by the end of this year, he said.

The refinery has the capacity to produce 700 barrels per day (bpd) of liquefied petroleum gas (LPG), followed by 2,177 bpd motor spirit, 5,500 bpd high octane blending component, 4,350 bpd kerosene/jet fuel, 6,973 bpd high speed diesel, and 10,800 bpd furnace oil.

CE okays budget guidelines

A high-level meeting on Wednesday approved broad guidelines of budget for 2001-2002 with "minimum taxation". According to informed sources the meeting which was chaired by the Chief Executive, Gen Pervez Musharraf discussed a number of new budgetary proposals aimed at undertaking comprehensive structural reforms in the Central Board of Revenue (CBR).

The meeting was told that the number of existing taxes were further being reduced and that the main tax will be the general sales tax (GST), to be effectively recovered from the next financial year. Also, the thrust of the budget will be to broaden the tax base but without further burdening the common man.