For the first time in the history of Pakistan,
foreign exchange reserves reached a high figure of $5 billion
Feb 25 - Mar 10, 2002
The Finance Minister, Mr. Shaukat Aziz is highly
optimistic about a turn around in country's economy by next year.
Talking informally to the newsmen in Islamabad he claimed that the
country will achieve economic growth of 3.3 to 3.5 per cent in the
current financial year against 2.6 per cent last year.
Promising record relief to the common men and
salaried class in the coming budget he sounded confident when he said
that the current three year long Poverty Reduction and Growth Facility
(PRGF) extended by the International Monitary Fund (IMF) may be the
last foreign lending to Pakistan as the country has improved its
economy considerably. By the year 2003-2004 when the present PRGF
programme terminates we will be in a position to run the future
programme without any foreign loan. The Finance Minister claimed that
there has been absolutely no increase in the debt burden of the
country since 1999 when the present government took over. It was $38
billion then and it is same today. "It is a new chapter in the
economic history of the country," he claimed.
"We succeeded in reducing the current account
deficit and fiscal deficit. Current account deficit is 2 per cent
while fiscal deficit is 5.5 per cent of the GDP", he said adding
that, on an average the current account deficit has been about 5 per
cent and the fiscal deficit about 7 per cent of the GDP during the
last ten years.
Debt rescheduling and write off of the debt are
good signs and it will reduce the debt time, the Board of Investment
is working hard to attract the foreign investors. The Foreign Direct
Investment has increased as compared to the previous year, the Finance
Minister said adding that foreign remittances were increasing and the
EXIM, OPIC and some Japanese investors have shown interest in
investment. "With the increasing tension in the region the flow
of investment got affected. But now we have gained the confidence of
the investors and flow of investment has increased," he added.
Smuggling had resulted in huge loss to the Pakistan
economy, mainly due to misuse of Afghan transit trade facility.
"We have decided to overcome this menace. We will raise the issue
with the new Afghan government and put vigilance on the borders and
decrease the duty of such items," he said.
Talking on privatization policies of the
government, the Finance Minister said that after September 11, the
privatization process was affected but it has gained momentum now.
"We will soon privatize the UBL, PSO, PTCL, KESC and other
institutions," he added.
"Next budget will be people friendly
completely tax free providing maximum relief to the masses. More jobs
would be created to control unemployment by increasing the allocation
for education, health, poverty reduction and social action programmes.
Special stress in the new budget will be laid on the jobs creating
programmes, Shaukat Aziz said adding allocations in these sectors will
The Minister said educational standards would be
enhanced in order to produce a good lot of well educated youth, which
could lead the country towards new heights of development and
prosperity. We will streamline the present infrastructure of the
hospitals in order to provide better health facilities to the masses,
besides construction of new hospitals," he added.
According to independent economists there is lot of
substance in what the Finance Minister has claimed. All economic
indicators lead to the conclusion that a turn around in economic is
well insight. As a reward for Islamabad's backing for the "war on
terror", Pakistan is expecting a multi-billion-dollar inflow of
aid and grants.
"Pakistan will receive 1.7 billion dollars
within two years and it already has received 673 million dollars from
the United States," 350 million dollars was expected from Japan
and 300 million dollars from Britain and the European Union.
US President George W. Bush pledged to write-off
one billion dollars of Pakistan's 2.8 billion dollar US debt during
President Pervez Musharraf's visit to Washington last month. Pakistan
may enjoy further write-offs of loans from Britain, Canada, Italy,
Germany and the United States. The western countries had already
written off another 500 million dollars of debt. The United States has
since September 11 promised Pakistan an aid package worth more than
one billion dollars, 600 million dollars of which has already been
delivered. Pakistan is also to begin charging the United States about
60 million dollars a month for logistical support it has provided for
US forces in the war in Afghanistan.
The United States was considering enhancing market
access for Pakistani textile exports but Islamabad was pushing for
better trade terms. "We could not get the desired commercial
benefits from the US but negotiations (with the US) would continue to
settle (subsidised) tariff, quotas and shipment issues," a source
in the ministry said.
For the first time in the history of Pakistan,
foreign exchange reserves reached a high figure of $5 billion, enough
for six months of imports, as a result of a continued flow from
Pakistanis living abroad and financial aid from multilateral donors.
The reserves reached $5.002 billion for the week ending February 16 as
compared to $4.937 billion of the previous weekend. Reserves held by
the State Bank of Pakistan amounted to $3.269 billion ($3.194 billion
the previous week) while reserves with the commercial banks totalled
$1.733 billion ($1.743 billion in the previous week).
Forex reserves are likely to reach $6 billion by
June 30 this year, when the IMF is expected to release the second $110
million instalment of its Poverty Reduction and Growth Facility (PRGF)
programme. Moreover, the Asian Development Bank and the World Bank
would also release funds, and expectations are higher that remittance
from overseas Pakistanis will reach $1.9 billion by June 30, from $1.1
billion of the previous fiscal year.
According to an analyst, the flow of foreign
exchange has improved since September 11 and the country has received
assistance from the International Monetary Fund, Asian Development
Bank and World Bank. The steady inflow of dollars from expatriates,
from donor agencies and from rescheduling of debt helped the country's
foreign exchange reserves to finally cross the $5 billion mark. The
rupee has strengthened steadily after September 11 and, in the open
market, it improved from Rs. 67.50 to Rs. 59.45 to a dollar, and in
the inter-bank market from 64 to 60.15 to a dollar.
Workers' remittances registered a tremendous growth
in the seven months up to January 31, this year, which comfortably
crossed the $1 billion level of the previous fiscal year (2000-2001).
According to a report prepared by the government's
Board of Investment (BoI), the chances of Pakistan getting greater
foreign investment this year are better than those of the previous
year. Foreign Direct Investment (FDI) for the last year has been
mentioned at 322 million dollars, while the figure for the first six
months of the current year is 205 million dollars. The forecast for
the entire fiscal is about $500 million.
In view of all these developments the optimism
expressed about the tax free budget coming with lot of relief to
common men and salaried class seems justified. "We are looking
forward to revise the salary packages of the government employees to
give them more relief, Shaukat Aziz said adding that in the phase I of
the salary increase in the current fiscal year 30 per cent increase
was given. In the phase II for next year budget about 15 per cent
increase will be given to them. It will provide a relief to the
government employees on one hand while on the other it will help in
arresting the inflation." He expressed hope that incentives would
be given to the private sector enterprises in order to win the
confidence of this important sector in the investment in different
sectors. In current budget tax duties were decreased and government is
looking forward to further decrease it in next budget.