The first quarter of the current financial year (July/Sept. 2002) ended with a positive note strongly indicating that Pakistan's economy has started picking up. For the first time in decades the revenue collection, a key indicator in this regard, has met the quarterly targets while the import export gap has declined more than it was expected.

By end September, revenue collection exceeded the target of 90 billion, The trade deficit-the import export gap — touched the figure of 240 million dollars against estimate for the year at $1.2 billion. If we take the yearly target of Rs.460 billion the revenue collection for the first 3 months should have at Rs.120 billion. However, the Central Board of Revenue (CBR), while distributing the targeted amount into four quarter fixed a target of Rs.90 billion for the first year.

The collection of Rs.9.2 billion during July-Sep.2002 is almost Rs.13 billion higher then Rs.77.5 billion during the same period last year showing an increase of about 16 per cent.

Expressing this view, Finance Minister Shaukat Aziz is reported to have said in Karachi that increase in imports reflected growing demand and higher output of goods and services. A substantial increase in sales tax showed greater commercial activity. He described both of them as healthy signs for the country's economy. However, the gains which the economy has recently made should be consolidated leading to its full recovery. Its sustainability will need to be carefully watched in the remaining three quarters of the ongoing financial year and even beyond that timeframe.

While the external sector has shown noticeable improvement and the finance minister expects the country's foreign exchange reserves to reach $10 billion by end June, an all out effort to meet full year's revenue target of Rs.460 billion will be imperative.

After taking into account the tax collection effort and its results in July-September period, it is reasonable to believe that this year's revenue target will be achieved. But, at the same time, it will be necessary to ensure that this year's target of economic growth of 4.5 per cent is also fully attained. The linkage between the two is quite close. The increase in taxes by almost Rs.100 million over the last couple of years has shown that by expanding the tax base, reducing the number of SROs and streamlining procedures, the government has been able to increase its revenue collection. An important element in this effort will be to accelerate investment which is expected to reach one billion dollars by the end of the current financial year.

While disclosing that export have increased by 17 per cent during July/Sept.2002. The Federal Minister for Commerce and Industry, Abdul Razzak Dawood, expressed the hope that other things remaining normal, the current financial year's export target of $10.40 billion would be achieved a couple of months before the close of the year. He was of the view that well-sustained stability in the exchange rate of Pak rupee, preferably at the current level, in the coming months, would be a favourable factor in maintaining a predictable growth rate in exports. But another factor that could influence progress in Pakistan's exports would be possible changes in the economic scenario in the world economy and an onset of recession might cause a setback.

In a press interview the Finance Minister said the country has achieved macro-economic stability and all the macro-economic indicators showed that the economy was moving in the right direction.

"We have achieved this stability in three years. Now the economy has a strong base and the first quarter figures for the current year indicate an upward movement in all vital indicator, he claimed.

He said that foreign exchange reserves had always been vulnerable, and this kept uncertainties prevailing in the economy. "We always lived hand-to-mouth with rare intervals, but now we are better placed to absorb exogenous shocks," he added.

He pointed out that the economic growth increased from 2.6 per cent to 3.6 per cent last year and it was expected to be 4.6 per cent this year ending June 30, 2003, "And, the next year" he said, "the growth is expected to be more than 5 per cent. Once the growth crosses the 5 per cent mark, you would see a decline in poverty".

It needs to be appreciated, the minister said, that macro-economic stability was achieved despite the shocks the economy had to suffer and the hurdles it had to face in the last three years, namely, front loading of IMF programme, restoring credibility with the donors, water shortage , and oil price hikes.

Advisor foreign exchange and debt management State Bank of Pakistan, Mr. Zafar M. Sheikh disclosed while participating in a discussion on TV that the State Bank has decided to liquidate all short term high cost foreign debts. He said total reserves stood closed to $8.5 billion which expected to touch the figure of 10 billion by end of the current fiscal. The rupee dollar parity has narrowed down to Rs.59 per collar in Inter Bank market and almost the same prevailed in the kerb.

Zafar Shaikh stressed that the most crucial and key policy decision was to maintain stability and strength of the exchange rate under all circumstances. This, he said, would restore confidence in rupee, and ultimately would lead to its further strength. He cited instances of when the central bank pumped in dollars in the market to keep the rupee stable against the dollar during the height of Indopak tensions to avoid any speculative run on the exchange rate.