The financial year 2002-2003 coming to a close by the
end of this month has created a record in the financial history of
Pakistan. It is for the first time that all the target, fixed for the
fiscal year have already been met — some even surpassed except the
revenue collection by the CBR. Latest figures are not available but it
is almost certain that the target of revenue collection of Rs.454
billion will also be met by June 30.
Export target of $10 billion was already crossed last
week when President Musharraf personally witnessed the sailing of the
container from Karachi port with a consignment touching the figure of
10.5 billion dollars. It is likely to cross $11 billion by June 30, GDP
growth rate target of 4.5 per cent was surpassed during the first 10
month. It is estimated to cross 5.1 by the close of current fiscal.
Forex exchange reserves has crossed the target of $10 billion about six
week back. It is likely to end up at $11 billion. Remittances from
expatriates have already surpassed the target by about a billion dollar.
Inflation has been contained to slightly less then estimated.
The significant economic achievements of 2002-03
include a notable increase in growth of domestic output stemming from a
sharp pick up in manufacturing and a welcome recovery in agriculture; a
robust growth in per capita income: a healthy reduction in fiscal
deficit, low inflation; notable increase in current balance of payments
surplus; impressive growth in exports and imports; surge in workers'
remittances; massive addition to the country's foreign exchange
reserves; a decline in both external and domestic debt; a significant
lowering of domestic interest rates; a noteworthy increase in national
savings; a substantial rise in foreign direct investments; record rise
of Karachi Stock Exchange (KSE) index and a distinct improvement in
Pakistan's credit rating in international markets.
Real Gross Domestic Product (GDP) in the current
fiscal year is now anticipated to increase by 5.1 per cent as against
the target of 4.5 per cent and 3.4 per cent last year. This significant
improvement in growth performance is attributable to impressive increase
of output in manufacturing, agriculture and service sectors which grew
by 7.7 per cent, 4.2 per cent and 5.3 per cent respectively. Pakistan's
growth performance in 2002-03 exceeded the average growth of developing
countries estimated at 4.6 per cent.
The major contribution to revival of growth in
2002-03 is attributable to agriculture, which on account of improvement
in water availability is expected to witness a rise in output of 4.2 per
cent after the disappointing growth of 2.64 per cent during 2001-2002.
Major crops wheat, sugarcane, rice and maize registered an impressive
recovery with 5.8 per cent growth against a contraction of two previous
years on account of drought conditions in the country.
The latest estimate of wheat production is 19.235
million tonnes 6.5 per cent higher than last year's 18.227 million. Rice
crop in the current fiscal year is estimated at 4.478 million tonnes as
against 3.882 million tonnes last year. The estimate of sugarcane
production is 53.049 million tonnes as against 48.042 million tonnes
last year. The cotton crop, however, registered a decline of 3.8 per
cent from 10.6 million bales to 10.3 million bales.
The most noteworthy economic development of the
current fiscal years is substantial rise is the growth of manufacturing
output at 7.7 per cent. Factors contributing to this notable performance
are macroeconomic stability, decline is cost of capital, increase in
exports and the availability of consumer financing at reasonable rates
More impressive than the Growth of Domestic Output
(GDP) has been robust rise in Gross National Product (GNP), which
escalated by 8.4 per cent in 2002-03 primarily on account of sharp
increase in remittances. This was substantially higher than 5.3 per cent
growth in GNP in 2001-03. Real per capita GNP grew by 6.3 per cent as
against 3.1 per cent last year. In dollar terms, per capita income
jumped from $419 to 492, an increase of 17.4 per cent.
A praiseworthy economic achievement of the present
government is restraint on inflation, which remained subdued at 3.3 per
cent in 2002-03 as against 3.4 per cent last year. Low inflation is
attributable to better supply situation of essential commodities,
prudent fiscal management, appreciation of exchange rate and
sterlisation by the State Bank of Pakistan (SBP) of monetary impact of
substantial inflow of foreign exchange.
Monetary policy during the current fiscal year was
greatly influenced by developments in external accounts of the country.
The State Bank had the difficult task of striking a balance between the
two conflicting imperatives of how to prevent a sharp appreciation of
our exchange rate (which would have an adverse impact on the
competitiveness of our exports) and how to prevent an excessive increase
in money supply with a view to ensuring price stability.
During July-March 2002-2003, the SBP, on account of
net purchase of $4.4 billion from the market, injected Rs.257 billion,
however, 70.4 per cent of this injection was sterilised through
auctioning of government bonds. Despite this sterilisation on a massive
scale, the over-all money supply during July-March 2003 grew by 12.5 per
cent against the revised annual target of 16 per cent. Credit expansion
through commercial banks registered an increase of 145 per cent.
The weighted average of lending rates declined from
14 per cent in June 2001 to 8.2 per cent in March 2003. The spread
between lending and deposit rates also declined to 5.45 per cent from
7.8 per cent in June 2001.
Another important achievement of the present
government is reduction in over-all fiscal deficit, which during 2002-03
is estimated at 4.6 per cent of GDP. Reduction in fiscal deficit has
stemmed from improvements in revenue and curtailment in expenditure.
Total revenue as a percentage of GDP increased from 17.2 in 2001-02 to
17.6 in 2002-03 and total expenditure declined from 22.8 per cent to
22.2 per cent.
The over-all performance of tax administration during
the current fiscal year has been impressive. Central Board of Revenue (CBR)
collected 15 per cent more revenue than last year.
The surplus in current account of the balance of
payments (excluding official transfers) jumped to $2.562 million or 3.7
per cent of GDP during July-March 2002-03 from $1,014 million (1.7 per
cent of GDP) during the same period last year. By the end of the current
fiscal year the current account surplus, it is hoped, would be $3.0
billion or 4.3 per cent of GDP.
Exports grew by 20.8 per cent during July-April
2002-03 as against a decline of 1.8 per cent during the same period last
year. Pakistan's export growth during the currency fiscal year out
performed global export growth by a wide margin. Like exports, imports
also increased by 22.5 per cent during July-April 2002-03 as against a
decline of 6.9 per cent last year. Machinery imports grew by 35.6 per
cent. The trade deficit stood at $1.250 million during July-April
2002-03. The fiscal year might end with a trade deficit of $1.5 billion.
Pakistan succeeded in attracting around $700 million
FDI flows during July-April 2002-03 as compared to $308 million in the
same period last year. It is expected that FDI flows may reach $800
million by the end of the current fiscal year.
The build up of foreign exchange reserves during the
current fiscal year has been phenomenal. During July-May 2002-03, the
country increased it's foreign exchange reserves by $4.279 billion. One
may 30, 2003 the total foreign exchange reserves stood at $10.513
billion, of which SBP's reserves were $9.314 billion.
The massive build up of foreign exchange reserves has
provided stability to the country's exchange rate, which appreciated by
4.0 per cent vis-a-vis US dollar since the beginning of the current
A heartening economic development in recent years has
been decline in the dimensions of external debt and foreign exchange
liabilities. This decline has amounted to $2.335 billion. Total external
debt and foreign exchange liabilities at end March 2003 amounted to
$35.6 billion. However, when adjusted for SBP's liquid reserves of $9.3
billion, the net external debt and foreign exchange liabilities amounted
to $26.3billion at end March 2003.
The performance of Karachi Stock Exchange in the
current fiscal year has been spectacular. On account of a marked
improvement in the country's economic fundamental and promising
prospects of growth with stability, KSE has been adjudged the best
performing market in the calendar year 2002. KSE index rose from 1770
points in June 2002 to 3117 points on May 29, 2003 and points 3300 on
June 18 which is an increase of 80 per cent. The aggregate market
capitalisatiion also rose from Rs.407.6 billion to over Rs.700 billion
during the same period, a growth of 70.5 percent.
Addressing a post budget seminar, the Finance
Minister Shaukat Aziz rightly claimed that the wide-ranging fiscal
reforms carried out during the last over three years have started paying
dividends. He said that Pakistan is now moving towards fiscal
consolidation on sustained basis. "Now our main objective is to
ensure that the benefits of these improvement should trickle down to
common man who is still hard pressed. The focus in the new budgets to
create maximum jobs and reduce poverty, agriculture, housing and
construction and SMEs sector have been identified as the priority areas
in our development planning as these sectors are labour intensive and
the maximum number of jobs can be created in these sectors. A major
portion of the development budget in the next year budget will go to
these sectors", the Finance Minister added.