The past five years present a commendable record in the history of economic management in Pakistan


Oct 25 - 31, 2004





The government of President Pervez Musharraf, first 3 years as chief executive of the country and the remaining two as the most effective and powerful President, completed 5 years in October 2004 as he assumed power in October 1999. The day, however, passed without much fanfare not because the government has nothing to show as its achievement. As a matter of fact, the present government despite facing many crises has achieved much more compared to any governments in the recent past. The present government may have failed to achieve the desired result in many areas, but nobody can deny them the credit for good performance in some areas specially in the economic domain.

The administration of President General Pervez Musharraf assumed office in October 1999 facing serious and difficult problems; economy was in bad shape. All public sector organizations were running at a loss. There was a heavy external and domestic debt with almost no means of servicing it. Expenditure exceeded the revenues, and revenue generation was weak. Pakistan was perceived as a highly corrupt country at the highest levels. The reserves were barely sufficient to buy five to six weeks of imports and were inadequate to serve the country's debt obligations.

The economic mismanagement had tarnished the investor-friendly image of Pakistan. The lingering dispute with independent power producers all of them foreign investors and the freezing of foreign currency deposit accounts of non-resident Pakistanis created a distrust that has not yet been completely erased. Pakistan's international credibility was at its lowest ebb.

After the military's action of October 12, 1999, the economic team of the new Pakistani administration set a clear goal: Managing the crisis, and ensuring that Pakistan avoided default. Later, a tough reform plans was pursued with vigor, targeting the nation's politics and the economy. The most significant shift introduced by the military led administration is promoting good economic governance. Discretionary powers were curtailed and the values of transparency, consistency, and predictability were introduced. Freedom of the press and access to information has had a constructive effect on the behavior of decision makers.

The past five years present a commendable record in the history of economic management in Pakistan. An economic laggard in 1999, Pakistan is a resurgent economy in 2004. Pakistan is enjoying a budget surplus for the past three consecutive years after a decade of deficits. The country successfully implemented the International Monetary Fund (IMF) programs without any delay or interruption, establishing Islamabad's credibility as a serious player in the international financial community. Pakistan's credit rating has improved from a negative Selective Default (SD) in 1999, to B2/B in 2004. On the basis of this record, Pakistan entered the international markets to raise US $ 500 million in Eurobond last year. There was an overwhelming response and the floatation was oversubscribed four times the initial value. The transaction's success amounted to a vote of confidence by the international investor community in Pakistan's economic policy and the government's reform agenda. In the 5th year of tough economic reforms, Pakistan will have the distinction shortly of completing IMF's poverty reduction growth facility. Pakistan will be the first country in the program to do so sign of good economic management. Pakistan has more money in its treasury today than it did in over a decade. President Musharraf began his government in 1999 with US $ 1.7 billion, barely enough for 5 to 6 weeks of imports. In June 2004, government accounts boasted a reserve of US $ 12.3 billion enough for 44 to 45 weeks of imports.

There has been a virtual turnaround in the balance sheets of the public sector commercial organization. According to report compiled and made public by the Ministry of Industries and Production, the performance of public sector corporations which started picking up with coming into power of the present government have performed extremely well during the outgoing financial year. Some corporations like USE, SCCP, SEC, PACO and their units were running in losses and following the economic policies of the present government and taking steps to improve the efficiency, good governance and reducing non-developmental expenditures, these are now out of losses and making profits.

The profit of other corporations have increased manifold during the same period. The production of raw steel of Pakistan Steel Mills increased from 1.015 million metric tons in 2002-03 to 1.024 metric tons in 2003-04. Net sales reflect increase from Rs.22,084 million to Rs24,769 million showing 12 percent increase. Profit depicts an increase from 1,239 million to Rs 6,405 million, showing 417 percent increase.


The corporation earned a profit of Rs. 1395.23 million in 2003-04 which is 267.44 percent high as compared to the previous year. The sales of the units of the corporation during 2003-04 were 18.11 percent high as compared to 2002-03.

Aggregate production of Pak Arab Fertilizer increased from 742,173 metric tons in 2002-03 to 836,448 metric tons in 2003-04, which is 13 percent high. Net sales increased from Rs. 4,634 million to Rs. 7,097 million (53 percent) during the current year 2003-04. Profit depicts increase from Rs 1,794 million, which is 61 percent high.

Production of single super phosphate of Lyallpur Chemicals and Fertilizer Limited shown increase from 74,500 metric tons to 78,385 metric tons, which is 5 percent high. Net sales shows increase from Rs. 366 million to Rs 515 million which is 41 percent. Profit depicts increase from Rs. 2 million to Rs. 18 million which is 800 percent high. The performance is attributed to higher production and sales activities.




The income dividend, (interest and other) of holding corporation increased from Rs 158 million to Rs 425 million which is 169 percent high. Profit of holding corporation depicts increase from Rs. 101 million to Rs 395 million which is 291 percent high.

The production of one and only unit of SECCP, Javedan Cement Limited increased from 218,149 metric tons to 447,787 metric tons, which is 105 percent. The company earned profit of Rs. 126 million in 2003-04 against last year loss of Rs. 38 million, which is 432 percent high.


The production of Machine Tool Factory increased from Rs 527 million to Rs 557 million which is 5.7 percent. Net sales increased from Rs 642 million to Rs 842 million, 31 percent high during 2003-04. The company earned profit of Rs. 21 million during the 2003-04 against last year loss of Rs 11 million which is 291 percent high. Improved performance is attributed to successful product diversification as well as decrease input cost like stores and spares and energy etc and decrease in operating. Through implementation of revamping programs, PMTF plans to start production of motorcycle parts and manufacturing of textile machinery in collaboration with China.


The corporation earned profit of Rs 40 million during 2003-04 against last year loss of Rs 3 million. Improvement was due to decline of other expenses, Utility Stores Corporation (USC).

The corporation earned a profit of Rs. 141.09 million in 2003-04 as compared to Rs. 68.87 million in 2002-03. The corporation was in losses but now making profit.


The income of EPZA increased from 1,599,709 dollars in 2002-03 to 2,054,463 dollars in 2003-04. The income increased by 28 percent during 2003-04 as compared to previous year.


The industrial growth of 100 large scale manufacturing items recorded 18.08 percent which is highest in the decade. The main items related to food beverages, tobacco, textile sector, jute goods, Leather, Paper printing and publishing. Wood Furniture, pharmaceuticals, chemicals, petroleum products, tyres and tubes, non metallic mineral products, iron and steel, engineering, electrical and automobile industry.


The national flag carrier has earned an after tax profit of Rs. 1.4 million in 2003-04. This is despite the fact that the airline had to absorb an excessive fuel bill of over Rs 1.2 billion due to increase in oil prices in the international market. The PRA Board of Directors was informed recently that even under these adverse conditions, the airline has maintained all basic parameters and is poised to continue its push for achieving commendable growth levels. The airline is, therefore, confident about its future growth and progress, the press release said.

It is encouraging that PIA has now been turned into a profitable organization while a number of steps have been taken to improve in flight service. There are also plans to change the livery (logo and the colour scheme) of the airplanes in PIA's fleet. In an effort to make PIA more customer focused, the airlines started its first Contact Centre equipped with modern facilities to serve as a single point of contact for all customers.

There are, however, many areas where the present government has failed. The so-called revolutionary concept of district government initiated by President Musharraf has not picked up. The devolution programme as envisaged in the local bodies ordinance 2001 has not only failed to accomplish the goal it set out to achieve, but has, on the contrary created so much confusion that if has adversely affected the administration in the four provinces. The failure of the government to check poverty unemployment and unprecedented rise in the prices of kitchen items is the most perturbing as it has added to the miseries of common man. Despite claims of the government on the contrary, there is undeniable evidences that unemployment and poverty level is constantly on the rise and the inflation is going up adding to the miseries of the fixed income group. Unfortunately, the government is not fully cognizant of the fact that mere boasting of raising the foreign exchange reserves or improved macro economic indicators will not satisfy the general public unless its effects are trickled down to grass root level providing some relief to the common man. The common perception is that the net result of the boasted economic development during the past 5 years has been that the rich have become richer and poor poorer.

It cannot be denied that nothing palpable is being done that could bring some relief to poor and reduce the rigours of poverty. The state of improvement among a vast majority of poor and to lower middle class has become so acute during the last few years that they are forced to forgo essential needs of food and health. According to an estimate the cost of kitchen items have gone up by about 100 percent during the last 5 years. The government must attend to these problems on priority basis in order to salvage its image at the gross root level.