Apr 13 - 19, 2009

Despite all political odds accompanied by ghastly incidents of violence, extremism on the back of war on terror, the economy showing sign of improvement in Pakistan.

It is however unfortunate that excessive involvement of the none-state actors instead of contributing towards political stability which is vital for socio-economic growth causing unrest among a large majority of the population.

Actually besides majority political parties either at the helm of affairs or in the opposition there is another decisive factors which the popular will of masses which has been ignored while taking decisions by the non-state actors as well as the ruling parties. Unless we take care of what the people of this country feel in general it seems a difficult task to deal with the critical issues faced by the country.

Though the economy of the country showing some positive signs such as foreign exchange reserves reaching close to $12 billion, the KSE Index crossing 7000 point level and relatively stable financial market. However the question is that are these positive signs going to last long without winning the support of the people in the disturbed areas like FATA, NWFP, and Balochistan. There are some alarming signs of spreading the unrest to the urban areas in Punjab and Sindh. There is no second opinion on the effectiveness of the consensual approach of the people at large as the only thing which would last in any situation or any where is the truth which always reflected in the popular will of the people. Taking decisions against the popular will of the people may be resulting in de-linking with the people!

It is noteworthy that the hard hit average income group of the inflationary pressures attaching hope for getting benefits of the declining commodity prices especially food items and energy prices such as petroleum products, natural gas, electricity etc. which play a vital role in price inflation. However, under the IMF program it seems that policy makers have to carry out the policies of the IMF which are obviously aimed at recovery of the given loans instead of reducing the sufferings of the low income groups.


Coming back towards the sign of improvement, it seems that during the current fiscal year economy is likely to expand between 2.5 percent to 3.5 percent and annualized inflation is expected to be around 19.5 percent to 20.5 percent whereas overall fiscal and current account deficits are likely to be between 4.3 percent to 4.7 percent and 5.8 percent to 6.2 percent of the GDP, respectively.

The fiscal consolidation has been a major priority under the macroeconomic stabilization agenda for FY09 which seems to be having an impact as the fiscal deficit for the first half of FY09 is estimated to have dropped to 1.9 percent of projected annual GDP compared to 3.4 percent in H1-FY08. "The fiscal deficit for H1-FY09 thus appears to be in line with the annual target set in the budget FY09 as well as that agreed with IMF under the Stand-By Arrangement," it added. The fiscal improvement thus far has largely been brought about by elimination of oil subsidies and a cut in development spending.

After a sharp deterioration in July-October period of FY09, overall external account balance improved noticeably in the ensuing months, aided by a sharp fall in the current account deficit and a modest recovery in financial inflows. Consequently, foreign exchange reserves increased and the rupee also recovered part of the losses suffered during Jul-Oct FY09. Thus, the aggregate 68.6 percent growth in overall external account deficit during the first eight months of FY09 was accrued essentially during the first four months of the period

All price indices i.e. CPI, WPI and SPI, witnessed a clear downtrend in recent months. After showing a continuous acceleration since March 2008, CPI inflation (YoY) started easing from November 2008; it fell to 21.1 percent in February 2009 as against a peak of 25.3 percent in August 2008. However, this inflation is higher compared to 20.5 percent in the preceding month and 11.3 percent in the same month last year.

Agricultural growth will be reasonably good during FY09, despite the drag from 18.5 percent decline in sugarcane output during kharif FY09. "This assessment is based on an anticipated record wheat harvest (that would significantly improve the contribution by major crops), above target performance of minor crops and a reasonably good outturn by the livestock sub-sector,' it added.

In the face of worsening outlook for the global economy, and drought in international capital markets mean that Pakistan's economic revival strategy must perforce focus on fostering domestic and regional demand. Moreover, lowering inflation and limiting the twin deficits, in particular, would be key to enabling a transition in macroeconomic policy from a stabilization framework to one focused on reviving growth, it said.

"In the short to medium-term, it would be imperative for Pakistan to rely on concessional external assistance to finance development expenditure," it said and added that the need for greater external assistance for Pakistan is underscored by the fact that the sources of domestic financing are either not available or remain risky due to its vulnerable external account position. Also, given the drying up of capital flows, official assistance seems to be the only option for countries like Pakistan to stimulate its economy to put it back on sustainable path of growth and development.


As far as contribution of the people who can contribute towards the economic growth of the country is concerned they are doing their utmost which is evident from the participation of the overseas workers who sent the highest-ever amount of $739.43 million as remittances in March 2009, surpassing the previous record of $673.50 million received in December 2008.

In the first nine months (July-March 2009) of current 2008-09 fiscal year, the country received an amount of $5,658.06 million as workers' remittances as against $4,728.37 million during the same period of the last fiscal year showing an increase of $929.69 million or 19.66 percent.


The total liquid foreign reserves held by the country stood at $ 11,171.0 million on 4th April, 2009. The break-up of the foreign reserves position is as under:-

i) Foreign reserves held by the State Bank of Pakistan: $7,805.3 million
ii) Net foreign reserves held by banks (other than SBP): $3,365.7 million
iii) Total liquid foreign reserves: $11,171.0 million