Dec 28, 2009 - Jan 03, 20

Calendar year 2009 was a year of both disappointments and achievements. While the real economy remained subdued, performance of financial sector was disturbed by transfer of industrial sickness to the financial sector. Expectation of bumper cotton crop lured the spinners to export more yarn but subsequently demand for imposition of ban on its export were made. Despite orders of the Supreme Court instructing the government to ensure sale of sugar at Rs40/kg, the commodity was sold at as high as Rs100/kg in certain areas.

Due to raids on sugar mills and confiscation of stocks sugar disappeared from the market. During Ramadan about two dozen people, mostly women, died in stampede while attempting to get sugar and wheat flour. It was one of the worst incidences of its kind.

The year also witnessed one of the largest bank robberies at Foreign Exchange of Allied Bank in Karachi. A fraud of Rs9 billion at Bank of Punjab also hit newspaper headlines. A unique feature was the statements of the accused of paying millions of rupees to lawyers to get court orders in their favor.

Another story hitting newspaper headlines was default of Maple Leaf Cement Factory in making Rs800 million payments against Rs8 billion Sukuk. Incidentally, Allied Bank was the arranger and lead manager and Meezan Bank was the Shariah Advisor to this issue of Sukuk.

On top of all, military actions against the militants earned millions of people epithet of internally displaced persons. As the assault continued terrorists attacked many installations of strategic importance including GHQ, ISI offices, police and army training centers.

Peshawar emerged as the worst target of the terrorists. Story of 'Black Water' though denied by the government got some credibility.

Terming of National Reconciliation Ordinance null and void by the Supreme Court has once again initiated rift between the executive and the judiciary. Whatever may be the final outcome, political uncertainty and fragile law and order situation are taking toll on the economy.

Added are the rampant load shedding of electricity and gas in the country. People have already received the new year gift in the shape of yet another hike in electricity and gas tariffs effective January 2010. The hike will be a hard blow to consumers plundered by incorrect bills, and who are already suffering from ongoing load shedding.

The reason for hike in electricity tariff is not the global price of crude oil but blatant electricity theft. The reason for shortfall in natural gas is also UFG or line losses and the ongoing litigation has not allowed extraction of gas from already discovered gas fields.

According to experts, circular debt has affected the entire energy chain. In an attempt to save fuel cost both PEPCO and KESC are not running their power plants at full capacity. This is not only resulting in prolonged electricity outages but also pushing up oil import bill as usage of small and fuel-inefficient power generators is on rise.

Efforts were made to ease the pressure by two TFC issues. However, analysts strongly believe that unless the root cause of circular debt, rampant electricity theft, is controlled it would continue to plague the entire energy chain.

Some experts have been suggesting that hike in electricity tariff can help in improving financial health of electric utilities. This time they have coined a new term 'recovery of full cost'. Under this policy not only there have been frequent increases in electricity tariffs but also withdrawal of much talked about subsidy being paid to certain groups of consumers.

POL products remained a major source of revenue collection. Having failed in imposing 'Carbon Tax' the government chose to charge PDL at a flat rate irrespective of global prices of crude oil. Lately HSD price has come close to motor gasoline and now efforts are being made to bring CNG price at par with motor gasoline price.

This year availability and prices of urea and DAP remained stable but not without incurring huge cost. This year Trading Corporation of Pakistan was a little more vigilant which resulted in timely import of urea and its onward dispatches. However, its discharge at Gwadar port not only increased handling cost but dispatches were also slow because of road linking port with other parts of the country.

Ample availability of DAP and its availability at affordable price is likely to improve wheat output in the country. However, one of the points of concern is that country does not have adequate wheat storage facilities. According to some estimates while wheat production was as high as 24 million tons the storage capacity was around 7 million tons.

This year the country continued to face water shortage. Two of its worst impacts were inadequate availability of irrigation water affecting yield of different crops and low hydropower generation. Heavy reliance on thermal power plants not only increased oil import bill but also resulted in higher cost of generation, affecting margins of electric utilities.

Two of the key factors affecting the country most appear to be missing will and inability to make timely decision. On top of this fighting a proxy war of the US in Afghanistan has brought the war against terror within Pakistan's boundaries. On top of this constant rift between treasury and opposition benches has kept political uncertainty high.

Without restoring investors' confidence creation of new productive facilities is difficult. The country enjoys strong economic fundamentals but efforts have to be made by all the stakeholders to make this country prosperous. This is not the sole responsibility of the ruling party and opposition has to share even greater responsibility. Public Accounts Committee is headed by leader of the opposition and he must play the lead role in putting appropriate checks and balances. The IMF and FoDP have provided a breathing space. Let us all play our role in making Pakistan strong and prosper.