Feb 8 - 14, 2010

The persisting law & order situation accompanied by domestic insurgency in the northern areas give tough times not only to the people in general but also to the government of the day to keep up with good governance and pull for the economy.

The huge outlays and expenditures related to encounter law and order situation as well as the domestic insurgency in the north have made it difficult for the government to contain budget deficit within the target of 4.9% of the GDP amounting Rs740billion.

In fact all the gains of removal of subsidies from electricity and other sectors are the unpopular steps taken by the government as the people in general and the trade and industry in particular find it hard to swallow the high cost of energy while on the other hand the government exchequer is also not getting any benefit of the subsidy-withdrawal as the worsened law and order situation is eating into all the benefits.

Notably, the government has also missed the target in the first quarter of financial year 2010 whereas fiscal deficit was recorded at 1.5% of the GDP i.e. slippage of 0.3% from the target as against 1.1% in the last year's same period.

Well placed sources said that the ministry of finance also hinted fiscal deficit to grow as much as 5.3% of the GDP as against previous expectation of 4.9%. In absence of inflows from Friends of Democratic Pakistan (FoDP) and other unilateral transfers also pose a challenge for the government to finance the budget gap.

The financial analysts have expressed their apprehension that inflationary pressures are likely to mount due to absence of external financing and limited avenues of non banking financing may again shift the government's reliance on banking system.

In addition to expansionary fiscal activities, quasi fiscal activities related to building up of circular debt and higher outstanding credit to commodity finance are also affecting the liquidity.

However the performance on external front remains commendable with contraction of 78% in Current Account Deficit (CAD) to US$1.8 billion as against US$7.8 billion in the comparable period of last year. Meanwhile, after a decline of 3% to Rs75 billion of credit to the private sector in the first quarter of the financial year 2010 there were signs of improvement in the credit to private sector which resumed its growth trend in second quarter of the current fiscal year.

Credit to private sector expanded by Rs199 billion in second quarter of the financial year 2010 amid increase in banking sector's deposits and reduction in accretion of fresh Non-Performing Loans (NPLs).


The untamed law & order situation has shattered the confidence of the investors as they naturally prefer to sit on the fence looking for stability in all terms with their fingers crossed. Consequently, the stagnant investment situation is causing an adverse impact on economic activity as sub sectors of the economy are suffering a lot.

It is a matter of serious concern that during last 40 days over hundred people lost their lives in Karachi alone. The bomb blast on Aushura procession at M.A. Jinnah Road claimed life of over 45 innocent people besides inflicting serious injuries to scores of the people. The wounds caused by that unfortunate incident were aggravated by the unruly mobs attacking and ransacking country's largest whole-sale market adjacent to Boulton market, the biggest trading center and the source of supplies to the entire country.

While the government was still in the middle of taking remedial measures for rehabilitation of the gutted whole-sale market, people were stunned to hear yet another gory incidents of bomb blasts first at Shahrah-e-Faisal and next at the parking lot of Jinnah hospital in which cumulatively 25 persons lost their lives and over 100 critically injured on the day of Chehllum of Hazrat Imam Hussain.

Though the government provided all sorts of assistances to the bereaved families and medical care for the injured besides announcing compensation of Rs5 lakh each for deceased family and one lakh rupees each for the injured, yet the losses suffered by the citizens due to untamed law and order were immeasurable.

Despite application of all possible security measures and strengthening of the security network such unpredictable incidents are always difficult to be combated. Some radical steps are to be introduced irrespective of the liking and disliking of the political stalwarts.

Among the required steps to ensure protection to the life, honor and property of the citizens we have to follow practical examples adopted elsewhere around the world. To achieve the target of combating law and order situation effectively the distance between the police and the citizens have to be narrowed down effectively.

Practically there is a yawning gap between the law abiding citizens and the administration especially the police force obviously due to culture of rule the masses rather than serve them.

In fact support and coordination of the people with the police department is the key to the success of coping up with terrorists and to achieve the target the most important factor is that in every large city the police personnel should be recruited from local community, which is a common norm all around the world.


The total liquid foreign reserves held by the country stood at $ 14,517.3 million on 30th January, 2010.

The break-up of the foreign reserves position is as under: -

i) Foreign reserves held by the State Bank of Pakistan: $ 10,719.4 million
ii) Net foreign reserves held by banks (other than SBP): $ 3,797.9 million
iii) Total liquid foreign reserves: $ 14,517.3 million