May 17 - 23, 2010

The country is facing host of economic and developmental issues and most distressing is the persistent energy crisis that is causing negative impact on the real gross domestic product (GDP) growth.

Official circles believe that the GDP growth in the current fiscal is likely to be around the annual target of 3.3 percent, higher than the 2 percent growth seen in 2008-09. They claimed that the prospects of returning to macroeconomic stability have improved in the initial months of 2009-10 as most of the key indicators continue showing positive trends that began in the closing months of the last fiscal year.

As per official projection, real GDP growth in 2009-10 is likely to be around 3.3 percent. Average Consumer Price Index inflation may remain between 10 percent to 12 percent. Total amount of workers' remittances likely to be received during 2009-10 would hover between $7.8 billion and $8.8 billion. Total exports and imports may remain between $18.5 billion and $19.0 billion, $30.5 billion and $31 billion, respectively while fiscal and current account deficits are likely to be between 4.7 percent and 5.2 percent and 3.7 percent and 4.7 percent of GDP, respectively.

The alarming point is that Pakistan's tax-to-GDP ratio of 9.2 percent is one of the lowest in the world. Although the government aims to raise it to at least 15 percent but in order to achieve the goal, it would have to take stringent measures.

"The 0.6 percent year-on-year increase in tax collection during Jul-Nov (2009-10) is a source of concern. If this continues Pakistan's tax-to-GDP ratio will decline further from an already low 9.8 percent seen in 2008-09."

Total teledensity of the country is up and reached to 63.5 per cent in December 2009 which was 62.1 per cent in June 2009. During the first two quarters of the fiscal year 2009-10, teledensity has increased by about 1.8 per cent. Mainly the rise has been witnessed in WLL density which grew by 6 per cent while the cellular mobile teledensity grew by 2.2 per cent in the first two quarters of the fiscal year 2009-10.

However, the fixed line teledensity remained unchanged during the first two quarters of the fiscal year 2009-10. Main reason for slowdown in the pace of teledensity could be attributed to the maturity of market where operators' efforts are now on retention policy instead of expansion of subscribers.

According to Advisor to Prime Minister for Information Technology, Sardar Muhammad Latif Khan Khosa telecom sector is expanding fast in Pakistan in collaboration with China. "We are determined to provide security to the companies operating in the sector."

Pakistan Telecommunication Company Ltd (PTCL) announced its financial results for the 3rd quarter ended on March 31, 2010. The company has announced a net profit of Rs2.51 billion compared to Rs1.91 billion recorded in the 3rd Quarter last year, i.e. 31 percent growth compared to same period last year.

On consolidated period for 3 quarters (9 months) from July 1, 2009 to March 31, 2010 the net profit is Rs7.86 billion compared to Rs7.22 billion for the same period last year. PTCL has witnessed landmark success in reinventing itself from a state-run organisation to a competitive private sector organisation. On this journey, PTCL has repositioned itself as Pakistan's only integrated telecom service provider offering bundled voice data, Internet and IPTV services at highly competitive rates.

PTCL success can be evaluated from the fact that its broadband Pakistan has become the largest broadband service in the country covering over 1000 cities countrywide with 80 percent market share.

With the launch of EVO, PTCL has become the first 3G wireless broadband service provider in the country. PTCL has also won more than 50 percent of all USF projects, the most significant for the provision of broadband in the under served areas. To provide valued services to its customers, PTCL has also established the first international standard largest data centre, besides, establishing Network Operations Centre (NOC).

The Mobilink has also announced investment plans for the year 2010 bringing the total investment made by the company in Pakistan to over $3.5 billion. The telecom giant has earmarked more than $250 million for the year 2010 for enhancement of existing infrastructure and further improvement in quality of service. The company has already invested more than $3.3 billion in the country to date.

This is the largest foreign direct investment by any cellular operator in the country. Demonstrating upward trends in the fourth quarter of 2009, Mobilink revenues, as per local currency, showed an increase of 5.3 percent as compared to Q3, 2009. The improved operating performance has been positively reflected in an upgrade in the company's ratings to B- by Standard & Poor's Ratings Services. According to S&P, the outlook is stable.

Mobilink President and CEO Rashid Khan said, "Operating in one of the most competitive markets in the region requires constant improvements and value additions be it in terms of offers and services or capital investment to enhance quality of service.

Moreover, the United Nations in its annual report 'Economic and Social Survey of Asia and Pacific' forecasted Pakistan's economic growth at 3.2 per cent during the current financial year. The survey, an annual publication of Economic and Social Commission on Asia and Pacific (ESCAP) was launched recently in different countries including Pakistan by former Advisor to Finance Ministry and Director General NUST Business School, Dr Ashfaq Hassan Khan.

The survey report has projected country's inflation at 12 percent during the current financial year against the inflation of 20.8 percent last year and 12 percent in 2007-08, showing a large decrease as compared to the inflation last year.

Regarding savings and investments, it has forecasted country's gross savings growth at 15.1 percent against 14.4 percent in 2008-09 and 13.4 percent in 2007-08. On the other hand, the gross investments would grow at 18.5 percent during the year against 19.8 during last year and 21.6 percent during 2007-08, it predicted.

The survey said that Pakistan's economy has been affected not just by the global economic crisis but also by the declining security situation and intensification of conflict linked to terrorism.

The industry especially large-scale manufacturing suffered the worst due to drop in international demand.

Improved performance of the service sector offset it to some extent which grew 3.6 percent during the year, it said adding that a rebound was witnessed in agriculture due to bumper wheat crop. The report says that anticipated recovery is expected to be supported by the restocking of inventories and a small recovery in exports as the incipient recovery in major economies gather pace.

The large-scale manufacturing sector, which contracted in 2009, is projected to register positive growth during this year.

The report says that Pakistan witnessed a contraction in both of its exports and imports adding that global economic crisis led to a decline in exports by 6 percent while imports contracted at a much faster rate by 11 per cent due to lower domestic demand coupled with massive fall in international oil prices.

Depreciation of domestic currency also played a role in containing imports. According to the report, strong growth momentum in the workers' remittances continued in 2009 and with over 20 per cent increase the remittances stood at $7.8 billion. All these developments helped in bringing significant improvement in the current account balance, where deficit of 8.4 per cent of GDP in 2008 was reduced to 5.3 of GDP in 2009. However, it said that due to global economic slowdown and political and security uncertainties, there was a slackening of capital inflows due o lower FDI inflows, higher portfolio outflows, lower disbursements of loan and higher amortization payments.

The report said that the fiscal deficit has been rising in recent year which stood at 7.6 percent of GDP in 2008.

The report said that the fiscal performance improved substantially in 2009 due to more stringent fiscal policy while the budget deficit came down to 5.2 per cent of GDP.

It said that performance at revenue side was not very encouraging adding that the government needs to improve tax base and raise the very low tax-to-GDP ration in order to reduce the fiscal deficit to sustainable levels.

The report said that a sustained high and inclusive economic growth was needed for rapid poverty reduction.