Pakistan Economy - News & Updates
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ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) registered 296 companies during May 2009, which is 26 companies more than the number of companies registered during April.
With new incorporations, the total corporate portfolio as on May 31, 2009 comprises of 53,324 registered companies. Of these 296 companies incorporated during May, 284 companies were limited by shares, comprising of one public unlisted company, 273 private companies and 10 single member companies. In addition, three associations not-for-profit under section 42 of the Companies Ordinance, 1984 and nine foreign companies were also registered.
Total authorised capital and paid-up capital of 296 companies incorporated during May 2009 amounted to Rs 529 million and Rs 122 million, respectively.
The number of new incorporations was highest at Lahore, whereby 111 companies have been registered, followed by Islamabad registering 87 companies, Karachi with 66 companies. Peshawar, Quetta, Faisalabad and Multan registered 20, 5, 5 and 2 companies respectively. The highest number of company incorporation was witnessed in the services sector comprising of 43 companies, followed by 40 in tourism, 34 in trading, 28 in construction, 22 in communication and 22 in information technology sector.
ISLAMABAD: Asian Development Bank has suggested Pakistans policymakers a package of policies for the medium-term to manage current economic crisis and put the economy on path of sustained growth.
The working paper, A Reinterpretation of Pakistans Economic Crisis contains these suggestions.
The working paper has suggested that policymakers in Pakistan should adopt a package of policies that include reorient emphasis toward employment-creating policies and away from growth for-its-own-sake policies.
The suggestions include: growth must be placed within the context of achieving full employment with price stability; regressive taxes should be replaced with progressive direct taxes to reduce the burden on low-income and low-wealth households; high core inflation should be addressed through a combination of more moderate monetary policies (lower interest rates), reduction of programmes with a strong inflationary bias, and a programme of wage stabilisation.
In this regard, a comprehensive job creation program can play an important role in moving the economy to full employment while simultaneously enhancing wages and prices stability.
The working paper defines the role of ADB and states that at first and foremost, it is of paramount importance to understand the overall developmental challenges that the country faces. Pakistan is an economy characterized by vastly underutilized resources. These resources are available for production and can help the economy respond in real terms to a sustained increase in nominal demand for goods and services. ADB recognise that in the short run, there may be supply bottlenecks that can retard growth. There is either disguised unemployment or a substantial traditional sector where productivity is below that in the modern sector.
Second, concentrating exclusively on the financial problems will not provide a long-term solution and a sustainable development path. For this reason, austerity programs, derived from the premise that Pakistan has been living beyond its means, will reduce the capacity of the government to engineer a solution to the structural problems that afflict the country.
While it is true that from an accounting point of view Pakistans problem is that domestic absorption has outpaced output, the existence of very large underutilized resources indicates that Pakistan is living below its means. The austerity approach to policy may restore foreign reserves and slow inflation but it provides no sustainable path to engineer the conditions that will support growth. Once growth is reactivated, the same structural impediments that were dormant during the austerity period would return to endanger economic stability.
Third, budget support should not be linked to conditionalities about the size of the budget or of the deficit. The latter should be analyzed in the context of the objectives to be achieved, in particular, how to keep the total spending in the economy at the rate necessary to ensure that all the goods that is possible to produce are purchased. In this sense, the idea of balancing the budget (over a decade, during a year, or at the end of each fortnight) becomes a meaningless objective.
* Development budget for water sector includes allocations for construction of dams, canals, drainage and reclamation projects, investigation schemes
ISLAMABAD: In the budgetary preparation process, the National Economic Council (NEC) is likely to allocate Rs 45.024 billion for the water sector in the Public Sector Development Programme 2009-10, sources told Daily Times on Wednesday.
The sources said the government was likely to approve Rs 39.019 billion for 65 ongoing development schemes in the water sector and Rs 6.005 billion for 18 new development schemes.
Projects: In the development budget for the water sector, major allocations have been made for construction of dams, canals, drainage and reclamation projects, general investigations schemes, and federally-funded provincial projects.
In the ongoing schemes, the government allocated Rs 12 billion for the raising of Mangla Dam, including resettlement, Rs 180 million for Mirani Dam, Rs 100 million for Mirani Dam Project, Rs 100 million for completion of Sabakzai Dam, Rs 50 million for construction of Satpara Multipurpose Dam and Rs 2 billion for the construction of Gomal Zam Dam.
The government was likely to approve Rs 60 million for feasibility studies of Naulong and Hingol dams in Balochistan and another Rs 60 million for their construction, the sources said.
In its meeting today (Thursday), the NEC is likely to approve an allocation of Rs 50 million for the restoration of Bolan Dam in Kachhi district, Balochistan, Rs 600 million for the construction of 100 Delay Action Dams in Balochistan, Rs 200 million for construction of 20 small dams in the NWFP, Rs 15 million for a feasibility study of small dams in the NWFP, Rs 400 million for the Naigai Dam in Dadu, Sindh and Rs 10 million for a feasibility study on increasing the capacity of Baran Dam and construction of the Tochi-Baran Link in the NWFP.
Other allocations for the ongoing projects are Rs 1 billion for the revamping/rehabilitation of irrigation and drainage system in Sindh, Rs 3.5 billion for the extension of Right Bank Outfall Drain (IBOD-II) from Sehwan to the Arabian Sea, Rs 1 billion for lining of irrigation channels in Punjab and Rs 1 billion for the extension of Pat Feeder Canal for the utilisation of Indus water in Balochistan.
In the new projects the government is likely to approve funds for several small dams across the country. The small dams include Hingol, Naulong, Garuk, Pelar, Winder, Basol, Sukleii and Badinzai dams in Balochistan; Nai Gaj, Darwat, Khadeji, Salari, Sita, Khenji, Taroan and Nali dams in Sindh; Tank Zam, Daraban, Chudwan Zam, Sheikh Haider, Chashmai Akor, Showkas, Totakan Kuhai and Qadam/Tangi dams in the NWFP and Papin, Ghabir, Kol Fateh, Mujahid, Lawa, Mora Shera, Jamalwal and Check dams in Punjab.
* Zardari says government has to win hearts and minds of people
* Says trade is more important to Pakistan than aid
* Says trade is more important to Pakistan than aid
ISLAMABAD: US President Barack Obama is seeking an additional $200 million to help the internally displaced persons (IDPs) of Swat and Malakand division, US Special Representative for Pakistan and Afghanistan Richard Hobrooke said on Wednesday.
Today, the president (Obama) requested the Congress of the US to allocate an additional $200 million, he told a joint press conference with President Asif Ali Zardari and Foreign Minister Shah Mehmood Qureshi. He said the reconstruction phase would be very important and critical, and assured full American help and support in this phase.
We are committed to helping you strengthen democracy, to defeat militants in the west who threaten democracy in Pakistan, democracy in Afghanistan and stability throughout the region, he said.
The US has already announced $110 million for the IDPs, and Holbrooke said if the additional $200 million were allocated, the total US aid would exceed $300 million. The special envoy also urged other nations, including the European Union and the Gulf Cooperation Council (GCC) to do more to assist Pakistan deal with the IDP crisis. Holbrooke also plans to visit the IDP camps in NWFP today (Thursday).
Hearts and minds: To questions on an end to the war in Swat, President Zardari refused to set a timeline. To say that the war is won or that the war is going well is too soon. We have a war of ideology to fight, we have a war where we have hearts and minds to win, he said. Prior to the press conference, he asked Holbrooke during a meeting to grant greater market access to Pakistani goods in its market. Trade is more important to Pakistan than aid, he said.
Earlier, in his opening remarks, Foreign Minister Shah Mehmood Qureshi said Pakistan was committed to defeating terrorism. We have taken a decisive decision to take on militants, extremists and terrorists, he said.
ISLAMABAD (June 04 2009): Federal Cabinet on Wednesday accorded approval to signing Gas Sale Purchase Agreement (GSPA) on Iran-Pakistan gas pipeline project. Giving details of the Cabinet meeting at a news conference, Information Minister Qamar-uz-Zaman said that the Cabinet authorised the Ministry of Petroleum and Natural Resources for formal signing of agreement with the Iranian government, hopefully, in June.
According to APP, the minister hoped that the final agreement would be inked by mid-June. He said that the government would encourage the Pakistani firms to build this gas pipeline. After analysing the current more than expected wheat production, the Cabinet met with Prime Minister Syed Yousuf Raza Gilani in chair also allowed export of 200,000 tons of wheat products with immediate effect.
About the wheat procurement by Passco and provinces, Kaira said that the country surpassed the initial target of 6.5 million tons by procuring over 10 million tons of wheat so far. Though the final estimate would be available in July, initial estimates indicate good wheat crop this year.
The Cabinet also decided that the provinces should lift their stock of wheat that was imported on their demand. The meeting decided that the provinces should start early release of wheat stocks to flour mills for which issue price of 975/40-kg has already been announced. The issue price could be enhanced according to price trends subsequently. The Cabinet also decided to purchase an additional 50,000 tons of rain-damaged paddy in Sindh and Balochistan by Passco at Rs 750 per 40 kg.
The meeting gave approval to import 300,000 tons of fertiliser to meet the requirement of the coming months for Kharif crop. The Cabinet also accorded approval to allowing the private sector to import urea fertiliser. The country requires 2.9 million tons fertiliser for the Kharif crops against the domestic production of 2.55 million tons. He said that the Cabinet had allowed import of 0.3 million tons to bridge the shortfall to ensure availability of fertiliser.
The Prime Minister directed the concerned ministry that all necessary measures should be employed for timely and effective distribution of fertilisers with the close co-operation of the provincial governments aimed at facilitating easy availability to farmers. Presently, the government is extending Rs 800 subsidy per bag of fertiliser.
The minister said the Cabinet was told that a list of IDPs who have been verified by Nadra was provided to UBL for issuance of cards for disbursement of Rs 25,000 cash grant. United Bank would start issuing cards from Monday and registered families would receive Rs 25,000 grant from Tuesday.
He said that the Cabinet was informed that efforts are being made to restore basic facilities in those areas cleared of militants to facilitate early repatriation of IDPs. The meeting was also briefed on the status of donors' assistance for IDPs.
About abducted students of Razmak Cadet College, the minister said that out of 128 kidnapped students 81 have been recovered while 41 students and five teachers are still missing. Efforts are being made for their safe recovery, he added. To look into the affairs of Zakat, the Prime Minister constituted a Cabinet ministerial committee comprising the Minister for Zakat, the Minister for Religious Affairs, the Minister for Parliamentary Affairs and the Advisor on Finance.
The other decisions the meeting took are giving approval to start negotiations for an agreement on military co-operation between the government of the State of Qatar and Pakistan, ratified the memorandum of agreement on the establishment of joint economic co-ordination between Pakistan and Philippines.
The meeting granted permission to start negotiations with the Hashemite Kingdom of Jordan for entering an agreement on co-operation in the field of vocational training. Under the agreement, both countries would cooperate and exchange expertise, legislation, studies, training programmes, etc, which will help train and upgrade vocational trainers and young people to make their mark in the labour market.
The Cabinet ratified the decisions taken by the ECC on May 29, 2009. This included establishment of Export Processing Zones Authority (EPZA) tech tower in six acres. The ECC meeting also considered introduction of Ethanol-10 Blended Fuel in Pakistan.
The meeting allowed marketing of E-10 motor vehicle fuel on trial basis. A committee comprising ministries for Industries & Production, Petroleum and Natural Resources, Secretaries Finance and Industries & Production was constituted to consider and examine the incentive package.
The meeting also decided to restrict the issuance of LPG marketing licences to only applicants who have duly executed agreements with local or international LPG production sources committing supplies of LPG at least for a period of five years.
The ECC meeting also allowed OGDCL to supply 20-24 mmcfd gas from their Bahu field to M/s Fauji Kabirwala Power Company Ltd. The meeting also approved issuance of government guarantee of Rs 1 billion for Pakistan Textile City Karachi for two years. The Ministry of Social Welfare and Special Education briefed the Cabinet on its one-year performance and future plans.
ISLAMABAD (June 04 2009): The Finance Ministry released Rs 145 billion for development projects under Public Sector Development Programme (PSDP) during nine months (July-April) of the current financial year. According to sources, the Ministry has assured the Planning Commission that it would release the entire amount of Rs 219 billion allocated for development projects under PSDP by the end of June 2009.
The so far released amount includes 66 percent foreign aid and 39 percent of the original allocation. Due to financial constraints during the current financial year 2008-09, the government had conducted a rationalisation exercise to reduce the burden on PSDP.
Initially, the Planning Commission advised the Ministries/Divisions in August 2008 to review their ongoing and future projects/programmes focusing on high priority projects; medium priority projects; projects likely to be delayed for 2-3 years; projects to be dropped/discontinued and projects likely to be shifted on public private partnership (PPP) mode.
In January 2009, Finance Division advised the Planning Commission to reduce throw forward of ongoing projects by 20 percent to qualify for World Bank's Poverty Reduction Support Credit-1 (PRSC-1). In turn, Ministries/Divisions were requested to review their ongoing portfolio and identify possible savings placing projects in categories including:
Projects of high priority to be fully protected; Projects which implementation could be delayed for 1-2 years; to identify projects to be dropped from PSDP, projects likely to be shifted to the public private partnership mode and projects in Balochistan NWFP be exempted from any rationalisation.
Consequently, 140 projects were either discontinued or placed for execution as private public partnership that reduced future liability by Rs 385 billion. In March 2009, Finance Division reduced the size of federal PSDP to Rs 219 billion against approved size of Rs 371 billion. Finance Division has also transferred the Benazir Income Support Programme from the development to current budget.
Finance Division slashed allocation in infrastructure sector by 50-70 percent from Rs 178 billion to Rs 96 billion with Rs 82 billion reduction. Social sector allocation was reduced by 70 percent of original allocation from Rs 161 to Rs 99 billion placing a cut of Rs 62 billion. Production sector faced a reduction of Rs 3 billion from Rs 20 to Rs 17 billion, Science and Technology Infrastructure from Rs 7 to Rs 5 billion and Environment allocation was reduced from Rs 5 to Rs 2 billion.
ISLAMABAD (June 04 2009): The Asian Development Bank (ADB) has raised serious objections on IMF conditionalities under the "standby arrangement", with the argument that the IMF agreement reflects "conventional" approach to dealing with macroeconomic imbalances in Pakistan.
An ADB working paper on the assessment of IMF program and its conditionalities, released on Wednesday, contains policy advice that differs markedly from that of the International Monetary Fund. One of the authors of the report also co-authored an article in Far Eastern Economic Review, together with the Director-General of the Department who deals with Pakistan, titled 'Plea to Pakistan: Fix Your Economy', in February this year.
THE ANALYSIS WAS BAFFLING FOR THREE REASONS:
(i) the forum ie Far Eastern Economic Review was not appropriate as it could have negatively impacted on direct foreign investment to Pakistan;
(ii) it was undertaken by a department which is propped up mainly by its lending to this country and the article was in conflict with the duties of the staff of an IFI; and
(iii) the analysis was shallow and the authors' attempt appeared to be self-aggrandisement rather than a serious analytical piece. A former Advisor to Ministry of Finance, Dr Ashfaq Ahsan, said that he did not agree with ADB point of view about going into IMF program.
Additionally, multilaterals have areas of expertise that they strictly adhere to in the spirit of harmonisation among the multilaterals so as not to duplicate efforts. IMF remains the institution that has the necessary expertise to deal with macroeconomic issues.
Pakistan government went on the IMF program and accepted the conditions based on its economic needs at the time. The result seven months down the line is that the budget deficit has become sustainable; the rupee is stable at around 81/dollar; and growth rate remains positive in contrast to other countries struggling with global recession.
In contrast, ADB is primarily a lending institution that has not even been successful in achieving its overarching objective: poverty reduction at least in this country as is amply borne by the rise in poverty levels as revealed by Assef Ahmed Ali of the Planning Commission. Ashfaq said that whatever policies Pakistan pursued were the right policies and these should be continued in the next fiscal year as well.
According to ADB report, it is believed that the IMF program does not correctly portray the source of inflation pressures, or the constraints on economic development. There is still latitude within the constrained policy environment to pursue more sustainable outcomes than those established by the limited horizons set by the IMF agreement.
THE PROBLEM WITH THE FUND'S APPROACH IS THAT IT IS LESS THAN CLEAR ON:
(i) the nature of currency sovereignty;
(ii) the nature and financing of budget deficits; and
(iii) the nature and financing of trade deficits. This matters because while it is true that Pakistan's problems are largely the result of misguided policies, it does not mean that the only solution available is to subject the economy to an austerity program.
The Bank has recommended that tax policy needs to be reformulated to replace regressive taxes with progressive direct taxes to reduce the burden on low-income and low-wealth households. The raising of taxes is a highly problematic policy for a nation whose growth was already slowing even before the global crisis generated recession throughout much of the world.
The ADB said that another government policy emphasis has been to stabilise the exchange rate. The typical method used in many nations is to target inflation, reduce budget deficits, and encourage exports. This is exactly the logic of the current IMF agreement. It is possible that this package of policies can generate short-run benefits by allowing accumulation of foreign currency reserves that can be used to appreciate the currency.
However, this outcome conflicts with promotion of long-run economic and political sustainability. Indeed, there are some inherent conflicts between maintaining a strong currency and promoting exports--a conflict that can only be temporarily resolved by reducing domestic wages, often through fiscal and monetary austerity measures that keep unemployment high.
The best way to stabilise the exchange rate is to build sustainable growth through high employment with stable prices and appropriate productivity improvements. An export-led growth strategy based on restraining wage increases sacrifices domestic policy independence and places maintaining a stable exchange rate as a top policy goal.
The IMF is particularly concerned with SBP financing of the budget deficit. Since July 1, the government is said to have borrowed about $2.5 billion from the SBP; the government's goal is to reduce that to zero. Such borrowing is thought to be effectively "government printing of money" to finance its deficit; the orthodox view is that this is highly inflationary.
Hence, the goal is to eliminate such borrowing for the remainder of the year, forcing the government to turn to "markets" for its borrowing. It will then need to offer sufficiently attractive interest rates on its debt; this will allow the government's borrowing costs to rise to market rates (as mentioned, this would be at least 15 percent now).
The ADB has further argued that the IMF conditions will reduce the capacity of the government to engineer a solution to the problems of inflation and falling foreign currency reserves without increasing the unemployed buffer stock.
The Bank further disagreed with the orthodox analysis that Pakistan needs to foster conditions that will reduce its dependence on imports. The growth and development path chosen will make a difference to the country's capacity to import.
However, it considered that the orthodox solution to a current account deficit will actually make it more difficult for Pakistan to reduce dependence on imports. The ADB believes that the IMF conditions will reduce the capacity of the government to engineer a solution to the problems of inflation and falling foreign currency reserves, without increasing the unemployed buffer stock.
While the IMF statement suggests it is keenly aware of the need to deploy a "socially acceptable" solution, the ADB considers that a policy strategy based largely on fiscal austerity will create unacceptable levels of socio-economic hardship.
Further, the ADB thinks the program addresses the failures in the policies of the previous government, largely focused on a consumer-driven growth strategy despite the import dependent nature of the economy. It is clear that while the country enjoyed very high levels of FDI, the funds were largely concentrated in the consumer sector.
THIS HAD TWO CONSEQUENCES: (i) it increased demand for foreign exchange; and (ii) it created a foreign exchange liability. The other significant point is that this investment did not generate corresponding amounts of foreign exchange revenue because it did not improve export capacity.
The policy emphasis on fiscal restraint is also fraught with problems. Targets to reduce the budget deficit as required by the IMF agreement may help lower inflation, but only because the "fiscal drag" acts as a deflationary mechanism that forces the economy to operate under conditions of excess capacity and unemployment.
This type of deflationary strategy does not build productive capacity and the related supporting infrastructure, thus offers no "growth solution". Likewise, fiscal restraint may not be successful in lowering budget deficits for the simple reason that tax revenue can fall as the taxable base shrinks because economic activity is curtailed.
To deal with the issue of crisis management, the ADB has proposed that it is highly likely that the IMF will continue to provide loans as needed, but with conditions that include fiscal restraint. Unfortunately, this is a risky time for budget cuts, which would entail both economic and political repercussions. Significant budget cuts can only be made in the areas of military spending, food and fuel subsidies, pensions, or development. For obvious reasons, cuts in all of these areas would be problematic.
The alternative is to raise taxes--again a highly problematic policy for a nation whose growth was already slowing even before the global crisis generated recession throughout much of the world. The ADB further objected that the policy emphasis on fiscal restraint is also fraught with problems.
The report could be found on the ADB website (Asian Development Bank (ADB) - Fighting Poverty in Asia and the Pacific - ADB.org Pakistan/default.asp) under the title: "A Reinterpretation of Pakistan's 'Economic Crisis' and Options for Policymakers".
KARACHI ( June 04, 2009): State Bank of Pakistan (SBP) lowered on Thursday its gross domestic product (GDP) growth forecast for the 2008-09 (July-June) fiscal year to between 2.0-3.0 percent from its previous estimate of 2.5-3.5 percent.
Pakistan achieved GDP growth of 5.8 percent in the 2007-08 fiscal year, and the government had originally set a growth target of 5.5 percent for the current year.
In a quarterly report, SBP also raised its 2008-09 average inflation forecast to between 20.5-21.5 percent from an earlier forecast of between 19.5-20.5 percent.
ISLAMABAD (June 04 2009): The World Bank (WB) is likely to consider five development projects worth $1.2 billion as the WB board meets on Thursday in Washington. Sources told Business Recorder on Wednesday that Pakistan is seeking the amount for various development projects in education, poverty alleviation and social safety net.
The projects include Sindh Education Sector Programme costing $300 million, Punjab Education Sector Programme $350 million, Poverty Alleviation Fund III $200 million and Social Safety Credit Policy worth $200 million. According to sources there is another project, however, they refrained from giving any detail. The government expects that the Board would only approve the four projects costing around $1050 million.
By C.R. JAYACHANDRAN and HARIS ZAMIR
KARACHI -- Pakistan's economy is likely to grow just 2% to 3% this financial year with inflation slowing sharply, the central bank said Thursday, indicating it remains biased toward supporting the economy even with inflation running in the double digits.
"While the improvement in macroeconomic indicators is very encouraging, the economy is not out of the woods yet," the State Bank of Pakistan said in a quarterly report. "Major macroeconomic indicators show underlying weaknesses which, if not addressed, could hamper economic recovery."
The new forecast for the year ending this month represents a slowdown from last fiscal year's 5.5% growth and is below the 2.5% to 3.5% that the central bank forecast in April. It compares with a full-year growth forecast of 2.10% to 2.17% given in May by Shaukat Tarin, adviser to the prime minister and the country's de facto finance minister.
The central bank cited "stubbornly high inflation, massive deterioration in external accounts and declining industrial output," especially among big manufacturers, for the weaker growth forecast.
Manufacturing output fell 7.7% for the nine months through March from the same period a year earlier, according to the latest available data. In the year-earlier period manufacturing grew 5%.
The central bank cut its key lending rate by 100 basis points in April to 14%. Consumer-price inflation eased to 17.19% on year in April from 19.02% in March. Inflation, which peaked at 25.3% in August, will come in at 20.5%-21.5% for the full fiscal year, the central bank said.
Although offering no specific forecast beyond this fiscal year, the central bank said it expects the inflation rate will continue to fall sharply in the next few months on the lagged impact of its earlier tight monetary stance, declining international commodity prices and weaker domestic demand.
It forecasts Pakistan's fiscal deficit will narrow to 4.0% to 4.5% of gross domestic product this financial year from 7.4% last financial year, though the central bank acknowledged its forecast might be tough to hit.
"The anticipated weaker performance of revenues and increase in expenditures both point to the risk of slippage in the fiscal-deficit target, and a contingent increase in financing requirements," the central bank said in its report.
The central bank's new projections look more realistic as increased terrorist attacks and the army's aggressive fight against Taliban militants in the Swat Valley and elsewhere continue to plague the economy, said Khalid Iqbal Siddiqui, head of research at Karachi-based Invest and Finance Securities.
"Higher interest rates and acute power shortages have also eroded industrial growth," Mr. Siddiqui said. But in the coming financial year, "the economy is likely to fare a little better on the possibility that operations in the northern part of the country against the Taliban will end and the government can focus more on measures to boost the economy."
ISLAMABAD: Pakistan and France would sign civil nuclear deal in December. In a weekly press briefing, foreign office spokesman said initial negotiations for nuclear deal will be completed in July and the deal would be signed in December.He said Pakistan wants early resumption of talks with India but no conditions being attached for talks.
Replying to a question regarding Kashmir issue, spokesman said there is no confusion or compromise made on Kashmir issue. He termed the statement of Indian external ministers statement about restoration of peace as positive and said Foreign Secretary Salman Bashir would meet Indian High Commissioner today in this connection. Pakistan is in touch with US for the resolution of Kashmir issue.
Foreign office spokesman said government is appealing against release of Hafiz Saeed and we will wait for verdict.
By Masood Haider
Thursday, 04 Jun, 2009
NEW YORK: Pakistans Ambassador to the United Nations Abdullah Husain Haroon Tuesday called on the international community to help Pakistan overcome the desperate humanitarian crisis emerging in the wake of military action against militant groups. He suggested that the best way to do so would be for all loans given to Pakistan by international donors following the 2005 earthquake to be forgiven.
Speaking at a meeting on the emerging crisis at Asia Society here he said this was not Americas war on terror; it was worlds war against the scourge.
The world, therefore, has a responsibility to come to the aid of Pakistan, which had in the past few years been hit by a series of disasters the 2005 earthquake, the 2007 floods and lately by an astronomical rise in energy and food prices.
Also making an appeal to send money to Pakistan was George Rupp, Chief Executive Officer of International Rescue Committee who felt that $ 110 million dollars sent Pakistan by the United States were not enough.
Substantially much more money was needed to fight this war, which he felt would be long and protracted.
Asked about the morale of the army in fighting the militants Ambassador Haroon said that [The] Pakistan Army was clearing the valley of the Taliban as it advanced to other areas. The Taliban will not go in a hurry, he said, adding, They keep coming back.
Replying to a question, the ambassador said that adequate mechanisms and monitoring systems were in place to ensure that money being pumped into Pakistan did not go into wrong hand and was used fog the welfare of the affected and for the development of the region.
Questioned about the release of Jamaatud Dawa chief Hafiz Saeed, Haroon said that he was set free by Pakistans independent judiciary, which emerged at the climax of the lawyers movement. The move did not violate any UN Security Council resolution or decisions.
Nicolas Platt, former US Ambassador to Pakistan, was moderator at the panel discussion.
Thursday, 04 Jun, 2009
NEW YORK: Pakistans Ambassador to the United Nations Abdullah Husain Haroon Tuesday called on the international community to help Pakistan overcome the desperate humanitarian crisis emerging in the wake of military action against militant groups. He suggested that the best way to do so would be for all loans given to Pakistan by international donors following the 2005 earthquake to be forgiven.
Speaking at a meeting on the emerging crisis at Asia Society here he said this was not Americas war on terror; it was worlds war against the scourge.
The world, therefore, has a responsibility to come to the aid of Pakistan, which had in the past few years been hit by a series of disasters the 2005 earthquake, the 2007 floods and lately by an astronomical rise in energy and food prices.
Also making an appeal to send money to Pakistan was George Rupp, Chief Executive Officer of International Rescue Committee who felt that $ 110 million dollars sent Pakistan by the United States were not enough.
Substantially much more money was needed to fight this war, which he felt would be long and protracted.
Asked about the morale of the army in fighting the militants Ambassador Haroon said that [The] Pakistan Army was clearing the valley of the Taliban as it advanced to other areas. The Taliban will not go in a hurry, he said, adding, They keep coming back.
Replying to a question, the ambassador said that adequate mechanisms and monitoring systems were in place to ensure that money being pumped into Pakistan did not go into wrong hand and was used fog the welfare of the affected and for the development of the region.
Questioned about the release of Jamaatud Dawa chief Hafiz Saeed, Haroon said that he was set free by Pakistans independent judiciary, which emerged at the climax of the lawyers movement. The move did not violate any UN Security Council resolution or decisions.
Nicolas Platt, former US Ambassador to Pakistan, was moderator at the panel discussion.
By Amin Ahmed
Wednesday, 03 Jun, 2009
RAWALPINDI: The countrys burgeoning current account deficit indicates Pakistan was living beyond its means with excessive domestic demand boosting imports and fuelling the inflation which restrict exports, according to the Asian Development Bank in its latest report on the economic crisis of Pakistan.
This orthodox interpretation of the external financial situation of the country presumes the current account deficit must be financed by flows of foreign reserves, which for the most part must be attracted by high returns and a stable political, economic and social environment, says the report titled: A Reinterpretation of Pakistans Economic Crisis and Options for Policy Makers.
The worsening trade account implies that local Pakistani consumption became dependent on the whims of foreign lenders. Further, given its large budget deficit, the government is said to be increasingly dependent on the foreign purchases of its debt to supplement domestic savers purchases of government debt.
The report warns if Pakistan cannot attract these needed reserves, it must slow its growth to reduce imports; lowering prices and wages could also encourage exports.
Thus, both monetary and fiscal policy ought to be tightened to encourage such capital flows even as this reduces the need for them, the report suggests.
Summing up how Pakistans new government doing in dealing with the current crisis, and setting the economy on a sustainable course, the report says the national government was trying to implement a series of measures to stabilize the economy and in this way set the basis for a successful recovery. At the same time it was trying to deal with the inflation problem.
The report recommended that tax and spending reform should be formulated to accomplish economic, social, and political objectives rather than to hit a deficit target. The government will find it very difficult to achieve its budget deficit target even if it were to cut spending on social services like education, health, etc. and development expenditures drastically.
This is because such draconian cuts would likely throw the economy into a deep recession that would reduce tax revenues. If this were done, it would have serious repercussions for the countrys political stability and for its future. A better strategy would be to negotiate with multilateral agencies a programme that would allow the country to service its external debt, and gradually reduce its trade deficit until it reaches a more manageable level. During this time, the structure of spending should be analyzed, and a realistic development program should be devised.
While referring to the recent agreement with IMF, the report opine that that there was still latitude within the constrained policy environment to pursue more sustainable outcomes than those established by the limited horizons set by the IMF agreement. Further, says the report, the IMF programme does not correctly portray the source of the inflation pressures, or the constraints on economic development.
It says Pakistan needs to foster conditions that will reduce its dependence on imports. The growth and development path chosen will make a difference to the countrys capacity to import. However, the orthodox solution to a current account deficit will actually make it more difficult for Pakistan to reduce dependence on imports.
Giving its assessment of the current situation in Pakistan, the report says growth by itself is not an adequate goal given the needs of the country. Policy must be designed to pursue the goal of full employment, price stability, and equity. While Pakistans latest growth experience during 20042007 initially led to high growth, it has now become clear that this growth model failed to address the main problems afflicting the Pakistani economy.
A crisis of confidence in the government prevails that was unable to undertake strong economic measures, such as creating jobs, solving the power and water shortages, and relieving poverty. There is also an inability to keep inflation in check, a neglect of some important components of the supply side of the economy, perceived inability to address the increasing fiscal and current account deficits that are believed in many quarters to be undesirable, and inadequate response to security threats.
The report recommends Pakistan must continue to seek international funds, while negotiating for minimal conditionalities. It is highly likely that the IMF will continue to provide loans as needed, but with conditions that include fiscal restraint.
Unfortunately, this is a risky time for budget cuts, which would entail both economic and political repercussions. Significant budget cuts can only be made in areas of military spending, food and fuel subsidies, pensions, or development. For obvious reasons, cuts in all of these areas would be problematic.
The alternative is to raise taxes again a highly problematic policy for a nation whose growth was already slowing even before the global crisis generated recession throughout much of the world. The economic and political situation had not improved in the recent weeks and the government has requested further assistance from the international community.
The report points to a reduction domestic currency debt service or domestic debt relief. Debt service alone will likely absorb more than half of all government revenue. Cutting the SBPs target interest rate would free more revenue than is likely to be obtained either by draconian cuts to other spending or by huge increases to tax rates.
In the context of the immediate urgency imposed by the foreign currency reserve crisis that most likely will last at least through 20092010, the ADB recognizes the reality that short-term policy options will be heavily conditioned by the IMF arrangement. However, the Bank believes that there could be some room to consider elements of a debt relief strategy within the IMF arrangement, as well as pursuing a range of fruitful strategies even though the IMF agreement has been signed.
For the medium-term, the report suggests a package of policies that includes reorient emphasis towards employment-creating policies and away from growth for-its-own-sake policies; reformulate tax and transfer policy; address the external deficit and the fall in international reserves in a manner that does not lead to domestic stagnation, unemployment, and poverty.
The government should seek debt relief and especially gradual elimination of foreign-currency-denominated debt. The government should diversify the countrys export basket with a view to promoting those sectors that will lead to sustainable economic development in the long run.
A well-designed export-led growth strategy can play an important role in the countrys development. The aim of this development strategy is not to direct domestic resources toward production for external consumers instead of using them to produce for domestic consumption. The objective of this programme is to reduce import reliance and limit the external debt drains on foreign reserves, the report says.
Wednesday, 03 Jun, 2009
RAWALPINDI: The countrys burgeoning current account deficit indicates Pakistan was living beyond its means with excessive domestic demand boosting imports and fuelling the inflation which restrict exports, according to the Asian Development Bank in its latest report on the economic crisis of Pakistan.
This orthodox interpretation of the external financial situation of the country presumes the current account deficit must be financed by flows of foreign reserves, which for the most part must be attracted by high returns and a stable political, economic and social environment, says the report titled: A Reinterpretation of Pakistans Economic Crisis and Options for Policy Makers.
The worsening trade account implies that local Pakistani consumption became dependent on the whims of foreign lenders. Further, given its large budget deficit, the government is said to be increasingly dependent on the foreign purchases of its debt to supplement domestic savers purchases of government debt.
The report warns if Pakistan cannot attract these needed reserves, it must slow its growth to reduce imports; lowering prices and wages could also encourage exports.
Thus, both monetary and fiscal policy ought to be tightened to encourage such capital flows even as this reduces the need for them, the report suggests.
Summing up how Pakistans new government doing in dealing with the current crisis, and setting the economy on a sustainable course, the report says the national government was trying to implement a series of measures to stabilize the economy and in this way set the basis for a successful recovery. At the same time it was trying to deal with the inflation problem.
The report recommended that tax and spending reform should be formulated to accomplish economic, social, and political objectives rather than to hit a deficit target. The government will find it very difficult to achieve its budget deficit target even if it were to cut spending on social services like education, health, etc. and development expenditures drastically.
This is because such draconian cuts would likely throw the economy into a deep recession that would reduce tax revenues. If this were done, it would have serious repercussions for the countrys political stability and for its future. A better strategy would be to negotiate with multilateral agencies a programme that would allow the country to service its external debt, and gradually reduce its trade deficit until it reaches a more manageable level. During this time, the structure of spending should be analyzed, and a realistic development program should be devised.
While referring to the recent agreement with IMF, the report opine that that there was still latitude within the constrained policy environment to pursue more sustainable outcomes than those established by the limited horizons set by the IMF agreement. Further, says the report, the IMF programme does not correctly portray the source of the inflation pressures, or the constraints on economic development.
It says Pakistan needs to foster conditions that will reduce its dependence on imports. The growth and development path chosen will make a difference to the countrys capacity to import. However, the orthodox solution to a current account deficit will actually make it more difficult for Pakistan to reduce dependence on imports.
Giving its assessment of the current situation in Pakistan, the report says growth by itself is not an adequate goal given the needs of the country. Policy must be designed to pursue the goal of full employment, price stability, and equity. While Pakistans latest growth experience during 20042007 initially led to high growth, it has now become clear that this growth model failed to address the main problems afflicting the Pakistani economy.
A crisis of confidence in the government prevails that was unable to undertake strong economic measures, such as creating jobs, solving the power and water shortages, and relieving poverty. There is also an inability to keep inflation in check, a neglect of some important components of the supply side of the economy, perceived inability to address the increasing fiscal and current account deficits that are believed in many quarters to be undesirable, and inadequate response to security threats.
The report recommends Pakistan must continue to seek international funds, while negotiating for minimal conditionalities. It is highly likely that the IMF will continue to provide loans as needed, but with conditions that include fiscal restraint.
Unfortunately, this is a risky time for budget cuts, which would entail both economic and political repercussions. Significant budget cuts can only be made in areas of military spending, food and fuel subsidies, pensions, or development. For obvious reasons, cuts in all of these areas would be problematic.
The alternative is to raise taxes again a highly problematic policy for a nation whose growth was already slowing even before the global crisis generated recession throughout much of the world. The economic and political situation had not improved in the recent weeks and the government has requested further assistance from the international community.
The report points to a reduction domestic currency debt service or domestic debt relief. Debt service alone will likely absorb more than half of all government revenue. Cutting the SBPs target interest rate would free more revenue than is likely to be obtained either by draconian cuts to other spending or by huge increases to tax rates.
In the context of the immediate urgency imposed by the foreign currency reserve crisis that most likely will last at least through 20092010, the ADB recognizes the reality that short-term policy options will be heavily conditioned by the IMF arrangement. However, the Bank believes that there could be some room to consider elements of a debt relief strategy within the IMF arrangement, as well as pursuing a range of fruitful strategies even though the IMF agreement has been signed.
For the medium-term, the report suggests a package of policies that includes reorient emphasis towards employment-creating policies and away from growth for-its-own-sake policies; reformulate tax and transfer policy; address the external deficit and the fall in international reserves in a manner that does not lead to domestic stagnation, unemployment, and poverty.
The government should seek debt relief and especially gradual elimination of foreign-currency-denominated debt. The government should diversify the countrys export basket with a view to promoting those sectors that will lead to sustainable economic development in the long run.
A well-designed export-led growth strategy can play an important role in the countrys development. The aim of this development strategy is not to direct domestic resources toward production for external consumers instead of using them to produce for domestic consumption. The objective of this programme is to reduce import reliance and limit the external debt drains on foreign reserves, the report says.
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