Uncertainty may derail economic growth: experts
KARACHI (August 30 2007): Political uncertainty in the country may derail the pace of economic growth, which has been brought back to the track after a hectic exercise of at least five years, economists and a top economic manager of the country believe.
The economic decision-makers of the country are watching the day to day changes in the political scenario, and believe that if this episode does not end in the next few weeks, efforts to bring back the country's economic growth rate to the positive track may be hampered.
Referring to the country political instability for the last two months and rumours of imposition of emergency, martial law, dissolution of the National Assembly, have panicked local businessmen and foreign investors.
"Definitely, stock markets and economy of any country linked with political circumstances, said Advisor to the Prime Minister on Finance Dr Salman Shah over phone from Islamabad. He was of the view that current political situation would hurt the country's economy growth, and feared that exports might shrink.
He said that during the last few weeks, the country's stock markets had bearish trend by over 2000 paints, but now the markets were moving upward after dialogues between the government and various political parties.
The government had started dialogue with the political parties with a view to stabilising the economy, besides strengthening democracy, he said. Dr Salman Shah said: "The re-election of President General Pervez Musharraf will also determine the country's political and economic fate".
The continued political crisis could force the international buyers to place their export orders in other countries for on time delivery, he added. He said that any deadlock in the current political dialogues would undermine the country's economy, and added the government was striving to make things clear before the foreign investors.
"If the political fight continues in line with the code of conduct of Election Commission of Pakistan and demonstration of street power are avoided, then it is still believed that the economy will continue to thrive, the Advisor added.
"The current political battle is still under control and political fight among the government and opposition parties has not yet come on the streets," said Muzamil Aslam, an economist.
He said that the foreign investors were now taking back their capital and external flows of investment had also witnessed a decline of some 200 million dollars during July-August.
"Presently, we have seen political fight, which remained limited only to media and the assemblies, which could spill over to roads soon after the arrival of exiled political leaders in the country," he pointed out. Further decline was also expected in the foreign inflows, which could also affect the current account deficit, he added.
"The present political situation and crisis is damaging the country's image abroad and our importers are now reluctant to place orders," said Zubair Motiwala, a leading exporter. Referring to special travel advisories, issued by different countries advising their citizens to avoid travelling to Pakistan, he said some potential importers had cancelled their routine visits to Pakistan.
"Now we are facing the same situation which the Bangladeshi exporters faced last year, when general election campaigns started, creating political turmoil and violence.
As a result, export orders of Bangladesh were diverted to Pakistan, which spurred the country's exports significantly up, he said. He said that the letters of credit opened for 90 days, but now it was difficult to predict about the future of export orders, he added.
"Importer don't want to disturb their supply line, keeping in view the coming Christmas season, " Motiwala said, adding that the importers might turn to the neighbouring country to keep the supply chain intact till the Christmas.
Business Recorder [Pakistan's First Financial Daily]
