Pakistan Economy - News & Updates - Archive

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LAHORE (May 11 2006): The budget 2006-07 would be growth-oriented, pro-business and poor-friendly, as the government has evolved a solid strategy to tackle all the major issues, including inflation, high mark-up rates and poverty.

Senator Kamil Ali Agha, Minister of State for Parliamentary Affairs, expressed these views while speaking at the Lahore Chamber of Commerce and Industries (LCCI) on Wednesday.

Senator Zafar Iqbal, LCCI President Mian Shafqat Ali, Senior Vice President Abdul Basit, Vice President Aftab A Vohra, President Punjab Economic Forum Mian Anjum Nisar and former LCCI President Mian Misbahur Rehman were also present on the occasion.

Kamil maintained that the federal government has a lot of trust in the Lahore Chamber and the budget proposals forwarded by the LCCI would be given due consideration.

He averred that the present government was ensuring consistency in policies and for the first time in history of the country, the government has a matchless liaison with business community.

Senator Zafar Iqbal said that the LCCI Standing Committees would be linked up with the Senate Committees to make them more result-oriented.

He said that the level of interaction between the government and business community is enough to show the government's seriousness towards solution of business problems.

LCCI President Mian Shafqat Ali said that there is a need to keep the momentum of growth go on, it is equally important to trickle-down the fruits of development to the general masses. "Poverty, unemployment and inflation continue to affect the poor segments of the society," he added.

According to him, the incidence of poverty has dropped to 25.6 percent this year from 32 percent in 2001. However, the current rate of poverty is still very high, as 35 to 40 million people are still living below the poverty line.

 

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ISLAMABAD (May 11 2006): Word Bank Vice President for South Asia Praful Patel on Wednesday said that increasing cost of doing business is a serious threat to Pakistan's economic growth. He suggested that Pakistan should take immediate steps for improvement in key areas to catch this unhealthy trend and make its products and exports competitive in the international market.

Patel expressed these views, while addressing the Pakistan Development Forum (PDF) 2006. The two-day forum started here for reviewing the economic growth and gave its true picture to the international donors and bilateral trade partners.

Patel narrated some of his experiences of the last four days to the participants. He said he himself saw tremendous progress in Pakistan, besides sobering by some of the great challenges that it was facing.

He said the World Bank's team had a view of the eastern coastal zone of the Indus Delta in Sindh where those challenges stark for a number of people who have not benefited from the vast irrigation networks upstream.

They are indeed the tail of the tail-enders and represent some of Pakistan's most vulnerable people. He said it was heartening to see that the farmer organisations in Sindh and Punjab are beginning to take command of their water management. And at the Taunsa Barrage, for which the bank is providing assistance for rehabilitation, the team saw the sort of cutting-edge engineering that is needed to meet Pakistan's infrastructure needs for the 21st Century. But on the riverbanks, we heard voices of discontent among fisherfolk who had not been among the 160 families resettled into new homes.

Patel said that for Pakistan's infrastructure agenda to be achieved, it is the likes of the delta tail-enders and the poorest of the fisherfolk who will have to be brought along too.

The WB vice president said he wanted to share this immediate snapshot, as it captures much of what Pakistan confronts today - social change and a growing hunger for development.

He said the WB delegation was most impressed by the remarkable economic recovery that is taking place in Pakistan as its growth rate has been consistently above 6 percent over the last four years, exports expanded strongly, and investment picked up.

He said that this success was largely due to the economic reforms of the last seven years, which unlike so many other attempts at reform around the world, were truly homegrown -designed and implemented in Pakistan by an economic team of Pakistanis.

He said the earthquake of October 8 last year hit Pakistan badly. The calamity presented the people of Pakistan a demanding test of character and they responded with great generosity and hospitality for which Pakistanis were famous. He said the government should be lauded for its outstanding response and for shielding hundreds of thousands of families from the harsh Himalayan winter. The recovery process is now well underway though much remains to be done even as reconstruction costs are rising.

The donor community pledged generously to the tune of $6 billion in November. For us the challenge is to now translate these pledges - especially grants and concessional credits - into disbursements, through effective and viable actions to restore public services and infrastructure, and to help the people in rebuilding homes and livelihoods.

 

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ISLAMABAD (May 11 2006): The lukewarm response by Karzai government has diminished the hopes for laying 110 million dollar rail track between Pakistan and Afghanistan. Bilateral relations between neighbouring countries have soured after fresh volley of allegations over border infiltration.

Pakistan and Afghanistan had agreed to build a railway track of about 107 kilometers from Chaman to Kandahar to enhance people-to-people contact and to promote trade between the two sides.

Islamabad had promised to provide all out technical assistance to Kabul for construction of the rail link and a feasibility study was carried out a few months back.

"We have completed our feasibility report and it has now been handed over to Kabul for its final decision," an official of the Railways Ministry told Business Recorder.

He conceded the railway authorities were awaiting the response from Afghanistan for over half a year. It is learnt that both sides had agreed to approach donor agencies to generate around 110 million dollar funds. However, the cold response from Kabul, especially in issuing No Objection Certificate (NOC) for construction has dimmed the chances of the rail link project.

Pakistan government desperately wants the project to get underway as it would not only strengthen bilateral trade with Afghanistan, but would also open up opportunities to expand the rail network to Central Asian states.

"We plan to extend the rail track in the second phase of the project from Kandahar to Khushka (Turkmenistan)," the official said. He believed that the Chaman-Kandahar rail link was imperative to get access to Central Asian states where a vast railway network already exists. "We have requested Afghan government several times to take the project seriously but there is no positive response so far," he added.

 

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ISLAMABAD May 10: Prime Minister Shaukat Aziz on Wednesday invited the Islamic Development Bank (IDB) to participate in a consortium being formed to finance the construction of water reservoirs in Pakistan.

Talking to Islamic Development Bank President Ahmed Muhammad Ali, the prime minister said Pakistan valued the support provided by the IDB to Pakistan in its development process.

According to an official handout, the IDB president assured the prime minister of bank’s support in the construction of water reservoirs, adding that the bank was also considering financing projects in railways and energy sector.

He apprised Mr Aziz of IDB’s restructuring and reorganisation plans.

The prime minister assured Mr Ali of Pakistan’s support in the restructuring plans which would enable the bank to face challenges of the rapidly changing world.

The prime minister said Pakistan was promoting Islamic banking and Islamic insurance systems, adding that the share of Islamic banking in the overall banking system was increasing.

Talking of the economic recovery achieved by the country, the prime minister said that all economic indicators were showing an upward trend, index of human development was improving, poverty was declining and inflation rates were decreasing.

The prime minister informed the IDB president that the World Economic Forum would be held in Pakistan in September this year and sought his bank’s support to make the meeting a real success.

The prime minister also thanked the IDB president for the support and assistance provided by the bank for reconstruction and rehabilitation of earthquake affected areas. The IDB is providing $500 million for these areas.

 

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ISLAMABAD, May 10: The Fiscal Monetary Board (FMB) was informed on Wednesday that the economy was likely to grow at 6.5-7 per cent during the current fiscal year.

The board in its meeting, chaired by Prime Minister Shaukat Aziz, reviewed the recent development in the external sector and asked the concerned authorities to remain vigilant.

According to a press release the premier expressed his satisfaction over the economic situation in the country and the growing strength of the economy during the current fiscal year.

The board was informed that the declining trend in inflation was likely to continue as it was expected to be around 6.0 per cent on year-on-year basis. The average inflation for the year was likely to be slightly less than 8.0 per cent.

It was also informed that the trade deficit rose to $8.62 billion during the first nine months of the current fiscal as against $4.26 billion the same period last year.

The meeting was further informed that almost 75 per cent contribution to the rising trade deficit came from Petroleum group (41.5 per cent), Machinery group (21.5pc) and Iron, steel and scrap group (11.9pc). Consumer durable including road motor vehicles accounted for only 9.2 per cent to the rise in trade deficit.

The overall fiscal deficit during the period had remained at 3.0 per cent of the GDP.

The meeting was attended by commerce minister, adviser to the prime minister on finance, secretary general ministry of finance, governor State Bank of Pakistan, deputy chairman Planning Commission, principal secretary to the prime minister, secretary finance and economic adviser to the ministry of finance.

 

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ISLAMABAD, May 10: The Asian Development Bank has assured its technical and financial support for major water and power sector projects to help Pakistan in meeting its growing needs.

This was stated by head of a five-member ADB delegation Juan Miranda in a meeting with Minister for Water and Power Liaquat Ali Jatoi here on Wednesday.

Mr Juan also appreciated the President’s Water Vision and said that it would bring revolution in Pakistan and the economy would rapidly grow.

He said that the import of electricity from Central Asian States through Afghanistan would also be a good initiative. He said that the ADB was providing financial assistance to various projects in Pakistan and would continue its support for major projects in potential sectors.

The minister said that the economy had made significant progress over the last few years. Pakistan was witnessing massive upsurge in economic activity, not seen before in many decades, he added.

Jaoti said that the confidence of the domestic as well foreign investors was gaining new heights on the back of a stable macroeconomic environment.

He said that the economy was now more stable, economic policies were transparent and predictable, confidence of the private sector was restored to a large extent, expatriate Pakistanis were bringing their capital back, stock market was buoyant and the credit ratings of the country in international capital markets had significantly improved.

 

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KARACHI: President General Pervez Musharraf said on Wednesday Pakistan is an ideal destination for foreign investment and the impressions portrayed of extremism, and terrorism are absolutely false about Pakistan.
Addressing the inauguration of Pakistan’s biggest export exhibition Expo-2006 here at the trading hub and seaport of Pakistan, he said no one can deny the strategic position of Pakistan in the region as the country stands at the intersection of trading routes to Central Asia, Gulf, Afghanistan and China.

"The world investors cannot ignore Pakistan due to its strategic edge that country has", he said, adding Pakistan is a modern and open-minded society and the negative travel advisory propagated by some is far from reality.

He admitted that 1979 Soviet invasion of Afghanistan and subsequent Afghan War, the 1989 movement in Kashmir all had an impact on the Pakistani society but still the enlightened and forward looking mentality of the nation has prevailed.

"The world should rest assure that the few extremist present in the country would be hunt down soon", he resolved.

President Musharraf urged foreign investors to invest in the country and establish new industries that he believe will help in poverty alleviation and will pull the unemployed youth of the country from unemployment.

He said that uprooting poverty and massive unemployment would in turn eliminate extremism.

President said Pakistan lies at the crossroads of trade routes to Gulf, Central Asia, Afghanistan, Gulf and China and no trade activity is possible in these regions without Pakistan.

He mentioned that the reconstruction and rehabilitation projects worth $ 12.4 billion in Afghanistan are being carried out via Pakistan.

"Development projects estimated to be of $ 150 billion are in place for the western china and investors can access the region only through Pakistan", he added.

He mentioned that for the current fiscal year the trade target has been fixed at $ 18 billion out of which $ 9.3 billion has already been achieved.

He informed country’s currently share of agriculture and textile in world trade is 6 percent while that of heavy industry and engineering is 61 percent adding that government was conscious of prevailing trend and it has focused its concentration to further bolster national export.

He said Pakistan was the 5th largest country in dairy production but regretted that our inability to export various different dairy products. He underscored the need of deliberating on the issue of exporting various dairy products.

Citing to national economic progress, he went on to say that per capita income as well as purchasing power of the individuals had been enhanced due to investment oriented economic policies of the current government. He said during current fiscal year 500 percent record investment growth had been achieved. Pakistan, he added achieved the target of $ 3 billion investment which he thought was still below the required mark.

It is worth mentioning that above 10,000 participants from 57 countries set stalls in Expo-2006 which is nevertheless a big achievement on the part of government and organizers of Expo 2006.

 

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Wednesday May 10, 2006


PESHAWAR : The vice chancellor of the NWFP University of Engineering and Technology (UET), Syed Imtiaz Hussain Gilani, has said that higher education is an important factor in enhancing the production capacity of a nation.

“Human capital is a fuel for economic progress of a developing country like Pakistan,” Mr Gillani told an International Conference on Higher Education for Development held at the Higher Education Commission (HEC)’s auditorium here on Monday.


The conference is being held under the auspices of the UET in collaboration with the Higher Education Commission and Campus Consultancy Services, UK, according to a press release.


Mr Gillani said that as there were some sources of production which were essential for economic development of countries, of which higher education played a vital role.


“Universities owe an obligation to society,” he said, adding that it was their duty to find creative solutions for problems faced by society. “Therefore, it is important that universities remain free of any outside influence,” he added.


Under the dynamic leadership of Dr Attaur Rahman, he said, the country is witnessing positive changes in the higher education sector. The HEC is focusing on increasing access for higher education, providing quality education and making higher education relevant to national needs.


He said there is a debate going on in some circles that the present government is investing two per cent of its national budget on higher education. But if we compare this with other developing countries like China and India, he said, the investment ratio is three times greater than Pakistan.


He cited the example of China and India whose economies are booming due to investment in higher education, particularly in IT sector.


Earlier, in his inaugural address, HEC planning member Dr Mukhtar Ahmad said that higher education was facing numerous challenges all over the world including management, curriculum development and globalisation.


He said that HEC in Pakistan was focusing on strengthening human resources in the field of science and technology. In this connection, he said, HEC is planning to establish six world-class engineering in Pakistan in collaboration with Sweden, Germany, Netherlands and France.


The HEC would like to establish another university in collaboration with Britain.


He congratulated Munir Lone, MD Campus Consultancy Services and Syed Imtiaz Hussain Gilani, for gathering the UK academia to share their experiences with the Pakistani leadership so that a uniform policy could be devised to implement higher education for development in an efficient manner.


This conference is the first of its kind of a series under the overarching concept of higher education for development.


International speakers will share their experience and best practices of how HE was used for development and indeed, regeneration and revitalisation of economically-deprived regions within countries.


Prof Barry Winn, pro-vice chancellor at the University of Hull, Dr M.K. Khan of Bradford University, also spoke on the occasion.


The conference was attended by a large number of vice chancellors, deans, academia and higher officials. The conference aims at sharing to create a forum for exchange of views between university leadership in Pakistan and the UK development practitioners and other stakeholders.

 

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Thursday, May 11, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\05\11\story_11-5-2006_pg1_1
Aziz for tech-transfer to developing nations
* Sees GDP growth of 6-8% this year
* IDB president says reforms should deliver
* WB says cost of doing business in Pakistan too high

By Sajid Chaudhry

ISLAMABAD: Prime Minister Shaukat Aziz on Wednesday urged the developed world to support entrepreneurs from developing countries in acquiring technology, skills and knowledge and help bridge the digital divide.

“Together we can rise by unleashing the potential of the private sector. Together we can build a smarter, peaceful, more vibrant and progressive Pakistan. It is our belief that Pakistan of today and tomorrow is not the Pakistan of yesterday. Tomorrow’s Pakistan will be the land of hope and opportunities,” Aziz said while addressing donors at the inaugural session of the 5th Pakistan Development Forum (PDF) 2006 titled ‘Drivers of Economic Growth Unleashing the Potential of Private Sector’.

Aziz said public-private partnerships were a cornerstone in delivering public services in the 21st century. “We believe that development is a national responsibility which must be carried out with dignity and transparency. While we recognise the contributions of civil society and non-governmental organisations in development, we must fight unemployment and ensure accountability with measurable goals and targets. Our message is to help us help ourselves.”

“We have crossed the bridge when our economy was fragile,” he said. “Notwithstanding the earthquake and oil shocks, we anticipate the growth within our target range of 6 to 8 percent annual growth a year,” he said.

Aziz stressed the need for continuous efforts to establish an improved competitive environment to meet global challenges through sustained investment in infrastructure, science and technology, education and healthcare.

The prime minister emphasised the forging of links between multinational corporations and local businesses to make them more competitive in the world market, thereby increasing their productivity, earnings and eventually raising the living standards of the people. He said that Pakistan was developing Gwadar not only as a trans-shipment port but also as an energy port by setting up refineries and negotiating on gas pipelines and alternate energy sources to ensure reliable supplies to meet Pakistan’s energy needs.

Ahmed Muhammad Ali, the Islamic Development Bank president, said that Pakistan’s reforms should deliver fruits of economic growth to the common man and should have a positive impact on poverty reduction. “The country should mobilise local savings for national development, use remittances in important sectors and develop Sharia-compliant banking to attract savings,” he said while pledging that the IDB would take a lead role in Pakistan’s national development.

Praful C Patel, the World Bank vice president for South Asia, said that despite trade, banking and regulatory reforms in the past seven years, the costs of doing business in Pakistan were still too high. He said that second-generation institutional and policy reforms and investments in infrastructure were needed. He stressed the need to develop energy, transport, and irrigation infrastructure.

 

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Thursday, May 11, 2006

* Says Pakistan should avoid overvaluing its currency

By Sajid Chaudhry

ISLAMABAD: The World Bank has suggested to Pakistan to further strengthen the macroeconomic framework and avoid overvaluing its currency, India and Pakistan need to move towards the Most-Favoured Nation (MFN) based trade soon and this will require Pakistan to extend MFN status to India.

The World Bank’s Poverty Reduction and Economic Management Sector Unit South Asia Region has prepared “Pakistan Growth and Export Competitiveness” strategy that was formally handed over to Pakistan at the Pakistan Development Forum (PDF) 2006 inaugurated here on Wednesday.

The WB report also includes the options for a growth-supporting trade policy strategy that says that accelerating economic growth to the 7-8% range during the next decade, the key pillar of Pakistan’s poverty reduction strategy requires sustained macroeconomic stability and the creation of an investment-friendly environment. At the same time, recognizing that a major source of sustained higher growth is a dynamic economy function in an export-oriented policy environment.

The report focuses on the goals of economic growth accelerating Pakistan’s economic growth and on the related challenge of strengthening export competitiveness. The remedial measures it identified aims at reducing the cost of doing business and increasing market competition, stepping up the factor of productivity through efficiency gains and through lowering production costs throughout supply chain, strengthening export competitiveness and the economy’s base for export diversification.

It has highlighted that success in these efforts, which will help accelerate growth and employment generation, will depend on the consistency of government actions. Steady improvement in the quality of the business environment would encourage domestic and foreign private investment.

The findings of the WB report also pointed out to a number of high priority areas where early actions might have high payoffs. It suggested that the government further strengthen the macroeconomic framework and avoid overvaluing of the Pak rupee.

Address electricity pricing and structural issues in the power sector, improving SMEs access to finances, serious commitment to human capital development, improvement in the efficiency of duty drawback and sales tax rebate system for new and small exporters and improving transport/trade logistic and enhanced food quality and safety standards capacity.

The options for growth supporting trade policy strategy in the WB report suggests in the area of South Asia Free Trade Area (SAFTA) Agreement these measures: minimize sectoral and product exceptions, have clear rules against tariff rate quotas, have “Rules of Origin” that are very liberal simple, transparent and remain the same for all products, India and Pakistan need to move to MFN-based trade immediately, and this will require Pakistan extending MFN status to India and extend SAFTA agreement to services trade and investment. The regional countries should also cooperate in the areas of infrastructure, trade facilitation, harmonization of technical and sanitary and phytosanitary (SPS) standards in line with the major export markets.

About Free Trade Agreements or Preferential Trade Agreements, the WB report recommended that economic costs and benefits of engaging into too many bilateral FTAs negotiations, particularly with small countries, will need to be taken into account.

While showing interest in a potential FTA with a very large trading partner such as the US, may have an economic rationale, but FTAs with small countries will simply end up in costly complications in the tariff system without much gains to show.

 

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Thursday May 11, 2006

KARACHI : Warid Telecom is all set to inject $1 billion as fresh investment into its network in Pakistan by the end of the year 2006-07, while the company has also obtained licence for the launch of its 'roaming operations' in Bangladesh," Naveed Saeed, General Manager, Sales and Marketing Warid Telecom, told reporters at a press conference held to commemorate its first anniversary at a hotel here on Wednesday.

"We intend to invest one billion US dollars during 2006-07 for expansion and upgradation of our network across the country," he said, adding that Warid Telecom has acquired licence for the launch of its roaming operations in Bangladesh recently.


Naveed said that the company was following an aggressive marketing and expansion strategy under which it would expand its roaming services to African countries as well because it wants to show its presence on the global front.


"Our seriousness towards telecom sector is evident from the fact that our sister concern companies, Wateen Telecom and Wateen STN, are supporting and working to enhance the capabilities of Warid's cellular network all over the country," he said.


"Wateen Telecom is currently engaged in laying the biggest optical fibre cable in the country that would cost around $70 million and the cable would cover the area, with 5000 km in length," he added. Naveed said that the company is interested to expand its roaming services to India, and dialogues "are currently underway" to check the security concerns, besides other issues.


He said that Warid Telecom has recently acquired world class technology for data transmission and soon the data transfer speed in the company's network would be 3.5 GHz per second, while the subscribers would get the speed of 1MB per second.


Regarding the current status of the development of Mobile Number Portability (MNP), he said that the facility would have to be implemented. However, all cellular companies are working on the proposals.


The Warid official said that the number of subscribers of Warid Telecom has significantly increased and reached up to 4 million, out of 27 million aggregate subscribers. However, the company was eyeing to achieve the target of 10 million subscribers by the end of 2006.


"We have so far attracted 4 million subscribers towards Warid's network due to improved and quality service, and we are currently enjoying the market share of over 10 percent," he said.


On this occasion, Manager Public Relations, Farah Hussain, said, "Warid Rewards would give Warid post-paid and prepaid customers a one-off chance to win world's most luxurious cars through a lucky draw that would be held on its first anniversary ie on May 23, 2006."

 

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ISLAMABAD (updated on: May 11, 2006, 18:56 PST): Pakistan's consumer price index (CPI), a key indicator of inflation, rose 6.16 percent in April from a year earlier and was up 1.02 percent over March, the Federal Bureau of Statistics said on Thursday.

The year-on-year rise was lower the 6.91 percent in March, but analysts said the CPI was rising a year earlier, so a base effect was in play. Annual inflation in Pakistan peaked in April 2005, when it hit a near 8-year high of 11.1 percent.

"The month-on-month rise shows that the underlying pressures are still there," said Asif Qureshi, head of research at Invisor Securities.

"Petroleum prices have been increased in May. Plus, prices of other commodities are also moving up," he said.

"So for May, the year-on-year CPI rise is expected to move up to around 7.0 percent," he said.

Using 2000/01 as the base year, the CPI index stood at 134.33 against 132.97 in March.

Meanwhile, the wholesale price index (WPI) rose 8.10 percent in April from a year earlier and was up 1.23 percent over March, the data showed.

Using 2000/01 as the base year, the WPI index stood at 139.83 against 138.13 in March.

 

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KARACHI (updated on: May 12, 2006, 12:12 PST): Country's foreign exchange reserves rose by $38 million in the week ending May 6 to an all-time high of $13.054 billion, the State Bank of Pakistan (SBP) said on Friday.

Reserves held by the SBP rose to $10.655 billion from $10.645 billion a week earlier and those held by commercial banks also rose to $2.399 billion from $2.371 billion, the SBP said in a statement.

A previous all-time high of $13.016 billion was in the week ending April 29.

The bank did not give any reason for the increase in reserves.

Pakistan's forex reserves have been increasing steadily over the past few years mainly due to higher remittances from expatriate Pakistanis, inflows from privatisation proceeds and rising foreign direct investment.

 

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ISLAMABAD (May 12 2006): The National Electric Power Regulatory Authority (Nepra) has announced a 20-year upfront tariff of 9.5 cent per kWh for wind power projects to be established in Gharo-Keti Bandar corridor.

The tariff has been calculated on a 97 percent plant availability, which would be established on BOO (Built Own and Operate) basis. The sponsors would select appropriate type/size of wind turbines and optimise their setting to ensure maximum power output and minimum losses.

The interested prospective Independent Power Producers (IPPs) who wish to opt for upfront tariff have been asked to convey acceptance to Nepra and Alternative Energy Development Board (AEDB) by December 31 after obtaining the consent from the power purchaser and finalising interconnection arrangements.

The IPPs should apply to the regulator for formal approval of tariff and grant of generation licence. The IPPs which are not interested in upfront tariff may file a tariff petition with the Nepra under the relevant rules for tariff determination subject to the condition that no reference will be made to upfront tariff or its components in such cases.

The government would give 5 percent exemption in customs duty on the imported plant and equipment not manufactured in Pakistan, but it has been accounted for in the capital cost as per the Power Policy 2002.

Wind turbine generation system would be designed, manufactured and tested in accordance with the latest international standards. All the plants equipment should be new, unused and of the latest model. The IPPs would be responsible for the correct assessment of the benchmark of wind speed in the proposed wind farm and duly approved by the power purchaser.

The IPPs would install monitoring masts with properly calibrated automatic computerised wind speed recording metres at the same height as that of the turbine generators and a compatible communication system.

The sources said the AEDB, who is handling wind power projects, had complained to the prime minister that the Water and Power Ministry was creating hurdles in smooth progress of the policy.

They also said that the ministry, in a recent letter to the prime minister, while clarifying its position, said that it has no such intention and would extend all-out co-operation to the AEDB.

 

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ISLAMABAD (May 12 2006): The World Bank (WB) feared that Pakistan might fail to sustain 6-8 percent growth due to inadequate infrastructure services and power generation along with a wide gap between public and private sectors share in infrastructure investment.

World Bank Country Director John Wall expressed the concern, while addressing the concluding session of two-day Pakistan Development Forum (PDF) here on Thursday.

John Wall said, "Sustained rapid growth takes us a long way, though we have to still worry about droughts and other natural phenomena; and worry about the equity of rapid growth."

He said, "Reforming the power sector has proved to be full of political constraints and is moving very slowly and requires very large public subsidies."

Currently, the government is financing power sector by providing about Rs 100 billion subsidy annually, which the bank wants to be reduced to relieve national kitty of unnecessary burden.

When the bank inquired that how the government plans to finance the power subsidy, Water and Power Minister Liaquat Ali Jatoi explained that the government is phasing it out through power sector privatisation.

He said that Pakistan has nine power distribution companies, out of which about 73 percent of Karachi Electric Supply Corporation (KESC) had already been privatised. Besides, the Faisalabad Electric Supply Company (Fesco) and the Jamshoro Electric Supply Corporation (Jesco) were ready for privatisation.

He also said that currently Pakistan faces higher quality problems, the problem of success. Demand has risen faster than supply, which has shown up in high inflation and a zooming trade deficit.

The "tight fiscal, easy money" formula to get growth going needs to be "tight fiscal, tight money and credit" to sustain rapid growth, he said.

Idle domestic production capacity allowed rising demand to be accommodated by rising capacity utilisation in cement, steel, fertiliser, textiles, automobiles and motorcycles.

He also said that capacity is more than fully utilised, resulting in backlogs and imports.

He said, "The problem I see is not comparing last year and this year; my horizon is first looking back over the last three-four years and then looking ahead to the coming three-four years. What I see is a macro imbalance that, unless rectified, will prove to be unsustainable in terms of foreign trade, inflation, exchange rate stability and foreign exchange reserves."