DesiGuy
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WASHINGTON: Recent efforts at budget consolidation have been missed in Pakistan, because of revenue shortfalls, overrun on power sector subsidies and elevated security expenditures, as well as flood-related expenditures, says the World Bank`s latest Global Economic Prospects 2011.
Temporary price shocks have also been a factor, such as the disruption of flooding in Pakistan and some monsoon, particularly in Afghanistan and India.
South Asia`s real GDP growth accelerated to an estimated 8.7 per cent in 2010-11 from 7.0 per cent in 2009-10.
This is buoyed by very strong growth in India, which represents 80 per cent of regional GDP. Excluding India, regional GDP growth (on a fiscal year basis) firmed, but to a more modest 5.1 pc from 4.3 pc the year before.
In Pakistan, however, a standstill on policy implementation, severe disruption tied to massive flooding and continued security problems have constrained economic activity.
While policy interest rates have been raised (beginning in mid-March 2010 in India, and, more recently, in Bangladesh and Pakistan), monetary policy normalisation is incomplete and real interest rates remain negative.
For instance, overall general government deficit is less manageable in Pakistan, at an estimated 6.3 pc, than in other South Asian states.
The region`s high fiscal deficits reflect a number of longstanding structural factors, with significant pressures emanating from both the revenue and expenditure sides. In particular, tax mobilisation in the region is low.
The significant inflation differential between many South Asian countries and their trade partners has contributed to a real appreciation of their currencies in 2010.
Since January 2007 regional currencies have remained broadly stable, trading within a plus/minus 10 pc band with the exceptions of Afghanistan and Pakistan.
Over the same period, Afghanistan`s currency has appreciated by 17 per cent, supported by massive foreign aid inflows.
In contrast, Pakistan`s currency real effective exchange rate depreciated by 34 pc since January 2007, partly tied to large and persistent structural macroeconomic imbalances. In Pakistan, floods led to an estimated 20 pc reduction in cotton harvest and sharp fall-off in cotton exports and textiles (with the latter representing two-thirds of total merchandise exports).
In South Asia, the pace of growth of regional merchandise import volumes has slowed markedly compared with other regions, and could reflect a recent moderation in the pace of growth of remittances inflows a key driver of regional private consumption. Remittances are a main source of foreign exchange for the region, and are an important driver of regional domestic demand.
Remittances, inflows to South Asia increased by an estimated 10.3 pc (in US dollar value terms) in 2010, more than double the 4.5 pc growth rate in 2009 but well below the 19 pc average annual rate recorded between 1999 and 2009.
www.dawn.com - Security Verification
Temporary price shocks have also been a factor, such as the disruption of flooding in Pakistan and some monsoon, particularly in Afghanistan and India.
South Asia`s real GDP growth accelerated to an estimated 8.7 per cent in 2010-11 from 7.0 per cent in 2009-10.
This is buoyed by very strong growth in India, which represents 80 per cent of regional GDP. Excluding India, regional GDP growth (on a fiscal year basis) firmed, but to a more modest 5.1 pc from 4.3 pc the year before.
In Pakistan, however, a standstill on policy implementation, severe disruption tied to massive flooding and continued security problems have constrained economic activity.
While policy interest rates have been raised (beginning in mid-March 2010 in India, and, more recently, in Bangladesh and Pakistan), monetary policy normalisation is incomplete and real interest rates remain negative.
For instance, overall general government deficit is less manageable in Pakistan, at an estimated 6.3 pc, than in other South Asian states.
The region`s high fiscal deficits reflect a number of longstanding structural factors, with significant pressures emanating from both the revenue and expenditure sides. In particular, tax mobilisation in the region is low.
The significant inflation differential between many South Asian countries and their trade partners has contributed to a real appreciation of their currencies in 2010.
Since January 2007 regional currencies have remained broadly stable, trading within a plus/minus 10 pc band with the exceptions of Afghanistan and Pakistan.
Over the same period, Afghanistan`s currency has appreciated by 17 per cent, supported by massive foreign aid inflows.
In contrast, Pakistan`s currency real effective exchange rate depreciated by 34 pc since January 2007, partly tied to large and persistent structural macroeconomic imbalances. In Pakistan, floods led to an estimated 20 pc reduction in cotton harvest and sharp fall-off in cotton exports and textiles (with the latter representing two-thirds of total merchandise exports).
In South Asia, the pace of growth of regional merchandise import volumes has slowed markedly compared with other regions, and could reflect a recent moderation in the pace of growth of remittances inflows a key driver of regional private consumption. Remittances are a main source of foreign exchange for the region, and are an important driver of regional domestic demand.
Remittances, inflows to South Asia increased by an estimated 10.3 pc (in US dollar value terms) in 2010, more than double the 4.5 pc growth rate in 2009 but well below the 19 pc average annual rate recorded between 1999 and 2009.
www.dawn.com - Security Verification
