Pakistan has withstood series of endogenous events, including political uncertainty as a lead
up to election, and the unprecedented exogenous shocks that have ranged from financial markets
turmoil to climbing global commodity prices. On domestic political front, with elections now over the
country is well on its way to a smooth transition gearing for a fully democratic system. Leading parties’
efforts to cement a coalition augurs well for confidence building; smooth functioning of legislature and
their inbuilt accountability, while ensuring representation of public voice in steering the formulation and
implementation of the future economic agenda. Ruling and opposition parties will need to rise above
personal agenda to ensure sustainability of democracy.
2. After a period of benign global economic environment, world economic outlook since August
2007 has been adversely impacted by subprime mortgage meltdown and its ripple effects on financial
markets. Advanced countries are facing slowdown in economic activity. To mitigate the ensuing
recessionary pressures, easing of monetary policy by the United States are to compound the already
high inflationary pressures emerging from the exceptional rise in the global commodity prices, in
particular of products such as oil, gold and wheat.
3. Thus far Pakistan, like other Asian economies, remained immune to these shocks. Economic
and financial markets remained calm in Pakistan as they had limited exposure to the US subprime
market and other related products. With financial market turmoil deepening, the slowdown in
economic growth and consequent reduced demand of advanced countries triggered greater
uncertainty and induced vulnerabilities in international equity markets. These developments have
begun to cast shadow, impacting emerging economies equity markets softening their growth
prospects, albeit they remain set to grow strongly and .
4. Pakistan, like other emerging markets, faces a key question regarding sustainability of its
economic achievements. Abstracting from political debates, there is widespread confidence that
Pakistan has achieved a significant economic turnaround. While short terms challenges and stresses
have magnified, I propose to provide perspectives that the turnaround achieved is sustainable
provided it is urgently backed by a well designed macroeconomic stabilization package and deeper
structural reforms. In my presentation I make the case that Pakistan has strong economic growth
potential given the country’s inherent dynamics. Second, restoring macroeconomic sustainability,
despite disruption in FY08 trends, has to be on top of economic agenda and is feasible given scope
for domestic resource mobilization and improved debt management. Third, there is need to deepen
investment incentives and climate have to improve
5. Finally, Pakistan has to build momentum to diversify agriculture, industry as well as export
base, and develop infrastructure. Implementation of this agenda will augur well for country’s long term
economic growth prospects while offering wide range of investment opportunities that make Pakistan
an attractive destination.
6. Economic performance and potential: Pakistan’s’ average economic growth rate was 6.3%
for fiscal years (FY) FY03-07: during these 5 years economic growth was above 7% in two years and
2
9% in FY04-05 confirming rise in trend growth rate and capturing well the real economic potential. In
productive sectors growth has been broad-based but accompanied by underlying structural shifts.
Services sector has been the most buoyant and constitute over 53% of the overall GDP, with
agricultural sector’s share declining from 25.9% in FY00 to 20.9% in FY07 and industrial sector’s
contribution rising from 23% to 27% over this period.
7. Rising domestic consumption demand has been the main driver of growth; accompanying rise,
albeit somewhat slow, in investment rate. After averaging around 18.6% over the FY03-06, investment
rate grew to 23% in FY07 -- reflecting a 4.4% percentage point growth in investment/GDP ratio in one
year. This was expected to be boosted further by significant growth in public investment in FY08,
though given fiscal exigencies a part of this may not be realized.
8. Pakistan’s rich and large landscape offers a sizeable domestic market that is likely to double,
reaching a population base of 230 million by 2030. Being at the crossroads of South Asia, Central
Asia and West Asia with close proximity, both by air and sea, to the Gulf region makes Pakistan a
promising regional hub and market for nurturing intra and inter-regional trade and investment.
Recognizing these considerations, Multinational Corporations several years back set up businesses
here. As confidence in Pakistan’s economy grew, there has been a significant growth in foreign
capital inflows, cumulatively estimated to be around $13.5 billion (including global deposit receipts
flows) over the last five years. The telecom sector, the major recipient of foreign investment close to
$4.6 billion, is under private ownership and management; among other achievement the number of
mobile subscribers is now over 80 million. Similarly, close to half of banking assets are now under
foreign ownership as close to $2.7 billion foreign equity was injected in the sector and oil and gas
sector has attracted $1.4 billion. Pakistan is now a well tested destination for foreigners. Corporate
and banking companies’ returns have been high and investors, be domestic or foreign, are being well
compensated for whatever risk premium they attach to Pakistan.
9. Restore macroeconomic stability; despite the disruption caused by 2007 events.
up to election, and the unprecedented exogenous shocks that have ranged from financial markets
turmoil to climbing global commodity prices. On domestic political front, with elections now over the
country is well on its way to a smooth transition gearing for a fully democratic system. Leading parties’
efforts to cement a coalition augurs well for confidence building; smooth functioning of legislature and
their inbuilt accountability, while ensuring representation of public voice in steering the formulation and
implementation of the future economic agenda. Ruling and opposition parties will need to rise above
personal agenda to ensure sustainability of democracy.
2. After a period of benign global economic environment, world economic outlook since August
2007 has been adversely impacted by subprime mortgage meltdown and its ripple effects on financial
markets. Advanced countries are facing slowdown in economic activity. To mitigate the ensuing
recessionary pressures, easing of monetary policy by the United States are to compound the already
high inflationary pressures emerging from the exceptional rise in the global commodity prices, in
particular of products such as oil, gold and wheat.
3. Thus far Pakistan, like other Asian economies, remained immune to these shocks. Economic
and financial markets remained calm in Pakistan as they had limited exposure to the US subprime
market and other related products. With financial market turmoil deepening, the slowdown in
economic growth and consequent reduced demand of advanced countries triggered greater
uncertainty and induced vulnerabilities in international equity markets. These developments have
begun to cast shadow, impacting emerging economies equity markets softening their growth
prospects, albeit they remain set to grow strongly and .
4. Pakistan, like other emerging markets, faces a key question regarding sustainability of its
economic achievements. Abstracting from political debates, there is widespread confidence that
Pakistan has achieved a significant economic turnaround. While short terms challenges and stresses
have magnified, I propose to provide perspectives that the turnaround achieved is sustainable
provided it is urgently backed by a well designed macroeconomic stabilization package and deeper
structural reforms. In my presentation I make the case that Pakistan has strong economic growth
potential given the country’s inherent dynamics. Second, restoring macroeconomic sustainability,
despite disruption in FY08 trends, has to be on top of economic agenda and is feasible given scope
for domestic resource mobilization and improved debt management. Third, there is need to deepen
investment incentives and climate have to improve
5. Finally, Pakistan has to build momentum to diversify agriculture, industry as well as export
base, and develop infrastructure. Implementation of this agenda will augur well for country’s long term
economic growth prospects while offering wide range of investment opportunities that make Pakistan
an attractive destination.
6. Economic performance and potential: Pakistan’s’ average economic growth rate was 6.3%
for fiscal years (FY) FY03-07: during these 5 years economic growth was above 7% in two years and
2
9% in FY04-05 confirming rise in trend growth rate and capturing well the real economic potential. In
productive sectors growth has been broad-based but accompanied by underlying structural shifts.
Services sector has been the most buoyant and constitute over 53% of the overall GDP, with
agricultural sector’s share declining from 25.9% in FY00 to 20.9% in FY07 and industrial sector’s
contribution rising from 23% to 27% over this period.
7. Rising domestic consumption demand has been the main driver of growth; accompanying rise,
albeit somewhat slow, in investment rate. After averaging around 18.6% over the FY03-06, investment
rate grew to 23% in FY07 -- reflecting a 4.4% percentage point growth in investment/GDP ratio in one
year. This was expected to be boosted further by significant growth in public investment in FY08,
though given fiscal exigencies a part of this may not be realized.
8. Pakistan’s rich and large landscape offers a sizeable domestic market that is likely to double,
reaching a population base of 230 million by 2030. Being at the crossroads of South Asia, Central
Asia and West Asia with close proximity, both by air and sea, to the Gulf region makes Pakistan a
promising regional hub and market for nurturing intra and inter-regional trade and investment.
Recognizing these considerations, Multinational Corporations several years back set up businesses
here. As confidence in Pakistan’s economy grew, there has been a significant growth in foreign
capital inflows, cumulatively estimated to be around $13.5 billion (including global deposit receipts
flows) over the last five years. The telecom sector, the major recipient of foreign investment close to
$4.6 billion, is under private ownership and management; among other achievement the number of
mobile subscribers is now over 80 million. Similarly, close to half of banking assets are now under
foreign ownership as close to $2.7 billion foreign equity was injected in the sector and oil and gas
sector has attracted $1.4 billion. Pakistan is now a well tested destination for foreigners. Corporate
and banking companies’ returns have been high and investors, be domestic or foreign, are being well
compensated for whatever risk premium they attach to Pakistan.
9. Restore macroeconomic stability; despite the disruption caused by 2007 events.
No comments:
Post a Comment