JEDDAH, 28 March 2008 — Pakistan’s newly elected federal government has the opportunity to restore macroeconomic stability. “Given its strong political backing, the new government should restore macroeconomic stability, which was disrupted in the last couple of years, State Bank of Pakistan Gov. Dr. Shamshad Akhtar said here over the weekend.
“This (restoration of macroeconomic stability) should help restore investor confidence and allow the country to attract non-debt creating flows critical for development of industry and infrastructure sectors and ease the balance of payments situation,” she said at a meeting organized by Pakistan Executives Group at the Jeddah Hilton.
She highlighted the challenges faced by the Pakistan economy in the last 12 months in the form of high oil prices, inflation, terror attacks and the challenges that lay ahead for the incoming new government. “Despite all this the country has withstood these shocks and is placed to move forward,” Dr. Shamshad said.
Pakistan has great potential, both in terms of its natural and human resources, and has developed fairly good forward-looking development agenda and plans, she said, adding that a major breakthrough in industrial and export diversification depends, among others, critically on reinvigorating agriculture sector and ensuring adequate availability of infrastructure to meet the growing economic requirements.
Given huge domestic demand and high returns in virtually every sector, there has been a strong interest in Pakistan’s economy as illustrated by the strong foreign investment that has come from both GCC and West, she said.
The region given its diversity and richness of resources — with Gulf countries accounting for a large proportion of world’s oil and gas proven reserves and now holding sizeable world foreign exchange reserves — and Pakistan’s large agriculture and growing industrial base, domestic market, skilled labor force should enable effectively exploiting opportunities for deepening collaboration and cooperation for mutual advantage, Dr. Shamshad added.
According to her, Pakistan’s average economic growth has been 6.3 percent over the fiscal periods 2003-07 as a result of rising domestic consumption demand, which has led to significant investment in the telecom sector with foreign investment estimated at $ 4.6 billion. Close to half the banking assets are under foreign ownership and the oil and gas sector has benefited to the tune of $2.7 billion investment. “Yes, the risks are always there in emerging markets such as Pakistan, but accordingly the double digit returns achieved by investors have been far superior to those earned in the developed markets,” Shamshad said.
According to her, Pakistan has achieved a significant economic turnaround over the last few years, which is sustainable, provided it is backed up by a well designed macroeconomic stabilization package and deeper structural reforms.
