Pakistan, which is all set to announce the last budget of the PPP government, has announced a grim picture of the economy during the current fiscal year with most of the economic indicators showing a decline.
Pakistan's Finance Minister Senator Abdul Hafeez Shaikh, while unveiling the economic survey based on the 11-month performance of the current financial year, said inflation and the economic slowdown was "not a political problem but a problem of every single citizen due to certain reasons."
He estimated the GDP growth for the current fiscal year ending in June at 3.7 percent, falling short of the government's forecast due to floods damaging the agricultural sector and a weak global economy.
The government had forecast 4.2 percent growth for 2011-2012. Shaikh said a 3.7 percent expansion would still be the best performance since 2007-2008.
"If we compare with the 3 percent last year, then this is the highest economic growth in the last three years," he said.
Shaikh said the economy would have grown at a higher rate but for the extensive floods that damaged the crops and infrastructure in the Sindh and Baluchistan provinces, and the continuing threats to the global economic recovery.
"Is (the GDP growth rate) rising in the way we want? " he asked and answered in the negative.
According to the survey, the government's fiscal deficit in the first 10 months (July-April) of 2011-2012 stood at 5 percent of GDP, compared to 5.5 percent in the same period the previous year.
The agriculture sector grew by an estimated 3.1 percent in 2011-2012, the survey showed, compared to 2.4 percent growth the previous year. The sector accounts for 21 percent of GDP, 45 percent of employment and 60 percent of exports, according to the survey.
The manufacturing sector grew by an estimated 1.1 percent expansion, against 1 percent growth the previous year, while the services sector expanded 4 percent, compared to 4.4 percent in 2010/11.
Interestingly, the biggest support to the economy was the country's overseas workers' remittances during 2011 accounting for over $11 billion with those from Saudi Arabia topping the contribution with $2.65 billion in the first nine months.
Pakistan's Bureau of Ia mmigration has recorded record number of 222,247 workers sent to Saudi Arabia during the 2011-2012 financial year.
Rising petroleum prices has mostly contributed to the low pace of the economy as compared to $8.01 billion last year. This year's estimated oil import bill crossed $11.14 billion in nine months, according to the survey.
The minister admitted that every one is hit by rising inflation. "However, the rate of inflation in the three years was gradually coming down."
The minister claimed that the state of the economy is not as bad as is perceived. Factors like the impact of the worldwide recession, the devastating floods in Sindh and the ongoing war against terrorism had largely contributed to the economic slowdown.
The rupee, meanwhile, sank to its lowest level against the dollar yesterday.
The currency slid 0.9 percent to 93.8350 per dollar, which is a record low, Malik Bostan, president of Forex Dealers Association, was quoted as saying in an AFP report.
In an interview published in The Wall Street Journal, bank governor Yaseen Anwar was quoted as saying the government's failure to control the deficit could make it difficult to meet the more than $4 billion in IMF loans due in the fiscal year starting July 1.
"This statement created havoc in the market causing a drop of 1.3 percent in the rupee's value against dollar in two days," Mohammad Sohail of Topline Research said, according to AFP.
However, in comments issued yesterday, the State Bank of Pakistan said the country faced no risk in being able to make next year's IMF payments from its reserves.
"The decline in our projected reserves will be partially offset by an increase in remittances which will exceed $13 billion this fiscal year," Anwar said.
"Additional foreign direct investment (is) in the pipeline that includes US company investments in the power sector," he said.
But he conceded that the fiscal deficit and the lack of external financing will continue to challenge Pakistan, especially the central bank.
"Yet, let me assure you that Pakistan will not stumble into a situation that requires emergency external assistance," he added.
Analysts, quoted by AFP, said another factor that had devalued the rupee by 4.1 percent this year was the uncertainty over Pakistan's now six-month blockade on NATO supplies to Afghanistan.
"The rupee is in greater pressure as well because of the delay in the settlement of Pakistan's dispute with NATO, which has made uncertain the payment of billions of dollars of the Coalition Support Fund to Pakistan," Sohail said.
FROM: AGENCE FRANCE PRESSE
