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Pakistan's Economy :Midyear Review

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    Pakistan's Economy :Midyear Review

    Pakistan's economy has continued to perform strongly over the last several years with economic growth accelerating to 8.4 percent in 2004-05, its fastest pace in two decades.

    The strong economic recovery since 2002-03 accompanied by macroeconomic stability has been underpinned by prudent macroeconomic policies, wide-ranging structural reforms, fiscal discipline and consistency and continuity in polices. These policies have contributed to a marked improvement in productivity and in consumer and investor confidence leading to growing overall domestic demand, which should help to support growth at a robust level over the medium-term.

    The major achievements thus far included a strong economic recovery supported by a robust performance in industry, agriculture and services; extra-ordinary strengthening of domestic demand; reduction in fiscal deficit; a high double-digit-growth in exports and imports; workers' remittances continue to maintain its momentum, stability in exchange rate; a sharp reduction in the public and external debt burden; privatisation program moving forward with a brisk pace; and Pakistan re-entering international capital markets with major successes.

    Notwithstanding these successes, some major challenges also emerged in the shape of a sharp pick up in general price level and widening of trade and current account deficits: these can be described as side effects of strong economic recovery.

    On the back of strong economic recovery the current fiscal year (2005-06) was envisaged to consolidate the gains made over the last three years and also address the challenges of economic recovery mentioned above.

    Accordingly, the real GDP was targeted to grow by 7.0 percent, supported by a 4.2 percent growth in agriculture, 12.0 percent growth in manufacturing and a 6.5 percent growth in all other sectors. Inflation is like toothpaste, once out from the tube, it is difficult to put it back. Knowing very well that taming inflation is a difficult job; inflation at 8 percent was targeted for the fiscal year 2005-06 - slightly lower than the last year's average inflation of 9.3 percent.

    Fiscal deficit was targeted at 3.8 percent of GDP, exports and imports were targeted to grow by 16.4 percent and 16.2 percent, respectively with trade and current account deficits amounting to $5.035 billion and $3.157 billion, respectively; and remittances were targeted at $4.3 billion.

    Pakistan's economy faced headwinds from rising energy prices, touching all time high at over $70/bl from the beginning of the current fiscal year. It was then struck by massive earthquake of October 8, causing widespread destruction of areas and human lives. These two developments have so far had a limited impact on growth but the capacity of the economy to absorb shocks of such magnitudes is not unlimited. This Report reviews the performance of the key macroeconomic indicators during the first half (July-December) of the current fiscal year.

    ECONOMIC PERFORMANCE DURING JULY-DECEMBER 2005

    1: REAL SECTOR: Real GDP growth is targeted at 7.0 percent for the current fiscal year 2005-06 as against an extraordinary strong growth of 8.4 percent last year. While fixing the real GDP growth target for the year it was assumed
    that agriculture may not repeat its strong performance of last year as base effect would lower its current year's growth.

    Accordingly, this year's growth will be supported by a 4.2 percent, 14.5 percent and 6.5 percent growth in agriculture, large-scale manufacturing and other sectors, respectively.

    A AGRICULTURE: Pakistan's agriculture has been suffering, off and on, from severe shortage of irrigation water in recent years. The normal surface water availability at canals heads of 103.5 million acre feet (MAF) the overall (both for Kharif and Rabi) water availability has been less in the range of 5.9 percent (2003-04) to 29.4 percent (2001-02). Relatively speaking, Rabi season faced more shortage of water than Kharif during these periods.

    During the current fiscal year (2005-06) the availability of water for Kharif season (for crops such as rice, sugarcane and cotton) has been 5.4 percent more than the normal supplies and 19.6 percent more than last year's Kharif [see Table 1]. Wide-spread rains along with melting of snow on mountains top were responsible for higher than normal availability of water during Kharif season.

    Improved water situation also helped in recharge of ground water. The water availability during Rabi season (for major crop such as wheat), as of January 5, 2006, is estimated at 30.6 MAF which is 16.0 percent less than the normal availability but 32.5 percent more than last year's Rabi. Having discussed the water situation, though briefly, we now turn to analyse the likely outcomes of the four major crops during the year.
    COTTON:
    Area and production targets for cotton crop during the current fiscal year were 3.25 million hectares and 15.0 million bales, respectively. The crop was, however, sown on the area of 3.124 million hectares - 3.8 percent less than the target and 2.2 percent less than last year (3.193 million hectares).

    The Cotton Crop Assessment Committee of the Ministry of Food, Agriculture and Livestock (MINFAL) in its meeting held on October 25, 2005 has revised its cotton production estimates to 12.5 million bales on ex-farm basis, (Punjab 9.5, Sindh 2.9, NWFP 0.007 million and Balochistan 0.094 million bales).

    The recent information indicates that the size of the cotton crop may be in the range of 12.7 to 13.0 million bales or 8.9 to 11.0 percent less than last year. Factors responsible for the decline in cotton production include: excessive rain at the time of sowing, high temperature at flowering stage, late wheat harvesting resulting in decline in area under the crop, and pest attack in some cotton growing areas in Punjab and Sindh.

    SUGARCANE: For 2005-06 the area under sugarcane crop was targeted at 0.955 million hectares as against 0.966 million of last year. However, sugarcane has been sown in the area of 0.900 million hectares - 5.8 percent below the target and 6.8 percent less than last year.
    Sugarcane production for the year 2005-06 is estimated at 40.1 million tons against the original target of 50.095 million tons and last year's achievement of 47.244 million tons.
    Thus, sugarcane production is estimated to be lower by 15.1 percent over the last year. Factors responsible for the decline in sugarcane production include late harvesting of wheat, farmers shifting to other competing crops and frost affecting the crop.

    RICE: Area and production targets of rice for the year 2005-06 were set at 2.533 million hectares and 5.000 million tons, respectively. Area sown for rice is estimated at 2.531 million hectares - 0.1 percent lower than the target but 0.5 percent higher than last year.
    The size of the crop is estimated at 5.5 million tons - almost 9.5 percent higher than last year and 10 percent higher than the original target.

    WHEAT: Area and production targets of wheat - a Rabi crop, for the fiscal year 2005-06 are fixed at 8.415 million hectares and 22.0 million tons, respectively. The area under wheat crop this year is higher by 1.6 percent (8.234 million hectares) compared with last year.
    Availability of water in sufficient quantity along with good price of crop last year was responsible for the increase in area sown. Large-scale manufacturing continues to maintain its growth momentum during the first five months (July-November) of the current fiscal year.
    Against the growth target of 14.5 percent for the years the large-scale manufacturing has grown at an average rate of 12.0 percent during the
    first five months (July-November) of the fiscal year. A relatively.

    Weaker growth in large-scale manufacturing in October 2005 clearly reveals the impact of Earthquake. Industrial growth appears to have picked up in November 2005 when large-scale manufacturing grew by 15.2 percent. Most of the major industrial groups have registered high double-digit growth. The
    performance of petroleum group, engineering industries and non-metallic mineral products has been relatively weak.

    On the other hand, basic metal industries (the production of Pakistan Steel) and tyres and tubes have registered large negative growth. One of the coke oven batteries of the Pakistan Steel has been out of order since July 2005, causing Steel Mill to operate at around one-third of its capacity.

    *Consequently, the Federal Bureau of Statistics only captures the production of Pakistan Steel. The production of a large number of small, medium and large size steel mills being operated by the private sector is not captured in basic metal industries. production of basic metal industries has registered a decline of 60.3 percent.

    The production of tyres and tubes has registered a decline of 10.7 percent as manufacturers of cars are moving towards tubeless tyres. Automobile and electrical appliances industries continue to register strong growth of 33.4 percent and 28.6 percent, respectively during July-November 2005. Based on the trend of the first five months of the current fiscal year, it is safe to assume that the growth target for the year (14.5%) is likely to be achieved.

    FISCAL DEVELOPMENTS: The fiscal policy stance remained decidedly growth-oriented, providing for strong public sector spending, declining debt service costs, intensification of spending on alleviating poverty and investing in infrastructure.

    Pakistan has made considerable progress in recent years on fiscal side. The overall fiscal deficit that averaged nearly 7.0 percent of the GDP in the 1990s has declined to 3.3 percent in 2004-05.
    Fiscal deficit is targeted at 3.8 percent of GDP for the current fiscal year which is slightly higher than the deficit level of the previous year (3.3% of GDP). Higher deficit was targeted to finance higher public sector development program (PSDP), particularly towards financing infrastructure projects. Pakistan needs to strengthen its physical and human infrastructure to sustain growth momentum.
    Revenue collection by the Central Board of Revenue (CBR) was targeted at Rs 690 billion for the fiscal year 2005-06 - 17.6 percent higher than last year. Revenue collection by the CBR during the first half (July -December) of the current fiscal year has been impressive as it surpassed the target (Rs 308 billion) for the period by Rs 15 billion.
    Net collection stood at Rs 323.0 billion against last year's collection of Rs 262.5 billion, thereby registering an increase of 23.1 percent. Further breakdown of tax collection provides interesting information. The collection of direct taxes has increased by 32.9 percent on net basis - rising from Rs 78.4 billion to Rs 104.2 billion. The performance of indirect taxes has also been impressive. Net collection of indirect taxes grew by 18.9 percent - rising from Rs 184.1 billion to Rs 218.9 billion.

    Within indirect taxes, the performance of sales tax has been equally impressive. Sales tax on net basis grew by 20.8 percent - rising from Rs 109.4 billion to Rs 132.1 billion. Custom collection has been in line with other taxes in terms of its performance. Custom collection on net basis stood at Rs 61.5 billion as against Rs 51.2 billion of comparable period of last year, thereby registering an increase of 20.1 percent.
    The collection of central excise stood at Rs 25.3 billion during the first six months of the current fiscal year as against Rs 23.6 billion in the same period of last year, thus registering a growth of 7.4 percent.
    Pakistan continues to maintain fiscal discipline. The overall fiscal deficit for the first half (July - December) of the current fiscal year stood at Rs 160.2 billion or 2.1 percent of the projected GDP for the year. Furthermore, fiscal deficit stood at 56.2 percent of the full year deficit target of Rs 285 billion

    Total revenue for the first half amounted to Rs 498.4 billion as against Rs 423.8 billion in the same period last year, thus registering an increase of 17.6 percent. Tax revenue stood at Rs 364 billion which was 22.1 percent higher than the corresponding half of the last year. Similarly, non-tax revenue amounted to Rs 134 billion and was up by 6.7 percent in the same period. Total expenditure on the other hand stood at Rs 658.6 billion as against Rs503.3 billion in the same period of last year, thus registering an increase of 30.9 percent. Current expenditure amounted to Rs 537.5 billion which was 25.7 percent higher than the corresponding period of last year.
    The higher growth in current expenditure was mainly on account of earthquake related spending amounting to Rs 30 billion or 0.4 percent of GDP. Excluding earthquake related spending the current expenditure stood at Rs 507.5 billion and was up by 18.7 percent.
    Development expenditure amounted to Rs 121.1 billion and was 40.3 percent higher in the same period of last year. A substantially large growth in development spending simply points toward growth -oriented fiscal policy stance adopted by the government. The overall fiscal deficit excluding earthquake-related spending amounts to Rs 130.2 billion or 1.7 percent of the projected GDP for the year or 45.7 percent of the full year deficit target of Rs 285 billion.

    MONEY AND PRICES: Monetary policy stance of the SBP has undergone considerable changes during 2004-05, switching from a broadly 'accommodative' stance to an aggressive tightening in the second half of the fiscal year, more so since April 2005. The SBP sought to strike a balance between promoting growth on the one hand and controlling inflation on the other.

    The SBP opted to raise interest rates moderately throughout the period, but kept the benchmark rates well below inflation. The gradual and continuous rise in core inflation raised the pressure for a significant rise in interest rates. The SBP, therefore, raised the discount rate in April 2005 by 150 basis points to 9.0 percent.

    As against the revised Credit Plan target of 14.5 percent, the actual monetary expansion during FY05 registered a growth of 19.3 percent. In absolute terms, however, monetary expansion of Rs 479.1 billion during FY05 was significantly higher than Rs 407.8 billion expansions in FY04.
    The major causative factor for NDA growth during FY05 was the continued growth in credit to private sector. Net credit to the private sector registered an expansion of Rs 428.8 billion during FY05 compared with Rs 325.2 billion during FY04.
    Manufacturing sector had been the largest recipient of bank credit. Within manufacturing, textile sector witnessed a growth of 26 percent (on stock), and absorbed Rs 88.2 billion of credit during the year.
    Consumer finance continued to grow at robust pace during FY05 registering an expansion of Rs 84.7 billion compared with Rs 45.9 billion in FY04.

    CREDIT PLAN 2005-06: According to the credit plan for 2005-06, the SBP has set the target for monetary expansion to the tune of Rs 380 billion or 12.8 percent higher than last year (FY05) on the basis of a growth target of 7.0 percent and inflation target of 8 percent. The net domestic assets (NDA) and net foreign assets (NFA) of the banking system were set to increase by Rs 365 billion and Rs 15 billion, respectively.Within the NDA, the credit to private sector was projected to expand by Rs 330 billion, accounting for 86.8 percent rise in broad money supply (M2)

    The money supply (M2 definition) during July-December, 2005 of the current fiscal year expanded by Rs 236.3 billion as compared to an expansion of Rs 244.5 billion in the corresponding period of last year.
    Slower expansion in monetary assets during first six months of the current fiscal year was attributed primarily to a large contraction of Rs 64.6 billion in NFA. In the same period of last year the NFA recorded an increase of Rs 3.3 billion.

    The net domestic asset (NDA) on the other hand expanded by Rs 300.9 billion as against almost Rs 241.2 billion in the same period last year. Higher expansion in the NDA of the banking system is due mainly to a larger expansion in credit to private sector (Rs 297.7 billion as against Rs 284.7 billion in the same period last year).
    Credit to private sector grew by 4.5 percent (Rs 297.7 billion) during July-December 2005 as against a credit growth of 22.3 percent (Rs 284.7
    billion) in the corresponding period of last year. Credit to private sector continued to exhibit strong demand, reflecting confidence of this sector on the improving macroeconomic environment in the country.
    The distribution of credit to the private sector has been broad-based. The manufacturing sector continued to be the largest recipient of bank credit, utilising Rs 68.9 billion during July-November 2005-16.2 percent more than the same period last year. Within the manufacturing sector, textile industry received Rs 59.2 billion followed by cement industry (Rs 8.5 billion) and fertiliser industry (Rs 1.7 billion).

    The credit off-take of the construction sector rose by 82.4 percent to Rs 5.0 billion. A strong growth (188.0%) is witnessed in commerce related credit off-take which stood at Rs 34.3 billion. The growth in consumer loans continued its strong momentum, expanding by 61.2 percent to Rs 38.7 billion. Most of the consumer loans were acquired to finance a range of products, including automobiles (Rs 13.0 billion), personal loans (Rs 12.2 billion), credit cards (Rs 6.5 billion) and housing loans (Rs 5.9 billion) The government borrowing for budgetary support stood at Rs 78.3 billion as against Rs 25.4 billion in the same period last year.
    Higher government borrowing for budgetary support reflects a large spending on reconstruction and rehabilitation of the earthquake affected areas and the people. Monetary expansion in fact picked up substantially after the October 8 earthquake when broad money supply increased by 7.8 percent, after a contraction of 1.2 percent until the first quarter (July-September).

    INTEREST RATE ENVIRONMENT: Fiscal year 2004-05 witnessed a gradual shift in monetary policy stance, as rising inflation attracted response from the SBP. Although it raised interest rates until March 2005, monetary policy largely remained accommodative to support economic recovery; the weighted average lending rates remained negative in real terms and private sector credit rose by a record Rs 428.8 billion during the year.

    The sharp pick up in inflation in April 2005 changed the SBP's monetary policy stance from measured to aggressive tightening - a policy still being pursued.

    The benchmark 6-moths T-bill interest rate has been increased by 274 basis points (bps) since March 2005 and until December 2005. However, since March 2004 the 6-months T-bill interest rate has been increased by 650 bps. Accordingly, the weighted average lending rate increased from 6.57 percent in March 2005 to 9.77 percent in November 2005 - an increase of 320 bps.

    Since March 2004 the weighted average lending rate has been increased by 508 bps but the deposit rate has not increased with the same pace, resulting in widening of spread by 400 bps in the same period to 7.4 percent. However, in December 2005 the lending rate declined a bit to 9.53 percent and deposit rates inched up to 2.55 percent.
    The large banking spread reflects the inefficiency of the banking system. The discount rate was also increased by 150 bps to 9.0 percent in April 2005 as part of the tight monetary policy. The gradual tightening of monetary policy and the attendant rise in interest rate is however consistent with global rise in interest rate. The LIBOR has also started moving upward from as low as 1.87 percent in June 2004 to 4.69 percent in December 2005 .an increase of 282 bps.

    STOCK EXCHANGE: The buoyant mood in Pakistan's stock markets prevailed during FY05. The Karachi Stock Exchange (KSE) share index and aggregate market capitalisation (AMC) recorded increase of 41.1 percent and 50.0 percent respectively during FY05. The Karachi Stock Market remained as one of the best performing markets around the world during FY05.

    During the first half of the current fiscal year (FY06), the stock market maintained its robust business mood. The KSE share index increased from 7450 points in June 2005 to 9557 points in December 2005, recording a growth of 28.3 percent. Similarly aggregate market capitalisation has increased from Rs 2037 billion ($34.1 billion) in June 2005 to Rs 2748 billion ($45.9 billion) in December 2005 - an increase of 34.9 percent.
    The buoyancy in the stock markets can be attributed to a number of positive factors including: a continuation of pro-growth macroeconomic policies; a stable macroeconomic environment; a strong growth momentum taking firm hold; continuation of privatisation program in brisk pace; appropriate reform initiated by the Securities and Exchange Commission of Pakistan (SECP); the availability of adequate liquidity in the market; good operating financial results from the majority of blue chip companies; and a visible improvement in the India-Pakistan relationship. These factors are expected to continue to drive the equity market during the remaining period of the current fiscal year (FY06).

    On calendar year basis, the KSE has been the best performing market in the world in 2005. Out of the 21 leading stock exchange markets in the world, the KSE share index increased by 53 percent, followed by Seoul, Colombo, Mumbai, Tokyo and others.

    PRICES A sharp pick up in commodity prices and unprecedented rise in international price of oil have led to the re-emergence of inflationary pressures across the globe. After living in a low inflationary (4.0%) environment for the last five years, Pakistan witnessed higher inflation for a variety of reasons.

    The higher inflationary trend in Pakistan is the outcome of pressures manating from demand and supply side. Three and a half years of strong economic growth (5-8.4%) have given rise to the income levels of various segments of the society. The rising levels of income have strengthened domestic demand and put upward pressures on prices of essential commodities. Supply side pressures emanated from a variety of factors. A 38.3 percent increase in the support price of wheat in two years, shortage of wheat owing to less than the targeted production, and mismanagement in wheat operation in one of the wheat deficit province resulted in sharp increase in the prices of wheat and wheat flour.
    The prices of other food items such as beef, mutton, chicken etc also registered sharp increases owing to 'sympathy effect' on the one hand and demand pressure on the other. Unprecedented rise in international price of oil is yet another component of supply side pressures.
    Inflation during the first six months (July-December) of the current fiscal year is estimated at 8.4 percent as against 8.8 percent in the samem period last year. Food inflation is estimated at 7.5 percent as against 12.6 percent of last year.
    Non-food inflation at 9.1 percent is on higher side compared with 6.2 percent in the same period last year. The non-food non-energy inflation which is also known as core inflation has also moved up and estimated at 7.6 percent as against 6.6 percent in the same period last year.

    The Central Banks around the world tend to focus on core inflation that excludes the impact of food and energy prices. Core inflation basically represents policy (fiscal, monetary, exchange rate policies) induced inflation. The persistence of relatively high core inflation compelled the SBP to change its monetary policy stance from 'accommodative' to 'neutral' to aggressive tightening.

    House rent index also played an important role in building inflationary pressure this year. With second largest weight in the CPI (23.4%) after food (40.3%), the persistent rise in this index has contributed substantially to the increase in CPI based inflation.

    From a level of 4.5 percent in 2003-04, the index recorded an increase of 11.3 percent in 2004-05. During July-December 2005-06 the index has increased to 11.1 percent as against 10.4 percent in the same period last year.

    Cognisant of the impact of inflation on the economy, most importantly its adverse and disproportionate effect on the poor and vulnerable segments of society as well as its deleterious effect on purchasing power of the fixed-income group, the government responded in a multi-pronged manner to the rise in the price level. A strategy of regular monitoring of domestic stocks of key commodities and their prices was adopted, by which the government was able to respond in a timely manner to shortages by importing substantial quantities of wheat and other essential commodities to augment supplies.

    To ease off the demand pressures generated by the rising level of economic activity, the State Bank of Pakistan began to tighten monetary cycle rather aggressively since April 2005. The easing of demand pressure through monetary policy and improving the supply situation of food items through raising their production (for example, wheat this year) and through imports the government succeeded in reducing inflation from 11.1 percent in April 2005 to 7.9 percent in November 2005. Most importantly, food inflation which was as high as 15.7 percent in April 2005 brought down to 8.1 percent in December 2005.

    The sharp decline in food inflation in a short period of seven months provides ample evidence that government's policy to liberalise import regime by allowing duty free import of wheat, wheat flour, sugar, livestock and other essential food items have been a success. It is important to note that after staying at above 8 percent for the last 11 months, the CPI-based inflation declined to less than 8 percent in November 2005. It moved to above 8 percent in December 2005 purely on account of base effect.
    Going forward, the base effect of petroleum prices and transport charges will play an important role in further lowering inflation. Until December 15, 2005 the high prices of petroleum products and the attendant rise in transport charges are measured against the froze prices of petroleum products and transport charges during May - December 15, 2004.

    The government started raising the prices of petroleum products, and transport charges started increasing accordingly after December 15, 2004, therefore, the gap in petroleum prices and transport charges between last and current years will start narrowing down with consequential decline in overall inflation rate. Based on the above facts and stability in food prices it is safe to assume that the current fiscal year is going to end with an inflation rate of 8.0 percent (as targeted).

    I said na

    #2
    Re: Pakistan's Economy :Midyear Review

    EXTERNAL SECTOR:

    EXPORTS: Exports are targeted at $17 billion or 18.1 percent higher than last year. Exports during July- December 2005-06 were up by 23.8 percent, rising to $8073.1 million from $6521.6 million in the same period last year. The exports of primary commodities were up by 30.0 percent with rice exports increasing by 47.7 percent.

    Exports of Textile manufactures also registered a high double-digit-growth of 27.3 percent with exports of cotton yarn, cotton cloth, bed wear; readymade garments have been extra-ordinarily strong. Exports of other manufactures have been impressive as they grew by 17.8 percent. Exports of carpet & rugs, leather tanned, and surgical goods have declined during the first six months of the current fiscal year. More attention needs to be given in these items to enhance their exports.

    IMPORTS: Imports continue to be pushed higher by rising oil prices and continued strength of non-oil imports owing to buoyant domestic demand. Pakistan's imports are up by 53.1 percent during the July- December 2005, rising from $8917.6 million to $13654.2 million.

    Major contributions to this year's additional import bill have come from raw materials ($738 million), machinery ($763 million), petroleum group ($1161 million) and other imports ($1455 million). Raw materials, machinery and petroleum groups account for 56.0 percent increase in total imports. Consumer durables import account for only 6.5 percent in total imports. Its contribution to the overall increase in imports is only 7.5 percent.

    Contrary to the general perception that the rise in import bill is mainly on account of the extra-ordinary increase in the imports of consumer durables, the fact remains that the surge in imports is mainly on account of strong domestic demand fuelling economic activity. Petroleum group imports emerged as the single largest item in country's import bill with 62 percent rise in the first half and amounting to $3 billion as against $1.9 billion in the comparable period of last year.

    Food imports increased by 44.6 percent mainly because of large import of sugar compared with the negligible amount imported in the first half of last year.
    The unprecedented surge in domestic demand has fuelled an exceptional increase in non-oil imports. In particular, imports of machinery increased by 41.3 percent, and raw material group are up by 54.8 percent. Non-food non-oil imports also increased sharply by 51.3 percent, reflecting continued strong domestic demand. All categories of non-food non-oil imports recorded robust double digit growth.
    The increase in petroleum bill was mainly due to price increase of 50.6 percent for petroleum crude and 70.8 percent for petroleum products. Import of consumer durables is reflecting strong domestic demand fuelled by consumer credit as well as rising incomes in the last three years.
    Import of both new and second hand cars was significantly liberalised in the FY 2006 budget and resultantly the import of motor vehicles, in the form of completely knocked down kits for local assembly and completely assemble cars has increased by 64.8 percent.

    Notwithstanding a surge in the imports of road motor vehicles its share in total imports is only 4.8 percent and its contribution to overall imports is 5.4 percent.

    The high economic growth continued to push up imports of machinery and raw materials, both of which increased at very high rates. A particularly large increase (201.7%) was seen in the import of agricultural machinery which more than doubled to $59.1 million.

    This is a manifestation of higher cash incomes of farmers from last year's bumper cotton crop and the high price of wheat. Among raw materials, import of synthetic fiber increased by 57.9 percent and synthetic and artificial yarn by 86.2 percent. It also shows increasing input requirements of the textile industry.

    BALANCE OF TRADE: Despite sizeable export gains, the merchandise trade deficit widen to $5.58 billion in the first half of the current fiscal year. Exports in recent years have benefited from structural changes that have improved their competitiveness. However, rising oil bill and continued strength of non-oil imports owing to strong domestic demand have pushed import higher, resulting in widening of trade gap.

    CURRENT ACCOUNT BALANCE: Pakistan's current account balance that slipped into red in 2004-05 after posting surpluses for three consecutive years remains in deficit with gap continues to widen owing to higher oil import bill and hefty rise in non-oil imports fuelled by strong domestic demand.

    In addition to widening of trade gap, higher freight charges by international shipping lines as a result of sharp increase in global trade and higher fuel cost and growth in personal travel due to the rising level of income of middle and high income groups have also contributed to the widening of current account deficit.

    The current account deficit excluding official transfers stood at $3.0 billion in the first half (July -December) of the current fiscal year as against $0.83 billion in the same period last year.

    WORKERS' REMITTANCES: Workers remittances, the second largest source of foreign exchange inflow after exports, continue to maintain a rising trend. Workers remittances totalled $2.0 billion during July - December of the current fiscal year, as against $1.9 billion in the same period last year, showing an increase of 5.6 percent.

    The monthly average of remittances in the first six months stood at $342.5 million as against $324.4 million in the same period last year, showing an increase of 5.6 percent.

    If the current trend continues workers' remittances may touch over $4.4 billion by the end of the current fiscal year. The United States continues to be the single largest source of cash workers' remittances accounting for almost 28.5 percent or $586.0 million, followed by the UAE ($301.8 million or 14.8%), Saudi Arabia ($335.2 million or 16.4%), UK ($201.7 million or 9.9%) and Kuwait ($112.2 million or 5.5%).

    FOREIGN EXCHANGE RESERVES: Pakistan's total foreign exchange reserves maintained an upward trend during the last fiscal year. During the current fiscal year, the outflow in the shape of financing rising import bill was higher than the inflows in the shape of exports and other earnings, resulting in decline in reserves by $0.957 billion since the beginning of the fiscal year through end-December 2005.

    EXCHANGE RATE: Exchange rate remained stable during the first half of the current fiscal year, ranging between Rs 59.6266 per dollar in July 2005 to Rs 59.8247 per dollar in December 2005, representing a depreciation of Rupee by 0.3 percent. The exchange rate in open market also remained stable with premium hovering around 1.0 percent.

    FOREIGN PRIVATE INVESTMENT: Total foreign private investment amounted to US $1462.6 million during the first six months (July -December) of the fiscal year 2005-06 as against US $504.3 million in the comparable period of last fiscal year, thereby registering an increase of 190.0 percent.

    Further desegregating of foreign investment reveals that Foreign Direct Investment (FDI) has registered an increase of 147.9 percent, rising from $445.0 million to $1103.3 million and portfolio investment registered an inflow of $359.3 million as against $59.3 million in the comparable period of last year .

    Energy sector (oil, gas and power), communication (including telecom), financial services and trade sectors have been the major recipient of FDI, accounting for almost 85 percent or $935 million.

    The United States ($467.2 million), the UK ($110.7 million), Saudi Arab ($268.1 million), Hong Kong ($63.1 million) and Netherlands ($62.0 million) remained the major investors in Pakistan during the first six months of the current fiscal year.


    PUBLIC DEBT: Pakistan's public debt grew at an average rate of 18 percent and 15 percent per annum during the 1980s and 1990s, respectively - much faster than the growth in nominal GDP (11.9% and 13.9% respectively).

    Resultantly, public debt rose from 56 percent of GDP at the end of the 1970s to 92 percent by the end of the 1980s. In other words, it increased by 36 percentage points of GDP during the 1980s.
    Public debt was 85 percent of the GDP (on the basis of the new GDP series with the 1999-2000 base) by the end of the 1990s.

    A concerted effort was launched some six years ago to bring the country's public debt to a sustainable level. Reduction in the fiscal and current account deficits, lowering the cost of borrowing, raising revenue and foreign exchange earnings, and debt re-profiling from the Paris Club have been the key features of the debt reduction strategy.

    The public debt- to-GDP ratio, which stood at almost 85 percent in end June 2000, declined substantially to 61.7 percent by the end of June 2005 23 percentage points decline in country's debt burden in 5 years. During the first half of the current fiscal year, public debt further declined to 55.7 percent of the projected GDP for the year. In absolute terms public debt grew by a meager 2.9 percent during July-December 2005.

    NOTE: Beginning from 1999-2000, Pakistan's GDP was rebased at 1999-2000 Prices from two decades old base of 1980-81.Therefore, wherever, GDP appears in denominator the number prior to 1999-2000 are not comparable.

    It may be pointed out that public debt is a charge on the budget and therefore it must be viewed in relation to government revenue. Public debt was 317 percent of total revenue in end-June 1980, increased to 505 percent by the end of the 1980s and further to 627 percent by the end of the 1990s.

    Following the debt reduction strategy in which raising revenue was one of the key elements, the public debt burden in relation to total revenue has declined substantially to 437.2 percent by end-June 2005 and further to 418.5 percent by end-December 2005 to the projected revenue for the year. Although Public debt is now on a solid downward footing, sustaining the momentum will be a continuing challenge.

    EXTERNAL DEBT AND FOREIGN EXCHANGE LIABILITIES: Pakistan's total stock of external debt and foreign exchange liabilities grew at an average rate of 7.4 percent per annum during 1990-99 - rising from $20.5 billion in 1990 to $38.9 billion by end June 1999 but declined slightly to $37.9 billion in 1999-2000. It exhibited a declining trend thereafter.

    Foreign exchange earnings on the other hand either remained stagnant or increased at a snails pace during the same period. Despite the accumulation of over $18 billion debt in the 1990s, foreign exchange earnings rose by only $4.0 billion.

    Consequently the debt burden (external debt and foreign exchange liabilities as a percentage of foreign exchange earnings) rose from 240.2 percent in 1989-90 to 347.0 percent in 1998-99.

    Following a credible strategy of debt reduction, Pakistan has succeeded in reducing the rising trend in external debt and foreign exchange liabilities. Pakistan's external debt and liabilities have declined by $3.066 billion - down from $38.9 billion in 1998-99 to $35.834 billion by 2004-05.

    External debt and liabilities further declined to $35.245 billion by end-December 2005, thus showing a decline of $0.589 billion in the first half of the current fiscal year.

    The surplus in current account coupled with a continued build up in foreign exchange reserves and the higher foreign exchange earnings, the pre-payment of expensive debt and debt write-off are the major factors responsible for the reduction in the total stock of debt.

    As percentage of GDP, external debt and liabilities stood at 51.7 percent in end-June 2000, declined to 36.7 percent in end-June 2004 and further to 32.5 percent by end-June 2005.

    It has further declined to 28.5 percent in end-December 2005 of the projected GDP for the year. Similarly, external debt and liabilities as a percentage of foreign exchange earnings was 297.3 percent in 1999-2000, declined to 164.6 percent in 2003-04 and further to137.2 percent by end-June 2005.

    The economy continues to perform strongly despite rising oil prices and destruction caused by the October 8, 2005 earthquake. Although cotton and sugarcane production would be less than last year but other components of national accounts are likely to perform better than the target.

    Therefore, the growth target of 7.0 percent is likely to be achieved. While revenue position is better than the target the expenditure side is under pressure owing mainly on account of earthquake-related expenditures. Consequently the overall budget deficit is likely to be slightly above 4.0 percent of GDP this year.

    Inflation is on downward footing and the year is likely to end with an average inflation of 8.0 percent. Both exports and imports are growing at high double-digit with import growth likely to slow down during the second half of the current fiscal year. Both trade and current account deficits are high and rising. In the absence of both short and long-term corrective policy measures these two deficits may reach unsustainable levels.

    I said na

    Comment


      #3
      Re: Pakistan's Economy :Midyear Review

      Any link?

      Comment


        #4
        Re: Pakistan's Economy :Midyear Review

        Nice article Seema, very comprehensive. I have read the first part and will read the second one later.
        So our life
        is a drop of dew -- and yet
        And yet...

        Comment


          #5
          Re: Pakistan's Economy :Midyear Review

          source please.. not that w are skeptical or anything... but citing is the source is always important.
          I hate both men and women, and am afraid of animals, so basically I am very very lonely.

          Comment


            #6
            Re: Pakistan's Economy :Midyear Review

            good to see pakistan economy booming.

            Comment


              #7
              Re: Pakistan's Economy :Midyear Review

              Sources:
              TABLE 1: ACTUAL SURFACE WATER AVAILABILITY (MILLION ACRE FEET (MAF)
              ================================================== =
              Period Kharif Rabi Total
              ================================================== ====
              Normal (1977-01) 67.1 36.4 103.5
              2000-01 59.7 21.4 81.1
              2001-02 54.7 18.4 73.1
              2002-03 62.8 25.0 87.8
              2003-04 65.9 31.5 97.4
              2004-05 59.1 23.1 82.2
              2005-06* 70.7 30.6* 101.3
              ================================================== ====
              SOURCE: Ministry of Food and Agriculture

              -- As of January 5, 2006.

              TABLE-2: AREA AND PRODUCTION OF MAJOR CROPS:
              ================================================== ==========================
              Crop Area(Million Hectare) Production(Million Tons)
              ================================================== =========================
              2004-06 2005-06 2004-05 Original Current Original Current % Target Position 2004-05 Target Position Change
              ================================================== ========================
              Cotton* 3.193 3.247 3.124 14.265 15.0 12.700 -11.2
              Sugarcane 0.966 0.955 0.900 47.244 50.095 40.100 -15.1
              Rice 2.519 2.533 2.531 5.023 5.000 5.500 9.5
              Wheat 8.329 8.415 - 21.562 22.000 - -
              ================================================== =========================
              SOURCE: Crop Outlook 'Ministry of Food & agriculture

              TABLE-3: MONTH-WISE GROWTH IN LARGE-SCALE MANUFACTURING (%)
              ===========================
              Month Growth
              ===========================
              July 2005 10.4
              August 2005 12.8
              September 2005 12.5
              October 2005 9.3
              November 2005 15.2
              July-November 12.0
              ===========================
              SOURCE: Federal Bureau of Statistics

              TABLE-4: PRODUCTION OF MAJOR GROUPS OF LSM:
              ================================================== ===========
              July- Weights Nov 2005
              ================================================== ==========
              A.Food, Beverages & Tobacco 14.546 9.2
              B.Textile & Apparel 24.492 13.8
              C.Leather Products 2.272 17.8
              D.Paper Printing & Publishing 0.600 9.4
              E.Pharmaceuticals 18.162 15.0
              F.Chemicals 7.472 12.4
              G.Petroleum Group 7.824 2.9
              H.Tyres & Tubes 0.303 -10.7
              -------------------------------------------------------------
              Non-Metallic Mineral
              -------------------------------------------------------------
              I.Products 4.192 6.9
              J.Basic Metal Industries 3.504 -60.3
              K.Engineering Industries 5.405 4.8
              L.Electricals 2.485 28.6
              M.Automobile 3.255 33.4
              ================================================== ==========
              SOURCE: Federal Bureau of Statistics

              TABLE -5: TAX COLLECTION BY CBR (RS BILLION)
              ================================================== ===========
              July-December % 2004-05 2005-06 Change
              ================================================== ===========
              A. Direct Tax
              -------------------------------------------------------------
              Gross 88.9 119.5 34.4
              Refund/Rebate 10.5 15.3 45.4
              Net 78.4 104.2 32.9
              -------------------------------------------------------------
              B. Indirect Tax
              -------------------------------------------------------------
              Gross 220.4 246.2 11.7
              Refund/Rebate 36.3 27.4 -24.5
              Net 184.1 218.8 18.9
              -------------------------------------------------------------
              B.1 Sales Tax
              -------------------------------------------------------------
              Gross 138.3 149.3 8.0
              Refund/Rebate 28.9 17.2 -40.4
              Net 109.4 132.1 20.8
              -------------------------------------------------------------
              B.2 Central Excise
              -------------------------------------------------------------
              Gross 23.6 25.4 8.0
              Refund/Rebate 0.0 0.1 0.0
              Net 23.6 25.3 7.4
              -------------------------------------------------------------
              B.3 Customs
              -------------------------------------------------------------
              Gross 58.5 71.5 22.2
              Refund/Rebate 7.4 10.0 36.6
              Net 51.2 61.5 20.1
              -------------------------------------------------------------
              Total Tax Collection
              -------------------------------------------------------------
              Gross 309.2 365.7 18.3
              Refund/Rebate 46.8 42.6 -8.8
              Net 262.5 323.0 23.1
              ================================================== ===========
              SOURCE: Central Board of Revenue

              TABLE -6: FISCAL DEVELOPMENTS:
              ================================================== ==========
              2005-06 2005 2005-06 (BE) (Jul- (Jul-Sep) Dec)
              ================================================== ==========
              Total Revenues (i+ii) 990.3 236.6 498.4
              i)Tax Revenues 775.4 164.9 364.0
              ii) Non-Tax Revenues 215.0 71.7 134.4
              Total Expenditures (a+b) 1275.4 274.3 658.6
              a) Current 1019.5 223.7 537.5
              b) Development & Net Lending 265.8 50.6 121.1
              - PSDP 272.0 50.7 121.5
              Overall Deficit 285.0 37.7 160.2
              As % of GDP 3.8 0.5 2.1
              ================================================== ==========
              SOURCE: Central Board of Revenue

              TABLE 7: PROFILE OF MONETARY ASSETS (MILLION RS)
              ================================================== ===========================
              Credit Plan FY Cumulative Flows 06 Sectors 1 Jul 05 1 Jul 04 Original to to 31 Dec 05 31 Dec 04
              ================================================== ===========================
              1. GOVERNMENT SECTOR BORROWINGS 120,000 62,350 30,549
              a. Net budgetary Barrowing 98,000 78,301 25,421
              b. For Commodity Operations 20,000 -15,123 205,376
              c. Net effect of Zakat Fund/Privatisation 2,000 -829 1,331

              2. NON-GOVERNMENT SECTOR (A+B+C) 320,000 294,145 268,907
              A. Credit to private sector (i+ii) 330,000 297,651 284,703
              i. Commercial banks 295,864 284,581
              ii. Specialised Banks 1,787 122
              B. Credit to Public Sectors Enterprises (PSEs) -10,000 -1,994 -11,183
              C. Other Financial Institutions (SBP credit to NBFIs)0 -1,512 -4,613

              3. Other Items (net) -75,000 -55,595 -58,265

              4. Net domestic assets of the banking system 365,000 300,901 241,191

              5. Net foreign assets of the banking system 15,000 -64,572 3,302

              6. Monetary Assets (M2) 380,000 236,329 244,492 (12.81%) (7.97%) (9.83%)
              ================================================== ========================
              P = Provisional

              SOURCE: State Bank of Pakistan

              TABLE-8: WEIGHTED AVERAGE MONTHLY LENDING AND DEPOSIT RATES JUNE-01 TO DECEMBER-05
              ================================================== ================
              Deposit Rate Lending Spread Libor 6-Months Rate T-Bill
              ================================================== ================
              July 2002 4.02 12.08 8.06 1.863 6.40
              August 2002 4.31 11.46 7.15 1.815 6.40
              September 2002 3.93 11.89 7.96 1.751 6.37
              October 2002 3.97 11.48 7.51 1.618 6.34
              November 2002 3.87 10.66 6.79 1.471 4.76
              December 2002 3.60 10.31 6.71 1.383 3.84
              January 2003 3.21 9.95 6.74 1.383 3.19
              February 2003 3.04 9.36 6.32 1.270 2.09
              March 2003 2.81 8.26 5.45 1.262 1.64
              April 2003 2.62 7.75 5.13 1.27 1.80
              May 2003 2.41 7.09 4.68 1.23 1.80
              June 2003 1.90 7.58 5.68 1.10 1.66
              July 2003 1.70 5.12 3.42 1.14 1.21
              August 2003 1.60 5.02 3.42 1.20 1.21
              September 2003 1.50 5.20 3.70 1.18 1.61
              October 2003 1.45 5.32 3.87 1.24 1.61
              November 2003 1.45 5.29 3.84 1.23 1.66
              December 2003 1.42 5.68 4.26 1.21 1.64
              January 2004 1.34 5.04 3.70 1.18 1.64
              February 2004 1.32 5.30 3.98 1.17 1.68
              March 2004 1.30 4.69 3.39 1.15 1.74
              April 2004 1.21 5.07 3.86 1.34 1.84
              May 2004 1.21 5.42 4.21 1.59 2.08
              June 2004 1.21 5.05 3.81 1.87 2.08
              July 2004 1.20 4.63 3.43 1.98 2.52
              August 2004 1.20 5.08 3.88 1.99 2.62
              September 2004 1.22 5.84 4.62 2.17 3.01
              October 2004 1.18 6.01 4.83 2.30 3.19
              November, 2004 1.21 5.94 4.73 2.62 3.73
              December 2004 1.30 5.92 4.62 2.70 4.16
              January 2005 1.35 6.68 5.33 2.89 4.16
              February 2005 1.37 6.17 4.80 3.02 4.79
              March 2005 1.43 6.57 5.14 3.27 5.50
              April 2005 1.55 6.78 5.23 3.38 7.08
              May 2005 1.71 7.66 5.95 3.48 7.82
              June 2005 1.85 8.21 6.36 3.61 7.94
              July 2005 2.06 9.07 7.01 3.83 7.97
              August 2005 2.16 9.00 6.84 4.01 8.10
              September 2005 2.21 9.46 7.25 4.05 8.14
              October 2005 2.31 9.74 7.30 4.35 8.14
              November 2005 2.37 9.77 7.40 4.55 8.26
              December 2005 2.55 9.53 6.97 4.69 8.24
              ================================================== ================
              SOURCE: State Bank of Pakistan

              TABLE-9: MONTHLY BUSINESS TRENDS AT KARACHI STOCK EXCHANGE (KSE)
              ================================================== ==========
              Last Working Day of the Aggregate Market Capitalisation Month KSE Share Index (Rs Billion) $ Billion ================================================== ==========
              July 2002 1787.6 412.5 6.9
              September 2002 2018.8 458.3 7.8
              December 2002 2701.4 581.2 10.0
              January 2003 2545.1 554.8 9.5
              March 2003 2715.7 589.7 10.2
              June 2003 3402.5 746.4 12.9
              July 2003 3933.4 836.2 14.5
              September 2003 4027.3 907.3 15.7
              December 2003 4471.6 922.0 16.1
              January 2004 4841.3 1254.8 21.9
              March 2004 5106.7 1346.1 23.4
              June 2004 5279.2 1402.8 24.1
              July 2004 5289.9 1410.2 24.1
              September 2004 5217.7 1469.6 24.8
              December, 2004 6218.4 1696.1 28.5
              January, 2005 6747.4 1834.8 30.9
              February 2005 8260.1 2262.7 38.2
              March 2005 7770.4 2114.8 35.6
              April 2005 7104.7 1977.5 33.2
              May 2005 6857.7 1890.7 31.7
              June 2005 7450.1 2036.7 34.1
              July 2005 7179.0 2013.7 33.8
              August 2005 7796.9 2188.0 36.6
              September 2005 8225.6 2329.7 39.0
              October 2005 8317.4 2373.2 39.7
              November 2005 9025.9 2551.2 42.7
              December 2005 9556.6 2747.6 45.9
              ================================================== ==========
              SOURCE: State Bank of Pakistan & KSE.


              TABLE 10: KSE VS OTHER STOCK EXCHANGES JANUARY 01, 2005 TO DECEMBER 16, 2005
              ================================================== ======================
              EXCHANGE INDEX DATE CHANGE 1-Jan-05 16-Dec-05 Points %
              ================================================== ======================
              KSE KSE-100 6,218.40 9,514.83 3,296.43 53.0
              Seoul Composite 895.92 1,321.04 425.12 47.5
              Colombo All Share 1,506.89 2,155.00 648.11 43.0
              Mumbai BSE 30 6,602.69 9,284.46 2,681.77 40.6
              Tokyo Nikkei 11,488.76 15,173.07 3,684.31 32.1
              Brazil BVSP 26,196.00 33,291.82 7,095.82 27.1
              Frankfurt Dax 4,256.08 5,353.66 1,097.58 25.8
              Amsterdam AEX General 348.08 436.17 88.09 25.3
              Paris CAC 40 3,821.16 4,704.41 883.25 23.1
              London FTSE 4,814.30 5,531.60 717.30 14.9
              Jakarta Composite 1000.23 1,143.43 143.20 14.3
              Australia AORD 4,053.10 4,590.90 537.80 13.3
              Singapore Straits Times 2,066.14 2,325.53 259.39 12.6
              Argentina Mer Val 1,375.37 1,524.50 149.13 10.8
              New Zealand NZSX 50 3,064.44 3,281.90 217.46 7.1
              Hong Kong Hang Seng 14,230.14 15,029.81 799.67 5.6
              NYSE NASDAQ 2,175.44 2,252.48 77.04 3.5
              Bangkok Set 668.10 691.17 23.07 3.5
              Taiwan T. Weihhted 6,139.69 6,350.69 211.00 3.4
              NYSE D. Jones 10,783.01 10,875.59 92.58 0.9
              Kuala Lumpur Composite 907.43 893.37 -14.06 -1.5
              China Shanghai Composite 1,266.50 1,127.51 -138.99 -11.0
              ================================================== ======================
              SOURCE: Karachi Stock Exchange


              TABLE 11: INFLATION RATE (CPI)
              ================================================== =============
              July-December Item 2003-04 2004-05 2004-05 2005-06
              ================================================== =============
              CPI (General) 4.6 9.3 8.8 8.4
              Food Group 6.0 12.5 12.6 7.6
              Non-Food Group 3.6 7.1 6.2 9.1
              Core Inflation 3.7 7.0 6.6 7.6
              ================================================== ============
              SOURCE: State Bank of Pakistan


              TABLE 11: STRUCTURE OF EXPORTS ($ MILLION)
              ================================================== ===================
              Particulars July-December % 2005-06* 2004-05 Change
              ================================================== ===================
              A. Primary Commodities 758.2 583.1 30.0
              Rice 526.9 356.8 47.7
              Raw Cotton 37.4 62.7 -40.2
              Fish & Fish Preparation 98.5 75.5 30.5
              Fruits 59.9 50.6 17.6
              B. Textile Manufactures 4898.4 3847.9 27.3
              Cotton Yarn 648.0 475.1 36.4
              Cotton Cloth 1045.3 823.4 26.9
              Knitwear 902.9 897.3 0.6
              Bed Wear 1026.7 557.9 84.0
              Towels 288.4 238.9 20.7
              Readymade Garments 660.8 430.4 53.5
              C. Other Manufactures 1537.2 1304.5 17.8
              Carpets. Rugs & mats 125.8 128.5 -2.1
              Petroleum Products 324.0 184.5 75.6
              Sports Goods 136.4 135.1 1.0
              Leather Tanned 135.4 146.6 -7.6
              Leather Manufactures 365.0 251.1 45.3
              Surgical G. & Med.Inst. 74.4 87.2 -14.7
              Chemicals & Pharma. Pro. 170.8 159.0 7.5
              Engineering Goods 92.8 80.6 15.0
              D. Others 879.2 786.1 11.8
              Total 8073.1 6521.6 23.8
              ================================================== ===================
              -- Provisional

              SOURCE: Federal Bureau of Statistics

              I said na

              Comment


                #8
                Re: Pakistan's Economy :Midyear Review

                TABLE 13 STRUCTURE OF IMPORTS($ MILLION)
                ================================================== ======================
                July-December % Particulars 2005-06* 2004-05 Change
                ================================================== ======================
                A. Food Group 857.2 592.9 44.6
                Of Which Wheat Unmilled 19.1 14.1 34.9
                Tea 115.5 103.7 11.3
                Edible Oil 377.4 369.1 2.2
                Sugar 180.0 1.5 12088.8
                Pulses 86.1 50.5 70.6
                B. Machinery Group 2610.2 1686.2 54.8
                Power Gen Machines 264.4 178.9 47.8
                Office Machines 129.8 119.3 8.8
                Textile Machinery 420.9 448.9 -6.2
                Const. & Mining Mach. 74.3 76.8 -3.2
                Aircrafts, Ships and Boats 59.1 33.4 77.1
                Agri. Machinery 59.1 19.6 201.7
                Other Machinery 1602.5 809.3 98.0
                C. Petroleum Group 3033.4 1872.3 62.0
                Petroleum Products 1171.3 810.5 44.5
                Petroleum Crude 1862.1 1061.8 75.4
                D. Consumer Durables 886.1 531.2 66.8
                Electric. Mach & App. 233.9 135.3 72.8
                Road motor Vehicles 652.2 395.9 64.8
                E. Raw Materials 2084.4 1346.2 54.8
                Synthetic Fiber 123.1 78.0 57.9
                Synthetic & Artificial Silk Yarn 130.0 69.8 86.2
                Fertiliser 316.2 237.0 33.5
                Insecticides 81.6 95.1 -14.1
                Plastic Materials 508.3 373.2 36.2
                Iron & Steel scrap 868.2 449.4 93.2
                Alum Wrought & Worked 57.0 43.8 30.2
                H. Others 4182.9 2727.8 53.3
                Total 13654.2 8917.6 53.1
                Excluding Petroleum Group 10620.8 7045.2 50.8
                Excluding Petroleum & Food Groups 9763.6 6452.3 51.3
                ================================================== ======================
                -- Provisional

                SOURCE: Federal Bureau of Statistics


                TABLE 14 MONTHLY EXPORTS, IMPORTS AND TRADE DEFICIT (MILLION $)
                ================================================== =============================
                2005-06 2004-05 Months Exports Imports Trade Exports Imports Trade Deficit Deficit
                ================================================== =============================
                July 1272.0 1996.6 -724.6 1183.8 1457.7 -273.9
                August 1408.2 2234.7 -826.5 1187.7 1475.2 -287.5
                September 1499.3 2322.4 -823.1 1113.4 1377.7 -264.3
                October 1329.3 2327.5 -998.2 997.8 1456.4 -458.6
                November 1120.2 2299.7 -1179.4 1329.3 2327.5 -998.2
                December 1470.1 2475.1 -1005.0 1130.0 1673.7 -543.7
                Jul-Dec 8073.1 13654.2 -5581.1 6521.6 8917.6 -2396.0
                ================================================== ============================
                SOURCE: Federal Bureau of Statistics


                TABLE 15 WORKERS' REMITTANCES (MILLION $)
                ================================================== ======
                July -Dec July-Dec % Change 2005-06 2004-05
                ================================================== ======
                Cash flow 2045.2 1942.9 4.0
                Encashment 10.0 3.2
                - Total 2055.2 1946.1 5.6
                ================================================== ======
                SOURCE: State Bank of Pakistan


                TABLE 16 FOREIGN EXCHANGE RESERVES - END PERIOD ($ MILLION)
                =================================
                Month Reserves
                =================================
                January, 2004 12006.5
                February 12586.2
                March 12581.1
                April 12504.7
                May 12430.2
                June 12326.1
                July 12093.7
                August 12150.3
                September 12328.0
                October 12252.5
                November 11776.5
                December 11962.9
                January, 2005 12751.7
                February 12669.00
                March 12783.00
                April 13000.00
                May 12419.00
                June 12613.00
                July 12609.00
                August 12143.00
                September 12002.00
                October 11704.00
                November 11320.00
                December, 2005 11656.00
                =================================
                SOURCE: State Bank of Pakistan


                TABLE-17 MONTHLY TRENDS IN EXCHANGE RATES AND PREMIUM (RS/US $)
                ================================================== ===========================
                Composite/InterBank Premium Open Market Rate Premium (Rs) Rate (%)
                ================================================== ===========================
                July 2003 57.7 58.3 0.6 1.0
                August 57.8 58.2 0.4 0.7
                September 57.8 58.1 0.3 0.5
                October 57.6 57.7 0.1 0.2
                November 57.3 57.3 - -
                December 57.4 57.4 - -
                January, 2004 57.4 57.5 0.1 0.2
                February 57.4 57.4 - -
                March 57.4 57.7 0.3 0.5
                April 57.5 57.8 0.3 0.5
                May 57.7 58.3 0.6 1.0
                June 57.9 58.4 0.5 0.9
                July 58.3 58.6 0.3 0.5
                August 58.8 59.1 0.3 0.5
                September 59.0 59.6 0.6 1.0
                October 60.0 60.3 0.3 0.5
                November 59.9 60.2 0.3 0.5
                December 59.5 60.0 0.5 0.8
                January, 2005 59.5 59.7 0.2 0.3
                February 59.3 59.5 0.2 0.3
                March 59.4 59.9 0.5 0.8
                April 59.4 59.8 0.4 0.7
                May 59.5 60.4 0.9 1.5
                June 59.7 60.5 0.8 1.3
                July 59.6 60.5 0.9 1.5
                August 59.6 60.2 0.6 1.0
                September 59.8 60.4 0.6 1.0
                October 59.7 60.0 0.3 0.5
                November 59.8 60.0 0.2 0.3
                December 59.8 60.1 0.3 0.5
                ================================================== ===========================
                SOURCE: State Bank of Pakistan


                TABLE 18 FOREIGN PRIVATE INVESTMENT (NET)
                ==================================================
                July-December 2004-05 2005-06 % Change
                ==================================================
                Direct 445.0 1103.3 147.9
                Portfolio 59.3 359.3 505.9
                Total 504.3 1462.6 190.0
                ==================================================
                SOURCE: State Bank of Pakistan


                TABLE-19: TRENDS IN PUBLIC DEBT (RS BILLION)
                ================================================== =================================== Debt Payable in Rupees 59.8 373.6 789.7 1575.9 1853.7 1978.8 2132.6 2268.5
                As % of i) Public Debt (38.5) (46.6) (47.5) (52.2) (49.5) (52.3) (52.8) (50.5)
                ii) GDP [21.5] [42.8] [42.3] [50.1] [38.4] [35.8] [32.6] [30.3]
                Debt Payable in F.Exchg. 95.6 427.6 872.5 1442.0 1891.3 1807.7 1907.5 1889.0
                As % of i) Public Debt (61.3) (53.4) (52.5) (47.8) (50.5) (47.7) (47.2) (45.4)
                ii)GDP [34.0] [48.9 [46.8] [45.8] [39.2] [32.7] [29.1] [25.3]
                Total Public Debt 155.4 801.2 1662.2 3017.9 3745.0 3786.6 4040.0 4157.5
                GDP (MP) 278.2 873.8 1865.9 3793.4 4821.3 5532.7 6547.6 7465.0
                Total Revenue 49.0 158.8 322.9 512.5 720.8 791.1 924.1 993.4
                Public Debt As % of i) GDP (MP) 55.9 91.7 89.1 84.7 75.1 68.4 61.7 55.7
                ii) Total Revenue 317.1 504.6 514.7 626.9 502.7 478.6 437.2 418.5
                ================================================== ===================================
                SOURCE: Debt Office, Ministry of Finance


                TABLE 20: EXTERNAL DEBT AND FOREIGN EXCHANGE LIABILITIES ($ BILLION)
                ================================================== ================================================== =========
                End June End Dec Item 1990 1999 2000 2001 2003 2004 2005 2005
                ================================================== ================================================== =========
                1.Public & Publicly Guaranteed Debt 18.2 28.3 27.804 28.165 29.23 29.875 31.084 30.742
                A. Medium & long term (Paris Club, 14.7 25.4 25.301 25.606 28.07 28.627 29.177 28.987
                Multilateral and Other Bilateral> 1 Year)
                B.Other medium & long term (Bonds, 2.7 1.6 2.373 2.302 0.976 1.226 1.636 1.412 Military & commercial)
                C. Short Term (IDB) 0.8 1.3 0.13 0.257 0.187 0.022 0.271 0.343

                2. Private Non-guarantee-Debt 0.3 3.4 2.842 2.45 2.028 1.67 1.342 1.289

                3. IMF 0.7 1.8 1.55 1.529 2.092 1.762 1.611 1.492

                Total External Debt (1 through 3) 19.2 33.6 32.196 32.144 33.35 33.307 34.037 33.523

                4. Foreign Exchange Liabilities 1.3 5.3 5.664 5.015 2.122 1.951 1.797 1.722 -
                Foreign Currency Accounts (1.1) (1.5) 1.733 1.1 0 0 0 0

                Total External Liabilities (1 through 4) 20.9 38.9 37.86 37.16 35.47 35.26 35.834 35.245
                ================================================== ================================================== =========
                -- Provisional

                SOURCE: State Bank of Pakistan


                UPDATED ON FEBRUARY 1, 2006 COMPARATIVE PERFORMANCE OF KEY ECONOMIC INDICATORS:

                ================================================== ================================================== ============
                Unit 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
                ================================================== ================================================== ============
                I. Real Sector Real GDP Growth % 4.2 3.9 1.8 3.1 5.1 6.4 8.4
                Agriculture % 1.9 6.1 -2.2 0.1 4.1 2.6 7.5
                Large Scale Manuf. % 3.6 1.5 11.0 3.5 7.2 18.1 15.4
                Investment % of GDP 15.6 17.4 17.2 16.8 16.7 17.3 16.9
                National Savings % of GDP 11.7 15.8 16.5 18.6 20.6 17.7 15.7
                Inflation 5.7 3.6 4.4 3.5 3.1 4.6 9.3
                -Food Inflation 5.9 2.2 3.6 2.5 2.9 6.0 12.5
                -Non-Food Inflation 5.6 4.7 5.1 4.3 3.2 3.6 7.1
                - Core Inflation % 6.2 4.4 4.2 3.6 2.6 3.7 7.6

                II. Fiscal Sector Revenue Collection (CBR) Billion Rs 308.5 346.6 396.4 403.9 461.6 518.8 591
                Fiscal Deficit % of GDP 6.1 5.4 4.3 4.3 3.7 2.4 3.2
                Public Debt % of GDP 100.3 94.8 82.8 77.7 72.7 67.7 61.7
                - of which foreign currency Denominated % of GDP 53.0 45.8 42.3 40.8 36.7 32.7 29.1
                Debt Servicing % of Total 64.0 63.8 57.0 51.1 35.7 31.3 30.2 Revenue

                III. External Sector Exports (f.o.b) Billion $ 7.5 8.2 8.9 9.1 10.9 12.4 14.5
                Imports (f.o.b) Billion $ 9.6 9.6 10.2 9.4 11.3 13.7 19.0
                Trade Deficit Billion $ -2.1 -1.4 -1.3 -0.3 -0.4 -1.3 -4.5
                Remittances Billion $ 1.1 1.0 1.1 2.4 4.2 3.8 4.2
                Current Account Balance % of GDP -4.1 -1.6 -0.7 0.1 3.8 1.4 -1.6
                Billion $ -2.43 -1.14 -0.51 1.34 3.17 1.31 -1.77
                Foreign Direct Investment Million $ 376.0 470.0 322.4 484.7 798.0 949.4 1524
                External Debt and Forex Billion $ 38.9 37.9 37.1 36.5 35.5 35.3 35.8
                Liabilities External Debt and Liabilities % of Forex Earnings 335.4 297.2 259.5 236.8 181.2 164.9 137.2
                Foreign Exchange Billion $ 1.7 1.3 3.2 6.3 10.7 12.3 12.6 Reserves

                IV. Money & Capital Market Weighted Avg. Lending Rate % 15.4 14.0 13.7 13.1 7.58 5.05 8.2
                Credit to Private Sector Rs Billion 103.0 18.0 48.6 53.0 168.0 325.0 390.3
                Stock Market (KSE Index) 1991=100 1055 1521 1366 1770 3403 5279 7450.1
                Market Capitalisation Rs Billion 286 392 339 408 746 1357.5 2036.7
                $ Billion 5.7 6.7 5.8 6.8 12.8 23.4 34.3
                ================================================== ================================================== ============

                SOURCE: Ministry of Finance, Islamabad


                (UPDATED ON 30-01-2006) KEY ECONOMIC INDICATORS:

                ================================================== ===========================
                July-December
                ================================================== ===========================
                Items Unit 2004-05 2005-06 % Change
                ================================================== ===========================
                Large-scale Manufacturing % - - -
                Inflation % 8.8 8.4 - -
                Food % 12.6 7.6 - -
                Non-Food % 6.2 9.1 - -
                Core Inflation % 6.6 8.0 -
                Tax Collection (CBR) - Direct Tax 262.5 323.0 23.1 -
                Indirect Tax 78.5 104.2 32.9 -
                Sales Tax 184.2 218.9 18.9
                Import Related Rs Billion 109.4 132.1 20.8 69.3 80.7 16.5
                Domestic 40.1 51.3 28.3 -
                Customs Duty 51.2 61.5 20.1 -
                Central Excise 23.6 25.3 7.4
                Exports $ Million 6521.6 8073.1 23.8
                Imports $ Million 8917.6 13654.2 53.1
                Trade Balance $ Million -2396.0 -5581.1 132.9 (Deterioration)
                Current Account Balance $ Million -833.0 -3016.0 -
                Remittances $ Million 1946.1 2055.2 5.6
                Foreign Investment (Total) $ Million 445.0 1103.3 147.9 -
                FDI $ Million 59.3 359.3 505.9 -
                Portfolio $ Million 504.3 1462.6 190.0
                FOREX Reserves (End December) $ Billion 12.7 11.7 -
                Exchange-Rate (Avg. December) Rs/US$ 59.9 59.8 0.2 (Appreciation)
                Stock Market (KSE Index) Index 6218.4 9556.6 53.7
                Market Capitalisation Rs Billion 1696.1 2709.5 59.7 $ Billion 28.5 45.9 61.1
                Weighted Avg. Lending Rate (Nov) % 4.0 9.8 -
                ================================================== ===========================

                SOURCE: Ministry of Finance, Islamabad
                Last edited by Simply Seema; Mar 1, 2006, 11:50 PM.

                I said na

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                  #9
                  Re: Pakistan's Economy :Midyear Review

                  Mywish, ab khush ho.
                  So our life
                  is a drop of dew -- and yet
                  And yet...

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