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    Pakistan's Economy

    With the latest sale of $20 million arms to Malaysia and also a chance of sale to SriLanka and the policies of themilitary government. We are doing good.


    The writer is an indian


    Pakistan’s India policy loses its credit with Wall Street
    Pramit Pal Chaudhuri

    Pakistan's economy is looking up again. But Islamabad and Wall Street differ on how high Islamabad can see. Pakistan's Central Banker Ishrat Husain, in the capital last week, said the military regime's reforms in governance "will be the foundation for the revival of our economy." In contrast, a report by credit rating agency Standard & Poor's argues Islamabad's foreign policy will do the most harm to its finances.

    There is agreement that Pak-istan's economy is no longer in free fall. Mr Husain has modest goals. Follow the IMF's dos and don'ts and in a year "get a track record that will position us for IMF concessional loans that will be automatically extended for three years." Pakistan will be able to end its present enslavement to drop-by-drop borrowing and get long-term funding from bodies like the Asian Development Bank. "We're on track," he says.

    S&P's Ratings direct report on Pakistan admits things are looking up. The government is mopping up money at home and foreign exchange remittances are steady. GDP growth is projected to be 4.5 per cent. Exports will surge 14.2 per cent. A bumper wheat harvest will keep inflation at 3.6 per cent. IMF figures are even rosier. Mr Husain sees a 13 per cent revenue increase thanks to an “unprecedented survey of taxpayers."

    Tellingly, S&P gives both India and Pakistan a B+ local currency rating. Says the firm's London-based Pakistan analyst, Ashok Bhatia, "The two countries are more or less in the same basket." Investment firm Jardine Fleming has given the same "neutral" investor weighting to both countries. Dutch bank ABN-AMRO is also bullish.

    Mr Husain sees Pakistan climbing the ladder of financial credibility thanks to the military regime's emphasis on governance. He ticks off how Islamabad has cleaned up its act in contracts and cronyism. "This is our single most important achievement of the past year," he says. He believes it will reverse Pakistan's "very poor" international image. "Governance is at a much higher plateau today."

    However, S&P sees Pakistan's main financial liability as politics. It warns that "US South Asia policy has shifted to [the] containment of Pakistan itself." Major "irritants" with creditors have been Islamabad's "support for the Taliban regime, its safe harbour for terrorist organisations, and its perpetration of violence acts within Indian territory." S&P foreign currency rating for Pakistan is B-.

    Bhatia says the West recognises "it can influence Islamabad only so long as it extends it some money." Plenty of strings are attached. Says the S&P report, "IMF-World Bank support was made contingent upon a de-escalation of Pakistan-backed violence in Indian Kashmir."

    Bhatia calls Husain's claims the "standard official line." S&P believes "geopolitical developments" will determine whether Pakistan will ever graduate form standby to long-term loans.

    Mr Husain cautiously says, "As economic managers we are sensitive to foreign policy concerns." One Wall Street analyst is blunter, "The balance in Pakistan is between Islamic hawkishness and fiscal needs." Islamabad talks peace when it is short of money and vice versa.

    Indian analysts say this reflects the fact that when IMF tranches are due, Washington's leverage over Pakistan is highest. One measure: see if Mr Musharraf waves the olive branch as vigorously after the second part of the IMF standby loan comes through this month.



    ------------------
    unity, faith, discipline
    Pakistan Zindabad

    #2
    may be india should pay off the military ruler in exchange of peaceful behaviour.

    Comment


      #3
      Good for Pakistan!

      Comment


        #4
        I had long predicted that the great CE would eventually turn round the economy, and this is the first solid proof of it. In just 16 months the military raj has brought Pakistan back from the edge and revived our economy. That is a feat that no "democratic" government did in the whole 11 years. The stats look good indeed:-

        "The government is mopping up money at home and foreign exchange remittances are steady. GDP growth is projected to be 4.5 per cent. Exports will surge 14.2 per cent. A bumper wheat harvest will keep inflation at 3.6 per cent. IMF figures are even rosier. Mr Husain sees a 13 per cent revenue increase thanks to an “unprecedented survey of taxpayers."


        FULL MARKS TO THE GOOD GENERAL!

        LONG MAY HE RULE!


        Comment


          #5
          mallik the military expenditure and debt
          servicing taking heavy toll on pakistan economy

          Debt constrains Pak economic growth'

          Cabinet likely to take up Debt Management Committee report today

          By Nadeem Malik

          ISLAMABAD: At about 105 per cent of gross domestic product (GDP),
          net public sector debt of Pakistan is among the highest of rated
          sovereigns, says Standard and Poor's in its latest report.

          The report reckoned that despite reliance on concessional financing --
          about 45 per cent of general government debt is owed to multilateral
          and bilateral creditors -- interest payments consume about 45 per cent
          of general government revenues.

          Additionally, reflecting Pakistan's many years of military rule, disclosed
          defence expenditures consume another 25 per cent of revenues,
          crowding out needed infrastructural and human development outlays.

          The twin burdens of net public sector debt, at 105 per cent of the GDP,
          and net public sector external debt, at 201 per cent of exports, leave
          Pakistan uniquely constrained, states the report.

          Pakistan owes $35 billion (excluding frozen foreign currency accounts) to
          foreign lenders, and Rs 1.7 trillion to domestic, with no immediate hopes
          of substantial export growth, investment and revenues.

          The Debt Management Committee (DMC), headed by Dr Pervez Hasan,
          believes that there are no quick-fix solutions. However, it supposes that
          a long-term debt relief, fast-track privatisation and stabilisation of
          macroeconomic indicators may create a situation by 2004, where
          Pakistan would be able to survive without further debt reschedulings.

          Similarly, the report estimates that macroeconomic balances and
          debt-to-GDP ratios will be stabilised by 2010, based on the above
          assumptions. The committee, which is likely to present it findings to the
          federal cabinet here today (Wednesday), deems that multilateral help is
          inevitable in this period.

          Without IMF support, no donor agency would offer any support in the
          short- to medium-term. Pakistan's average debt servicing on external
          debt at 64.9 per cent of total foreign exchange earning is higher than
          the heavily indebted poor countries (HIPC).

          The latest staff report of the International Monetary Fund, which has
          given a cross-country analysis of all the low and middle-income
          countries, South Asia region and HIPCs, clearly depicts that Pakistan
          should seek debt forgiveness from the official bilateral creditors to
          stabilise its external sector, as statistics show eerie similarities with the
          HIPCs' economic vulnerabilities.

          According to the IMF statistics for 1990-98, Pakistan's total debt
          servicing and interest payments on foreign loans were the highest among
          all income groups. In 1998, Pakistan paid 12.5 per cent of its GNP on
          debt servicing alone. This average for low-income countries (where
          Pakistan is currently categorised) was 3.1 per cent, for all developing
          countries it averaged 4.5 per cent, for South Asia 2.5 per cent and for
          HIPC it was just 4.4 per cent.

          In the case of interest payments on foreign loans, Pakistan consumed
          2.8 per cent of its GNP during 1998. This average for low-income
          countries was 1.3 per cent and for HIPC it was 1.7 per cent of GNP.

          Pakistan has gradually lost its foreign exchange earning capacity in
          recent years leading to more dependence on foreign debts. The share of
          Pakistani exports in the world has declined from 0.22 per cent to 0.15
          per cent, foreign direct investment (FDI) is shying away and remittances
          of overseas workers have substantially fallen in recent years.

          The regain of this loss would mean an additional amount of $5 billion per
          annum, and reliance on external debts would decline to the same
          magnitude. Rising burden of interest payments in the budget from two
          per cent of GDP in 1980 to well over seven per cent of GDP, against the
          backdrop of slow growth in revenues in 1990s, has squeezed
          development spending enormously.

          As a result, poverty and unemployment are also rising. The latest
          estimates suggest that 34 per cent people are living below the poverty
          line of one-dollar-a-day, and on two-dollar-a-day basis 85 per cent
          population falls below poverty line.

          The political instability of 1990s, and unsustainable costs of debt and
          defence expenditures have also compounded by poor resource
          mobilisation. From 1996 to 1999, real revenue growth, adjusted for
          inflation, was zero, while real debt continued to increase by six per cent
          per annum due to continued large-scale fiscal deficits and, increased
          rupee value of external public debt due to the devaluation.

          Senior officials said: "Clearly, the reduction of debt burden will be a long
          haul, but the committee is confident that with strong economic policies
          the debt and debt service burden could be reduced by half in
          eight-to-10 years, implying a reduction of public debt stock to revenue
          ratio to 300 per cent from 600 per cent and, a decline in the ratio of
          annual public debt service payments to revenues of 30 per cent."

          The debt committee claims that even in the short run of three years, a
          reversal of the past trends and some moderate reduction in debt burden
          of 15-20 per cent will be feasible, provided the government: (a)
          achieves its declared revenue objectives; (b) reduces fiscal deficit; and
          (c) brings down the domestic cost of government borrowing.

          Similarly, the investment to GDP rate is stagnant around 15 per cent and
          is constraining the recovery of growth. Higher government savings will
          make possible not only reduced deficit, but also higher development
          spending and thus helps economic growth.

          Comment


            #6
            That is only stating the debt ratio rvikz. Does it change the bright economic news of the present time? NO. So what's your point?

            It would interest you to look at the national debt of India as well...you might be surprised what you find.

            Comment


              #7
              why dont pakistan tie its economy to india
              and reapits benefits. why you have to import
              goods from thousands miles away paying many times when you can import from india and passing on the savings to benefit poor people.if china can trade with india why not pakistan?

              [This message has been edited by rvikz (edited February 14, 2001).]

              Comment


                #8
                what can we import from india? sugar..
                indian dept, more then three times of that
                of Pakistans? (india's debt is well over
                $100 billion)...
                rivkz, do you know that india wanted to
                import surplus electricity pakistan has,
                but was not able to pay the price we were
                asking?? who fulfilled the demand for sugar
                in india a year ago???
                There is nothing that india has and Pakistan
                does not.. We would rather do our business
                with countries that are really advanced in
                technology then us. We don't count india as
                a better country. You are as poor as us
                (actually indian people are more poorer then
                pakistanis). It is true that indian economy
                is doing better then pakistans for last few years,
                but it is not even close to the real good economies.
                a few year back, pakistan
                was among the fastest growing economies, and
                this potential is still there.. there is just
                a need to provide the enviroment to
                contribute, and Pakistan will again be on
                the right track


                [This message has been edited by PureLand (edited February 14, 2001).]
                There are only two forces in the world, the sword and the spirit. In the end the sword will always be conquered by the spirit. --Napoleon Bonaparte

                Comment


                  #9
                  Pakistan has never had a problem with commodities trading. Pakistan has enough resources to sustain itself in the food market. Theres plenty of rice and wheat and corn and cotton grown in Pakistan.

                  The problem for Pakistan lies in technology. While Pakistan has enough manpower, know-how and expertise to indulge itself in technical ventures, for some reason they dont. Perhaps its the inherent mentality of using American, japanese, or western products that does not allow our local tech industries to thrive. The only local tech industry that is thriving in Pakistan right now is the ordnance industry. And the prime reason that happened was because Pakistan has been effectively cut off from the rest of the world in the department, because of sanctions. I believe though that these sanctions may have been a God-send, since they allowed Pakistan to excel in this field, and now as we have it, Pakistan is manufacturing top of the line weaponry.

                  However, in other tech departments, Pakistanis have a hard time supporting their local products and industries. Pakistanis wouldnt be caught dead driving a Pakistani car. They wouldnt settle for anything less than a Sony TV. Anything that has a foreign label is automatically taken as a superior product, even though that might not fit well with Pakistani infrastructure.
                  I believe thats where we lose most of our foreign exchange. Its not as if Pakistan cannot make cars. Its not as if they cannot make TVs or stereos. They can make any and everything. But they spend millions and billions of dollars in importing these foreign products, thus shelling out a bulk of our forex. If the same things are made and marketed locally, they would create literlly millions of jobs, and the prices would be enormously less than their japanese and american alternatives. And more people would be able to afford these products. And consequently, technology will spread out to more and more people, thus reducing illiteracy as well.

                  Comment


                    #10
                    Assalaam Alaikum
                    ----------------

                    Asia Rice-Pakistan boosts sales, at Thailand's cost

                    By Sambit Mohanty


                    SINGAPORE, Feb 13 (Reuters) - Pakistan's aggressive marketing of rice at very competitive prices, mainly to African markets, may hit sales by Thailand, the world's biggest exporter of the grain, regional traders said on Tuesday.

                    "We are a bit concerned about the way Pakistan is currently boosting its market share in the main African rice markets," said a leading Thai grains exporter.

                    "Pakistan is able to export some of its lower and medium grades of rice at prices which we find extremely difficult to compete," the Bangkok-based exporter added.

                    Excess carryover stocks from last year had prompted a fall in Pakistani rice prices. In addition to that, Pakistan has a freight advantage over Thailand as far as supplies to African nations are concerned, traders said.

                    "Pakistan's rice traders are desperate to get rid of their surplus stocks. Not only their rice is low-priced, they also have a $4 to $5 a tonne freight advantage to Africa over Thailand for a vessel of about 12,500 tonnes," said another Thai rice exporter.

                    Regional grain traders said Pakistan was mainly selling 15 percent broken grades, 20 percent broken and 25 percent broken rice to the African markets.

                    PAKISTAN OFFERING AT LOWER PRICES

                    Regional grain traders said Pakistan was offering 15 percent broken rice to Africa at about $155 a tonne FOB while Thailand's lowest price offer for the same grade was about $165 a tonne.

                    "I will not be surprised if Thailand's loses quite a bit of its African market to Pakistan in 2001 due to this kind of price differential," said one Singapore-based grains trader.

                    Some grain traders said Thailand could fall short of its rice export target of six million tonnes set for 2001, about the same as in 2000, due to the stiff competition.

                    According to Karachi-based exporters, Pakistan is likely to export about 1.5 million tonnes of rice this year, about 200,000 tonnes more than last year.

                    "At these prices Pakistan might be able to capture even a large part of the Philippine market although the demand situation is not very clear there due to the recent political developments," said one grains trader.

                    The Philippines postponed talks in January to import an initial 200,000 tonnes of rice from Thailand and Pakistan because of the change in government in Manila.

                    PRICES SEEN HEADING DOWN

                    Grain traders are not only gradually giving up hope that global rice prices would firm, they are becoming increasingly certain that prices will not even remain at current levels.

                    "We are sure that international prices will fall further," said one Thai exporter. "Demand from Asian nations is very weak at the moment. There is no indication whether Indonesia would buy rice this year or not."

                    Another export said: "With India and Vietnam also trying to grab a part of the global market, it is almost certain that prices are heading downwards."

                    Indonesia's state commodity agency Bulog has said it had no rice import plans for 2001, although it expected private traders to import less than 500,000 tonnes in 2001.

                    "There is also a sharp fall in rice demand from Malaysia," said one Thai exporter. "They are still using from stocks which

                    piled up in the past few months because of increased imports."

                    In December, Malaysian officials had said the country was planning to halt rice imports to avoid an excess in supply ahead of the new crop when around 700,000 tonnes of local grain would be harvested. But there has been no word from the government since then.

                    ------------------
                    unity, faith, discipline
                    Pakistan Zindabad

                    Comment


                      #11
                      I pray that Allah makes Pakistans economic situation better. The only problem that Pakistan had was unstability and bad management. We have everything we need to develope, especially the minds. Its a matter of putting the 'pedal to the medal' as they say.

                      Apart from that I belive that the Info. policy, devolution plan as well as the tax reforms will make a big difference. Maybe our arms exports will decrease our defence budget since we will be earning valuabe forign excahange as well as money for the military. Its a win-win situation... insha'Allah. May Allah keep us on the right path!

                      Comment


                        #12
                        From today's Jang.

                        Debt committee supports capping of defence budget

                        Opposes expensive borrowing from IMF, World Bank, ADB; $21bn needed in four years for debt servicing; rules out default option; cabinet approves strategy

                        By Nadeem Malik


                        The secretary-general finance, who was also present, said the country is paying 7-9 pc interest rate in dollar terms on these commercial loans. Dr Ashfaq Hasan Khan, economic adviser to the Ministry of Finance and secretary of the debt committee, said the total stock of the external debt was $35 billion, half of which was accumulated in the 1990s.

                        ...

                        In addition, the country also owes Rs 1.7 trillion to domestic lenders. Finance Minister Shaukat Aziz said that huge debt mountain was the result of non-productive borrowing, policy slippages and gross mismanagement of past 10 years, squarely putting responsibility on the political governments of recent past.

                        ....

                        The Committee claims that successful policy enforcement will bring a situation by 2004, when the country will be able to live without exceptional financing of the International Monetary Fund (IMF).

                        The minister also proudly endorsed this rhetoric, while announcing that report of the Committee would be made public to have dialogue with stakeholders, including business community, general public and politicians.

                        http://www.jang.com.pk/thenews/index.html

                        Until 1990, Pakistan has done well and only after that it has gone deep in debt. If it is a problem that has grown only in the last 10 years, Pakistan certainly can come out of it in 5 years.

                        So it is 2004! Wish you all the best Pakistan!

                        [This message has been edited by kumarakn (edited February 14, 2001).]

                        Comment


                          #13
                          Analyse it:

                          Both India and Pakistan should get their a**es working on improving their financial situation. Just that Pakistan has to work a lil harder than India (which doesn't mean India is cruising safe)

                          Originally posted by PureLand:
                          what can we import from india? sugar..
                          indian dept, more then three times of that
                          of Pakistans? (india's debt is well over
                          $100 billion)...
                          Pakistan:
                          GDP: $344 billion (1997 est.)
                          External Debt $35 billion (1997)
                          Internal Debt $34.2 billion
                          Growth: 5.5%

                          India:
                          GDP: $1.54 trillion (1997 est.)
                          External Debt $94.7 billion (1997)
                          Internal Debt: $39.7 billion
                          Growth: 6%

                          rivkz, do you know that india wanted to import surplus electricity pakistan has, but was not able to pay the price we were asking??


                          No offence meant! But having electricity to give away is not a sign of a healthy economy. As my father used to say, "if the business stops needing funds, it is a sign of alarm". Similarly, the fact that pakistan was able to sell electricity was really because the industry had shrunk and the demand for electricity had gone south. This is true particularly for a developing country like India or Pakistan. (mind you Pakistan was not energy surplus, when it was growing at 6 percent 10 years back)

                          This is not something we all should be proud of, but should look at it as a dark period. Hopefully we will never be there again.


                          a few year(sic) back, pakistan
                          was among the fastest growing economies, and
                          this potential is still there.. there is just
                          a need to provide the enviroment to
                          contribute, and Pakistan will again be on
                          the right track
                          I hope so too! Wish you all the best!!


                          [This message has been edited by kumarakn (edited February 14, 2001).]

                          Comment


                            #14
                            why you have to import
                            goods from thousands miles away paying many times when you can import from india and passing on the savings to benefit poor people.if china can trade with india why not pakistan?

                            I suggest you check your geography books. Pakistan's main regional trading partners are China, Iran, the Gulf States, and the Central Asian Republics. Do you call them thousands of miles away huh?

                            We have higher economic and social standards than India, and that is confirmed by the statistics. Trade between India and Pakistan benefits India more than us as it gives India an easier reach to Central Asia. We have plenty of trading partners in the region, and no shortage of markets for our imports and exports.


                            What does India have to offer? Very little indeed as witnessed by the rapid Chinese invasion of your economy.

                            Comment


                              #15
                              KumarAKN, the info you gave above is
                              incorrect for the year 1997 --

                              Pakistan:
                              GDP: $344 billion (1997 est.)
                              External Debt $35 billion (1997)
                              Internal Debt $34.2 billion
                              Growth: 5.5%

                              India:
                              GDP: $1.54 trillion (1997 est.)
                              External Debt $94.7 billion (1997)
                              Internal Debt: $39.7 billion
                              Growth: 6%

                              -----------
                              Pakistan's debt in 1999 was $32 billion and
                              india's debt in 1999 is almost $99 billion
                              take a look at world fact book @ http://www.cia.gov

                              Pakistan's national budget is also 3.5 times
                              smaller then indian although we are more then
                              9 times smaller in population.

                              National Budgets:
                              india: $36 billion
                              Pakistan: $10 Billion

                              Also Industries are not on decrease in
                              Pakistan. In fact, there are more industries
                              in Punjab area now then before since some
                              have moved out of Karachi. The surplus electicity is a result of some of the largest
                              power plants on our rivers.


                              [This message has been edited by PureLand (edited February 15, 2001).]
                              There are only two forces in the world, the sword and the spirit. In the end the sword will always be conquered by the spirit. --Napoleon Bonaparte

                              Comment

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