-On the eve of Pakistan's National Day-
Pakistan Economy-Performance and Prospects
-Tariq Ali, Freelance Journalist,
Pakistan
Pakistan's economy has made significant
progress in fiscal year 2000-2001, July 2000-June 2001. This year has seen Pakistan
successfully restoring relations with the international community, acquiring high
credibility for its reform program, harnessing important resources at home and abroad, and
putting into motion a broad participative process towards the revival of the economy.
Given the difficult past that Pakistan's macroeconomic environment had reached by the end
of the last decade, the government pursued a combination of stabilization and structural
reform programs during the FY 200-1. These include comprehensive tax reforms, trade and
tariff measures; price deregulation across important sectors, such as, energy and
agriculture; privatization of major public sector corporations; financial and capital
market reform; measures towards improving governance and fiscal transparency; and,
dedicated poverty alleviation programs.
Stabilization and structural reform measures
undertaken the year have paid rich dividends. Sharp reduction in fiscal and current
account deficits, an impressive recovery in industrial production, reasonable increase in
tax collection, lower than targeted inflation, sharp increase in credit to private sector,
a modest growth in exports and remittances, and impressive build-up of foreign exchange
reserves have been the major success of last year.
Having achieved a major success on
stabilization front, the challenges for the medium-term have been to rekindle growth
through greater private sector participation and efficient public sector investment,
thereby increasing employment opportunities and reducing poverty; in addition to achieving
fiscal discipline so that the country's debt burden do not increase. It is in this
background that a medium-term macroeconomic framework was prepared covering the period
from 2001-02 to 2003-04, the salient feature of which include: taking the economy at
higher growth path, 5.2%-5.5%, while keeping inflation at about 5.0%; fiscal deficit to
decline further to 3.2% of GDP and current account deficit to decline to 1.3 percent of
GDP; social sector spending will continue to receive highest priority; and foreign
exchange reserves to reach slightly above $4.0 billion by 2003-04. It is believed that by
the end of the medium-term program Pakistan will regain its lost growth momentum and
macroeconomic stability on a sustained basis.
The current fiscal year 2001-02 is the first
year of the medium-term program. While fixing the targets of Pakistan's key macroeconomic
indicators for the current fiscal year, the impact of possible slowdown in global economy
in general and the US economy in particular was taken into account. However, the
unprecedented events of September 11 in the United States have unleashed new and
unpredictable forces that have substantially raised the risk of global downturn.
Developing countries may see their economic growth rates plunge. Growth in international
trade in 2001 may go one of the severest deceleration in modern times. As 2001 closed and
a new year just begun, the global economy is now balanced precariously between recession
and recovery. Pakistan, being a part of the global economy, can't remain immune to these
developments.
The events of September 11 have affected
Pakistan on two counts. Firstly, to the extent it is integrated with the world economy,
the sharp downturn is bound to affect Pakistan's economy. The slower pace of economic
activity in Pakistan's major trading partner countries, EU and US in particular, would
reduce their demand for Pakistan's products. As such, Pakistan's exports would be lower
than the targeted level. Secondly, with the shifting of the epicenter of the global events
to Pakistan, the country has once again thrust into the role of a front-line State. The
events of September 11 have not only disrupted the normal trading activities but have also
increased the cost of international trade. The disruption in international trade is likely
to cause a decline in exports and imports. Decline in imports is likely to affect tax
revenues as roughly 40% of these are dependent in imports. Foreign investment,
particularly in oil and gas sector and in information technology as well as privatization
program are likely to be affected.
As a result of the developments in exports
and imports, trade balance has improved considerably in the first half. Trade deficit is
reduced to $ 425.4 million from $921.7million in the same period last, thus registering an
improvement of almost 54 percent. With the improvement in trade balance, and surplus in
services account as a result of substantial increase in worker's remittances, current
account balance, without official transfers, registered a surplus of $110 million in the
first five months, July-November, of the current fiscal year as against a deficit of $800
million in the same period last year. With official transfers, the surplus in current
account jumps to $994 million as against a deficit of $437 million in the same period last
year. Worker's remittances were targeted at $1.3 billion in the current fiscal year.
During the first half of the current fiscal year, remittances amounted to $609.2 million
in the same period last year-thus registering an increase of 61.3 percent.
The sharp build up in foreign exchange
reserves was witnessed in the first half, July-December 2001, of the current fiscal year.
Gross reserves stood at $3159.6 million at the beginning of the current fiscal year. Of
which the State Bank of Pakistan, SBP, reserves were $1642.6 million and commercial bank
reserves with the SBP were $1517 million. As on January 28, 2002 gross reserves stood at $
4860.8 million, the highest level ever achieved in the country, that is some $1701.2
million was added to the reserves. In other words, gross reserves increased by almost 54
percent.
The sharp build up in foreign exchange
reserves strengthened Pakistan rupee viz US dollar. Pakistani rupee appreciated by 6.5
percent in inter-bank and almost 10% in open market since the beginning of the current
fiscal year and until January 28, 2002. The inflow of foreign investment in Pakistan has
been declining since 1995-96 for a variety of reasons including the saturation in
investment in power sector; the East-Asian financial crises of 1997; economic sanctions
and freezing of foreign currency accounts of May 1998; the IPP and the HUBCO issues,
particularly the way it was handled in the past; low levels of foreign exchange reserves
and threat of default on external payments obligations; and disarrayed relations with the
International Financial Institutions, IFIs. Over the last two years the government has
succeeded in removing the above listed constraints. For example, all the IPP issues
including the HUBCO one have been resolved; foreign exchange reserves have reached a
comfortable position; economic fundamental have improved and Pakistan has acquired high
credibility for its reform program from the IFIs; and stability in the exchange rate has
been restored. Investment climates have further improved because of Pakistan's enhanced
status in the global order. The events of September 11 have created, hopefully, temporary
difficulties as far as foreign investment is concerned. During the first half total
foreign investment stood at $148 million as against the target of $600 million for the
current fiscal year. Foreign Direct Investment, FDI, stood at $205.1 million and portfolio
investment has witnessed an outflow of $57.1 million. Almost 50 percent of the FDI have
come in oil and gas exploration and power sector followed by trade 6.7%; electronics 5.8%;
transport 4.8%; textiles 3.2%; communication 3.0% and all other sectors 24.5%. Because of
the reasons stated above Pakistan is expected to receive higher inflow of foreign
investment in coming years.
Many policy challenges have emerged as a
result of the events of September 11. Particularly, how to prevent people falling below
the poverty line, how to minimize the difficulties in trade and industry, what to do with
the war risk charges and travels advice. While Pakistan has done its best to address these
challenges, there are several things which are beyond its control. For example, the issues
like cancellation of export orders, increase in freight charges, imposition of war risk,
surcharge, delay in clearing Pakistani consignments at various ports and withdrawal of
travel advice. The international community must come forward and take necessary measures
to address its difficulties. Grant assistance is needed to help improve social indicators
and to create additional jobs in the rural areas and adjacent towers. This will help
preventing people falling below the poverty line. Pakistan has received grant assistance
and using these resources to improve social indicators and reduce poverty.
Notwithstanding the temporary difficulties
caused by the September 11 events, the structural reform program launched two years ago
will continue uninterrupted during the medium-term plan. The government's macroeconomic
policies will continue to focus on the consolidation of macroeconomic stability, revival
of economic activity, reducing the public debt burden, while directing expenditure efforts
at poverty reduction and social sector development. The maintenance of a market-based and
competitive
Exchange rate will remain at the core of the
exchange rate policy while the functioning of the foreign exchange market will be
strengthened. Monetary policy will continue to focus on containing inflation and
accumulation of reserves to reduce external vulnerability.
Text courtesy: Embassy of Pakistan,
Kathmandu.
Constitutionalism, in this
sense, sets limits on the power of government and the people
-Dr. Alfred Diebold, Chief, FES, Nepal
Office
Constitutional system is the bedrock of
democratic governance. A constitution basically involves three cardinal elements. First,
it describes the rights and duties of citizens including their rights to participate in
the institutions of governance. Second, constitution deals with the distribution and
devolution of institutional power within the state. And lastly, it also lays the
principles of governance of the state, the market, civil societies and international
regimes. The operating ideology and norms of the constitution is called Constitutionalism.
How can media promote the culture of Constitutionalism, which embody all these attributes?
I think, one can put a number of arguments in
defense of media's role in the promotion of constitutional democracy. There are enough
reasons to call media "Fourth Estate" or "Watchdog" of society. Media
often serve as an instrument of political education designed to elicit citizens' and
leaders' respect for legal, political and social norms. In case, constitutional compliance
is violated, media critically report the arbitrary use of political power and prescribe
the ground rules for constitutional behavior. They thus set the political conditions in
the functions of the constitution as effective and significant governing tools.
Constitutionalism, in this sense, sets limits
on the power of government and the people. Media also initiate public debates on the
rationale of governing mechanism and serves as a medium of political communication between
the people and the government. These functions establish the vitality of media in every
democratic country. I have briefly underlined the arguments how media can serve the nerve
of the political system at the theoretical level.
At the practical level, I would like to put
the context of Nepal. All the political parties and attentive citizens are taking about
"Constitutional amendments" as a means to resolve the political problems of
Nepal. In this context, to discuss about the "issues" requiring amendments makes
greater sense and, I hope, our discussion today would be able to identify and furnish a
number of vital points necessary to stimulate further discussion on constitutional matters
and build a consensus on the governing norms, mechanisms, processes and institutions. I
believe, our partner's efforts towards this end would substantially contribute towards
making Nepal a constitutional state--a state that is accountable to the needs and concerns
of its citizens. Nepalese media as a conscious part of civil society can promote people's
right to know and articulate their feelings to the highest political leaders. A
broad-based debate on constitutional issues can additionally help to establish a coherence
and unity between law and politics in Nepal. With these remarks, I would like to conclude
and thank you very much for your participation in our initiative.
Speech made by the author at a media
seminar held by Editors'/Publishers Federation last week. Chief editor. |
