Strong ex­ter­nal ac­count – and more

Enterprise - - Snapshot -

The fis­cal year 2010-2011 tested Pak­istan’s econ­omy un­der ex­treme in­ter­nal and ex­ter­nal pres­sures. But the econ­omy started im­prov­ing in the sec­ond half of the fis­cal year and showed some signs of re­cov­ery, mainly driven by ex­ter­nal sec­tor buoy­ancy.

This is ev­i­dent from the over­all strength of the ex­ter­nal ac­count in the first ten months (July-april), along­side the con­tin­u­ing fall of cap­i­tal and cur­rent ac­count re­ceipts in the same pe­riod. Pol­i­cy­mak­ers are pay­ing lesser heed to re­quest the re­sump­tion of stalled IMF lend­ing pro­gram. As op­ti­mistic exports and re­mit­tances’ out­look, re­turn of for­eign in­vestors to stock mar­ket, re­cently lined-up for­eign di­rect in­vest­ment and ro­bust forex re­serves of $17 bil­lion have raised the spir­its of pol­i­cy­mak­ers. Of this amount, re­serves held by the State Bank of Pak­istan stood at $13.7 bil­lion and by the banks at $3.4 bil­lion.

The strong re­cov­ery of Pak­istan’s ex­ter­nal ac­counts is fur­ther af­firmed by the Asian De­vel­op­ment Bank, which re­cently be­came third party guar­an­tor to en­sure that in­vest­ment in Pak­istan is fully pro­tected. This is termed as highly pos­i­tive for at­tract­ing FDI in ma­jor en­ergy sec­tors.

Of­fi­cials of the Trade De­vel­op­ment Au­thor­ity of Pak­istan have fore­cast trade agree­ments with half a dozen coun­tries this year for boost­ing exports un­der prod­uct-wise strate­gies and de­vel­op­ment of sus­tain­able new mar­kets. The pref­er­en­tial trade agree­ment signed with In­done­sia in Septem­ber is an im­por­tant in this di­rec­tion. This will counter to some ex­tent the mas­sive de­cline in over­all for­eign in­vest­ment. The tar­geted FDI in­flows will help in­dus­tries like oil and gas, ed­i­ble oil, steel-mak­ing, au­to­mo­bile pro­duc­tion and telecom­mu­ni­ca­tions. The Board of In­vest­ment af­firms the FDI es­ti­mates of more than half a bil­lion dol­lar to flow in be­fore De­cem­ber this year.

Pak­istani stocks be­ing the cheap­est in the re­gion have also started turn­ing for­eign port­fo­lio in­vestors into net buy­ers from the ear­lier net sell­ers.

Cat­e­gor­i­cally, the 14.5 per­cent rise in exports by the end of 2010-2011 was con­sti­tuted by 62 per­cent buoy­ancy of the tex­tile sec­tor and 17 per­cent of the food sec­tor, while leather prod­ucts con­trib­uted 11.5 per­cent to exports growth.

The other im­por­tant fac­tor of work­ers’ re­mit­tances is ex­pected to cross $11 bil­lion this year, based on the recorded $9.1 bil­lion mark in the first ten months (July-april of 2010-11) as against $7.3 bil­lion last year. The re­mit­tances from Saudi Ara­bia recorded mas­sive growth of 36.7 per­cent, fol­lowed by EU (38.3 per­cent), UK (34.9 per­cent) and UAE (25.7 per­cent).

The cen­tral bank sees the ro­bust ex­ter­nal ac­count to lead to a “build up in re­serves and thus net for­eign as­sets (NFA)”; a con­tribut­ing fac­tor to fi­nan­cial mar­ket sta­bil­ity. Ex­perts stress on the need for an eco­nomic re­form agenda, in or­der to bring about a sub­stan­tial and mean­ing­ful change in the dis­mal state of the econ­omy. It is im­per­a­tive to strive for fis­cal con­sol­i­da­tion, re­duce fis­cal deficit and de­velop the in­fra­struc­ture and the over­all environment to at­tract greater in­vest­ment. With­out im­prove­ments on these fronts, only a strong ex­ter­nal ac­count will not be suf­fi­cient for the growth of the national econ­omy

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.