Pak­istan's cen­tral banker sees 8pc growth on ter­ror­ism fight

The Pak Banker - - FRONT PAGE -

Staff Re­porter

Pak­istan's cen­tral bank chief sees the coun­try's eco­nomic growth almost dou­bling to 8 per­cent as politi­cians unite to bat­tle ter­ror­ism in the wake of a child mas­sacre at an army-run school last month.

"I'm op­ti­mistic be­cause this is the first time in many years that the po­lit­i­cal par­ties are strug­gling in uni­son to find so­lu­tions," Ashraf Mah­mood Wathra, 59, said Mon­day at his wood-pan­eled Karachi of­fice, his first in­ter­view since he was ap­pointed in April as the third head of the State Bank of Pak­istan in four years.

"They seem to be very se­ri­ous." Op­po­si­tion par­ties ended five months of street protests against Prime Min­is­ter Nawaz Sharif after Tal­iban mil­i­tants killed 134 stu­dents on Dec. 16 in one of the coun­try's worst ter­ror at­tacks. Wathra didn't give a time­frame for growth to reach 8 per­cent, up from 4.1 per­cent in the year ended June. Pak­istan's econ­omy last grew more than 8 per­cent in 2005. Sharif has strug­gled to re­vive the econ­omy since tak­ing of­fice in May 2013 as ter­ror­ism and po­lit­i­cal dis­cord hin­der ef­forts to pri­va­tize state-run com­pa­nies and en­sure a steady power sup­ply. Growth will pick up to 4.3 per­cent this fis­cal year from an av­er­age 3.8 per­cent over the past four years, the In­ter­na­tional Mon­e­tary Fund pro­jected last month.

"Eight per­cent growth is pos­si­ble but not im­me­di­ately," said Yawar-uz-Za­man, vice pres­i­dent at Sha­jar Cap­i­tal Pvt. in Karachi. "Pro­vided we con­tinue elim­i­nat­ing ter­ror­ists, which will en­cour­age for­eign and lo­cal in­vest­ment, we may achieve this tar­get in five years."All po­lit­i­cal par­ties agreed to change the con­sti­tu­tion to en­sure that mil­i­tary courts can hold quick tri­als for ac­cused ter­ror­ists, Sharif said in a Jan. 2 state­ment. It re­it­er­ated re­cent com­mit­ment to "de­grad­ing, dis­man­tling and de­stroy­ing all forms of ter­ror­ism," mov­ing from a decades-long pol­icy of tar­get­ing mil­i­tants that strike in Pak­istan while in­di­rectly sup­port­ing those that at­tack abroad.

For­eign di­rect in­vest­ment rose 19 per­cent from a year ear­lier to $423 mil­lion in the five months since June, when the Pak­istani mil­i­tary be­gan bombing mil­i­tants in tribal ar­eas near the Afghan bor­der.

"Pak­istan could open up to business and for­eign in­vest­ment in­ter­est once again" when ter­ror is quelled, Sakib Sherani, chief ex­ec­u­tive of­fi­cer at Is­lam­abad­based re­search company Macroe­co­nomic In­sights, said by e-mail. "The war on ter­ror has done in­cal­cu­la­ble dam­age to Pak­istan's econ­omy since 9/11."

Ter­ror at­tacks have cost Pak­istan about $29 bil­lion in the three years through June 2014 and the $232 bil­lion econ­omy has lost $102 bil­lion since the U.S. in­vaded Afghanistan in 2001, the gov­ern­ment es­ti­mates.

Gov­er­nor Wathra, who has 35 years of bank­ing ex­pe­ri­ence, said the ad­min­is­tra­tion also needs to do more to im­prove pub­lic fi­nances. It scrapped its big­gest share sale in eight years amid the anti-gov­ern­ment protests and slump­ing oil prices.

"We cer­tainly missed our tar­get on the sale of OGDC," Wathra said, re­fer­ring to Oil and Gas De­vel­op­ment Co. "We ex­pect the di­vest­ment of Habib Bank to do ex­tremely well. The bank­ing mar­ket at­tracts a lot of for­eign in­vestors."

Pak­istan plans to gar­ner about $1.2 bil­lion by sell­ing a 42 per­cent stake in Habib Bank Ltd., the na­tion's largest by as­sets, as it works to­ward meet­ing goals un­der an IMF pro­gram.

Progress has been "broadly on track," the Wash­ing­ton-based lender said. It last month dis­bursed a $1.05 bil­lion loan, tak­ing to­tal re­ceipts to $3.2 bil­lion un­der the $6.8 bil­lion fa­cil­ity agreed in 2013.

It re­it­er­ated that cen­tral bank in­de­pen­dence is key for a bet­ter mon­e­tary pol­icy frame­work and called on the gov­ern­ment to al­low the bank full op­er­a­tional in­de­pen­dence with price sta­bil­ity as its main ob­jec­tive.

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