Editorial
Maintaining the growth momentumREPORTS suggesting that the current fiscal year would end with a lower than targeted GDP growth rate of seven per cent are disturbing. The reason for this reversal is said to be significant declines witnessed in the output of cotton and sugarcane. The government believes that the better-than-expected rice crop and good minor crops, plus increased hydel power production by Wapda and better performance by the financial sector during the year will help it maintain the high growth momentum begun in 2004. Then, GDP growth crossed the six per cent mark for the first time in almost a decade and was accelerated further in the following year to over eight per cent. This means the government hopes that the growth for the year would still be nearer to seven per cent if not on target. This appears to be an overly optimistic view because even growth in large scale manufacturing (LSM), which had contributed significantly to the high growth rates of the previous two years, appears to have slowed down.The LSM sector, which accounted for 70 per cent of total manufacturing output and 52 per cent of total output of the industrial sector in 2004-05 and was responsible for 27 per cent of the contribution of commodity producing sectors to overall GDP in that year, has fallen way behind the levels achieved in the last two years. During July-August in the previous two years, large-scale manufacturing grew by 28 per cent and a little over 13 per cent respectively but stagnated at 7.6 per cent during the same period in the current fiscal year. On the other hand, with inflation still biting into incomes, it is hardly likely that the financial sector would be able to perform profitably. Meanwhile, the trade gap is widening by the day and is projected unofficially to show a deficit of around nine billion dollars by year-end. In addition, the budget deficit is also expected to increase. This will certainly bring the rupee under pressure and further fuel inflation. This in turn will nibble at economic growth, making it even more difficult for the growth rate to cross even the six per cent mark.One would agree with the government’s assessment that the earthquake was not likely to have any significant impact on the overall economy because the regions affected by the disaster were the least developed areas of Pakistan and had very little by way of economic assets or economic activity. It is also likely that the inflow of a huge amount of resources and at a fast pace in these regions for relief, rehabilitation and reconstruction may create enough economic activity to accelerate the overall GDP growth in the country. But then the associated inflationary pressures are likely to prove a handicap causing the growth rate to be adversely affected. One had expected that the upswing in the growth rates witnessed in previous two years would be sustained in the current year as well because of the claims of the government that macroeconomic stability achieved some three years ago was sustainable, that economic management had improved tremendously meanwhile and that the country was now entering the second phase of reforms after successfully completing the first phase. This is not happening. Therefore, one would like the government to take a closer and more analytical look at its fiscal and monetary policies, especially those which are fuelling inflation and causing the trade gap and consumer credit to increase.Dawn
Ecnec approves Rs183.6bn projects
ISLAMABAD, Dec 14: The Executive Committee of the National Economic Council on Wednesday approved 29 development projects with an estimated cost of Rs183.6 billion. The projects will be executed in the next fiscal year as part of the Public Sector Development Programme-2006-07. Details
Pakistan joins Cairns Group
HONG KONG, Dec 14: Pakistan has joined the Cairns Group representing agriculture exporting countries belonging to developed and developing nations in the ministerial meeting of the group on Wednesday, thus becoming 18th Cairns’ memberThe group brings together developed and developing countries from Latin America, Africa and Pacific Asia region. It has been an influential voice in the agriculture reform debate since its formation in 1986, and has continued to play a key role in pressing the WTO members to meet in full the far-reaching mandate set in Doha. Details
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