Courtesy: MALIK MUHAMMAD ASHRAF
Is Pakistan on track to becoming the promised Asian Tiger?
In a striking contrast to the situation two years ago the buzzword among the world lending institutions, international evaluating and rating agencies as well as some prestigious national bodies is that the economy of Pakistan is bouncing back strongly as a consequence of the robust and imaginative macro-economic agenda pursued by the government. Just when the government has started negotiations with IMF for the seventh review under the $6.4 billion Extended Fund Facility in Dubai, an international rating agency Standards & Poor’s has raised Pakistan’s credit rating outlook to Positive from Stable. Explaining the rationale for this up-gradation, the report says, “The positive outlook reflects our expectation of Pakistan’s improved economic growth prospects, fiscal and external performance and the supportive relationship of external donors over the next 12 months.” This evaluation follows a similar encouraging report by Moody’s Investor Service in March.
Not only these rating agencies but also Economist, a prestigious economic journal published from UK, has in its recent issue also painted a very rosy picture about economic recovery in Pakistan. It said: “Those in search of a thriving stock market, a stable currency market and low inflation would not normally pitch up in Pakistan. Yet Pakistan is enjoying a rare period of optimism about its economy. The economy is likely to grow by 4.7 per cent, the fastest rate in eight years. The government of Nawaz Sharif deserves credit for the new stability in the economy. It has stuck to an IMF programme and consequently foreign exchange reserves have doubled to $17.7 billion. The new stability is encouraging”.
Fixing an economy like Pakistan is probably the most excruciating and convoluted responsibility. The focus of the policies pursued by the government undoubtedly has been on building a robust and vibrant economy. These policies have produced very positive and verifiable results. When the PML-N government was installed, the GDP growth rate was 3 per cent which stands at 5.1 per cent currently. The budget deficit which was nearly 9 per cent at that time has been brought down to 4.9 per cent and the inflation rate which hovered around 9 per cent in 2013 has been reduced to 5.77 per cent. The foreign exchange reserves stand at US$17.7 billion at the moment as against US$11.3 billion in June 2013. This performance and economic management by the government has been duly endorsed a New York based independent media company Bloomberg in an article published recently with these remarks: “Corporate earnings are soaring, stocks have surged and the currency is among the world’s top performers. Add to it the factors of lower oil prices, higher remittances and consumer spending. All these are pushing growth towards a seven-year high. The long term benefits are huge despite organisational and political challenges that have continued to stand in the way.”
The IMF and World Bank are also on record to have endorsed claims of recovery by the government. The former IMF Chief of Mission in Pakistan Jeffery Franks recently made these observations on the economic performance of the government: “The overall economic situation in Pakistan is gradually improving. The forecast of 2.8 per cent growth rate during 2013-14 has been revised to 3.1 per cent by IMF which may be a bit on the conservative side. Inflation has been better than expected at around 8 per cent and balance of payments position has also shown upward trend. Foreign exchange reserves have gone up and IMF foresees further strengthening of the reserves. Revenues are coming in as we expected. We believe that by the end of the year Pakistan would likely meet the deficit target and bring down the deficit down to 5.5 per cent of GDP from 8 per cent of GDP last year.” The current IMF chief in Pakistan expressed similar views during first week of March: “The country has a good foundation for growth.” It is pertinent to point out that IMF has already issued six tranches of the agreed loan on the basis of its evaluations on the economy and the release of seventh tranche is being discussed currently.
Managing Director of World Bank who visited Pakistan in the recent past dilating on the economic situation in Pakistan remarked: “The increase in country’s reserves is a good sign. Successful review by IMF and rapid implementation of initial reform actions are positive signs.” The World Bank, reportedly, also has agreed to provide US$10.2 billion to Pakistan during the next five years for policy reforms in the energy sector, revenue mobilisation, governance, social sectors and investment in hydropower. Moody’s has also upgraded Pakistan’s credit ranking in view of the economic performance.
The State Bank of Pakistan in its monetary policy statement issued on 21st March said: “Government has succeeded in overcoming fiscal deficit and the economy is now on a more stable footing.” The Bank predicted that inflation would fall to as low as four per cent by the end of the fiscal year and the growth rate would surpass the 4.4 per cent record during the previous financial year. The Bank has twice announced reduction in the policy rates during two years. The endorsement of the success stories of the government policies in the economic arena by these international lending agencies and State Bank, surely lend currency to the claims of the government in regards to the revival of the economy.
Apart from the foregoing achievements, the government, honestly speaking, has shown remarkable sense of urgency and commitment in tiding over the energy crisis and when the Prime Minister says that the country would be out of this crisis by the end of 2018 one can hardly take an issue with his claims. Under the China-Pak Economic Corridor, China has committed to make an investment of $34 billion in the power producing ventures with a cumulative power generating capacity of 10,600 MW to be completed between 2017-18. Another 6,645 MWs of early harvest projects in the energy sector are on the actively promoted list.
The Prime Minister inaugurated 100 MW solar power unit at Bahawalpur on Tuesday which will come on stream by the end of December. Two more units with power producing capacity of 300 MW and 400 MW which were jointly inaugurated by the visiting Chinese President and Prime Minister Nawaz Sharif will also be constructed on the same site which will also become operational by the end of next year. These are all very auspicious developments and would go a long way in boosting the already buoyant economy. These achievements despite the formidable challenges and debilitating variables inherited by the government, are commendable to say the least. They promise a great economic future for Pakistan.