Pakistan's economy has grown at seven percent: Salman
WASHINGTON (October 23 2007): Advisor to the Prime Minister on Finance and Economic Affairs Dr Salman Shah has said that Pakistan's economy has grown at an average rate of almost seven percent per annum over the last four years and positioned as one of the fastest growing economies in the Asian region.
Speaking at the annual meeting of the boards of governors of the World Bank (WB) and International Monetary Fund (IMF), he said that the size of Pakistan's economy had more than doubled (from 58 billion dollars to 132 billion dollars) and per capita income almost doubled (from 438 dollars to 847 dollars) during the last seven years.
"Prudent macroeconomic policies and wide-ranging structural reforms underpinned Pakistan's economic turnaround and six/seven years of consistent and transparent economic policies along with economic reforms have transformed Pakistan into a stable and resurgent economy", he said.
"How to sustain the ongoing growth momentum within a stable macroeconomic environment is the biggest challenge going forward. Linked with this are the challenges of job creation, further reducing poverty and meeting the MDGs targets, strengthening the country's physical infrastructure to support seven to eight percent growth in the medium-term and, most importantly, how to reap the benefits of demographic transition that is currently taking place in Pakistan", he added.
Dr Salman Shah pointed out that Pakistan's economy continued to gain traction as it experienced the longest spell of its strongest growth in years, and added the outcomes of the recently concluded fiscal year indicated that Pakistan's upbeat economic momentum remained on track.
He said that economic growth accelerated to seven percent in the fiscal year, which concluded on June 30 at the back of robust growth in agriculture, manufacturing and services, and added Pakistan's economic growth had been notably stable and resilient.
The advisor to the Prime minister mentioned that Pakistan's real gross domestic product (GDP) had grown at an average rate of seven percent per annum during the last five years and over 7.5 percent in the last four years in running.
Compared with the other emerging economies in Asia, he said this had put Pakistan as one of the fastest growing economies in the region along with China, India and Vietnam. The good performance had resulted from a combination of generally sound macroeconomic policies, on-going structural reforms and maintaining consistency and continuity in policies, he added.
"Based on the performance of half-a decade of strong, stable, resilient and broad-based economic growth, we are confident that Pakistan will continue to be a high mean low variance economy over the medium term", he said, and referred to the following other important developments of the fiscal year, which ended on June 30:
-- A sharp pick up in overall investment, reaching at a new height of 23 percent of the GDP.
-- Overall budget deficit remained at the target of 4.3 percent of the GDP.
-- Across of all measures vulnerability to external shocks, Pakistan's debt profile had improved significantly - public debt declined from 56.9 percent to 53.4 percent of the GDP and the external debt and liabilities declined from 29.4 percent to 27.1 percent of the GDP.
-- Highest ever-foreign investment flows at 8.4 billion dollars, emerging as a single largest source of external finance after exports.
-- The expatriate Pakistanis remitted 5.5 billion dollars, the highest ever in the country's history.
-- Exchange rate continues to remain stable despite widening of trade and current account deficit.
-- Foreign exchange reserves continue to rise and are sufficient to provide import cover of almost six months; and most importantly we successfully launched a new 750 million-dollar 10-year 144 A Sovereign Bond in international debt capital market with seven times over-subscription.
These and other measures reflected a strong vote of confidence of global investors on Pakistan' current economic prospect and future economic outlook, he said.
He observed that the rapid and broad-based economic growth was essential for poverty reduction and improving income distribution. Strong economic growth, large inflows of workers' remittances and massive spending on social sector and poverty-related programmes in Pakistan in recent years resulted in sharp reduction in poverty, he said.
At the national level, headcount decreased from 34.46 percent in 2000-01 to 23.9 percent in 2004-05, depicting a substantial reduction of 10.5 percent over this period. Most importantly, rural poverty declined more that the urban poverty. The other indicators of living standards also exhibited significant improvement, he added.
"While Pakistan's economy continues to perform impressively and its economic fundamentals have gained further strength, there is no room for complacency", he said, and added that a relatively higher inflation, largely attributable to higher food prices and widening of current account deficit, owing mainly to slower growth in exports were key macroeconomic challenges confronting Pakistan today.
"The government has already taken various measures to address these two challenges and we believe that going forward, inflationary pressures is likely to ease further and the gap in external account is likely to narrow.
"Going by the trend of the last half a decade, Pakistan's economic outlook for the current fiscal year remains favourable even in the midst of global liquidity crunch and sub-prime mortgage issues. We have targeted a real GDP growth of 7.2 percent of the current year, ably supported by robust growth in agriculture, industry and services sector", he said.
"The current inflationary trend, largely attributable to higher food prices is likely to ease further during the current year. The process of fiscal consolidation along with improvement in quality of expenditure will continue as well as gap on external account will be narrowed further in the current fiscal year. Although the country's debt burden has declined substantially in recent years, effort to reduce it further is the key policy objective of the current fiscal year. Despite this growth performance, we are not complacent", he added.
Salman Shah said that Pakistan greatly valued its partnership and engagement with the Fund and WBG. "We look forward to continuing to work together to achieve our shared goal of reducing global poverty and promoting inclusive and sustainable development", he added.
"Global challenges are our shared responsibility and require global solutions, global resources and leadership and to meet the major challenges of our times, our international institutions have also to reform, improve their internal governance, adjust their business model and strategies to remain relevant and deliver effective results", he said, and added: "We fully support the strategic directions set out for the WBG by President Zoellick in his vision for an inclusive and sustainable globalisation".
The underlining principles and the framework clearly articulated the value proposition the WBG could offer to its diverse client segments through a more differentiated menu of products, services and support.
"We also welcome the reaffirmation to integrate group-wide services to bring synergy within all the institutions of WBG, improve internal governance, address issues of voice and under representation of the developing countries, and develop closer cooperation with other multilaterals to foster regional and global public goods in pursuance of its poverty reduction and development mandate.
"However, to be operationally successful and responsive to the differentiated and evolving demands across its membership, the strategy must retain flexibility and promote use of country ownership and the country systems, reduce non-financial costs of doing business with the Bank and, strengthen countries institutional capacities," he said.
He welcomed the initial progress made by the WBG in implementing its Clean Energy Investment Framework. While implementing this agenda, he urged the bank to strive for the right balance between access to modern energy services for the poor and the promotion of low carbon emission economy without in any way compromising its developmental and poverty reduction mission.
Business Recorder [Pakistan's First Financial Daily]
