Thursday, May 1, 2003
Pakistan central bank sees 4.5% GDP growth in 2002-03
Reuters Karachi, April 29
Pakistan's central bank chief said on Tuesday he was optimistic economic growth would reach a target of 4.5 per cent in the 2002-03 fiscal year, adding that the Iraq war had scarcely affected the economy.
"We are quite optimistic," State Bank of Pakistan Governor, Ishrat Husain told Reuters in an interview. "Our own independent assessment shows we will be able to reach 4.5 per cent."
Husain said good rains, ending a long drought, had boosted the important agricultural sector, with production likely to rise by four or five per cent.
Large-scale manufacturing could grow by as much as six per cent in the fiscal year ending June, thanks to low interest rates and a sharp expansion in bank lending to individuals, especially for purchase of cars.
Exports were also on target to reach a target of $10.4 billion, he said, despite anecdotal evidence of a slight downturn in orders for leather garments and carpets in April because of the war in Iraq.
Husain said he had set aside $1 billion in case the war in Iraq had pushed up oil prices, but had not had to use the money as oil prices were now falling.
He said the country's strong balance of payments position had also enabled it to withstand external shocks, with the rupee showing no adverse reaction to the September 11, 2001 attacks on the United States, last year's tension with India, bomb attacks by Muslim militants or the Iraq war. "The economy has become more resilient," he said.
REFORMS
Husain said he hoped an increase in government development expenditure in 2003-04 would relieve "infrastructure bottlenecks" in the economy, and boost growth further.
"We hope that in 2003-04... we should be able to reach somewhere between five and 5.5 per cent," he said.
Husain said development expenditure should be financed through lower debt service costs, while at the same time reducing the fiscal deficit to four percent of gross domestic product in 2002-03 and 3.5 per cent in 2003-04. He added he was confident economic reforms would continue under the country's civilian government, despite initial fears it might take a populist stance after last October's elections ended three years of military rule.
Husain said there were more officials to deal with since the new government of Prime Minister Mir Zafarullah Khan Jamali, took power, but said the government's intentions were clear.
"There are more stakeholders now and takes more efforts to explain and to convince people," he said. "But so far there is no doubt in my mind that the prime minister is very much committed to the continuity of the economic policies and economic reforms."
After the October elections, both the State Bank and the International Monetary Fund warned Jamali's government against taking a more populist stance than the outgoing administration of military President Pervez Musharraf.
Husain said inflation was also under control despite a rise in the money supply caused by higher foreign exchange inflows.
He said inflationary pressure was held in check by a gradual appreciation in the rupee, declining food prices after the rains and lower oil prices. The average consumer price inflation from July 2002 to March 2003 stood at 3.39 per cent, official figures show.
"Our inflation target is four per cent," Husain said. "At present it is 3.3 per cent. It will be somewhere between 3.5 and four per cent at the end of June."
© Hindustan Times Ltd. 2002. Reproduction in any form is prohibited without prior permission