The State Bank of Pakistan in its first quarterly report for the fiscal year 2012 has warned the missing growth target due to the number of economic issues currently being faced by the country.
The gloomy forecast in the quarterly report of SBP emphasizes that economy of Pakistan is going through its testing phase as it is not enjoying the favorable economic ambiance.
There are a lot of underlying problems with the Pakistan economy that the government is not paying attention to. The blend of internal and external economic factors are haunting economic managers of the country to pursue the economic achievements of previous fiscal year FY11.
The factors which contributed towards economically successful year of fiscal year FY11 included higher international commodity prices, IMF’s exorbitant program, healthy financial inflows, currency stability and phenomenal growth in exports, but all these blessings happened in previous year seems now a daydream.
The previous fiscal year proved to be a “Year of textile” as the sector achieved new heights of the history by lifting up the overall exports of the country to the highest level. But, the ongoing recessionary scenario in United States & European Union coupled with lower cotton prices has wiped out the hope of Pakistani exporters to repeat the last year sensation once again. The foreign investors are showing resentment due to several internal issues like power crisis, law & order concerns and highest level of corruption.
Moreover, the financial inflows have also dried up relatively amid squeezed relationship with United States and weak economic position of major European countries. The only respite supporting the current account of Pakistan is money sent by expatriate Pakistanis in the form of remittances.
On the other hand, the import bill is bubbling gradually majorly attributed to inflated import bill of oil and now fertilizer. Moreover, the extravagant borrowing of government from banking system has also led to the sluggish growth in private sector due to crowding out effect.
The weak position of Pakistani Rupee due to deteriorating reserves, is also posing a risk to the SBP projected level of inflation and monetary easing. Moreover, the only beneficiary of monetary easing at current stage would be the government as it has borrowed aggressively from the banking system leaving no benefit for the private sector.
The agriculture sector of Pakistan also remained disturbed in last two years due to devastations caused by flood and heavy rainfall. However, it still performed better than expectation but lower food prices and higher local fertilizer prices could perturb the sector going forward.
On the other hand, the industrial sector is going through several challenges arising from energy crises and crowding out. Hence, government might face intricacy to achieve its target growth. In a nutshell, government is likely not to achieve its GDP growth target of 4 percent.
The repayment of $1.2 billion to the IMF is scheduled in first half of 2012 and it is anticipated that foreign reserves would face a major brunt going forward. Moreover, keeping in view the upcoming election, the fiscal deficit is expected to widen as ruling party would try to focus on subsidies to gain the soft image among masses.
Economic managers should take vital steps to come up with further reforms which are dire needs of the country.
http://www.halaltamweel.com/2012/02/02/News/Economic-warnings-need-attention/3640/Story.aspx
