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December 8, 2010

Economic turnaround unlikely in 2011


December 8, 2010

LAHORE: There are bleak chances of economic recovery in 2011 rather if present political economic situation persisted then the condition would be further worsened, which may lead to sovereign financial default of the country.
In the current scenario, there are no economic recovery chances till 2015 if the government will not come out with some concrete economic re-boosting policy and planning and later implement them. Factually, the present government is not interested to resolve the economic issues of the country, which is badly hitting everyone creating unemployment and pushing people below the poverty line by every passing day.
This was the crux of the observations made by participants in Jang Economic Session titled ‘2011-Is Economic Recovery Possible?’ here on Tuesday. The panel comprised of Economist Dr Akmal Hussain, Senior Vice President Lahore Chamber of Commerce and Industry (LCCI) Sheikh Muhammad Arshad, former Chairman Pakistan Hosiery Manufacturers Association (PHMA) Shahzad Azam Khan, former President Lahore Stock Exchange (LSE) Dr Yasir Mehmood, Director Farmer Associates of Pakistan (FAP) Rabia Sultan and former Vice Chairman Pakistan CNG Association Shuja Anwar. The hosts were Skindar Hameed Lodhi and Intikhab Tariq.
Dr Akmal Hussain said the country was heading towards sovereign default against the IMF loans. He said the government crossed all the limits of internal borrowing as the SBP also warned it of crossing the ceiling while lending from commercial banks had also reached crucial stage, which caused the availability of financing to the private sector as well. He said that in current situations, Balance of Payment deficit would also grow while the government had already failed to meet the IMF conditions of lowering down the budget deficit and imposition of RGST. He forecast the budget deficit will cross 6.3 per cent by closing of this fiscal year while the political parties are already opposing the RGST. He was of the view

that the government did not left any way out to comeback to road of economic recovery. He suggested the government should ask the Western world for swapping the debt for development purpose only since Pakistan was an ally in fighting their war against terror. The Western world would reap the benefits of it without any cost while the Pakistani economic loss crossed over $30 billion since the war started while defence expenditures also grow, he said.
To bring the country on the path of economic recovery over $20 billion would be needed for infrastructure development, reconstruction of flood affected areas, energy facilities and irrigation setup, he added. This economic stimulus package is crucial for Pakistan’s economy and must be initiated as early as possible, he stressed.
Sheikh Arshad said there were hopes that export target would be met with the condition of availability of electricity and gas to the industry, remittance would grow with some positive impact on stock market. These are only three positive expected aspects for 2011 while the rest of economy would continue crawling. He said that the government already failed to meet the first quarter revenue generation target and it would be further worsened by closing of the fiscal year. He was of the view that in the absence of the electricity and gas, the economic recovery was impossible. He said the infrastructure has been already destroyed after floods while agriculture production was also hit by it. He said the fiscal position of the government was very tight while annual debt servicing reached $6 billion, which affected the development projects as well. He said in the absence of development budget, purchases by the government were halted, which closed a number of industry or reduced the production. He feared that imposition of RGST on five zero rated sectors might also hamper the export target. He suggested the government to use 2011 for planning and come up with a solution.
Shahzad Azam Khan said there was no positive indicator of economic recovery in country or even till 2015. He said no government official or even the prime minister was able to give timeframe of an end to energy crisis. He said in the absence of energy the production had declined, which has been adding to unemployment in the country. Similarly, the government had raised the mark-up to higher side and now it was costing over 19 per cent to the private sector compared to only one per cent worldwide. In such a scenario, industrial loaning by the commercial banks was halted while they preferred to give loans to the government, he said. He said the government plea to control inflation by raising the mark-up rate was also a failure as it was growing by every passing day.
Dr Yasir Mehmood said that there were some hopes as the textile sector claiming to add over $4 billion in its export this year. However, events regarding imposition of RGST in the next one and half months would matter a lot in the country’s economic and political situation, he said adding that imposition of the RGST also created uncertainty in the country and the economy. He said that there was also a hypothesis that the government would pack-up on the RGST issue. He said the RGST mystery would clear many things about the future course of action of the government and expose its economic policies.
Rabia Sultan said the country has huge untapped mineral and other natural resources but human resource were negligible to explore it. She said hopes have been smashed now and 2 per cent growth may also not be achieved. She said due to wrong policies of the successive governments, billion of rupees worth water was wasted in recent flood, which could be used for both agriculture and cheapest electricity generation, which directly benefit every Pakistani. She said the country was lacking in economic policies while the stakeholders were never take onboard while making policies. She was of the view that till the attitude to ignoring the stakeholders in policymaking continued the disaster would continue. She said that if the optimum use of available resources would be ensured then 2011 could be a good year for the economic recovery of the country.
Shuja Anwar said the global recession has not hit Pakistan’s economy as much since it was limited export oriented. He said lack of intention on government behalf was the reason of present economic situation of the country. He said there was no positive intention of the government to uplift the economy thus there was not positive action expected in near future as well. He said revolutionary steps were needed at government side for improving the governance. If any such steps would not be taken then the financial system would completely collapse.

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