February 1, 2002	Friday	Ziqa’ad 17, 1422

KARACHI, Jan 31: The costs of military mobilization to the border and the Line of Control (LoC) has already begun to worry economists. And though it is still difficult to figure out the numbers, analysts fear an overrun in the country’s fiscal deficit this year.

First targeted at 4 per cent, the government had scaled down the GDP growth rate to 3 per cent in the wake of the continuing drought and the events following September 11. Most analysts are now sanguine that the growth would pass that post and could climb up to 3.5 per cent. A report released by brokerage firm, Khadim Ali Shah Bukhari & Co. (KASB & Co) on Thursday, put the GDP growth estimate at 3.1 per cent. “The combined impact of the September 11 disruption, global recession and the looming war clouds with India will likely curtail GDP growth to 3.1 per cent,” the report said.

Analysts estimated that the country may have lost $110 million per month in exports between October 2001 and April 2002, which would culminate in exports shortfall of $650 to 700 million in the running fiscal. By contrast, the government has been making a dimmer projection of $1 billion shortfall in exports this year, with the target now set at $10 billion.

Pakistan’s exports suffered from the physical disruption of shipping due to the war in Afghanistan, global recession plus higher freight charges due to the imposition of war risk surcharge, analysts said, adding that the disruption and surcharge difficulties had now been removed, while the easing of quota restrictions and duties by the European Union and potential easing in the US should mitigate the impact of the global recession on Pakistani exports.

The adverse impact of lower exports, analysts say, had been mitigated by lower oil prices; larger official remittances and grants by the bilateral donors.

The import bill was cut by $554 million during first half, primarily due to lower oil prices and a huge 61 per cent upsurge in inflow of remittances, which stood at $982 million for the first six months of the current fiscal, a quantum leap from $609 million remitted by expatiates Pakistanis, through the banking channel in the same time last year. This being the blessing of crackdown on the illegal Hundi money transfer system.

“The September 11 incident triggered a paradigm shift in not only the political landscape in Pakistan, but it also greatly influenced economic fundamentals,” says Aqib Elahi Mehboob, Head of Pakistan Research at brokerage, KASB & Co.

Pakistan recently qualified for a $1.3 billion IMF Poverty Reduction and Growth Facility (PRGF). It also negotiated debt rescheduling with the Paris Club (on unprecedented favourable terms), which would result in saving of approximately $1.1 billion for the current financial year alone.

But for all that, analyst argued that not much was happening in the manufacturing sector. Textile production was feared to take a sharp