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| April 25, 2002 | Thursday | Safar 11, 1423 |
ADB report on economy generally favourable
ISLAMABAD, April 24: The fiscal balance that worsened in the first half of 2001-2002 is likely to further deteriorate in the second half as expenditure on mobilisation of troops on the eastern border with India since December 2002 is reflected in the budget, says the Asian Development Bank (ADB).
The overall economic growth for 2001-2002 is likely to be about 3.5 per cent, an improvement on last year’s growth of 2.6 per cent, it further stated.
The ADB released here on Wednesday its latest projections — “Pakistan Economic Update (July 2001-March 2002)” — also said Pakistan economy seems to have weathered well the effects of the post-September developments and global recession. Output in the manufacturing sector has not been significantly affected by global recession, and the farming sector also has adjusted to continuing conditions of drought.
Money supply increased by 9.6 per cent compared with 4.3 per cent in the same period of the last year. The discount rate was lowered from 14 per cent in June 2001 to 9 per cent by February 2002, and the annual rate of return on six-month Treasury Bills declined from 12.9 per cent up to 6.4 per cent. However, the impact of this policy on the lending rate of commercial banks was relatively small, with the average rate declining only from 14 per cent to 12 per cent. The SBP could pursue a relatively easy monetary policy in the first eight months of 2001-2002, because monetary policy was no longer dictated by the need to stabilise the exchange rate.
PRICE STABILITY: Price stability observed during the last nine months is also likely to continue, and the current financial year is expected to end with an annual inflation of about three per cent, which is substantially below last year.
Tax collection may improve due to increase in imports and revival of economic activity, but that will only partially offset the impact of higher defence spending. “We expect the overall fiscal deficit to exceed 5.5 per cent of GDP.”
The downward trends in exports, particularly in value terms, observed in the first nine months of 2001-2002 are likely to continue in the final quarter. But the trend should be turning around so