ISLAMABAD, Dec 31: The government is projecting higher growth in 2003 due to higher investment and increased government’s development spending, says Prime Minister’s Adviser on Finance Shaukat Aziz.
“Next year we also expect considerable reduction in poverty due to continuation of reforms”, he stated.
Talking to Dawn he said that various bold economic decisions, which were taken during the last three years, have started to show results for improving the overall economy.
“Pakistan has established credibility in the economic management and has a will to tackle fundamental economic issues”, the adviser said.
He pointed out that further confirmation by credit rating agencies — mainly by New York based Standard & Poor’s and Moody’s International, will help the government to improve its bilateral and multilateral relations with the donors.
One of the important tasks of the government in 2003, he pointed out, will be to boost local and foreign investment. “While various trends have improved, we obviously need to also remove various irritants in pushing agriculture which is a key driver for growth and poverty alleviation”, Aziz said.
Similarly, he pointed out, that Small and Medium Enterprises (SMEs) will have to be given a jump start in terms of providing them more funds for further loaning during 2003. “Then the housing and construction sector will be given more attention during next year”.
Responding to a question Shaukat said that there was a need for more investment in the sectors like oil and gas and textile. He conceded that investment has been a major issue which needed to be addressed properly. “Perhaps we have to offer more possible incentives and remove various existing impediments to attract investment”, he said.
Aziz said that there had been some good trade and business activities in the past which needed to be accelerated in 2003 so as to provide some relief to the common man. “This relief should hopefully be possible because of pursuing prudent economic policies during the last three years”, he said adding that still the country has to go a long way to substantially improve various economic indicators.
“There had been some improvement in these economic indicators but more needs to be done to adequately remove poverty”, he said hoping that the new government will continue to provide more development funds.
He said that development budget has been increased from Rs116 billion to Rs166 billion during the last three years and, “I am sure this funding will continue to be increased”.
Asked about any new IMF loan programme, Aziz said that the ongoing $1.3 billion Poverty Reduction Growth Facility (PRGF) will be the last programme in Pakistan.
“The way we have enhanced our foreign exchange reserves to the level of $9.3 billion, and remittances at $1.78 billion in the first five months of 2002-03, we do not think we need another IMF programme”, Aziz believed.
Talking about the improving stock market, he said, it was clearly a good omen and reflected increased liquidity in the market, lower interest rate and the stable exchange rate.
Another important factor, he pointed out, was the increased corporate profit and it was highly likely that Karachi Stock Exchange (KSE) will be the best performing market in the world. “The improving stock market will lead to more inflow of domestic and foreign investment for the creation of new jobs”, Aziz said.
The good performance of the stock market, he said, was also the result of extensive reforms undertaken by the Security and Exchange Commission of Pakistan (SECP) including reforms of stock exchanges, corporate governance and disclosure, takeover regulations and the improvement of stock exchange management.
Responding a question he said that 4.5 per cent GDP growth was likely to be achieved during the current financial year.
The Economic Adviser of the Ministry of Finance, Dr Ashfaque Hasan Khan when contacted told Dawn that the major effort of the government in 2003 will be to promote growth and investment. “And this will be achieved without sacrificing the macroeconomic stability”, he asserted.
The monetary policy, he said, was much easier today which meant that cost of capital was reducing to do business in the country. The State Bank, he pointed out, was not directly influencing the market but was indirectly giving various guidelines. “The central bank gives signals to the market by adopting an easy monetary policy”, he said.
For example, Dr Ashfaque said, that the continuous decline in treasury bill rates to as low as 4.4 per cent was clearly a signal to the banking institutions that investment in treasury bills was not a profitable venture any more. “Therefore, they will have to look for other avenues for their investment”, he added.
“In other words, the State Bank is asking the commercial banks that time has come to reduce lending rate to single digit”, he said.
He said that now commercial banks should go into the consumer and mortgage financing rather than only sticking to car financing.
This consumer financing of durable goods and mortgage financing will promote housing and construction activities”, he believed.
He said that the year 2003 will witness consolidation of reforms and further improvement of investment climate in the country.
“We are hopeful to do some thing concrete to alleviate poverty and improve our broad economic indicators”, Dr Ashfaque said adding that reforms which were undertaken during the last three years will continue to be pursued by the new political government in the larger interest of the country.
ISLAMABAD, Dec 31: The government is projecting higher growth in 2003 due to higher investment and increased government’s development spending, says Prime Minister’s Adviser on Finance Shaukat Aziz.
