March, 24 2005	Thursday	13 Safar 1426

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ISLAMABAD, March 23: Pakistan’s total external debt has increased by $1.52 billion to $34.828 billion in the first half of the current fiscal year, from $33.307 billion on June 30, 2004. The Ministry of Finance released here on Wednesday mid-year review of Pakistan’s economy, that suggested the total debt and liabilities have also increased to $36.704 billion in the first six months of the current fiscal year, up by $1.45 billion from $35.258 billion of last year.

The finance ministry said the public and publicly guaranteed debt has also increased to $31.415 billion, up by $1.54 billion from $29.876 billion on June 30, 2004.

“Although the stock of external debt and liabilities have gone up, the burden of debt as percentage of the GDP or percentage of foreign exchange earnings continues to exhibit a declining trend,” said the ministry. Of this increase, the impact of revaluation (movement of euro and yen against dollar) has amounted to $433 million and the rest is accounted for the net inflows from the multilateral agencies and bilateral sources under project and programme loans.

The stock of external debt and liabilities as percentage of full-year GDP is, however, down from 37.2 per cent in end-June 2004 to 35 per cent in end-December 2004 and as percentage of estimated full-year foreign exchange earnings is down from 164.8 per cent to around 143 per cent in the same period.

It said the money supply (monetary expansion-M2) target has now been revised and estimated to grow by 14.5 per cent or Rs360 billion against budgetary target of 11.4 per cent or Rs280 billion, mainly because of higher inflation and higher credit expansion.

The rupee-dollar parity in inter-bank market stood at Rs59.5 per dollar on end-January 2005 as against Rs57.4 on the same period last year, reflecting a depreciation of 3.5 per cent. In the open market, the rupee depreciated by 3.7 per cent.

This depreciation has been attributed mainly to 36 per cent increase in non-food and non-oil imports and 38 per cent increase in crude oil import besides pre-payment of external loan and accelerating economic activity.

The finance ministry projected that current account deficit could rise to around 1.3 per cent of the GDP by end of the year. Due of widening of trade deficit the current account balance (excluding official transfers) was in deficit to the extent of $909 million during July-December of the current fiscal year as against surplus of $1.4 billion the same period last year.

It said the country’s trade deficit is likely to widen beyond target for the current fiscal year owing to much faster increase in imports than exports. Already in the first six months, the trade deficit amounted to $2.4 billion or 80 per cent of the full year target of $3 billion and up sharply from $723 million in the same period last year.

The inflation during first seven months (July-January) of the current fiscal year is estimated at 8.8 per cent as against 3.4 per cent in the same period last year. Food inflation is estimated at 12.3 per cent as against 4.0 per cent of last year.

Non-food inflation with 6.4 per cent is also higher side compared with 3.0 per cent in same period last year. The core inflation (non-food non-energy) has also moved up to 7.0 per cent as against 2.9 per cent in the same period last year.

The finance ministry said the persistence of high core inflation has compelled the State Bank of Pakistan to change its monetary policy stance from “accommodative” to “neutral” with gradual tightening of monetary policy.

The CBR target has been revised from Rs580 billion to Rs590 billion for the current fiscal year owing to better than targeted collection of Rs303.7 billion in the first seven months against a target of Rs292.5 billion.