KARACHI, Nov 11: Pakistan now plans to enter the international equity market after a successful entry in the international capital market, disclosed Dr Ashfaque Hasan Khan, director general of the debt office and economic adviser to the government, here on Friday.
In reply to a query during his lecture on “Pakistan’s Economic Future: Challenges and Opportunities”, Dr Ashfaque said irrespective of any government, Pakistan was now under an obligation to maintain financial discipline and live within the budget so that the value of its bond in the international capital market was not impacted adversely.
The lecture was organized by the South Asia Forum.
“Even otherwise, there is now a law which makes it mandatory for the government to show fiscal responsibility and maintain a strict discipline,” he pointed out. Pakistan, he said, was one of the few countries in the world to have such a law on its statute books.
“Five years ago we struggled to revive our growth and have now reached a stage when we want to sustain the growth tempo for the next five years so that the fruits of economic benefits trickle down to poorer section of the population,” he said.
He called budget deficit and current account gap “mothers of all economic problems” that plagued Pakistan’s economy during the 1990s. “Pakistan was reduced to a desperate borrower in the decade of nineties,” he recalled while pointing out that growing budgetary deficits left no option but to borrow from the domestic market and to seek foreign debts for narrowing current account gaps. “This added to debt burden and pushed up debt servicing to intolerable limits.”
Structural reforms were taken up to address the economic problems during the last five years which has narrowed down the budgetary deficit within sustainable limits, and Pakistan’s current account showed surplus for three consecutive years since 2001. “Investors’ confidence has been restored, economy has picked up, showing a high growth in 2003-04 and 2004-05, and government’s revenue — both tax and non-tax — has increased considerably,” he added.
But high growth had a price, Dr Ashfaque said while pointing towards the inflation, but added that the government had taken measures both on the demand management as well as on supply side to tackle the issue. He claimed that food inflation was being brought under control.
He also dispelled the general prevailing notion that the volume of Pakistan’s debt was on the rise despite government’s claim of reducing the debt burden. “The debt will continue to rise because there is a perpetual need to borrow to enhance our infrastructure facilities,” he explained, but asserted that the debt burden would remain within a stipulated prescribed ratio.
Under the law, he said, the government was bound to maintain a debt burden ratio of 60 with the GDP by 2008. A loan that expands the size of economy creates an affordable burden.
In another context, Dr Ashfaque said the unemployment problem was blown out of proportion. He quoted press reports according to which the production of manufacturing and construction industry in Karachi suffered a severe setback after a large number of Kashmiri and Pashtun workers left for their homes in the aftermath of the Oct 8 earthquake. “The labour market is tight,” he concluded.
