HONG KONG, March 29: Pakistan is targeting up to $2.5 billion in asset sales and an equal amount of foreign direct investment each year to help bridge a growing current account deficit as the economy gathers pace, a top government official said on Wednesday.
The economy, projected to expand by 6.7 per cent in the current financial year to June and by 7.0 per cent next year, has seen an investment boom after sanctions were lifted and debts rescheduled as a reward for joining the US-led war on terrorism.
In 2005 portfolio inflows were estimated to be around $450 million, compared with an annual average of $150 million in the previous three years, as Pakistani stocks soared 51 per cent. This year they are up 21 per cent.
“We have tight deadlines for privatization ... for example before the fiscal year is out we should have road-shows for Pakistan Steel Mills, the gas companies, Pakistan State Oil and the OGDC,” Salman Shah, advisor to the prime minister on finance, told Reuters.
He said the government was aiming to raise $2-2.5 billion by selling state-owned assets and was seeking to attract a similar amount via foreign direct investments in oil and gas, power, construction, real estate and textile sectors.
Analysts say textiles, a mainstay of the Pakistani economy, are expected to see a stiff challenge from growing Chinese competition since the abolition of textile quotas, but Shah argues that Pakistan enjoys an advantage over its rivals.
“We have a real surplus in textiles. Domestic demand in China and India is so high that it may not be sustainable for them to be major players in the global textiles business.”
Shah, who was in Hong Kong to address a Credit Suisse investment conference, said he was not perturbed by the decline in foreign exchange reserves, which have fallen steadily since a record high in April last year.
“If some of your reserves go down because you are financing an expansion in the capacity of the economy, it is not a big deal as long as there are sufficient reserves to cover imports and the traditional indicators,” Shah said.
Routine debt payments and a rising import bill have seen reserves fall by over a tenth to $11.404 billion since April.
Foreign exchange reserve growth will also be sustained by healthy expatriate remittances, which were supported by a boom in the Gulf economies and the shift of flows to formal from informal channels, he said.
He said annual remittances would stabilize at the current $4.5 billion.
A recent international debt offering by Pakistan would help guide investment flows into the economy, Shah said.
Pakistan sold $800 million in a dual-tranche sovereign bond, its third foray into the international debt market since 2004 which attracted more than $2 billion in orders.
“This has helped in establishing a benchmark for long-term investments in Pakistan ... it will help FDI, portfolio investments and in our ability to make major flotations of equity in global markets,” he said.—Reuters
