November 12, 2006	Sunday	Shawwal 19, 1427

KARACHI, Nov 11: The State Bank of Pakistan is releasing its 2005-06 annual report with some delay by the end of this month after its board of directors approve the draft in the meeting scheduled in the next few days.

“The report is, of course, delayed but not inordinately,” a senior SBP official said while answering a Dawn query on Saturday. He reminded that there had been occasions in the past when annual reports were released even in January, after seven months of expiry of the outgoing year.

Delay in release of the SBP annual report is being attributed to change in the composition of the board of directors. Three directors completed their terms on the board and have been replaced with fresh nominees, while a fourth has also been changed. The re-structured board is meeting late this week and is expected to give its approval to the report.

The Economic Survey for 2005-06 is an official document of the government of the day and is based on nine months performance. The State Bank’s report, which normally should be released by September, covers the entire 12 months period of the outgoing year and is considered to be an independent and professional assessment by an institution whose freedom is guaranteed by a law and whose head, the governor enjoys a statutory term.

Keenly awaited, the SBP report for 2005-06 is expected to give an analysis of the economic performance in the first quarter of 2006-07 (July September) at a time when cotton production is estimated to have fallen short of the official target of 13.8 million bales to the expected 12.4 million bales; the sugar situation is apparently heading for a crisis as mills have not started crushing cane even in the second week of November.

The inflation is showing no signs of respite; high interest rates have made investment costlier and hence a big drop in private credit demand; textile exports and industry looks to be in deep crisis; the widening trade gap has started stressing the rupee exchange value and business circles now talks about the possibility of rupee devaluation.

Market reports suggest some defaults in auto-loans, consumer credits and personal loans and there have been complaints against more than half a dozen banks that have outsourced their recovery functions to agencies, which are using arm twisting and harassment tactics.

“Some foreign banks and a few Pakistani banks are levying service charge at the rate of five per cent a month on credits given against credit cards,” a businessman complained who said that cars and buses purchased against auto loans have also been picked up by the private agencies designated by the banks.

As in the previous reports, the State Bank did raise the issue of misuse of low interest loans by the speculators, profiteers, hoarders, the emergence of business cartels in the market, auto assemblers’ fleecing the customers and many other issues.

The general expectation in the business circles is that next State Bank report will also discuss at length the implication of consumer financing, implication of high interest rates on investment and back-breaking inflation.

The State Bank released its last report on economic performance during January to March 2006 period much after the presentation of 2006-07 budget in June and has then warned the government of “emerging macroeconomic imbalances” with a piece of advice for taking corrective policies.

“The risks include the possibility of an increase in inflationary pressures, the gradual weakness in fiscal indicators and the widening of current account deficit,” the report had then warned.

Now that many of these predictions of SBP’s third quarterly report--that covered economic performance of January to March and also for the fourth and last quarter and dropped broad hints on the 2006-07 budgetary policies impact--are proving correct, the businessmen and the public at large are anxiously waiting to share central bank’s perception on the emerging economic picture for the rest of the current fiscal year.

The recent incidents at Bajaur and its follow up at Durgai are apparently outside the pale of the central bank’s area of operation but the socio-economic and political impact of these happenings on business can easily be felt by all those who frequently interact with the businessmen.

Way back in 1990, when Benazir’s government was dismissed by late Ghulam Ishaq Khan in August, the State Bank delayed the release of its annual report for more than seven months when it was finally made public in January 1991. But within days, after its release the bank revised downward the GDP growth from 5.2 per cent given in the original report to 4.7 per cent. It had never happened before nor afterwards.

The State Bank of Pakistan Act 1956 has been amended several times and now it has taken a form under which the central bank is bound to issue an economic performance report for every quarter of the fiscal year. This report is presented to the legislature. As the things are neither the central bank is sticking to its schedule of quarterly release of the economic performance reports nor the legislators have ever bothered to discuss a single report.