ISLAMABAD, June 13: Following is the text of overview of the Economic Survey 2001-02, released here on Thursday:
The outgoing fiscal year (2001-02) has been the most difficult and challenging year for the world economy in general and Pakistan’s economy in particular. This year has witnessed the world undergoing cataclysmic changes. Many epoch-making events unfolded on the international and national scene which impacted economies around the world, including Pakistan. In particular, the events of September 11 and December 13 and their aftermath, and continuation of catastrophic drought conditions adversely affected the pace of economic recovery in Pakistan.
The world economy was witnessing synchronized slow down along with deceleration in trade growth and falling commodity prices since late 2000. To a considerable extent, this synchronicity was the result of common shocks, including the rise in oil prices; bursting of dot.com bubble and the rise in interest rates in the United States. They precipitated a sharp slow down in the US economy and with the reversal of an incipient recovery in Japan, the growth momentum in Europe also faltered. For the first time since 1974-75, the world’s major economies were decelerating in tandem.
The tragic events of September 11 and their aftermath further exacerbated the already difficult emerging situation on the global economic scene. By the end of the year 2001 the major growth poles of the world economy slipped into recession, causing serious damage to the economies of the developing countries. The latter have seen their economic growth rates plunge with export growth undergoing one of the severest deceleration in modern times. Lower growth in the developing countries would prevent millions of poor emerging from poverty in 2002. Instead, million of people will be added to the list of poor living below the poverty line.
The easing of macroeconomic policies in advanced countries, notably in the United States and in a number of emerging market economies, particularly in Asia, to combat downturn are paying dividends. Recent information suggests that the global slow down may be bottoming out and that the recovery would come sooner than later. The growth outlook for 2002 appears brighter and the developing countries, including Pakistan would benefit from the pickup of external demand.
Notwithstanding the recent “soft take off”, the events of September 11 have caused serious difficulties for Pakistan as it has witnessed its exports, imports, industrial production, tax revenue, foreign investment and privatization program badly affected. Its efforts at consolidating the gains of the last two years and taking the economy to a higher growth path have been interrupted.
Yet another epoch-making development of the outgoing fiscal year relates to the events of December 13 leading to the unprecedented massing of troops by India on Pakistan’s borders. Pakistan had to deploy troops in self defense resulting in an over-run in defense spending. This has seriously undermined Pakistan’s efforts towards further fiscal consolidation. Heightened tensions with India have also dampened investors’ sentiment and have adversely affected the pace of economic turnaround.
The continuation of catastrophic drought conditions during the year has been yet another exogenous shock, causing serious damage to agriculture for second year in a row. The acute shortage of irrigation water and substantially lower than normal rainfall have adversely affected the performance of major crops, preventing agriculture to contribute its due share in overall economic growth. The impact of drought has also been felt in electricity and gas distribution compounding the shock to the economy from the energy sector. Lower reservoir levels in both Mangla and Tarbela and lower releases of water from these reservoirs resulted in a shortfall of hydel generation, forcing WAPDA to purchase expensive thermal electricity from IPPs and thus, generating negative value addition in this sector for three years in a row.
Notwithstanding the exogenous shocks of extraordinary nature discussed above, Pakistan’s economy has demonstrated greater resilience, thanks to the wide-ranging structural reform program which was put in place for over two and a half years. These reforms have enhanced the capacity of the economy to withstand the adverse impact of exogenous shocks. When compared with the performance of major economies in different parts of the world, Pakistan’s overall economic performance has been reasonably good during the outgoing fiscal year. Pakistan’s key economic fundamentals have improved but at the same time some weak areas continued to be a source of concern. These developments are summarized in the ensuing pages.
A modest pickup of growth in the midst of serious multifaceted challenges is one of the major achievements of the outgoing fiscal year. The real GDP grew by 3.6 per cent in fiscal year 2001-02. It may be noted that the real GDP was originally targeted to grow by 4.0 per cent with agriculture and manufacturing growing by 2.0 per cent and 6.2 per cent, respectively. The continuation of drought and the events of September 11 and their subsequent developments compelled the government to revise the growth target to 3.3 per cent with agriculture and manufacturing growing by 1.9 per cent and 3.8 per cent, respectively.
The real GDP, growing by 3.6 per cent has surpassed the revised target. This growth was supported by a 1.4 per cent growth in agriculture, 4.4 per cent growth in manufacturing and 5.2 per cent growth in services. Two points need to be noted as far as Pakistan’s growth performance is concerned. First, Pakistan’s growth performance was better than many developed and emerging market economies. For example, as against the growth performance of Korea (3.0%), Singapore (-2.1%), Indonesia (3.3%), Hong Kong (0.1%), Malaysia (0.4%), Thailand (1.8%), Philippines (3.4%), Sri Lanka (0.4%), US (1.4%), Canada (1.5%) and Germany (0.6%); Pakistan’s growth performance stands out clearly. Second, when growth decelerated all around, it staged a modest recovery in Pakistan with little or no contribution coming from the single largest sector of the economy, agriculture.
The persistence of drought has prevented Pakistan achieving even higher economic growth. This fact becomes clear once we examine the performance of non-agricultural GDP. Pakistan’s non-agricultural GDP grew by 4.3 per cent in 2001-02 as against 4.2 per cent of last year. Drought has not only impacted agriculture but its impact has also been felt in electricity and gas distribution sector. Once we adjust the impact of drought, that is, excluding agriculture and value added in electricity and gas distribution, the real GDP grew by 4.7 per cent in 2001-02 as against 5.2 per cent of last year. What is important to note is that, the slower growth in real GDP over the last two years has been caused by catastrophic drought. Had there been no drought, Pakistan’s economic growth would have been around 5 per cent.
Another major achievement of outgoing fiscal year has been the sharp increase in the growth of real GNP. The real GNP grew by 5.4 per cent in 2001-02 as against 2.2 per cent last year, mainly on account of extraordinary increase in net factor income from abroad, which, in turn, is the result of a sharp increase in the inflow of workers’ remittances. With population growing by 2.2 per cent, the real per capita income grew by 3.2 per cent in 2001-02 as against almost zero growth of last year.
The sharp deceleration in inflation has been another major achievement of the year. Inflation, as measured by the changes in the consumer price index, stood at 2.6 per cent during the first ten months (July-April) of the current fiscal year as against the target of 5.0 per cent and last year’s achievement of 4.7 per cent in the same period. Food and non-food inflation stood at 1.4 per cent and 5.0 per cent, respectively as against 4.1 per cent and 5.3 per cent, respectively of last year in the same period. Inflation at 2.6 per cent is the lowest in three decades. Efficient monetary management, prudent fiscal operation, the better availability of food and essential consumer items, and moderate increase in international prices of key importables, such as sugar, edible oil, pulses and crude oil have been mainly responsible for keeping inflow low. Since inflation is a regressive and arbitrary tax and hurts the poor most, keeping inflation, and most importantly food inflation low, must be seen as a necessary part of an effective poverty alleviation strategy.
The overall developments in the monetary and credit sector have been satisfactory during the outgoing fiscal year. Money supply grew by 9.3 per cent during the first nine months (July-March) as against the annual target of 9.5 per cent. Almost 78 per cent contribution to monetary expansion has come from the strong build up in net foreign assets. Credit expansion to private sector appears low but the same is not true for the following reasons. First, the figures of monetary expansion or credit to private sector are on net basis (gross disbursement minus retirement). Higher credit expansion last year means more retirement in the current year. Since credit expansion was much higher last year, therefore, there was larger retirement this year. Second, there was accelerated retirement of export finance this year because of their declining rates. Thus, excluding export refinance, private sector credit expansion was higher than what is reported. Third, as a result of low prices of raw and lint cotton, credit requirements for cotton-related activities were low. Fourth, higher tax refund by the CBR improved the liquidity position of the businesses and as such their credit need were reduced to that extent. Fifth, private sector raised their funds by issuing TFCs and through the stock market. Thus, their dependence on banking sector for credit is declining. Once adjustments are made on these factors it would appear that credit to the private sector has been higher or at best, remained at last year’s level.
Pakistan’s stock market remained buoyant during the outgoing fiscal year. The KSE-100 index increased by almost 40 per cent during the first ten months (July-April). In fact, the Karachi Stock Exchange has been the best performing market during December 31, 2001 to May 14, 2002 among the 14 leading markets in Asia with rate of return of 41 per cent. The most important achievement of the year has been the significant improvement in Pakistan’s external account. Improvement in trade balance, sharp increase in the inflow of workers’ remittances and substantial increase in official transfers are mainly responsible for strengthening of external account. The current account balance (excluding official transfers) turned surplus to the extent of $ 913 million or 1.5 per cent of GDP during July-March 2001-02 as against a deficit of $ 746 million in the same period last year. However, including official transfers, the size of the current account surplus increased to $ 2095 million or 3.4 per cent of GDP as against a deficit of $ 82 million in the same period last year. Can Pakistan maintain a surplus in current account on a sustained basis? The answer depends on whether the flow of external resources including workers’ remittances can be sustained. This seems to be a difficult proposition at the moment.
The improvement in trade balance has been the result of relatively sharper decline in imports than exports. Exports in value terms registered a decline of 1.8 per cent and stood at $ 7.32 billion during the first ten months of the current fiscal year. Being a frontline state in the war against terrorism, Pakistan witnessed its trading activities disrupted as a result of the events of September 11 leading to war in Afghanistan. Pakistan’s export orders were cancelled, clearance of export consignments at various ports were delayed, obtaining new orders became even more difficult, shipment of exports postponed and cost of trading increased substantially because of the rise in freight and insurance charges. The depressed international commodity prices caused unit values of Pakistan’s major exports to decline in the range of 1 to 27 per cent. All these factors have impacted Pakistan’s export performance in value term.
Pakistan’s exports have nevertheless, expanded substantially in volume term. Exports of basmati rice in quantity terms were up by 7 per cent; cotton cloth, towel, bed wear, and readymade garments were up in the range of 12 to 26 per cent; and leather gloves and footwear were up by 12 to 39 per cent. Exports of petroleum products in quantity terms were up by 70 per cent. With firming of prices in international market as a result of recovery in global economy, Pakistan’s exports may rise substantially next year.
Pakistan’s imports also suffered because of the disruption in shipping and cargo services, and substantial increase in freight charges. These factors along with the decline in prices of POL products in international market and lesser import requirements of sugar and soyabean oil have led to a decline in imports by almost 7 per cent during the first ten months of the current fiscal year and stood at $ 8.2 billion. As a result of the developments in export and import, the trade balance improved by 34 per cent during the first ten months of the current fiscal year.
One of the key elements in improving current account balance has been the sharp increase in the inflow of workers’ remittances. Workers’ remittances were targeted at $ 1.3 billion for the fiscal year 2001-02 almost 20 per cent higher than last year. During the first ten months (July-April) remittances amounted to $ 1.865 billion as against $ 0.922 billion in the same period last year. Remittances not only doubled over last year but have crossed the annual target by $ 0.565 billion. If current trend continues, workers’ remittances may cross $ 2.2 billion by the end of the current fiscal year.
Despite difficult external environment the overall foreign investment, though falling short of the target ($ 600 million), increased substantially over last year. During the first ten months of the fiscal year foreign investment stood at $ 306 million as against $ 129 million last year - registering an increase of more than 100 per cent. Foreign direct investment stood at $ 308 million as against $ 259 million last year, thus registering an increase of 19 per cent. Portfolio investment has witnessed sharp inflow in recent months resulting in neutralizing almost all outflow of last year. With significant improvements in economic fundamentals on the one hand, and consistency and transparency in policies on the other, along with privatization program being more or less back on track, Pakistan may receive higher inflow of foreign investment in coming years.
Yet another most important achievement of the year has been the sharp build up in foreign exchange reserves. As on June 01, 2002, Pakistan’s total foreign exchange reserves stood at $ 5566 million, of which $ 3663 million was held by the State Bank of Pakistan and $ 1903 million was held by banks (other than SBP). More than $ 2.4 billion reserves were accumulated during the fiscal year 2001-02 of which, $ 2.0 billion were added to the SBP reserves and the remaining $ 400 million to banks reserves. The build-up in foreign exchange reserves is the direct outcome of the government’s macroeconomic policies that have been pursued over the last two-and-a-half years. Improvements in the trade and current account balances, substantial increase in private flows, availability of grant assistance and inflow of assistance from donor agencies are responsible for the reserves build up. The contribution of outright purchases in building reserves has been, at best, minimal. If Pakistan would not have taken enough measures to build up foreign exchange reserves it would have faced serious balance of payment crisis of its history after the events of September 11 and December 13. As a result of the strong build up of reserves, the vulnerability to external shocks has been reduced to a larger extent.
The sharp build up in foreign exchange reserves not only have provided much needed stability in the exchange market but have strengthened Pakistani rupee viz US dollar. Pakistani rupee appreciated by 7 per cent in inter-bank and almost 11 per cent in open market since the beginning of the current fiscal year.
While discussing the series of positive developments during the year, mention must be made of the significant reduction in Pakistan’s outstanding stock of domestic as well as external debt. Pakistan’s external debt and foreign exchange liabilities stood at $ 36 billion by end-March 2002 as against $ 37 billion by the end of last fiscal year. This shows a reduction of $ 1 billion of external debt and foreign exchange liabilities in nine months. As per centage of GDP, it has been reduced from 63.5 per cent to 58 per cent - a reduction of 5.5 per centage point in less than a year.
The Paris Club debt rescheduling/ re-profiling has been yet another milestone towards achieving debt sustainability. Unlike the standard ‘flow’ treatment, Pakistan received ‘stock’ treatment to its Paris Club bilateral debt. Pakistan has been the fourth non-HIPC country to get ‘stock’ treatment of its debt beside Egypt, Poland and Yugoslavia. The Paris Club debt rescheduling has provided substantial debt relief to Pakistan. As far as domestic debt is concerned, it has declined from almost Rs 1.8 trillion last year to Rs. 1.65 trillion this year - a decline of Rs 147 billion. As per centage of GDP, domestic debt has declined from 52.7 per cent to 44.3 per cent - a decline of 8.4 per centage points in one year.
The government has brought the issue of poverty alleviation to the centre-stage of economic policy-making, to which end a strategy to reduce poverty and improve income distribution has already been put in place. This strategy is based on the premise that sustained economic growth accompanied by macroeconomic stability is the most powerful mean of reducing poverty in the medium-term. Although growth is absolutely essential, focus on this alone is not sufficient to achieve poverty alleviation, for which direct programs have been launched. Despite difficulties in budget caused by the shortfall in revenue, the poverty-related expenditure continued to rise. As against Rs. 119 billion or 3.4 per cent of GDP last year, poverty-related expenditure increased to Rs 136 billion or 3.7 per cent of GDP - an increase of 17 per cent in a relatively difficult budgetary environment speaks of the government commitment to reducing poverty. Next year this expenditure is likely to increase by more than 18 per cent and may reach 4 per cent of GDP.
Pakistan has made considerable progress in many areas in a difficult environment during the year. While key economic fundamentals have improved, some weak areas continued to be source of concern. One of the weaker areas has been the growth in the economy. Although the economic growth has remained hostage to unprecedented drought for over two years, low levels of investment have nevertheless been responsible for keeping economic growth at a lower level. There is now considerable evidence that investment is one of the most important determinants of long-term economic growth. Both investment and growth decelerated in the 1990s which was a mirror image of the prevalent macroeconomic environment in the country. Investment declined from 19 per cent of GDP in early 1990s to 16 per cent on average, over the last two years - a loss of 3 per centage points. Growth has also lost ground by one-half during the same period.
How to raise investment level is a major challenge for the government over the medium-term. Although investor confidence has improved over the last two years much more will, however, be required to improve investment climate. There are three broad and interrelated elements that shape good investment climate: the overall macroeconomic situation, governance, and infrastructure. As regards the first element, a stable macroeconomic environment characterized by low inflation, low budget and current account deficits, and comfortable foreign exchange reserves, accompanied by wide-ranging structural reform program, make up one crucial set of ingredient for spurring investment and productivity growth. It has been commonly observed in developing countries that they start with macro reform but fail to move ahead with institutional and infrastructure improvements. As a result, the growth generated by macro reform peters out. Thus, what is required is that improvement in macroeconomic environment must be accompanied by concerted efforts in improving governance and infrastructure.
Turning to the governance component of the investment climate, bureaucratic hurdles, cumbersome labour laws, interaction with tax authorities, and other irritants have been the major problems in doing business in Pakistan. Although the government is making effort to address these issues, there are rooms for further improvement. There are two other dimensions that are linked with governance. First, the existing regulations and procedures, their effectiveness and transparency, and corruption associated with them. Second, the rule of law and enhancing transparency and accessibility of the legal system. The government is taking keen interest in streamlining regulations and procedures as part of its exercise in removing irritants. The government has also undertaken judicial reform aimed at strengthening the rule of law and enhancing the transparency and accessibility of the legal system by modernizing the court system at all levels. These efforts need to be expedited to improve investment climate.
Infrastructure is the third element of the investment climate issue. Uninterrupted power supply at competitive rates, good condition roads, rail and telecommunications network, efficient port operations, and quick custom clearance from the port are important ingredients of any country’s infrastructure. These areas require serious consideration of the government.
Investment climate plays a critical role in poverty reduction. A conducive investment climate benefits both the formal and informal sectors, and it is the latter where the poor often have the best chance of finding employment. Whereas conducive investment climate helps the formal sector to grow and create jobs, it also generates new demand for an expansion of the informal sector which benefits the poor.
Fiscal balance is another weak area that continues to be a source of concern. A general deterioration in public finances in Pakistan during the 1990s has caused serious macroeconomic imbalances and subsequent rise in public debt. Failures in enhancing tax revenues consistent with the growing expenditure requirements exacerbated fiscal imbalances over the period. Considerable progress has been made over the last two years to bring the fiscal deficit to a sustainable path. Fiscal deficit as per centage of GDP which used to average 7.0 per cent of GDP in the 1990s was brought down to 5.3 per cent last year. During the outgoing fiscal year it was targeted at 4.9 per cent. The events of September 11 and December 13 and their subsequent developments seriously undermined government’s effort to further reduce fiscal deficit. While the former is responsible for revenue slippages, the latter, leading to the military stand-off caused slippages on the expenditure side. Accordingly, the fiscal deficit for the outgoing fiscal year is provisionally estimated at 5.7 per cent of GDP. The underlying deficit for the fiscal year, however, still remains at 4.9 per cent because these slippages on revenue and expenditure sides are one-off element. For fixing fiscal deficit target for 2002-03, 4.9 per cent instead of 5.7 per cent, would be treated as base.
Notwithstanding the extraordinary events that undermined government’s efforts to further consolidate fiscal gains during the year, more durable improvements in fiscal performance must lie at the heart of structural reform program. Durable improvements require reforming the tax and tariff systems and their administration.
Tax administration plays a vital role in the success or failure of any attempt to reform taxation. It is in this view that a serious attempt has now been made to redesign tax administration on modern lines. Experts from the private sector have been inducted in the CBR at the top management level. A time-bound reform agenda of the CBR is likely to be announced shortly. The monitoring of the tax administration reform should be high on the agenda of the government over the medium-term.
A critical ingredient to successful adjustment is prolonged commitment to fiscal discipline. There is a general consensus that commitment to fiscal discipline can only come from a rule-based fiscal policy. A rule-based fiscal policy is considered essential for achieving long-run fiscal sustainability, maintaining fiscal discipline, and preventing potential future increases in public indebtedness. Given the difficult past that Pakistan’s macroeconomic environment had reached by the end of the last decade a rule-based fiscal policy would be highly desirable for restoring macroeconomic stability and promoting growth on a sustainable basis.
The wide-ranging structural reform programs which were put in place for over two and a half years are paying dividends. Pakistan has witnessed a modest rebound in growth, its vulnerability to external shocks has reduced, and its key economic fundamentals have improved. To ensure sustained high economic growth and resilience against external shocks, Pakistan needs to work towards achieving not only sound macroeconomic fundamentals but also sound structural fundamentals. Key to attaining these objectives is expeditious completion of the structural reform agenda.
Pakistan has witnessed a long and harsh winter in the 1990s. Through two-and-a half years of concerted efforts spring is now descending on Pakistan’s economic scene. The future of Pakistan is seen with optimism and hope. But at the same time, Pakistan is fully conscious that, in the past many opportunities were lost. The same should not be repeated.
The real GDP was originally targeted to grow by 4.0 per cent in 2001-02, with agriculture and manufacturing growing by 2.0 per cent and 6.2 per cent respectively. While fixing the growth target the continuation of drought like situation with lesser degree and some slowdown in global economy were anticipated. However, the persistence of acute shortage of water for irrigation purpose on the one hand and the events of September 11 and their aftermath on the other forced the government to revise growth target to 3.3 per cent with agriculture and manufacturing growing by 1.9 per cent and 3.8 per cent, respectively. Despite these difficulties, the real GDP growth staged a modest recovery to 3.6 per cent in 2001-02, as against the last year’s achievement of 2.5 per cent. This growth is supported by a 1.4 per cent, 4.4 per cent and 5.1 per cent growth in agriculture, manufacturing and services sectors, respectively.
The non-agriculture GDP grew by 4.3 per cent as against 4.2 per cent last year. Besides, agriculture, the value addition in electricity & gas distribution has also been adversely affected by drought. After adjusting the impact of drought i.e. excluding agriculture and electricity & gas distribution, the real GDP grew by 4.7 per cent this year as against 5.2 per cent in the last year. This implies that had there been no drought, Pakistan’s economic growth would have been around 5 per cent.
Agriculture sector remained hostage to unprecedented drought conditions, however, it managed to register a positive growth of 1.4 per cent as against negative growth of 2.6 per cent last year. This was mainly due to various measures taken by the farmers, including judicious use of water, exploitation of under ground water, improvements in cultural practices and overall better management. Major crops, though registered a negative growth of 0.5 per cent in 2001-02 as against the target of a decline of 0.2 per cent, have performed relatively well when compared with a decline of almost 10 per cent last year. Minor crops have grown slightly by 1.0 per cent in 2001-02 as against the growth target of 5.0 per cent and marginal increase of 0.1% last year.
The output in the mining and quarrying sector has surpassed the target of 2.5 per cent and grew by 3.8 per cent in 2001-02 as against 4.3 per cent of last year. Manufacturing sector witnessed modest growth of 4.4 per cent in 2001-02 as against 7.6 per cent of last year. Large-scale manufacturing grew by 4.0 per cent during the first nine months (July-March) of the fiscal year as against the revised target of 3.2 per cent and last year’s impressive growth of 8.6 per cent. Given the difficult regional and global economic environment, the performance of overall manufacturing as well as large-scale manufacturing sector has been satisfactory. Small-scale manufacturing on the other hand continued to grow by 5.3% in 2001-02.
The Services Sector has been growing at a faster rate than commodity producing sector of the economy for quite sometime. It has maintained the same trend in 2001-02 and grew by 5.1 per cent as against 4.8 per cent last year.
The real GNP grew by 5.4 per cent in 2001-02 as against 2.5 per cent last year, mainly because of 148.8 per cent increase in net factor income from abroad, which, in turn, is the result of a sharp increase in the inflow of workers remittances. The real per capita GNP at factor cost increases by 3.2 per cent in 2001-02 as against a marginal increase of 0.2 per cent last year. The per capita income at current market prices is estimated at Rs.26413 which is 9.2 per cent higher than last year.
The events of September 11 and December 13 and their subsequent developments greatly clouded the investment climate and affected investor sentiment. Total and fixed investment declined to 13.9 per cent and 12.3 per cent of GDP, respectively in 2001-02. Public sector investment declined to 4.7 per cent in 2001-02 from last year’s level of 6.3 per cent. This was in line with government’s conscious policy to create greater space for the private sector. Private sector fixed investment also declined, though marginally, from 8.0 per cent to 7.6 per cent of GDP. Had there been no extraordinary events during the year, private sector investment would have surged.
The national savings as per centage of GDP has increased from 15.0 per cent last year to 15.4 per cent in 2001-02, mainly on account of a significant improvement in the current account balance which eliminated the need for recourse to foreign savings to finance domestic investment. It may be noted that national saving rate has increased by 3.7 per centage points of GDP since 1998-99.
Agriculture is the mainstay of Pakistan’s economy. Nearly one-fourth of total output and 44 per cent of total employment is generated in agriculture. Like previous year, the catastrophic drought hit the agriculture this year as well. The acute shortage of water affected the performance of agriculture, which grew by 1.4 per cent in 2001-02, as against a decline of 2.6 per cent last year.
Amongst the major crops, the wheat production is estimated at 18475 thousand tonnes in 2001-02, as against 19024 thousand tonnes last year, showing a decline of 2.9 per cent. Cotton production decreased from 10732 thousand bales in 2000-01 to 10613 thousand bales in 2001-02 - a decline of 1.1 per cent. Rice production is also estimated to have declined to 3882 thousand tonnes in 2001-02, as against 4803 thousand tonnes last year, showing a decline of 19.2 per cent. Sugarcane production has however, increased by 10.2 per cent in 2001-02, and estimated at 48024 thousand tonnes in 2001-02 as against 43606 thousand tonnes last year. As regards the minor crops, Mung pulse production is higher by 10.5 per cent followed by mash pulse (7.4 per cent), masoor pulse (2.2 per cent) and potatoes (0.7 per cent). However, the Chillie production is down by 46.6 per cent, followed by onion (11.2 per cent) during 2001-02. Agriculture credit disbursement of Rs. 32.6 billion during July-March 2001-02, is higher by 12 per cent, as compared to Rs.29.1 billion over corresponding period last year. The fertilizer off-take stood at 2196.4 thousand nutrient tonnes in July-March 2001-02 or l
The growth target for large-scale manufacturing (LSM) for the year 2001-02 was set lower than previous year for two reasons. Firstly, as a result of 8.6 per cent growth in 2000-01, the base for large-scale manufacturing was already high. Secondly, the impact of possible slow down in global economy in general and the US economy in particular, was also taken into account. Accordingly, the large-scale manufacturing was originally targeted to grow by 6.5 per cent in 2001-02. However, it was revised again to 3.2 per cent in the wake of the events of September 11 and December 13.
The main contributors to the modest growth of 4.0 per cent in large scale manufacturing are petroleum group (18.7 per cent), food, beverage & tobacco group( 6.1 per cent) textiles & apparel group ( 4.4 per cent) and tyres & tubes (5.9 per cent). Nine out of eleven groups registered positive growth while the remaining two recorded negative growth. The individual items that registered positive growth are cotton cloth (15.2 per cent) and cotton yarn (4.8 per cent) in textiles group; cooking oil (12.9 per cent) and sugar (9.2 per cent) in food, beverages and tobacco groups; flakes & detergents (29.5 per cent) in chemical & pharmaceutical group, and LCV’s (13.0 per cent) in automobile group. The individual industries which show negative growth include air conditioners (76.9 per cent), bicycles (7.6 per cent), tractors (9.6 per cent), phosphatic fertilizer (49.5 per cent) and cosmetics (32.9 per cent). The mining & quarrying sector grew by 3.8 per cent during July-March 2001-02 as against 4.3 per cent last year. Main contributions came from coal and natural gas which grew by 2.5 per cent and 5.6 per cent, respectively.
During the first ten months (July-April, 2001-02), the net foreign private investment stood at $ 306.0 million as against $ 128.8 million in the same period last year, thereby, showing an increase of 137.6 per cent. This increase is mainly emanating from decline in outflow of portfolio investment from $130.2 million in July-April 2000-01 to only $1.6 million in the same period of last year.
Foreign direct investment was targeted at $ 600 million during the year. However, the events of September 11 and their aftermath created difficult investment climate. Foreign Direct Investment (FDI) increased by 18.8 per cent and stood at US $ 307.6 million during July-April, 2001-02 as against US $ 259.0 million in the comparable period of the last year. The United States accounts for 58.5 per cent of FDI inflows, followed by U.K (7.8 per cent) and U.A.E (5.8 per cent). The remaining amount of inflow is unevenly distributed among various countries. Almost 55 per cent FDI has come in oil and gas and power sectors, followed by trade, transport, storage & communication (21.3 per cent), chemical, pharmaceutical and fertilizer (5.0 per cent), and electronics (4.9 per cent).
The existence of widespread poverty in the midst of global prosperity is undeniably the most serious challenge confronting the world today. It is an inescapable fact that, at the start of the 21st Century, almost one - fifth of humanity or 1.2 billion people subsist on less than $ 1 a day. It is also a fact that the gap between the rich and the poor has widened over the years. Eighty per cent of global GDP of $ 30 trillion accrues to only 20 per cent of the world’s population (living in OECD countries) and the remaining 80 per cent of the people only have a 20 per cent share of the world income.
Poverty is a complex and multidimensional phenomenon, which goes beyond the notion of income, and encompasses social, economic, and political deprivations. Hence solution to poverty can not be based exclusively on economic policies, but requires a comprehensive set of well-coordinated measures. There is a growing realization that a world where a few live in comfort and plenty, while many live in abject poverty is neither just, nor acceptable. At the backdrop of this growing realization the leaders of 149 states met at the Millennium Summit of the UN and adopted the Millennium Development Goals (MDGs) which set the target of reducing poverty by on-half by the year 2015.
A consensus was developed at the Monterrey Conference held in Mexico in March, 2002 that each developing country is primarily responsible for generating growth and reducing poverty through sound macroeconomic policies and good governance. But at the same time it was recognized that no developing country can really succeed in the task of poverty reduction through its own efforts alone. In a world of increasing economic integration the success of the poverty reduction programs of developing countries depend critically on economic and financial policies of industrialized countries. An enabling international environment is required to foster growth in developing countries. To achieve the MDGs, a three-pronged strategy for external support has been advocated which includes: enhancing the quantum of economic assistance and its effectiveness, improving market access and providing meaningful debt relief.
Based on the requirements of 2150 calories, the Government of Pakistan has adopted the official poverty line in 1998-99 as Rs.650 per capita per month. According to the caloric-based poverty definition (headcount ratio), 28.2 per cent people in Pakistan lived below the poverty line in 1998-99. Poverty in Pakistan is largely a rural phenomenon as 32 per cent rural population lived below the poverty line as against 19 per cent urban population in 1998-99. The estimates of poverty for 2000-01 are at the finalization state and likely to be available in few months time. During the second half of the 1990’s income inequality in Pakistan remained, on average, unchanged with Gini Coefficient stagnating at 0.4. The ration of highest 20 per cent to lowest 20 per cent of household income remained, on average, at 8.
Keeping in view the factors responsible for slowing growth and rising poverty, the government has formulated a comprehensive economic revival program aimed at reviving economic growth and social development. In the same vein the government has adopted a multi-pronged approach to promote pro-poor economic growth and reduce poverty, which has been articulated in the Interim-Poverty Reduction Strategy, 2001-04. The core principles of the strategy include: (a) engendering growth, (b) implementing broad based governance reforms, (c) improving income-generating opportunities, (d) improving social sector outcomes, and (e) reducing vulnerability to shocks.
Large fiscal deficit has been the major source of macroeconomic imbalance in Pakistan. It is in this background that the reduction of fiscal deficit from 6.5 per cent in 1999-2000 to 5.3 per cent of GDP in 2000-01 is seen as a major achievement. Further fiscal consolidation was envisaged in fiscal year 2001-02 with a fiscal deficit target of 4.9 per cent of GDP. Prudent fiscal management, better tax enforcement and wide-ranging tax reforms including Tax Survey, initiated by the government, had set the stage for further deficit reduction. The events of September 11 and December 13 and aftermath, seriously undermined government’s effort to further reduce fiscal deficit. The events of September 11 adversely affected the performance of key economic aggregates, prominent among those are imports and industrial production. At the same time, exchange rate instead of depreciating has in fact appreciated to the extent of 7.0 per cent and inflation remained far below the target. Since, almost 40 per cent of the CBR revenue originates from imports, sharp reduction in the volume of imports along with the appreciation of exchange rate severely contracted the tax base. While the events of September 11 were mainly responsible for the revenue slippages, the events of December 13 leading to the military stand-off caused slippages on the expenditure side. Accordingly, the fiscal deficit for the outgoing fiscal year is estimated at 5.7 per cent of the GDP [See Table-5.3]. It may, however, be pointed out that the underlying fiscal deficit is 4.9 per cent of GDP for the fiscal year 2001-02 because these slippages are treated as one-off element. For fixing fiscal deficit target for 2002-03, 4.9 per cent instead of 5.7 per cent of GDP would be treated as base.
Pakistan public debt has grown by an average rate of 18 per cent and 15 per cent per annum in the 1980s and 1990s. As per centage of the GDP, public debt was 55.9 per cent in 1980, increased to 92 per cent in 1990, and crossed 100 per cent by mid-2000. By any standard, Pakistan public debt became unsustainable and the growing debt servicing liability made fiscal adjustment more difficult. Public debt consists of debt payable in rupee and debt payable in foreign exchange. Fiscal consolidation taken place over the last two years has started paying dividends. Public debt payable in rupee has declined in absolute term from Rs 1.7 trillion last year to Rs 1.6 trillion during the outgoing fiscal year-a decline of almost 5 per cent. As per centage of the GDP, it has declined from 50 per cent to 44 per cent-a decline of 6 per centage point in one year is unprecedented in the country’s history.
During the outgoing fiscal year 2001-02, the government has not only succeeded in arresting the rising trend in external debt but exchange rate appreciation to the extent of 7 per cent has also helped in reducing debt payable in foreign exchange by more than Rs 100 billion. It stood at Rs 1.97 trillion or 52.8 per cent of GDP in 2001-02, thus registering a decline of more than 7 per centage point of the GDP in one year.
Domestic debt in Pakistan is categorized into permanent debt (medium and long-term), floating debt (short-term) and unfunded debt (mostly national saving scheme-related). During the first nine years of the 1990s (1990-99), domestic debt grew by more than 16 per cent per annum. Considerable improvement on fiscal side during the last three years has succeeded in not only arresting the rising trend in domestic debt but it has actually declined by Rs 147.2 billion in 2001-02 -a decline of 8.2 per cent, unprecedented in the country’s history. As per centage of GDP, it has declined from 52.7 per cent last year to 44.3 per cent in 2001-02. Its beneficial effects would be realized in terms of lower interest payment in years to come.
Financial development makes fundamental contributions to economic growth and tends to reduce aggregate economic volatility. The comprehensive financial sector reform program introduced in the 1990s has largely transformed Pakistan’s financial sector from a narrow-based and government controlled regime to an outward looking, market-based and dynamic system. Financial health of the banking system has largely improved although some problems still exist in the field of non-performing loans (NPLs), profitability of banks, and the interest rate structure. However, over the last two and a half years the State Bank of Pakistan (SBP) has accelerated the pace of reforms for further strengthening the financial and banking sector. One of the recent policy initiatives taken by the SBP is the introduction of a supervisory framework to watch the health of the financial institutions. The performance of both the banking and non-banking institutions is now being evaluated on the basis of six indicators, termed as CAMELS: (1) capital adequacy, (2) asset quality, (3) management soundness, (4) earnings and profitability, (5) liquidity, and (6) sensitivity to market risk.
The overall money supply (M2) was targeted to grow by 9.5 per cent in 2001-02. During the first nine months (July-March), money supply grew by 9.3 per cent as against 4.7 per cent in the corresponding period of last year. Almost 78 per cent contribution to the monetary expansion is attributable to the strong build up in net foreign assets (NFA). By the end of March 2002, the NFA stood at Rs 110.7 billion as compared to Rs 21.6 billion in the same period last year. Credit to Government sector (Net) declined by Rs 28.8 billion.
Credit to private sector amounted to Rs 34.8 billion during the first three quarters of the current fiscal year as against Rs 82.9 billion in the same period last year. On the face of it, private sector credit expansion presents a dismal picture. However, the pace of private sector credit expansion has not necessarily been slower for the following reasons. Firstly, as it is well-known, the figures of monetary expansion or for that matter credit to private sector are on net basis (gross disbursement minus retirement). Therefore, higher credit expansion last year means more retirement in the current fiscal year. Credit to private sector amounted to Rs 82.9 billion last year in three quarters, therefore, retirement has also been higher given the effectiveness of loan recovery drive and prudent lending by the banks.
Secondly, excluding export refinance, credit to private sector during the first nine months amounted to almost Rs 50 billion as against Rs 78 billion in the same period last year. In other words, there were accelerated retirement of export finance (Rs 15 billion) as against net expansion of Rs 4.8 billion during the same period last year. Retirement of export finance at accelerated pace was the result of the declining rates of the fund as exporters thought this as an opportunity to get new funds at lower rates.
Thirdly, credit to private sector was low because of the relative lower requirement for cotton-related activities in view of lower prices of raw and lint cotton. Almost Rs 20 billion less credit was disbursed on this account. Furthermore, the credit requirement for private sector was also low because of the very low (2.6%) inflation rate as well as the appreciation of the exchange rate, which translates into a lower credit requirement for importers. Fourthly, higher tax refund by the CBR to the extent of Rs 18 billion during this period led to greater internal financing by businesses and therefore, reduced the credit needs of the private sector to that extent. Fifthly, credit to private sector normally picks up in late August to peak in December-January. The events of September 11 and December 13 and their subsequent developments took place exactly during the peak demand period. To the extent these events created uncertain environment, the private sector credit pick up was slow.
Sixthly, unlike in the past, the private sector is now reducing their reliance on commercial banks for their credit requirement and turning towards non-bank financing for the same. For example, the private sector has issued Term Finance Certificates (TFCs) worth Rs 8.6 billion during July-May 2001-02, compared to around Rs 4.5 billion in the corresponding period of last year. Furthermore, after a number of years, corporates have raised significant amounts of financing directly from the capital markets. According to data from the Karachi Stock Exchange, till the first week of May 2002, Rs 5.7 billion was raised through initial public offerings (IPOs) or right issues, compared to Rs 3.5 billion for the whole of fiscal year 2000-01. And finally, the overall depressed international economic environment created by the events of September 11, also affected domestic economic activity including industrial sector, which may have impacted the credit demand of the private sector. Thus, on balance, the state of credit utilization by the private sector has not been as dismal as the number suggests.
A modern and efficient capital market is the backbone of an economy. It plays a crucial role in mobilizing domestic and foreign resources, and channeling them to promote investment activities both for the short and the long-term periods. No country can prosper without developing its equity market. There are three stock exchanges in Pakistan, which form an equity market (Karachi, Lahore & Islamabad).
Capital market in Pakistan has witnessed many ups and down during the outgoing fiscal year. The events of September 11 unleashed new and unpredictable forces that substantially raised the risk of global down turn and created tense business environment throughout the globe, including Pakistan. The KSE share index lost 116 points or over 9 per cent in just three trading days. This unexpected fallout also led to various settlement problems in the ‘Badla Market’. A number of positive developments, including the decline in interest rates, removal of economic sanctions, trade concessions, economic assistance extended by a number of countries, successful completion of the Standby Arrangement, a new three years Poverty Reduction Growth Facility (PRGF) with the IMF, Paris Club debt rescheduling, and Pakistan’s enhanced stature in the comity of nations after September 11 changed the environment altogether and led to the resurgence in the market.
Pakistan’s stock market has been the best performing market world-wide in terms of profitability during January-March 2002. With profitability rate of 43.3 per cent, Karachi Stock Exchange attracted considerable amount of foreign funds in the third quarter of the current fiscal year. Karachi Stock Exchange (KSE) index was 1366.4 on June 29, 2001, it stood at 1868.1 at the end of March 2002, showing an increase of 502 points, or 36.7 per cent during the period.
One of the major achievements of the outgoing fiscal year has been the sharp deceleration in inflation. Inflation, as measured by the changes in the CPI, is estimated at 2.6 per cent during the first ten months (July-April) of the fiscal year as against 4.7 per cent in the comparable period of last year. Thus, inflation at 2.6 per cent is the lowest in the last three decades. The overall low inflation is mainly attributable to a very low food inflation which is estimated at 1.4 per cent as against 4.1 per cent in the comparable period of last year. Non-food inflation, mainly driven by fuel and lighting and transport, remained more or less at last year’s level of 5.0 per cent. Fuel and lighting component of inflation was up at 9.2 per cent as against 12.1 per cent of last year. Similarly, transport charges were up by 7.4 per cent during the first 10 months of the fiscal year as against 12.8 per cent last year in the same period. Almost 77 per cent contribution to current low inflation came from non-food while food-inflation contributed only 23 per cent. Last year, non-food and food inflation had contributed 62 per cent and 38 per cent, respectively to the overall inflation. Further breakdown reveals that 44 per cent contribution to current inflation came from fuel & lighting and transport charges. Last-year, these two components contributed roughly 35 per cent to inflation.
The outgoing fiscal year has been the most difficult and challenging year for Pakistan. The economic fallout of September 11 events caused global economic slow down, which in turn, reduced demand for Pakistani products, particularly in the United States, the European Union & Japan, and also weakened prices of Pakistan’s major export items. In addition, cancellation of export orders, rise in freight charges and imposition of war risk premium disrupted Pakistan’s trading activities. As a result, Pakistan’s exports during July-April 2001-02 stood at $ 7323.9 million which were 1.8 per cent lower than $ 7456.5 million recorded last year in the same period. The worst months for exports have been November - February, 2001-02 when it registered a negative growth of 7.6 per cent. With global economy showing signs of improvement, Pakistan’s exports picked up during the month of April, 2002 when it grew by 6.8 per cent.
Pakistan’s exports have expanded substantially in quantity terms. For example, basmati rice, oil seeds nuts, cotton cloth, bedwear, towels, readymade garments, leather manufactures and petroleum products have increased in quantitative terms, ranging from 7 to 120 per cent. The events of September 11 along with decline in POL prices on the one hand and almost no imports of sugar and soyabean oil, on the other led to a decline in imports during July-April, 2001-02 by 6.9 per cent to $ 8245.2 million as against $ 8859.3 million of the comparable period last year. However, the non-food and non-oil imports have registered an increase of 2.5 per cent during this period. The relatively larger decline in imports than exports during July-April, 2001-02 caused trade balance to improve by 34.3 per cent to $ 921 million as against $ 1403 million of the comparable period last year.
The current account balance (excluding official transfers) during July-March, 2001-02 posted a sizable surplus of $ 913 million or 1.5 per cent of projected GDP, as against a deficit of $ 746 million in the same period last year. However, including official transfers, the current account balance recorded a surplus of $ 2095 million or 3.4 per cent of projected GDP. The positive upturn in current account balance stemmed from a combination of factors, including significant improvement in trade balance, sharp increase in the inflow of workers remittances, and substantial increase in official transfers. The foreign exchange reserves held by the State Bank of Pakistan continued to rise during the current fiscal year and by end May, 2002 touched all time high at $ 4125 million. However, Pakistan’s total liquid foreign reserves amounted to $ 5566 million on June 01, 2002.
The increase in external debt and foreign exchange liabilities over the years owe heavily to developments in the fiscal and external account of the balance of payments. Pakistan’s accumulated medium & long term external debt by end March, 2002 amounted to $ 26.3 billion which is marginally higher by $ 709 million over last year. The debt service payments during July-March, 2001-02 amounted to $ 981 million. However, the total stock of external debt and the foreign exchange liabilities as on March 31, 2002 stood at $ 36.0 billion - almost $ one billion lower than end June, 2001. The increased inflow of resources from International Financial Institutions has improved the aid environment. Accordingly, commitments and disbursements during the current fiscal year have been substantial and are likely to aggregate at $ 3935 million and $ 2384 million respectively.
Pakistan has successfully negotiated a stock rescheduling of its Paris Club bilateral external debt of $ 12.5 billion ($ 8.8 billion ODA & $ 3.7 billion non-ODA) in December, 2001. Pakistan became the fourth non-HIPC country, after Egypt, Poland and Yugoslavia, to avail this facility. This is the third rescheduling in series since 1999. The first rescheduling agreement was reached in January 1999 for debt amounting to $ 3.0 billion and the second rescheduling agreement was signed in January, 2001 for debt totalling $ 1.8 billion.
According to the third rescheduling, the ODA debt will be repayable in 38 years including a grace period of 15 years, while the non-ODA debt will be repayable over a period of 23 years including 5 years grace period. This rescheduling has provided substantial debt relief to Pakistan. On the basis of ODA interest rate of 2.3 per cent and non-ODA interest rate of 4.0 per cent, Pakistan will be saving $ 2.7 billion in three years (2001-02 to 2003-04) and $ 8.5 billion during the grace period of ODA debt.
The Government of Pakistan accepts education as one of the fundamental rights of a citizen as well as commitment to provide access to education to every citizen. Education is a key to change and progress. It is the most important factor which distinguishes the poor from the non-poor. The Government has given much importance to education, that is, it has emphasized not only to increasing the literacy rate but also to improving the quality of education levels. The overall literacy rate is estimated at 50.5% (male 63%; female 38%) with rural and urban literacy rate standing at 30% and 70%, respectively. Under the Education Sector Reforms, National Literacy Campaign has been launched through out the country. The campaign envisages making 13.5 million people literate and raising the literacy rate to 60% by 2004. Around 270,000 adult literacy centers would be open for the purpose.
During the fiscal year 2001-02, the number of schools at primary stage were 169,087, at middle stage were 19,180, and at high stage were 13,108.The number of arts and science colleges were 789 (480 male and 309 for female). There were 68 Universities in Pakistan, including forty in public sector. There are 36,096 private institutions in Pakistan. Out of the total, 66.4 per cent lies in Punjab, 12.3 per cent in NWFP, 17.9 per cent in Sindh, 1.5 per cent Balochistan, 0.9 per cent in FATA & 1 per cent in Islamabad. Overall 39 per cent of the institutions are in rural areas and 61 per cent in urban areas. The National Education Policy 1998-2010 has proposed a number of steps in respect of involvement of private sector in education: In order to improve primary education, a number of projects have been initiated including rehabilitation of existing primary schools through out the country. An ordinance for compulsory primary education has been promulgated. Science education is also being given priority.
The total education budget for the year 2001-02 is estimated to be Rs.73.745 billion, with a break-up of development budget of Rs.8.770 billion (11.9%) and recurring budget of Rs.64.975 billion (88.1%). The total budget for education for 2001-02 is 2.0% of the GDP, the share of private education is 0.6 per cent of GDP. Through Education Sector Reforms, a number of measurers are being taken to enhance literacy rate, maximizing equal opportunities of education and reducing the gender gap at all levels of education. Access to higher education opportunities will be increased by 10 per cent annually.
Provision of health facilities to a society is essential to improve the efficiency and productivity of the population. At present, in Pakistan, health care is provided to the public through a vast infrastructure of health facilities consisting of 907 hospitals, 4625 dispensaries, 5230 basic health units and 879 maternity and child health centres. The number of registered doctors is 96248, dentists 4622, nurses 40114 and qualified health visitors 5845. As per population it works out as 1516 persons per doctor, 31579 persons per dentist, 3639 persons per nurse. With the availability of about 97945 hospital beds in the country, the population bed ratio works out at 1490 persons per hospital bed.
Various health priority programmes with special focus on the major public health problems of the country have been carried out. These include cancer treatment, AIDS prevention and malaria Control Programmes. A new health policy with motto “Health for All” has been announced. During the year 2001-02, 40 BHUs, 10 RHCs and one Urban Centre have been built and 30 BHUs and 20 RHCs have been upgraded. Besides, 3300 new doctors, 250 dentists, 2300 nurses and 5000 paramedics have been trained. Under the preventive programme, 8.5 million children have been immunized and 18.0 million packets of ORS were distributed during 2001-02. The total out lay on health sector for the outgoing fiscal year 2001-02 is Rs.25.4 billion (Rs.6.7 billion development expenditure and Rs.18.7 billion current expenditure) which is 0.7 per cent of GNP. Per capita per day calories intake is estimated at 2306 calories and per capita protein availability at 67.00 grams in 2001-02.
In 1947, 32.7 million people lived in Pakistan. By 2001-02, the population is estimated to have reached 145.96 million. Thus in roughly two generations, Pakistan’s population has increased by 113.46 million or has grown at an average rate of 2.8 per cent per annum. Pakistan has more mouth to feed, more families to house, more children to educate, and more people looking for gainful employment. Millions more are migrating from the countryside to major cities in search of jobs, raising pressure on urban infrastructure and giving rise to Katchi Abadies. Population increases of this magnitude in Pakistan may create alarm for many but these trends in population growth hide more promising developments.
Although demographic transitions taking place in Asia where the share of working age population is declining and those of old age is increasing. When seen over the last four decades, Pakistan has not experienced demographic transition. With further slow down in population growth, Pakistan may see its shares of working-age population rise while that of young age population decline.
The total labour force comes to 41.5 million, compared to 41.2 million last year. Of this 28.1 million or 67.7 per cent is in the rural areas and 13.4 million or 32.3 per cent in the urban areas. Agriculture remains the largest employer of labour force in the country, employing 48.4 per cent of total employed in 2002.
The government has also launched small public works programme, namely the Khushal Pakistan Programme to create employment opportunities for the poor. So far Rs.24 billion has been spent on this programme and an allocation of Rs.15 billion has been made for the outgoing year. This has created one million temporary jobs in the rural areas and adjacent small towns. To promote SME sector, the government has also set up SME Bank on January 1, 2002 to provide small loans. The Bank has disbursed so far Rs.95 million for 330 projects which have created about one thousand jobs. The government has also established Khushali Bank for improving poor peoples access to credit and making them self-employed. In five years time, the Bank aims at to provide loans to 600,000 people with loan portfolio of Rs.7.6 billion.
Pakistan’s achievement in building high and low types of roads have been quite credible. As on March 2002, the total length of roads in the country was 251,661 Km, including 148,877 Km of high type (59.2 per cent) and 102,784 Km of low type roads (40.8 Per cent). During the outgoing fiscal year, the length of high type roads have increased by 7.3 per cent over the last year but the length of low type roads has declined by almost same per centage point. In other words, the low type roads were converted in to high type roads through the Khushal Pakistan Program, which has undertaken many projects for improving rural infrastructure. The total number of motor vehicles on road stood at 4.4 million. The construction work on Peshawar-Islamabad (M-1) and Pindi Bhattian-Faisalabad (M-3) is in progress. The Pakistan Railways major assets include: 610 locomotives, 1,880 passenger coaches and 22,192 freight wagons. During the first nine months of current fiscal year, it carried 49.2 million passengers and 4.0 million tones freight. Its gross earnings stood at Rs.9, 572.2 million against 8,596 million last year.
The Pakistan International Airlines covers 33 international destinations and 21 domestic stations, covering almost all parts of the country. Its fleet consists of 44 aircrafts of varied types. Presently, two private airlines are also operating on local and international routes. The country has two major seaports namely,
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