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Executive summary of Economic Survey 2004-05

June 05, 2005

ISLAMABAD, June 4: Following is the executive summary of the Economic Survey 2004-05, released here on Saturday.

Growth and investment

Pakistan’s economy extended its impressive expansion for the third year in a row in 2004-05 with economic growth reaching its highest annual rate of 8.4 per cent in two decades, the fifth time in the country’s history that it exceeded 8 per cent growth mark. Economic recovery has raised the perceived wealth of households and thus boosted confidence, leading to higher consumption. The ensuing lifting of aggregate demand in turn has spurred credit demand. With increased lending, it has stimulated more demand, in turn feeding back into economic activity and thus, reflecting a broader virtuous circle. This positive prospect for consumer demand, if sustained, will be a crucial support for the government’s major macroeconomic policy target for 2005-06.

Real GDP grew by 8.4 per cent in 2004-05 as against 6.4 per cent last year and surpassed the target (6.6%) for the year by a wide margin. The sharp pick up in growth this year is ably supported by a stellar performance in large-scale manufacturing (15.4%), impressive recovery in agriculture (7.5%) and a strong growth in services sector (7.9%).

The agriculture sector grew by 7.5 per cent in 2004-05, which is higher than actual growth of 2.2 per cent last year and a target of 4.0 percent. Major crops, accounting for 37 per cent of agricultural value added, grew by 17.3 per cent as against a mere 1.9 per cent last year. Minor crops, which contribute 12 per cent of value addition in agriculture, grew by 3.1 per cent in 2004-05 over last year’s 2.6 percent.

The overall manufacturing, accounting for 18.3 per cent of GDP repeated stellar performance by registering a growth of 12.5 per cent in 2004-05 as against 14.1 per cent last year and surpassing its target by 2.3 percentage points. Accordingly, its share in GDP also increased by 0.7 percentage point over last year. The large scale manufacturing, accounting for 69.5 per cent of overall manufacturing and 12.7 per cent of GDP, recorded an impressive and broad - based growth of 15.4 per cent in 2004-05 as against 18.2 per cent last year and against the target of 12.2 per cent — the second highest growth achieved in three decades. Small-scale manufacturing continued to grow at an estimated 6.3 per cent rate in 2004-05. The Construction sector is provisionally estimated to grow by 6.2 per cent in 2004-05 as against a decline of 6.9 per cent last year. Services sector has registered an impressive growth of 7.9 per cent in 2004-05 as against an equally robust growth of 6.0 per cent last year and against the target of 6.2 per cent for this year. The wholesale & retail trade, finance & insurance sub-sectors grew by 12.0 and 21.8 percent, respectively against 8.1 per cent and 4.5 per cent last year.

The commodity producing sectors (agriculture and industry) and service sector contributed equally to the real GDP growth of 8.4 percent. The commodity producing sector contributed 50 per cent or 4.2 percentage point to this year’s growth while the remaining 50 per cent or 4.2 percentage points contribution came from services sector. Within the CPS, agriculture contributed 1.74 percentage points or 20.7 per cent to overall growth while industry contributed 2.46 percentage points or 29.3 percent.

The per capita income in dollar term has grown at an average rate of 13.5 per cent per annum during the last three years rising from $ 579 in 2002-03 to $ 657 in 2003-04 and further to $ 736 in 2004-05. The main factor responsible for the sharp rise in per capita income include acceleration in real GDP growth, stable or even appreciation in exchange rate and four fold increase in the inflows of workers’ remittances.

Total investment provisionally estimated at 16.9 per cent — slightly lower than last year (17.3 %). Fixed investment as percentage of GDP is estimated at 15.3 per cent as against 15.6 per cent last year. A 0.3 percentage point decline is mainly attributed to public sector investment, which declined from 4.8 per cent to 4.4 percent. However, private sector investment as percentage of GDP rose marginally to 10.9 percent. Major growth in investment by private sector is witnessed in agriculture (10.2%), manufacturing (23.9%), mining and quarrying (15.2%), construction (79.9%), transport and communication (42.2%), and wholesale and retail trade (27.4%). Public sector investment registered a marginal decline of 0.4 percent. A major decline (26.6%) has taken place in manufacturing, mining and quarrying (5.0%) and transport and communication (3.3%).


Agriculture accounts for nearly 23 per cent of Pakistan’s national income (GDP) and employs 42 per cent of its workforce. Agriculture also supplies raw material to Pakistan’s Industries, notably textile industry, the largest industrial sub-sector of the economy. Most importantly, 67.5 per cent of country’s population living in rural areas are directly or indirectly dependent on agriculture for their livelihood. Given its importance to national economy, the Government attaches high priority to raising agricultural productivity with a view to promoting faster agricultural growth and hence, raising farmers income.

Pakistan witnessed unprecedented draught during the first two yeas of the decade of 2000 (2000-01 and 2001-02) which resulted in contraction of agricultural value added. In other words, agriculture registered negative growth in these two years. The next two years (2002-03 and 2003-04) witnessed a modest recovery in agricultural growth at the back of improvement in the availability of water for irrigation purpose. A stronger — than — expected performance of agriculture has been one of the hallmarks of the fiscal year (FY) 2004-05 with growth reaching as high as 7.5 per cent on account of unprecedented increase in cotton production (14.6 million bales) and a near bumper wheat crop of the size 21.1 million tons. Major crops, accounting for 37.1 per cent of agricultural value added registered stellar growth of 17.3 per cent as against 1.8 per cent last year. Minor crops, contributing 12.2 per cent to overall agriculture grew by 3.1 per cent as against 2.6 per cent last year. The performance of livestock — the single largest contributor to overall agriculture (46.8%); fisheries and forest — the two minor contributors, have been lackluster at best as they grew by 2.3 per cent, 2.1 per cent and 0.4 per cent respectively.

Pakistan’s agriculture has been suffering, off and on, from severe shortage of irrigation water in recent years. During the last five years (2000-01 to 2004-05), against the normal surface water availability at canal heads of 103.5 million acre feet (MAF), the overall (both for Kharif and Rabi) water availability has been less in the range of 5.9 per cent (2003-04) to 29.4 per cent (2001-02). Relatively speaking, Rabi season faced more shortage of water than Kharif during these periods. During the current fiscal year (2004-05) the availability of water for Kharif season (for crops such as rice, sugarcane and cotton) has been 12 per cent less than the normal supplies and 10.3 per cent less than last year’s Kharif. The water availability during Rabi season (for major crop such as wheat), as of end of March, 2005 was estimated at 23.1 MAF which was 36.5 per cent less than the normal availability and 26.7 per cent less than last year’s Rabi. Water situation for Rabi season, however, improved gradually as initially it was thought that the shortage will be around 60 percent. The wide- spread spring rains of January- March 2005 however improved the water flows for irrigation purpose to a greater extent. Larger — than — expected snowfall on the mountains also helped fill the reservoirs during the summer time and as such water situation would improve further for Rabi and Kharif 2005-06. It is estimated that about 3 million acre feet of water will be carried over for Kharif 2005 (during last four years it was negligible). Hence, there will apparently be no shortage of water and the full indents of all the four provinces will be met for the upcoming Rabi and Kharif crops 2005-06.

Amongst major crops, cotton production is estimated at 14.618 million bales for 2004-05, the highest ever record in the country’s history, and up by 45.5 per cent over the last year’s production of 10.048 million bales. Wheat production is estimated at 21.109 million tons in 2004-05, as against 19.500 million tons last year, showing an increase of 8.2 percent. Rice production has increased by 2.9 per cent in 2004-05 from 4.848 million tons last year to 4.991 million tons in 2004-05. Sugarcane production has however, decreased from 53.419 million tons in 2003-04 to 45.316 million tons in 2004-05, showing a decrease of 15.2 percent. As regards the minor crops, the production of chillies and onions increased by 34.7 and 25.4 per cent respectively during 2004-05. The production of all the pulses, namely mash, masoor and mung are down by 25.6, 10.0, and 7.7 per cent respectively. The production of potato also decreased by 2.7 percent. Lesser production over last year is due to shortfall in area. Excessive rains also damaged some minor crops. Agriculture credit disbursement of Rs.73.811 billion during July-March, 2004-05, is higher by 54 percent, as compared to Rs.47.937 billion over the corresponding period last year. The fertilizer off-take stood at 2811.4 thousand nutrient tons in July-March 2004-05 or higher by 10.2 percent, as compared to 2552 thousand nutrient tons for the corresponding period last year.

Manufacturing, mining and investment policies

Pakistan’s economy, which grew at 6.4 per cent in fiscal year 2003-04, achieved a broad-based growth of 8.35 per cent in 2004-05, ably supported by an impressive growth in manufacturing sector. The overall manufacturing, accounting for 18.3 per cent of GDP, registered an impressive growth of 12.5 per cent against the target of 10.2 per cent and last year’s achievement of 14.1 percent. Overall manufacturing is growing at a much faster pace than agriculture and services and if this pace is sustained, its share in GDP is likely to rise even further in the medium-term.

The main contributors to this impressive growth of 15.4 per cent in July-March, 2004-05 over last year are the textile and apparel group (24.5 %), chemicals (14.4%), petroleum group (11.8 %), tyres and tubes group (10.1%), non-metallic mineral products (15.1%), engineering goods group (11.3%), electrical items group (54.9%), and automobile group (30.1%). The items that registered positive growth are cotton yarn (18.2 %), cotton cloth (28.5 %), nitrogenous fertilizer (3.2 %), phosphatic fertilizer (59.7 %), cooking oil (27.8%), cement (15.3 %), cigarettes (10.5 %), jeeps and cars (26.1%), tractors (24.5 %), L.C.V’s (62.3 %), motorcycles/scooters (47.6 %), paper and paper board (4.3 %), T.V sets (5.7 %), motor tyres (18.9 %), refrigerators (19.8 %) and caustic soda (11.1 %). The individual items exhibiting negative growth includes: sugar (21.0 %), vegetable ghee (1.9 %), bicycles (14.8 %) and billets (20.5 %).

The output of the mining and quarrying sector grew by 5.0 per cent this year as against the rise of 3.8 per cent last year. The principal minerals which have shown positive growth are: baryte (16.6 percent), limestone (19.3 percent), natural gas (19.3 percent), rock salt (2.88 percent), sulphur (11.5 percent) and chromites (183.3 percent). While negative growth was exhibited by dolomite (22.2 percent), gypsum (52.9 percent), and magnetite (12.5 percent).

Foreign direct investment has witnessed an increase of 17.2 per cent in the first ten months (July-April, 2004-05), whereas, net foreign private investment stood at US $ 1027 million against US $ 629.1 million last year, thereby, showing increase of $ 397.9 million. The increase in foreign private investment is because of the inflow of portfolio investment of $ 135.5 million as compared to inflow of $ 131.3 million in the comparable period last year.

The privatization program maintained its pace during 2004-05 and succeeded in privatizing some high-ticket items despite an inhospitable global environment. By end April 2005, Pakistan had completed or approved 146 transactions at gross proceeds of Rs 148.3 billion. Of this, an amount of Rs 13.5 billion was received during the period July-April 2004-05 from the sale of the Government’s shareholding in PIAC, Felleti’s Hotel, Gharibwal cement, KAPCO and KESC.


Although poverty is still pervasive in most developing countries particularly those in Sub-Sahran Africa and South Asian countries, the past century has seen more advances in global prosperity and more people have come out of poverty than in all of human history. Standards of living have also improved. Infant mortality rates globally have been cut in half during 1970-1997, from 107 to 56 per thousand; and life expectancy has risen from 55 years to 67 years.

Like many other developing countries, Pakistan has also made significant efforts to integrate its economy with rest of the world through foreign trade and investment. The Government of Pakistan adopted a strategy for poverty reduction in 2001, focusing on five areas which include i) accelerating economic growth and maintaining macroeconomic stability; ii) investing in human capital; iii) augmenting targeted interventions; iv) expanding social safety nets and v) improving governance. This strategy has already started bearing its fruits. Economic growth has accelerated and the country has achieved macroeconomic stability. The long term growth trajectory of 6 per cent per annum achieved during the last fiscal year and a real GDP growth of 8.4 per cent during the current fiscal year have improved the living standards of the people and thus, may help reduce poverty among the lowest segment of population.

The first district level Pakistan Social and Living Standards Measurement (PSLM) Survey, with a sample size of 76520 households from 5348 sample area, covering both urban and rural areas, has been conducted during the year 2004-05. The Survey was completed in March 2005. The first report of the Survey has been finalized and will be released shortly by the Federal Bureau of Statistics (FBS). The Survey indicates that most of the indicators like, major source of drinking water, the type of toilet used, and enrolment in various levels in schools show a significant improvement over the last 4 years.

Pakistan’s commitment to reducing poverty in the medium term was first reflected in Poverty Reduction Strategy Paper (PRSP) finalized in December 2003. The Medium Term Development Framework 2005-10 (MTDF) carries this assurance forward in more than one way. The MTDF’s strategic thrust is for balanced growth that combines economic growth to progressively rise to 8 per cent by 2009-10, with substantial rise in allocation to the social sector, so as to achieve the poverty reduction goal by the year 2015. Sound macroeconomic policies and implementation of structural reforms in almost all sectors of the economy have transformed Pakistan into a stable and resurgent economy in recent years. Agriculture, small and medium enterprises (SMEs), and housing & construction have been prioritized in accordance with their potential to provide employment to the poor segments of the society. SMEs are an important conduit for labour absorption and thereby reducing unemployment and poverty.

Poverty and social sector related expenditures under the PRSP are the most important fiscal intervention to target the poor and vulnerable sections of the society; they have increased over 120 per cent in the last four years > from Rs.114 billion in 1999-00 to 254 billion in 2003-04. An amount of Rs. 278 billion, an increase of 9.5 per cent over the previous year, is budgeted for the current year. During the first nine months of 2004-05, the PRSP expenditure amounted to Rs.191 billion as against Rs.156 billion in the same period last year, thus registering a growth of 22 percent. This has been possible mainly due to government’s medium-term fiscal strategy aiming to create fiscal space for higher levels of social sector and poverty-related spending.

Fiscal development

As a result of pursuance of prudent fiscal policy, Pakistan has succeeded in reducing fiscal deficit down from an average of 7 per cent of the GDP in the 1990s to 2.3 per cent last year and at around 3.0 per cent in the current fiscal year. The associated public debt burden also declined sharply from over 100 per cent of GDP to less than 60 per cent in the current fiscal year. The revenue deficit has been narrowed from 3.0 per cent of GDP in the late 1990s to 0.2 per cent and the primary balance has remained in surplus for the last many years.

The wide-ranging tax and tariff reforms as well as reforms in the tax administration have started paying dividends. Tax collection by the Central Board of Revenue (CBR) has picked up, the overall budget deficit as percentage of GDP has declined, the revenue deficit has been narrowed, and the primary surplus has increased. Consequently, public debt as a percentage of GDP has declined and Pakistan is now moving towards fiscal consolidation. During the last six years, tax collection has increased by 70 per cent and the overall fiscal deficit which averaged almost 7.0 per cent of GDP during the 1990s has been reduced to 3.0 per cent in 2004-05. The revenue deficit (the difference between total revenue and total current expenditure), has been narrowed from 3.0 per cent of GDP to 0.2 per cent in 2004-05, which will increase national savings, and thus reduce the country’s dependence on foreign savings to finance domestic investment. The primary balance (total revenue minus non-interest total expenditure) remained in surplus for the last four years.

CBR has collected Rs 451.1 billion as net revenue receipts during July-April 2004-05. The target of Rs 444.4 billion set for the first ten months has not only been achieved but also exceeded by around Rs 7 billion. When compared with last year’s collection of the corresponding period, this collection indicates a healthy growth of 13.6 percent, whereas the gross collection has increased by 14.5 percent.

Total expenditure is estimated at Rs.1050.4 billion in 2004-05 which is 9.9 per cent higher than last year. Of this, current expenditure is estimated at Rs.866.0 billion (82.4 per cent of total expenditure) while development expenditure is amounted to Rs.188.0 billion (17.6 per cent of total outlay). The current expenditure which was 14.0 per cent of GDP last year has declined to 13.2 per cent in the current year. However, there was no change in development expenditure as per cent of GDP which remained stagnant at 2.9% of GDP in 2003-04 and 2004-05. The share of interest payments in total expenditure declined from 32.7 per cent in 2000-01 to 20.2 per cent in 2004-05 while that in current expenditure, dropped from 36.3 per cent in 2000-01 to 25.3 per cent in 2003-04 and further to 24.6 per cent in 2004-05. In line with reduction in debt burden, the interest payments burden dropped from 3.5% last year to 3.3% of GDP in 2004-05.

Defense expenditure in 2004-05, amounting to Rs.194 billion is 7.5 per cent higher than last year. However, as percentage of GDP, it has dropped from 3.3 per cent last year to 3.0 per cent this year. As percentage of the total outlay, defence spending has declined marginally from 18.8 per cent last year to 18.5 per cent this year. Similarly, as percentage of current expenditure, it has declined from 23.3 per cent to 22.4 per cent in the same period.

The public debt- to-GDP ratio, which stood at almost 85 per cent in end June 2000, declined substantially to 59.4 per cent in end March 2005 > 25 percentage points decline in country’s debt burden in 5 years. In absolute terms, public debt grew by 3.8 per cent during the first nine months (July-March) of the current fiscal year. The rupee component of the debt hardly registered any increase while the foreign exchange component rose by 7.6 percent. It is important to note that the growth in public debt has slowed considerably in recent years because of the prudent debt management. Public debt was 317 per cent of total revenue in end June 1980, increased to 505 per cent by the end of the 1980s and further to 627 per cent by the end of the 1990s. The public debt burden in relation to total revenue has declined substantially to 457 per cent as of end March 2005.

As a per cent of GDP, domestic debt is expected to decline sharply from 36.4 per cent to 30.8 per cent — a decline of almost 6 percentage points in domestic debt burden. During the last 5 years (2000-05), the real cost of domestic borrowing averaged 4.1 percent, mainly on account of relatively low inflation. The real cost of borrowing for domestic debt declined substantially to 4.1 per cent on average against 5.7 per cent in the second half of 1990. Accordingly the real cost of borrowing for public debt averaged 2.9 per cent during the last five years (2000-05). The combined effect of growth in revenue and debt resulted in a sharp decline (6.4% per annum) in the country’s debt burden. During the last five years, the debt servicing liabilities have declined sharply from 64 per cent of revenue to 26 per cent of revenue and from 54.4 per cent to 25.6 per cent of current expenditure in 2004-05.

Money & Credit

The financial services sector in Pakistan has been going through a major reform process for the last several years. The principal focus of such reform initiatives has been the consolidation of the various aspects of the financial services sector which included among others a strong framework for effective risk management. The State Bank of Pakistan (SBP) has also strengthened its regulatory capacity. It is now more proactive in aligning its regulatory profile in a rapidly changing domestic and global financial environment. The banking regulation and supervision are now fully compliant with the international standards and codes. As a consequence of such reforms, Pakistani banks have been strengthened to compete with foreign banks both in the domestic market and internationally. As the first generation of reforms in the financial sector of Pakistan has been completed successfully, the SBP is planning for the second generation of reforms to further deepen the financial sector and integrate it into the global economy. Financial sector reforms has brought marked improvement in the financial health of the commercial banks in terms of capital adequacy, profitability and asset quality and also greater attention to risk management.

The broad-based economic growth experienced in the last couple of years has put the country on the path to greater economic recovery and set the stage for speedy credit and monetary expansion. The broad money, (M2) showed a growth of 13.1 per cent (Rs 325.6 billion) during July-March 2004-05 compared with the full year revised target of 14.5 per cent (Rs 360 billion) and the actual growth of 12.3 per cent (Rs 254.8 billion) in the corresponding period of last year. Massive increase in NDA was mainly triggered by substantial private sector credit off-take (Rs 370.1 billion). NFA of the banking remained smaller as NFA expanded by Rs 51.6 billion during July-March 2004-05 compared with Rs 50.4 billion in the corresponding period of last year. However, the NFA of scheduled banks increased significantly by Rs 68.3 billion against the contraction of Rs 4.9 billion in the same period of last year. Budgetary borrowings of the Government amounted to Rs 5.8 billion during July-March 2004-05 against the annual target of Rs 60 billion and the actual borrowings of Rs 53.6 billion in the same period last year.

The break-up of private sector credit utilization revealed that manufacturing was the major sector, claiming a share of 41 per cent (Rs 150.9 billion) in the net credit expansion. Textile sector, the mainstay of the domestic activities, continued to get upgraded through imported machinery, and its credit off-take increased to Rs 94.8 billion; it constituted 25.6 per cent of total credit off-take and 62.8 per cent of the total credit utilized by the manufacturing sector.

The commercial banks in the private sector have so far given a satisfactory performance since their inception, registering an overall growth in the deposit base and profits and are maintaining healthy credit portfolios. The non-performing loans (NPLs) of commercial banks, specialized banks, and DFIs have declined during the first nine month of 2004-05 from Rs 220 billion in June 2004 to Rs 203.7 billion in March 2005 — a reduction of 7.4 percent. The process of privatization continued as fast track with the privatization of HBL in 2004. Shares of NBP were also offloaded through local stock exchanges. As a result of the privatization and restructuring, more than 80 per cent of the banking assets are now owned and managed by the private sector. The government is also in the process of restructuring of IDBP, ZTBL and SME bank for their ultimate privatization.

Khushhali Bank’s efforts over the past four years have been to develop an efficient distribution system capable of handling large volume of business across diverse operating environments while at the same time, developing an insight into the market. Today, Khushhali bank has a network of 130 service outlets across 64 districts of the country; has processed nearly 400,000 loans valuing about Rs 4.0 billion and with a predominantly rural portfolio. For 2005, the Bank plans to expand its network to 75 districts of the country, with projected annual disbursements of nearly Rs 3.0 billion, with a strategic focus on the rural areas of Pakistan. The SME bank continues to strengthen its position as a small but key player in the SME sector. Bank credit to SMEs sector continued to expand considerably as its share in total private sector credit rose from 7.9 per cent (Rs 5.2 billion) during July-September 2004 to 18.1 per cent (Rs 59.9 billion) during July-February 2004-05.

Capital market

As a result of successful implementation of the successive reform measures the capital market in Pakistan has been growing by leaps and bounds and has emerged as one of the important pillars of the economy. Under the new privatization strategy, the government is selling off its shares of state controlled enterprises by listing them on the bourses as well with a view to broadening and deepening the capital markets. During July-March 2004-05 the KSE 100-share index rose from 5279 points to 7770.3 points — an increase of 47.2 percent. During this period the AMC rose from Rs 1357.5 billion (or $ 23.4 billion) to Rs 2114.8 billion (or $ 36.6 billion), thus showing a growth of 55.8 percent. The Karachi Stock Market remained as one of the five best performing markets around the world with rate of returns in dollar term of 100 percent.

Total turnover of shares on the KSE was 71.7 billion in the first nine months of 2004-05 as compared to 65.2 billion in the same period last year. During the calendar year 2004, total profit before taxation of the 12 trading groups amounted to Rs 229.5 billion as compared to their before taxation profit of Rs 136.8 billion in 2003. The total funds mobilized during July-March 2004-05 in the three stock exchanges (KSE, LSE & ISE) amounted to Rs 90.1 billion, as compared to Rs 136.5 billion in the last fiscal year. The total turnover of shares in the three stock exchanges during the first three-quarters of the current fiscal year was 88.5 billion, compared to 100.8 billion shares in the same period last year.

In the early part of 2005, the Karachi Stock Exchange (KSE) witnessed an accelerated rise with KSE-100 index rising by 65 per cent in a period of only 2.5 months to a record level of 10,303 on 15th March 2005. To add perspective, this increase was on top of the cumulative 388 per cent rise in KSE-100 in the preceding three years. The stock market turned bearish since March 16, 2005 and the KSE 100 index dropped to as low as 6939 as on April 12, 2005 from its peak of 10,303 on 15th March 2005 showing a decline of 32.7 percent. Notwithstanding this sharp fall there were no broker defaults in the stock market and also market was not closed or suspended, as had been the case in some previous market falls..

Although market faced extreme volatility in the month of March 2005 however, for the period beginning January to March 2005 the KSE performed better than the other regional markets. The KSE 100-index increased by 24 per cent from 1st January 2005 till 28 March 2005 as compared to the other regional markets. The Sensex-Mumbai Index during the same period declined by 2 per cent and the Hong Kong Han Seng Index declined by 4 percent. The Thailand SET and the all Singapore SES index during the same period increased by 3 per cent and 5 per cent respectively.

The Securities and Exchange Commission of Pakistan in consultation with the stock exchanges has introduced significant capital market reforms in the fields of risk management, governance, transparency and investor protection. The reform measures provided include the following; (i) measures for strengthening risk management at the exchanges. (ii) amendments in the listing regulations of the exchanges relating to rotation of auditors. (iii) prohibition on use of group account by central depository system participants. (iv) internet trading guidelines, 2005 and (v) demutualization of stock exchanges.


For the first ten months of the current fiscal year (July 2004 to April 2005), inflation as measured by the Consumer Price Index (CPI), averaged 9.3 percent, compared to 3.9 per cent for the corresponding period last year. While food price inflation was recorded at 12.8 per cent compared to 4.9 per cent for the same period last year, non-food inflation increased to 6.9 per cent versus 3.3 per cent in the comparable period of last year. Core inflation, also indicated a rising trend 7.4 per cent for the first ten months of 2004-05. The largest contributions to the acceleration in CPI have come from Food (weight: 40%), and House Rent (weight: 23%), with Fuel & Lighting (weight: 7.3%) and Transport & Communication (weight: 7.3%).Contributing factors to the rise in inflationary pressure in the economy points to the fact that a phenomenal increase in aggregate demand in the economy, on the one hand, was compounded by supply shocks of principal commodities, on the other. The adverse external developments which impacted the domestic price level included a surge in international oil prices coupled with an unprecedented rise in world price of commodities due to demand from China.

The government responded in a multi-pronged manner to the rise in the price level. First a high level committee was constituted to monitor the price situation on daily basis by keeping a close watch on the supply and demand conditions. The government also did not pass on the entire increase in the international price of oil to general consumers. To ease off the demand pressures generated by the rising level of economic activity, the State Bank of Pakistan began to tighten monetary policy rather aggressively. Like in Federal Government where price situation is reviewed weekly, the provincial governments have been asked to do the same in their respective capitals and take necessary measures, if required, to stabilize prices of essential commodities The easing of demand pressure through monetary policy and improving the supply situation of food items either through raising their production or through imports are likely to put downward pressure on general price level in coming months.

Trade and payments

Pakistan’s external sector is being affected both by structural and cyclical factors. Three years of strong economic growth, complemented by record low interest rate and the ongoing structural shift of many household in Pakistan towards higher consumption have injected new life into domestic spending. The strengthening of domestic demand triggering a pickup in investment spending after a multi-year lull, has fueled Pakistani import growth. Higher global oil prices further added to a massive surge in imports which more than offset the improved outcome from exports and accordingly were the key drivers of the widening trade gap.

Exports were up by 14.6 per cent during the first nine months of the FY 2004-05 — rising to $ 10206.6 million from $ 8905.2 million in the same period last year. One-half of the net increase in exports amounting to $ 650.7 million has come from the non-traditional export items (other exports). Imports during this period were up by 37.8 per cent — rising from $ 10497.4 million to $ 14468.6 million. The extra-ordinary increase in imports owes mainly to strengthening domestic demand and higher prices of crude oil and petroleum products. The surge in domestic demand fueled an exceptional 41.5 per cent increase in non-food non-oil imports. In particular imports of machinery, chemicals and metal group were up by 54.9 percent, 32.9 per cent and 79.6 percent, respectively. These three groups alone accounted for one-half of total imports, clearly reflecting the growing level of domestic investment. The unprecedented rise in oil prices pushed the oil import bill up by 30.9 per cent to $ 2760.5 million — caused a relatively larger increase in overall imports than exports. As a result trade deficit has widened to $ 4262.0 million as against $ 1592.2 million in the same period last year.

Pakistan’s current account balance has slipped into red in 2004-05 after posting surpluses for three consecutive years. The current account deficit, excluding official transfers, stood at $ 1358 million during July-March 2004-05 as against a surplus of $ 1505 million in the same period last year. The deterioration in the current account was driven by substantially wider trade deficit owing to higher oil import bill and hefty gains in non-oil imports resulting from strong domestic demand. The net outflows under the services account surged to $ 4238 million, showing an increase of 89.2 percent. Higher freight charges as a result of sharp increase in global trade and higher fuel cost; growth in personal travel; and exchange companies payments were mainly the contributing factors. Nevertheless, the inflows under private transfers depicted a significant increase of 42.6 per cent and aggregated at $ 6258 million. Buoyant trend in private transfers was largely attributed to rising workers remittances which during July-April 2004-05 were up by 7.5 per cent to $ 3451.5 million. By end April 2005, the foreign exchange reserves touched all time high at $ 13,000.2 million. Since the beginning of the current fiscal year and until April 2005, Pak-rupee versus US dollar depreciated by only 1.8 percent, indicating stability in exchange rate environment.

External debt and liabilities

Over the last five years and in particular with the establishment of the Debt Office in the Ministry of Finance, a concerted effort has been made to achieve debt sustainability in the country. Following a credible strategy of debt reduction, Pakistan has succeeded in reducing the rising trend in external debt and foreign exchange liabilities which has declined by $ 1.24 billion — down from $ 37.86 billion in 1999-00 to $ 36.62 billion by end-March 2005. However, the external debt and liabilities during July-March, 2004-05 amounted to $ 36.62 billion are showing an increase of 3.9 per cent over the last year. The rise in absolute amount of the stock of debt ($ 1365 million) during this period is the result of valuation effect and the net inflow effect. About 46 per cent or $ 628 million increase in the stock of debt owes to valuation effect (exchange rate movements) and the remaining 54 per cent or $ 737 million is on account of higher net inflows. Given the present outlook of the exchange rate movements, we expect a further decline in valuation effect in the fourth quarter of the current fiscal year.

The surplus in current account coupled with a continued build up in foreign exchange reserves and the higher foreign exchange earnings, the pre-payment of expensive debt and debt write-off are the major factors responsible for the reduction in the total stock of debt during the last five years. As percentage of GDP, external debt and liabilities stood at 51.7 per cent in end-June 2000, declined to 36.7 per cent in end-June 2004 and further to 33.1 per cent by end-March 2004-05. Similarly, external debt and liabilities as a percentage of foreign exchange earnings was 297.3 per cent in 1999-2000, declined to 164.6 per cent in 2003-04 and further to145.9 per cent by end-March 2004-05. It may also be pointed out that Pakistan’s external debt and liabilities were 22 times of its foreign exchange reserves in 1998-99 but declined sharply to 2.8 times in six years.

The declining trend persisted during the current fiscal year (July-March 2004-05) and both the actual paid amount as well as rolled over amount further declined to $ 2.172 billion and $ 1.100 billion, respectively. The real cost of foreign borrowing which include interest cost as well as the cost emanating from the depreciation of the Pak-rupee (or capital loss on foreign exchange) was on average, 3.4 per cent and 2.7 per cent per annum in the 1980s and 1990s, respectively. Pendulum swung to other extreme during 2000-05 when real cost of borrowing declined to negative 0.2 per cent per annum on average owing to benign interest and inflation rates environment along with the appreciation of exchange rate during this period. During 2000-05, the real growth of external debt burden witnessed massive decline (13.1% per annum) on account of almost 14.7 per cent real growth in foreign exchange earnings, decline in real cost of borrowing (-0.2 per cent) and marginal (1.6 %) rise in real growth of external debt.

Pakistan maintained a non-interest current account surplus (surplus in primary balance) to an average of 2.9 per cent per annum which helped reduce the country’s debt burden at a relatively faster pace. These developments helped Pakistan to enter into the capital market by issuing Eurobond as well as Islamic bond (Sukuk) worth $ 500 million and $ 600 million, respectively.


Education is key to change and progress, therefore, Government of Pakistan has adopted this sector as one of the pillars for poverty reduction and benefit of masses. Government is fully committed to provide best Educational Facilities to its people within the minimum possible time. The reasons for Pakistan’s low educational status are varied but one important factor is that Pakistan’s educational system has been highly fragmented and segmented. It has, therefore, created some intractable problems in the optimal utilization of human resources under the given labor market condition.

Existing National Education Policy 1998-2010 was formulated keeping in view the prevailing problems in the society. The Government has initiated major administrative reforms, such as Devolution of Power and Education Sector Reforms. Moreover, Millennium Development Goals (MDGs) and Education For All (EFAs) are the International policy concerns announced in 2000, which need to be properly reflected in our Policy. As such, the Ministry of Education has taken in hand an exercise to review the National Education Policy (1998-2010) for its updating to bring it in line the current needs of the country.

Overall literacy rate of 52 per cent has increased by about two percentage points compared to that of Labour Force Survey (LFS), 2001-02. This improvement is of one and a half percentage points for males and more than two percentages points for females.

Major progress has been made in the first two years of the Higher Education Commission, with the establishment and execution of transparent system for award of indigenous and foreign Ph.D. Scholarships with the aim of enhancing local research activities and developing future faculty member. Over eleven hundred indigenous Ph.D. Scholarships have been awarded. Furthermore, increased opportunities have been provided for Ph.D. scholars, selected via rigorous testing and screening process, to pursue their studies in industrially advanced nations such as China, France, Germany, UK, USA and Austria. In-service teachers were supported through various teacher training programs training. More than 200 faculty member benefited from these programs.

To bring the formal education and Deeni Madaris close to each other and to facilitate horizontal mobility of students with the ultimate aim of integrating the two systems, Madaris reforms have been initiated with the introduction of formal education in 8000 Madaris, (Primary Education in 4000, Middle and Secondary Education in 3000, and Intermediate Education in 1000 Madaris). Formal subjects of English, Maths, Social/Pak Studies and General Science would be introduced at the Primary; Middle and Secondary levels while English, Economics, Pakistan Studies and Computer Science will be introduced at the intermediate levels.

Federal Government has decided to encourage the private sector to play its due role in the promotion and development of educational opportunities especially in the rural areas. This policy has resulted in the establishment of an estimated 30,000 private educational institutions at all levels with an enrolment of approximately 3 million students. Private schooling has now become important for the country. Enrolment in private primary schools is now in the order of 42 per cent of total enrolment (2004). During 2004, at the middle school level, the private sector had a share of 37 per cent of total enrolment. At the secondary and higher secondary level in the same year, the private sector share was 30 per cent and 64 per cent respectively of the total enrolment.

Health and nutrition

The public health sector is a priority area of Government activities. Under the commitment to achieve the goals of “Health for all” the agenda of Millennium Development Goals for health and human development is being implemented and a broad based strategy under the poverty reduction strategy paper (PRSP) to attend the imbalances in health sector has been prepared. The existing network of medical services consists of 916 hospitals, 4582 dispensaries 5301 basic health unit (BHUs), 552 rural health centres (RHCs) 906 Maternity and child health centers (MCHs) and 289 T.B centres (TBCs). In the calendar year 2004, there was one doctor for 1359 persons, one dentist for 25107 persons, one nurse for 3175 persons and one hospital bed for 1540 persons. The total outlay on health sector is budgeted at Rs. 38.0 billion which has increased by 15.8 per cent over last year and as “per cent of GNP, it is 0.57 percent. The new health facilities added to the overall health services include construction of 45 new facilities (37 BHUs and 8 RHCs) upgrading of 40 existing facilities (27 BHUs of 13 RHCs) and addition of 3500 new doctors 1700 nurses and 17000 lady health workers. To reduce the incidence of diseases and promote the health status of people, various health programmes like Family Planning and Child Immunization Programme, Aids Prevention, Cancer treatment, Drug Abuse, T.B and Malaria Control Programmes had been carried out during the current year.

The caloric intake per person has increased from 2529 calories per day to 2534 calories and protein availability has reached to 65.8 gram in 2004-05.

Population, labour force and employment

During the last 50 years, Pakistan’s population has increased from 33 million to 152.53 million in 2004-05. Although the current population growth rate slowed to 1.9 per cent per annum, overall population has increased by 2.76 million people as compared to last year.

Pakistan is on the favorable end of the demographic transition. In the next few decades there would be a massive influx of people in the working age group (around 60 million people). This trend can already be seen as over the last decade, the proportion of working age cohorts has increased from 53 per cent in FY86 to 56 per cent in FY03. As total labour force has also increased from 41.38 million in 2001 to 45.76 million in 2004. Of this, 99.25 million of work force is in the rural areas and 51.22 million is in the urban area.

According to the Labour Force Survey 2003-04 the overall labour force participation rate (CAR) is 30.41 per cent (48.74 per cent of males and 11.16 per cent of females). CAR was 28.7 per cent in 1996-97 increased to 29.4 per cent in 1997-98 but later declined to 29 per cent in 1999-00. It has increased to 29.61 per cent in 2001-02 and finally to 30.4 per cent in 2003-04. Similarly, RAR was 43 per cent in 1996-97, increased to 43.3 per cent in 1997-98, decreased to 42.8 per cent in 1999-00 and has increased to 43.3 per cent in 2002-03 and further to 43.7 per cent in 2003-04.

The agricultural sector has absorbed 17.97 million of the total employed labour force. On the whole, an increase has been observed in almost all-major industries/sectors gender neutrally. Sector wise break up of employed labour force shows that female labour force participation is on the up for most sectors especially agriculture and fishery workers. It is important to note that the employment of the rural females increased despite a considerable rise in female Labour Force Participation Rate. The increase in rural female employment was mainly in the category of unpaid family helpers, which may be due to enhanced growth rates in agriculture in recent years or due to the combined efforts of various NGO. In addition, about 3.52 million people were estimated to be unemployed in fiscal year 2005 as compared to 3.72 million last year.

Transport and communications

An efficient transport and communication network plays an important role in the socio-economic development of a country. Better road infrastructure is associated with greater agricultural output, higher income, better indicators of access to health services, and greater income opportunities. The development of rural infrastructure have important implication for the alleviation of poverty. A number of studies point to a significant impact of roads on poverty reduction through economic growth. The length of paved roads is also highly correlated with physical and human capital. Socio-economic benefits provided by roads and highway projects include all-weather reliability, reduced transportation costs and increased access to markets for local produce, access to new employment centers.

Pakistan’s achievement in building high and low types of roads have been quite credible. As on March 2005, the total length of roads in the country was 259,758 Km, including 162,879 Km of high type (63 percent) and 96,879 Km of low type roads (37 percent). During 2004-05, the length of high type roads have increased by 2.7 percent. The construction work on Islamabad-Peshawar Moterway (M-1) is in progress.

During the first nine months of the current fiscal year, Pakistan Railways carried 61.3 million passengers and 4.9 million tons of freight. Its gross earnings stood at Rs.13.2 billion, against 10.6 billion last year, which was higher by 25 percent. PIA carried 3.828 million passengers during July-March 2004-05 as against 3.692 million in the same period last year. Both passenger capacity and traffic volume increased by 14.5 per cent and 9.1 percent, respectively. Its fleet consists of 49 aircrafts of various types. There are presently three air lines operating in the country two of them are providing both domestic and international services. The third one is operating on domestic routes only. Karachi Port has handled 21,845 thousand tons of cargo during July-March, 2004-05, compared to 20,500 thousand tons during the same period last year, showing an increase of 6.6 percent. The Port Qasim has handled 16 million tones of cargo during July-March 2004-05 as against 11.2 million cargo handled during corresponding period last year, registering a growth of 43 percent. The Gwadar Port is being built with Chinese assistance and its first phase has almost completed.

In 1999-2000, there were only 0.3 million cellular mobile subscribers in Pakistan which jumped to 2.4 million by 2002-03 as a result of introduction of CPP regime and addition of another mobile operator (Ufone). Mobile subscribers continued to rise at an unprecedented pace, reaching 5.0 million by 2003-04. Major turnaround was witnessed when the mobile companies started giving free mobile connections and bearing the cost of government levies themselves. In a short period of 10 months in the outgoing fiscal year, more than 5 million new subscribers have been added to the list, reaching over 10.5 million by end April 2005. In other words more than 100 per cent increase in subscriber in just 10 months was unprecedented. Accordingly, the teledensity with respect to cellular mobile has jumped form 0.2 per cent in 1999-2000 to 7 per cent in 2004-05.

For promotion of Information Technology, 1900 cities/towns/villages have been provided Internet facility, upto March, 2005. Total telephone lines installed by March 2005 were 5.5 million as against 4.4 million up to June 2004 last year.


It is universally recognized that energy is one of the most important inputs to economic growth and development. The consumption of energy is one of the critical indicators of the level of development of any country. Developed countries use more energy per unit of economic output and far more energy per capita than developing countries. At present, over a billion people in the industrialized countries use some 60 per cent of the world’s commercial energy supply, while 5 billion people living in the developing countries consume the remaining — a large number of them are poor. It is estimated that about two billion people around the world have access to modern energy services.

During July-March, 2004-05, the production of crude oil per day has increased to 66,508 barrels, from 62,122 barrels per day during the same period last year, showing an increase of 7.1 percent. The over all production of crude oil has increased to 18.1 million barrels during July-March, 2004-05, from 17.1 million barrels during the comparable period last year, showing an increase of 5.8 percent. On average the transport sector consumes 48.7 per cent of the petroleum products, followed by power sector (31.1 percent) industry (12.1 percent), household (3.8 percent) other government (2.5 percent), and agriculture (1.8 percent) during last 14 years i.e. 1990-91 to 2003-04.

The production of natural gas per day has stood at 3,681 million cubic feet during July-March, 2004-05, as compared to 3,210 million cubic feet in the same period last year, showing an increase of 14.7 percent. Production of gas has increased to 1,003,198 million cubic feet during July-March 2004-05, as compared to 882,684 million cubic feet during the same period last year, showing an increase of 13.6 percent. On average the power sector consumes 35.4 per cent of gas, followed by fertilizer (23.4 percent), industrial sector (18.9 percent), household sector (17.6 percent), commercial sector (2.8 percent), and cement (1.5 percent) during the last 14 years from 1990-91 to 2003-04.

The installed capacity of electricity (hydel and thermal) has increased by 0.7 per cent during the first nine months of the current fiscal year and stood at 19,389 MW. Total installed capacity of WAPDA stood at 11,298 MW during July-March 2004-05 of which hydel generation was 6,463 MW (57.2 percent) and thermal was 4,835 MW (42.8 percent). During first three quarters of current fiscal year 61,759 GWh electricity has been generated as against 56,145 GWh were produced in the same period last year, showing an increase of 10 percent. The number of villages electrified has increased to 87,698 during July-March, 2004-05, from 78,820 in 2003-04, showing an increase of 11.3 percent.

Presently, some 700 CNG stations are operating in the country while 200 are under construction. By March 2005 about 700,000 vehicles were converted to CNG as compared to 450,000 vehicles during the same period last year, showing an increase of 56 percent. With these developments Pakistan has become the leading country in Asia and the third largest user of CNG in the world after Argentina and Brazil.

Environment and housing

I. Environment

Pakistan is conscious that pursuit of unbridled growth and development all over the world has laid a heavy burden on sustainability for the present and foreseeable future on the planet Earth. Sustainable development is, therefore, the cornerstone of all considerations by the government. Concern for environment- its protection, renewal and enrichment - has been reckoned as obligation towards the betterment of all the citizens at large. Presently, environmental situation has risen due to a number of factors including high population growth rate, lack of public awareness and education, mismanagement of water and other natural resources as well as unplanned urban and industrial expansion.

Draft of “National Environmental Policy 2005” which has been approved by the Prime Minister in principle and is being circulated to larger stakeholders for comments. Once approved, it would be country’s first ever “Environmental Policy”. This policy would compliment the objectives of NEAP-SP and will address the sectoral issues like (a) Water management and conservations, (b) Energy efficiency and renewable, (c) Agriculture and livestock, (d) Forestry and plantation, (e) Biodiversity and protected areas, (f) Climate change, air quality and noise and (g) Pollution and waste management. In addition, the proposed policy aims to address other cross-sectoral issues such as (a) Population and environment, (b) Gender and environment, (c) Health and environment, (d) Trade and environment, (e) Poverty and environment and (f) Environment and local government.

The key factors contributing to air pollution in Pakistan are: a) rapidly growing energy demand; and b) a fast growing transport sector. In the cities, widespread use of low-quality fuel, combined with a dramatic expansion in the number of vehicles on roads, has led to significant air pollution problems. It may be mentioned here that the two-wheeler industry is performing very well in Pakistan. In the year 2003-04 motorcycle industry showed a visible sign of growth when the total market size achieved a figure of around 327446 while during 2004-05 (July-March) it was 342678 units. Rickshaws have grown by more than 59%, while Motorcycles and scooters have almost doubled over the past ten years (This data does not include locally assembled diesel engine turned “auto Carts” used in rural areas). Motorcycles and rickshaws, due to their two-stroke engines, are the most inefficient in burning fuel and contribute most to emissions.

Pakistan is the largest user of CNG in Asia and presently, some 700 CNG stations are operating in the country while 200 are under construction. By March 2005, about 700,000 vehicles were converted to CNG as compared to 450,000 vehicles during same period last year, showing an increase of 56 percent. Use of CNG as fuel in transport sector has observed a quantum leap, replacing traditional fuels and has helped a lot in lowering the pollution load in many urban centers. After the successful CNG programme for petrol replacement, the government is now embarking upon a programme to replace the more polluting diesel fuel in the road transport sector. The government has planned to offer incentives to investors to introduce CNG buses in the major cities of the country. During July-March 2004-05, 3681 million cubic feet of natural gas was supplied per day as against 3210 million cubic feet per day during the same period last year, showing an increase of almost 14.7 percent. For the last five years, the use of coal in the power sector has been decreasing. It may be due to the fact that a number of plants have now been converted to natural gas. Likewise, there has been a considerable reduction in coal usage for domestic purposes.

Per capita water availability in Pakistan has been decreasing at an alarming rate. In 1951, per capita availability was 5300 cubic meters, which has now decreased to 1105 cubic meter just touching water scarcity level of 1000 cubic meter. The productivity of fresh water is also decreasing due to losses in the movement of the water from the canal heads to the croplands. The existing water resources are under threat due to rapid degradation, soil erosion, deforestation and untreated discharge of municipal and industrial wastes to rivers and other water bodies.

Government of Pakistan is committed to supply safe drinking water to its people and many emptive as well as preemptive measures has been proposed in forthcoming national environmental policy to ensure supply of safe drinking water. Various bilateral and multilateral donors/aid/lending agencies have shown their willingness to support government’s endeavor in this regard. Plans are underway to extend the coverage of clean drinking water from 63 per cent in 2001-02 to 70 per cent in 2005-06 and sanitation from 40 per cent to 55 per cent in the same period. It is targeted to provide 93 per cent of population with access to clean drinking water by 2015 and 90 per cent of the population with access to sanitation.

The productivity of soil is being lost due to water logging, salinisation and sodicity. It is estimated that about 38 per cent of Pakistan’s irrigated land is water logged, 14 per cent is saline. In the urban areas, less than 60 per cent of solid waste is collected. No city in Pakistan has proper waste collection and disposal system for municipal or hazarders wastes. Our Industries use about 525 types of chemicals and dyes/colour in different processing industries. Their processing generates wastes causing contamination of soil and pose potential risk to public health and damage the fertility of cropland.

The National Conservation Strategy (NCS) represents the broad national environment policy of Pakistan, within which a National Environment Action Plan (NEAP) has also been approved. The main objectives of NEAP are to safeguard public health, promote sustainable livelihood and enhance quality of life for the people of Pakistan. It focuses on clean air, clean water, solid waste management and eco-system management. The government has also formulated a comprehensive strategy to develop provincial capacity for implementing environmental protection laws and monitoring their effectiveness.

II. Housing Sector

The housing situation in Pakistan has steadily deteriorated over the past many years for a variety of reasons including ineffective policies, resulting in huge housing backlog. According to 1998 census, the total number of housing units throughout the country was 19.3 million. The housing backlog, as estimated according to the 1998 census, was 4.30 million units, which is now projected to 6.0 million units. The annual additional requirement is estimated around 570,000 housing units whereas the annual production is estimated around 300,000 housing units, resulting in a recurring shortfall of 270,000 housing units annually. It is estimated that in order to address the backlog and to meet the housing shortfall in the next 20 years the overall housing production will have to be increased to 820,000 housing units annually.

Recognizing the gravity of the situation and realizing the potentials of housing and construction as productive sector of the economy, the present Government has declared Housing and Construction as a priority industry and also formulated a pragmatic and workable National Housing Policy with a view to (a) Accelerate housing activity and contribute towards employment generation and economic development, (b) Facilitate provision of housing inputs including land, finance, building materials, institutional and legal framework, (c) Analyse the culture of poverty and the forces generating ever-increasing slums and katchi abadis including political, public, socio-economic, bureaucratic and environmental forces, (d) Promote ways and means for housing development by enhancing affordability, saving capacity, human tendencies and potential, (e) Provide safeguards against malpractices, bureaucratic in-efficiencies, institutional weaknesses and mafia assaults and (f) Particularly for the low income groups.

The Prime Minister has also announced “HOUSING FOR ALL” programme which includes: (a) Housing schemes for Government employees will be launched in all the districts of the country for which provincial governments and ICT will provide (100) acres of State Land immediately at affordable price (b) Housing schemes for Government employees will be developed on public private partnership basis in which Banks will participate through appropriate collaboration with the private sector developers. Such partnership will be secured on competitive basis through a transparent selection process, (c) Federal/Provincial/ District Governments should facilitate and provide all necessary support to Banks/developers with a view to creating an enabling environment, (d) Federal Government will ensure provision of trunk infrastructure at project sites from National Utilities regarding electricity, gas and telephone. If required Banks may finance extra cost of such infrastructure, (e) Provincial/Federal Governments will ensure provision of trunk infrastructure for housing schemes, (f) To facilitate this process, Governments of Sindh, NWFP and Balochistan may emulate the housing development model recently formulated and adopted by the Government of Punjab for its employees, (g) Provincial Governments should identify lands, wherever available in their jurisdiction, and make it available for promotion for Government housing sector, (h) Provincial Government will rationalize the rates of Registration Fee, Stamp Duty and Property Tax to promote housing sector, (i) Provincial Governments/ICT Administration will ensure effective implementation of foreclosure laws, (j) Provincial Governments will make necessary legislation, if required, for transfer to state land at realistic/affordable rates for the Government employees housing schemes and (k) Federal/ Provincial Governments will submit proposals regarding grant of proprietary rights to dwellers of Kachi Abadis located on the Federal Government land for consideration and decision.

The prime Minister has inaugurated (Phase-V) Housing Scheme for Low Paid F.G. Employees (BPS 1-16) on 11-4-2005 for construction of 1000 multi-storeyed flats in Sector G-11/4, Islamabad. The cost of the flats ranges from Rs.1.2 - 1.8 million. The allottee will contribute 40% cost in installments and National Bank of Pakistan will provide the remaining 60% as loan. Flats will be handed over to the allottees in two years time. 90% apartments are earmarked for Federal Government employees of the Ministries/Divisions, Attached Departments and Sub-ordinate offices and the remaining 10% apartments for the Employees of Autonomous Bodies/Corporations and other Federal Government Organizations.