WASHINGTON, Sept 24: Four consecutive years of stable economic growth is having a positive impact on Pakistan where both average incomes and purchasing power have increased, says State Bank Governor Dr Ishrat Husain.

Mr Husain, who is in Washington to attend annual meetings of the International Monetary Fund, says that a steady increase in the purchasing power of ordinary citizens has also raised the demand for various goods and services, having a positive impact on the national economy.

Anatol Lieven, senior research fellow at the New America Foundation in Washington, agrees: “After many years of economic stagnation, Pakistan’s economy is now growing quite well, thanks to a mixture of wise economic policies and western aid and debt forgiveness after the Sept 11 terrorist attacks.”

But he warns that signs of economic revival “should not lull us into complacency” because Pakistan had experienced similar high growth in the past but this did not produce long-term political or social stability.

“For the benefits of this growth went overwhelmingly to a small fraction of the population, thereby increasing rather than decreasing social resentment. Corruption and tax evasion made it impossible for the state to transform Pakistan’s grossly inadequate infrastructure or to create a modern education system.”

“Many of these critical failings still remain and until they are rectified Pakistan’s progress will remain fragile and its long-term viability as a state threatened. The greatest danger stems from the combination of population growth and ecological crisis,” Mr Lieven warns.

Mr Husain acknowledges that institutional corruption remains a debatable issue in Pakistan, but says that despite such problems the economy seems to have turned the corner.

The country, he says, has moved out of a decade-old vicious cycle of stagnation and structural snags that impeded progress and obstructed investment.

The IMF World Economic Outlook report also endorses Mr Husain’s optimism, predicting that growth rate in Pakistan will remain strong in 2005, underpinned by robust agricultural and manufacturing growth, and supportive macroeconomic policies.

Reports published in the US media during the annual IMF meetings have also noted Pakistan’s spectacular 8.4 per cent growth rate in the fiscal year ending in June. One such report describes the current business boom in Karachi as “one of the most impressive indicators” of Pakistan’s economic revival.

The report notes that in the last five years, the automobile sector, mostly based in Karachi, has seen a five-fold expansion — from 30,000 cars per annum to almost 150,000 during 2004-2005. Motorbike sales have surged to half a million a year, with export earnings during 2005-06 expected to reach the $17 billion mark.

Analysts note that in the early 2001, Pakistan’s per capita income growth was negative. Today the per capita income has risen to almost $700 per year, compared to $400 in 2001, as a result of financial and administrative reforms coupled with privatization and liberalization of the banking sector.

One analyst quoted a recent ADB report, which says: “Pakistan’s economy is on solid ground due to macroeconomic fundamentals, more private investment and significant expansion in the Public Sector Development Programme.” In 1999, Pakistan’s external debt — a staggering $38bn — to GDP ratio was over 60pc, today it has come down to 37pc, the report notes.

Analysts quoted in the report say that one indicator of the renewed trust in the business environment is the registration of 410 new public and private companies in IT, telecom and energy sectors with the Securities and Exchange Commission of Pakistan in August alone.

Some reports, however, warned that biting fuel oil prices threaten to take steam out of the growth momentum of Pakistan, with forecasts suggesting bitter inflation and current account levels.

Quoting from an Asian Development Outlook 2005 Update release, the report says: “The steeper than projected increases in oil prices, shortages of essential food items, and strong domestic demand would push inflation at higher levels of 8.5 per cent than the earlier forecast of 5pc.