KARACHI, Jan 20: The Governor, State Bank of Pakistan, Dr Ishrat Husain, has cited a shift in economic mood after the recent visit of US Secretary of State, Colin Powell, to the region, believing that the investors’ confidence has again started to improve.

Speaking at a seminar on Current Economic Scenario of Pakistan, which was organized by the Institute of Cost and Management Accountants of Pakistan here Saturday night, the State Bank governor identified some ideas reflecting a positive change inside the country.

Though he did not think that the Karachi Stock Exchange was a true economic indicator, yet he said its improvement emerged after the visit of Colin Powell, signalling a shift in the mood.

His analytical view about the current situation suggested more efforts for the improvement after the exogenous shocks the country received during the year. However, he also mentioned that institutional capacity for the implementation of economic policies was critical and needed a lot of improvement.

He said the Afghan reconstruction programme could reactivate Pakistan’s economy but stressed the need for full utilization of the opportunity.

“How soon the Afghan reconstruction starts is very important for us,” he added.

According to him the second biggest and important thing was that the country wanted to take a jump of 30 per cent in the development expenditures till June 2002.

“Though we are not ready to cut development expenditures at any stage, yet no big projects will be introduced,” the State Bank governor said.

He said most of the projects would be for the local utilization as already the Khushali Bank was being utilized for such kinds of projects.

He said the most stunning block for development was poor institutional capability, which had actually declined in the last one decade. He said the supply of fund was not the main problem but the blockade or leakage of the pipe through which the fund was to flow would be the problem.

He mentioned the failure of the multi-billion dollar Social Action Programme in this connection. “We need to repair these pipes,” he commented.

Explaining the current and future economic scenario in and outside the country, Dr Ishrat referred to the World Bank report, which maintains abolition of the multi-fibre agreement to mainly benefit Pakistan, China and India.

He appreciated the textile industry for its prompt change, with major emphasis on quality products, spending one billion dollars (for BMR) in one year.

He said, “after abolition of the multi-fibre agreement, there will be a great opportunity for Pakistan to have joint ventures with the European companies and the US, as they will not be able to compete with us.”

Answering a question, Dr Ishrat said India gives Rs130 billion to its industry and exporters as a subsidy, but Pakistan has got rid of the tendency, consequently resulting in a situation where the Indian deficit is almost double than that of Pakistan.

Dr Asad Sayyed, advisor SDPC and Badruddin Fakhri, president ICMAP gave a detailed presentation about the current economic situation of the country.—APP