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LAHORE, March 7: The economic reforms launched by the government during the last couple of years have helped the economy cushion the adverse impact of the US terror attacks and the Indian military build-up on the borders with Pakistan.
This was stated by Finance Minister Shaukat Aziz while addressing the directors of the Lahore Stock Exchange here on Thursday.
He said the economy had withstood the negative effects of the two developments, although the damage done to it as a result of the Sept 11 events was far greater than the benefits reaped by the country (as a result of its support to the US-led coalition in its war on terrorism).
Aziz claimed that the economic fundamentals had improved in the recent months, but there was a lot to do to pull the county out of the danger zone. He said the government’s reforms agenda was far from over. “It is just the beginning. A lot still needs to be done. The reforms would continue beyond October 2002 (after the general elections) and would be institutionalized so that they are not reversed (by the new government). The president himself has assured their continuity,” he said.
The minister said the government was trying to secure as much debt relief from the lenders as possible (in return for its support to the international coalition). He said the country had already received $720 million in grants out of $1.2 billion promised by various countries to help its economy recover from the impact of the events following Sept 11.
CAPITAL MARKETS: Aziz said the capital markets were down a bit in terms of volume, trading, and foreign investment but the tide seemed to be turning.
He said the capital market reforms launched by the government had helped modernize the stock exchanges, raise the level of professionalism, make them transparent, and prepare them for future. He urged the stock exchanges to focus on risk management in terms of exposures because it would create new opportunities for them.
The minister said the government was doing a lot to improve the bourses, and macroeconomic stability achieved by it would further strengthen the capital markets. He said inflation was down at 2.6 per cent in the first six months, export finance was available at 7.5 per cent and the central bank had reduced its discount rate by four per cent. He said the impact of these developments had though not reached the borrowers but they would certainly leave a salutary impact on the capital markets.
Furthermore, he said, the government was encouraging listing of public sector companies on the stock exchanges that would make their functioning more transparent as well as help the bourses. Moreover, the government had expedited the process of privatization that would also help the markets to improve.
He also claimed that overseas Pakistanis and foreign portfolio managers were deeply interested in investing in Pakistan. However, he said, sometimes they had to delay their plans due to “external factors” (like the US terror attacks and the Indian military build-up).
INVESTMENT: He said the macro and microeconomic reforms and such developments as controlled inflation, improved foreign exchange reserves which were likely to cross $6 billion by June 30, and improved inflow of remittances (which have risen to $160-180 million a month from $80 million) had led to increased investment in stocks as well as real estate. The people had now started to bring back their money into the country for investment.
The minister, however, laid great emphasis on the importance of domestic investment in agriculture as well as industry. However, he said, there were areas like oil and gas sector where the country could not do without foreign investment.
CABINET COMMITTEE: The minister said the president had set up a cabinet committee on deregulation to remove irritants in the way of investment and business. The committee would be chaired by the finance minister himself. It will comprise five ministers and federal secretaries besides having members from the private sector. The first meeting of the committee is scheduled for Monday. “The president himself will monitor the performance of the committee,” he said.
CURRENT ACCOUNT: Aziz reported 50 per cent improvement in the current account in the first half of the ongoing fiscal year due to the low international oil prices and the little (three per cent) impact of the war on terrorism on the country’s exports. He said the foreign exchange reserves were expected to cross $6 billion by June 30, adding the government had not obtained any short-term loans for this purpose as was speculated by some. “It is because of the improved economic performance of the country.”
WTO: The minister said the post-WTO era would offer more opportunities than challenges to the economy if the businessmen focussed on increasing their productivity. He said the “business as usual” policy would not work.
Aziz did not agree that the per capita income had come down, saying it had actually gone up, although marginally. He said the cost of the utilities had not been increased for the lower income segments of the society.
