NEW DELHI, June 20: With huge investment of $2 billion on balancing, modernization and replacement, State Bank of Pakistan Governor Dr Ishrat Husain on Friday said textile sector was fast rehauling and positioning itself to survive the challenges of new textile market in 2005 with focus on value-addition, pricing and quality.

In an interview, the SBP governor, who was here to attend an Asian Clearing Union (ACU) conference, said the textile industry was not only old type of yarn and cloth, but “we have one billion dollars exports of bedwear, knitwear and readymade garments. We are also increasing synthetic textiles exports, so it is value-added where are going in.”

“And the textile industry must be complimented for the foresight they have shown by completely rehauling and positioning themselves for 2005,” he said maintaining, other major sectors where a lot of investment is taking place are oil and gas and financial sectors.

The SBP governor said the central bank governors of seven Asian countries were very much impressed by the turnaround of Pakistan economy and indicators, showing positive results.

Dr Ishrat said he had presented factual appraisal of the economic progress, which Pakistan was able to make from October 1999 to June 2003 at the conference. This was possible not only because of the macro-economic stability, but also due to the deep-rooted structural reforms and good economic governance, he added.

“So I felt that this was a good message, which clarified a lot of misgivings about Pakistan’s economic situation in the minds of Indian media,” he added.

Answering a question, Dr Ishrat Husain said if everything went right Pakistan would be able to get rid of the IMF by 2004 as had been promised by the government three years ago.

About the privatization of Habib Bank, the SBP governor said: “By the grace of Allah, we should be able complete the process of privatization in another three months.” After the privatization of Habib Bank, 80 per cent of the banking assets in Pakistan will be in the hands of the private sector as compared to 30 per cent banking assets in the hands of private sector in India, he maintained.

Asked as what would be the impact of the new and first budget of the nascent democratic government in Pakistan, the SBP governor categorically said the budget was making a transition from completing the macro-economic stability towards a higher growth.

Replying to another question, Dr Ishrat said the good news was that the government had almost stopped borrowing from banks and the State Bank, and the cost of borrowing to the government from the banking sector is down to less than two per cent, so that provides a lot space to the government in reducing its debt servicing and freeing up the resources for the development expenditures.

With the slash in the lending rates and excess liquidity, Dr Ishrat said the private sector credit was more than double from Rs50 billion to Rs120 billion, indicating a healthy sign for the economy. “We have completely re-profiled our burden of the debt. To the extent that our debt servicing on external debt, which used to take away 66 per cent of our foreign exchange earnings. This ratio has come down to less than 30 per cent and in a year’s time. This will be down to 25 per cent, which is an international law.

Any country which is able to achieve 25 per cent of foreign exchange earnings as debt servicing ratio is considered to be normal, he said adding, “within three to four years, we have gone from almost default country to a normal country as far as the external debt servicing ratio is concerned.”

Responding to a question as if economic approach helped restore the confidence of both domestic and foreign investors and fostering economic activity in the country, Dr Ishrat said it always took some time. We have lot of excess capacity in cement, automobile, sugar, fertilizer, refineries and power generation, and we have already invested a lot in these big items.”

Dr Ishrat said the second area where a lot of investment was taking place was oil and gas sector. “Pakistan was dependent on just a few gas fields and those were depleting so we have to find new discoveries. And I am quite happy that new discoveries have taken place. But you need investment both in production as well as transmission pipelines for the gas.”—APP