NEW YORK, Feb 6: Pakistan’s economy is weakening amid the strife sweeping the country, according to a report in The Wall Street Journal.
“Anaemic textile exports, rising food prices and energy shortages have undercut growth, causing the government to miss a range of economic targets, the newspaper said in a dispatch from Karachi. Last month the government said growth would fall below its original target of 7.2 per cent for the fiscal year ending June 30.”
After spasms of violence that followed the assassination of PPP leader Benazir Bhutto, and the approach of national elections on Feb 18 that held the potential for more unrest, the Journal, citing analysts, said that the economy could slacken further. Rioters caused an estimated $1.3 billion in losses, according to Karachi Chamber of Commerce. Power transmission, telecommunications and roads were affected.
President Pervez Musharraf, according to the paper, has been counting on a robust economy to ride out the country’s political shocks. For five years, Pakistan has grown on average 7 per cent annually, with the US providing nearly $11 billion in assistance since the Sept 11, 2001, attacks.
The WSJ quoted Finance Minister Salman Shah as saying that economic fundamentals remained strong and growth should still exceed 6 per cent, which would outstrip many of Pakistan’s peers in Asia. Last year, the Karachi Stock Exchange’s benchmark index advanced more than 40 per cent.
But the report cited Musharraf’s opponents as saying that the economy now held huge political hazards because inflation and slower job growth had increased public discontent, especially among the poor. “He’s giving the next government a highly unstable economic scenario,” Sherry Rehman, a spokeswoman for the PPP, was quoted as saying.
Rising prices for food staples have spurred inflation, with the benchmark inflation rate staying above 8 per cent for the second straight month in December and breeching a government target of 7.5 per cent, the Journal said. Inflation has sapped exports, which declined 12 per cent in December from a year earlier.
The WSJ pointed out that the State Bank said in a recent report that Pakistan risked missing its target of containing its fiscal deficit to 4 per cent of gross domestic product partly because the militancy had spurred heavy defence spending.