The Finance Ministry has said that the current fiscal year is witnessing unprecedented increase in credit to private sector, accelerating growth in non-food non-oil imports, extraordinary growth in industrial production, robust growth in agriculture, higher than targeted increase in tax collection and exports.
Moreover, continuation of low inflation and low interest rate, a buoyant stock market, and higher investor confidence in growing economy is quite visible.
This was stated in "Economic Situation" as of March 2004 portraying an optimistic picture of economy released by the ministry on Monday.
It also said the process of strengthening Pakistan's economic fundamentals that began four years ago has further accelerated in the current fiscal year (2003-04).
There are indications that, like last year (2002-03), most of the targets of the key economic indicators will be surpassed by significant margins.
It is generally perceived within and outside the country that Pakistan's economy is now back on the path of higher economic growth it experienced in the 1980s along with macroeconomic stability, the document said.
REAL GDP GROWTH: Based on the information available regarding agriculture and large-scale manufacturing, it is safe to say that the real GDP growth target of 5.3 percent will be surpassed by a fair margin and is expected to be in the range of 5.5-6 percent.
AGRICULTURE: The agriculture sector was targeted to grow by 4.3 percent in 2003-04. The water availability has increased by 29 percent during the current fiscal year.
The fertiliser off-take during Rabi (October-January) has increased by 15.3 percent.
The wheat crop is sown on an area of 8.2 million hectares against the target of 8.1 million hectares during the current season, which implies that it might surpass the production target of 20 million tonnes.
The cotton production was targeted at 10.5 million bales, however, taking into account arrival at ginneries the production is estimated at 10.3 million bales.
The sugarcane area and production targets for 2003-04 were set at 1 million hectares and 48 million tonnes, respectively. However, sugarcane crop is sown on 1.1 million hectares and production is estimated at 52.6 million tonnes, 1 percent higher than the last year.
The rice area and production targets were set at 2.23 million hectares and 4.3 million tonnes, respectively. However, recent information suggests that rice is sown on 2.45 million hectares and the production estimates are at 4.87 million tonnes, 8.9 percent higher than the last year.
The information regarding minor crops is also encouraging and offers grounds that the growth target for agriculture will be achieved.
INDUSTRY: The large-scale manufacturing (LSM) was targeted to grow by 8.8 percent in 2003-04. During the first seven months (July-January) of the current fiscal year (2003-04), large-scale manufacturing has registered a broad-based growth of 15.1 percent as against 6.3 percent as compared to the same period of the last year and much higher than targeted growth for the year.
Vegetable ghee (6.8 percent), cooking oil (20.1 percent), beverages (21.5 percent), cigarettes (11.5 percent) and sugar (21.5 percent) have performed well in food, beverages and tobacco group. Cotton cloth (14.8 percent), Leather products (49.9 percent), Paper Printing and Publishing (7.7 percent), Cement (13.7 percent), and basic metal industries (14.7 percent) have also done well. Most importantly, automobile production has increased by 57 percent in the first seven months of the current fiscal year.
Based on seven months information it is safe to suggest that industrial growth will exceed the target by a wide margin.
TAX COLLECTION: Original target for tax collection by the Central Board of Revenue (CBR) was set at Rs 510 billion for the current fiscal year. During July-February 2003-04, the tax collection stood at Rs 313.4 billion as against Rs 271.7 billion as compared to the same period of the last year, which is 15.4 percent higher than the last year.
Target for the first eight months has been Rs 298 billion and the actual collection has been Rs 313 billion, Rs 15 billion higher than the target.
Direct taxes have increased by 11.1 percent, while indirect taxes have increased by 17.2 percent. Within indirect taxes, sales tax has increased by 14.3 percent and customs collection is up by 40.7 percent.
It took five years to reach from Rs 200 billion to Rs 300 billion, but during the last four years we are set to move from Rs 300 billion to cross Rs 500 billion. It is important to note that Rs 100 billion additional tax revenue was collected in five years with over Rs 90 billion of additional tax. But the government has collected Rs 200 billion additional amount in four years with no additional tax measures in the budgets.
INFLATION: Inflation was targeted at 4 percent for 2003-04. During the first eight months (July-February) of the current fiscal year, inflation is estimated at previous year's comparable period's level of 3.5 percent.
The rising trend in inflation rate witnessed during the last four months is because of increase in prices of some basic food items like wheat, wheat flour, beef, mutton, vegetable ghee and onion, etc.
Food and non-food inflation have been 4.2 percent and 3 percent, respectively during July-February 2003-04 as against 3.7 percent and 3.4 percent of the same period of the last year respectively.
Tight monetary policy accompanied by prudent fiscal management has been responsible for relatively lower inflation in Pakistan.
MONETARY SECTOR: Overall money supply grew by 11.2 percent during July-February 2003-04 as against 10.6 percent in the same period of the last year. Monetary supply is targeted to increase by 11.1 percent during 2003-04.
Credit to private sector amounted to Rs 230 billion during the same period, which is almost three times higher than the corresponding period of the last year (Rs 78.2 billion).
Sharp increase in the credit to private sector indicates that the confidence of the private sector has been restored and they are investing in the economy in a big way.
STOCK MARKET: Karachi Stock Exchange (KSE) 100-Index has moved up from 3,433 on July 1, 2003 to 4,952 as on March 15, 2004, showing an increase of 44.2 percent.
The market capitalisation increased from Rs 754 billion to Rs 1,301 billion in the same period, which implies an increase of 72.5 percent. In dollar terms, the market capitalisation moved from $ 13 billion to $ 22.5 billion, thereby, showing an increase of 73.1 percent.
The Karachi Stock Exchange has been the sixth best performing stock market in the world during 2003.
EXTERNAL SECTOR: Exports are targeted to increase by 8.4 percent to $ 12.1 billion in 2003-04.
Exports during July-February 2003-04 registered an increase of 13.8 percent, increased from $ 6,920.4 million to $ 7,877.5 million. Exports during the current fiscal year are likely to cross the target.
Exports of primary commodities decreased by 1.5 percent. Within primary commodities, exports of rice and spices registered a growth of 17.4 percent and 32.1 percent respectively.
Exports of textile manufactures grew by 15.7 percent, but other manufactures registered an increase of 2.2 percent, the prominent being the petroleum products exports of which grew by 33.5 percent.
Other exports, basically non-traditional exports, grew by 50.8 percent.
Imports during the same period have increased by 17.2 percent, increasing from $ 7,759.3 million to $ 9,093.8 million.
Non-food, non-oil imports basically representing the imports of machinery, raw materials and capital goods, increased by 29.4 percent during July-February 2003-04. This clearly indicates the rising levels of domestic economic activity.
Trade deficit stood at $ 1,216.3 million in July-February 2003-04 as against $ 839 million in the same period of the last year.
Current account balance remained in surplus during July-January 2003-04.
With and without official transfers, the current account surplus amounted to $ 1.855 billion and $ 1.422 billion respectively against the whole year target of $ 0.5 billion (or 0.6 percent of the GDP).
Interestingly, the oil bill was 17 percent of the total import bill during 1995-99, it increased to 27 percent in 2002-03 and decreased to 20 percent during July-February 2003-04.
WORKERS' REMITTANCES: Workers remittances during July-February 2003-04 amounted to $ 2,545.6 million as against $ 2,873.7 million in the same period of the last year.
Though it shows a decline of 11.4 percent, but if we exclude $ 125 million remittances coming through Haj Sponsorship Programme, the decline is marginal. Furthermore, when viewed against the target of $ 3.6 billion or $ 300 million per month, the inflow of remittances is $ 145 million higher than the target.
FOREIGN EXCHANGE RESERVES: Foreign exchange reserves stood at $ 12,526 million as on March 15, 2004. It was $ 10,728.6 million in end-June 2003, showing an increase of 16.7 percent from June 2003.
EXCHANGE RATE: Exchange rate on March 15, 2004 has been Rs 57.5 per dollar in the inter-bank market, while in the open market it was Rs 57.7 per dollar, showing a premium of Rs 0.2 per dollar or 0.3 percent.
The exchange rate (Pak rupee) has appreciated marginally by 0.6 percent since June 2003.
FOREIGN INVESTMENT: Total foreign private investment was $ 820 million in 2002-03 as against $ 474 million a year before. During July-January 2003-04, it stood at $301.6 million as against $617.8 million in the same period of the last year.
Direct foreign investment stood at $339.5 million during July-January 2003-04 as against $596.4 million in the same period of the last year.
Portfolio investment registered an outflow of $ -37.9 million as against an inflow of only $21.4 million. Last year's direct investment also include privatisation proceeds of $205 million from the United Bank Limited (UBL), whereas the privatisation proceeds of Habib Bank are yet to be included in the foreign direct investment.
It is expected that after inclusion of the HBL privatisation proceeds the figure will look better.
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