Pakistan's macroeconomic fundamentals are better than at any time in the past decades, said Asian Development Bank's Country Strategy and Programme Update (CSPU) 2005-2006. According to the CSPU, in the FY 2004, gross domestic product (GDP) grew 6.4 percent compared with 5.1 percent in FY 2003.
A major contributor to overall economic growth was manufacturing, which grew 13.4 percent, it said adding that the fiscal deficit fell to 3.3 percent of GDP in the FY 2004.
There was robust growth in exports (10 percent) as well as a high level of remittances of 3.9 billion dollars in FY 2004.
It said that the imports expanded rapidly, however, the current account surplus fell to 1.6 billion dollars, compared to 4.1 billion dollars in FY 2003.
This was the fourth consecutive year of surplus on the balance of payments and as a result foreign exchange reserves at the State Bank of Pakistan reached to 10.6 billion dollars (that is more than 10 months of imports).
In June 2004, the International Monetary Fund (IMF) completed its eighth review of Pakistan's performance under the 3-years poverty reduction growth facility (PRGF) and released 253 million dollars. The medium-term prospects for Pakistan's economy continue to improve, the CSPU reported.
It said that the finance minister in his budget speech in June 2004, set out the government's vision for attaining eight-percent economic growth in the medium term. This growth rate is ambitious but not impossible provided that risks are appropriately managed. The risks included complacency in economic management because of the relatively comfortable macroeconomic situation and the ending of the PRGF in December 2004, it added.
The other risks, it said are lack of progress on second generation reforms, particularly to tax administration and promoting the private sector, failure to address weaknesses in implementation capacity, resulting in low utilisation of the public sector development programme (PSDP), inefficient delivery of basic services and internal security concerns as a fall-out of the ongoing government's actions against terrorist groups.
In its dialogue with development partners, the government committed that macroeconomic stability, along with progress on reforms will be implemented. The government has also committed to give priority to addressing capacity and implementing the issues. Both these commitments were reiterated in the budget speech of the finance minister, it said.