Economic Adviser to Prime Minister Dr Salman Shah has said that by next year the government would be targeting to reduce the inflation rate from current 8.5 percent to 7 percent, and a year after to 5 percent. He was addressing a seminar on 'Economic Development and Performance of Private and Public Sectors', organised by a national daily here on Saturday.
Salman said that the original target to reduce inflation rate for next year was 5 percent, which was no more possible. "High inflation rate is a great concern for the government that had touched as high as 11.5 percent, which has been brought down to 8.5 percent after liberalising import of essential items. Moreover, since the domestic production is contributing now, the inflation would further decline," he added.
He pointed out that growth drivers in the economy lies in agriculture, manufacturing, engineering, services and textile sectors. He said that agriculture sector was not performing to its full potential, but this should be looked as an opportunity for growth. "We have to achieve that potential with the help of the private sector," he said.
"Moreover, a huge potential also exists in other sectors as well that are waiting to be tapped. The textile sector has great potential to lead the world and in long term I see Pakistan leading textile exporter of the world, although this sector is facing problem with European Union at present, but we are tackling it. The engineering, automobile and electronic appliances are doing well. In fact, its growth is in double digit and some even are growing by 50 percent a year," he added.
Dr Salman averred that Pakistan was progressing well, and things were not that bad as was being painted by some elements. He said that economy had witnessed over eight percent growth, and this year it was being targeted at 7 percent. "If we achieve that, this would be fifth consecutive year of solid growth. This would be a great achievement and would provide a space to sustain the growth. Pakistan is on track to progress," he added.
According to him, for the first time the International Finance Commission (IFC) in its recent survey listed Pakistan as one of top 10 countries for reforms in the world, "while we were on the top in South Asia". This spoke a lot about the success of the on-going reform programmes in the country, which have accelerated in the last five years.
He told the audience that the World Bank has committed to increase its participation in the country from $900 million to $1.5 billion per annum while the Asian Development Bank has extended a similar gesture from $800 million to $1.4 billion per annum. "This positive commitment is due to success of our reform programmes, which has delivered macro-economic stability on which we can base our future growth," he added.
On reform programmes, he said that in financial sector the government had carried out some most extensive and deep reforms that would not be found anywhere in the world. He said that prior to the privatisation of banks, 80 percent banks were in the public sector and now the same number belongs to the private sector, and the banking sector has become a dynamic sector.
He highlighted the reforms in governance, capital market, privatisation and tax. In taxation, he said, the government had introduced technology, and improved tax process and governance system. "It was imperative to enhance revenue, otherwise we could not invest in infrastructure and without a world class infrastructure no growth could be attained," he added.
The Advisor admitted that the growing trade deficit was a concern for the government, but this was caused by international oil price-hike, and import of machinery and raw material, which was essential for economic growth. However, increase in the imports reflects increase in economic growth in the country, he added.
On capital deficit, he said that at present it stands at 2 percent of GDP, which was very much manageable and easily financed since major flow were coming in. He said that the government was going for major listing of their companies in the international market and also going for 'GDR and ADR'. "This would alone raise between $1.5 billion and $2 billion in the near future. In addition to that, we have the support of privatisation and international financial institutions," he added.
On energy, Dr Salman said: "We were in a region where energy was in surplus and also we were in a position to attain that surplus. Of course, creating that capacity was a challenge, but not impossible."
He said that Pakistan has the machines, manpower and plans to meet the challenge and the government would ensure to get the required energy.
According to him, the government was working on North-South Corridor project on fast track with the financing of World Bank, aiming to improve transportation of goods from Karachi to Khyber, including building world class ports, railways and roads. The government was also aiming to curtail the transportation time to 36 hours, which would also help in reducing the cost by three to four percent of GDP.
On water storage, he said that major water storage would be developed with consensus. "These are good projects and much needed by the country for future growth, and it would be beneficial for all regions of the country. We would build them, as there is no any other way for the economic growth, which is linked with the reduction of poverty. The government is also committed to community development, which is the ultimate goal of the government," he added.
Wapda Chairman Tariq Hameed showed concern over decline in water per capita. He said that in 1951 water per capita was 5400 cubic metre, which has declined to 1200 and in 2010 it was anticipated to further reduce to 1024. He said: "We were only storing nine percent of the water availability, which would decline since we are losing the storage capacity of the existing dams. The water availability scenario is looking ugly, thus we need to build storage places to meet the future water demands," he added.
On power, he said that power consumption was increasing every year. This year alone it has increased by nine percent and economic growth was the big factor in the growing consumption. "By 2007, we would be in trouble, as we would not be able to meet the power demand. Hence, we have to take quantum jump to meet the growing demand, which is only possible through creation of hydel power for which we need to build big dams," he said.
CBR Chairman Abdullah Yousuf said that CBR was reshaping the taxation system and introducing technology in it to facilitate the taxpayers, which would make their lives easy to file their tax returns. "In fact, we are making CBR as people-friendly," he added.
SECP Chairman Tariq Hassan laid importance on SMEs, as it entails enhancement of economy competitiveness and generation of additional employment. He said that SECP fully recognises the significance of the SMEs sector and it has specifically emphasised on the development of the corporate SME sector. SECP has taken several radical reforms to promote corporate growth and to extend the benefits of corporate status to SMEs in the country, he added.
Dr Ashfaq Hassan Khan, Economic Advisor to the Prime Minister, Mukhtar Ahmed, Advisor to the Prime Minister on Energy, EPB Chairman Tariq Ikram, Bank of Punjab President Hamish Khan, FPCCI President Ch. Muhammad Saeed, FAP Chairman Shah Mahmood Qureshi and Tariq Saeed Saigol, Chairman of Maple Leaf Group, also spoke on the occasion.