Pakistan had emerged as attractive investment destination and would sustain macro-economic stability and robust economic growth in years ahead, Governor State Bank Dr Shamshad Akhtar said.
She told diplomats and finance experts on Tuesday at Pakistan embassy that sound macro-economic management, backed by market-oriented policies, conducive incentive regime, stability and effective regulatory framework enabled the country emerge as viable and investment-friendly destination.
She highlighted investment potential in various sectors, positive prospects for sustainability of macro-economic indicators, SBP's monetary stance and Pakistan's economic resilience achieved in recent years.
Governor State Bank Dr Shamshad Akhtar said investment in development initiatives, liberal and diversified availability of private sector credit stimulated growth across the board in a number of sectors. While macro-economic imbalances enhanced demand pressures, they stimulated economic growth to 7.4 percent on average over FY05-07, she added.
Dr Shamshad Akhtar said Pakistan continued to attract large foreign investment flows into banking, telecom, oil and gas sectors primarily. The country will attract about six billion dollars investment in FY07 an all time high annual flow. Foreign investment is expected to be more diversified and support infrastructure development, manufacturing, tourism and hotel industry etc.
She said Pakistan's real gross domestic product (GDP) growth rate rose in recent years, averaging 7.4 percent in preceding three years, she stated. Current growth momentum in range of seven percent can indeed be maintained, though it requires careful calibration of macro-economic management and facilitation of economic diversification. The SBP governor said macro-economic stability was managed by a combination of policies, availability of foreign inflows supported by enhanced investor confidence and presence of global liquidity. SBP adopted hawkish monetary stance for almost two years has now paid dividends as inflationary pressures emerging from rising aggregate demand mitigated. Core inflation is down to 5.5 percent.
She said higher remittances inflows, rising from 1.1 billion dollar in FY01 to 5.5 billion dollar in FY07, had helped finance, on an average, 98 percent of trade deficit.
Privatisation programme was pursued effectively along with drive to attract foreign direct investment (FDI), which mobilised cumulatively 10.0 billion dollars and helped finance 75 percent of external current account deficit in FY05-FY07. Another factor was reduction in debt/GDP ratio.
Dr Shamshad Akhtar said, that finally, due to strong foreign inflows coupled with effective reserve management Pakistan had over six years built up reserves, set to reach over 14.5 billion dollar by the end of June 2007 thereby offering more than six months of import coverage.
She said the high economic growth was accompanied by structural changes. Among main features, she listed emergence of vibrant, buoyant services sector, which grew by 8.8 percent in FY2006 and now accounts for 52.3 percent of GDP. This was led by developments in finance, insurance, wholesale, retail trade, transport, storage and communication sub-sectors. Pakistan offered opportunities to exploit gas and coal reserves suitable for power and hydro-electricity generation, she concluded.