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Key Economic Data 
  2004 2003 2002 Ranking(2004)
Millions of US $ 96,100 82,300 73,300 44
GNI per capita
 US $ 600 520 480 160
Ranking is given out of 208 nations - (data from the World Bank)

Books on Pakistan


Area (



Pakistani rupee

Pervez Musharraf

Update No: 001 - (24/02/06)

A worsening insurgency
Throughout February, there was no sign of an easing of the insurgency in Baluchistan and Waziristan. In Baluchistan, nationalist elements, allied with some tribes, continue to harass the security forces, forcing the central government to deploy growing numbers of security personnel to maintain the situation under control. In Waziristan, Taleban-like groups have brought most of the region under their control and try to increase support among the population by eliminating criminal gangs and imposing Sharia law. Although the militants in Waziristan rarely target security personnel, the number of violent incidents has been on the rise this year. However, neither insurgency has the potential to directly threaten the hold of Musharraf on power. Both regions are relatively marginal in terms of contribution to the national economy and demography and are not strategically placed. Moreover, in terms of resisting the pressure from the political parties for a full return to civilian rule, Musharraf has been quite successful. His policy of wooing, intimidating and bribing has managed to further weaken the political parties, which remain quite unpopular due to their long history of corruption, internecine fighting and ineffectiveness.

Good growth despite all
Moreover, Musharraf's government can claim to have achieved a quite satisfactory level of economic growth. The latest IMF estimates place GDP growth at 6.3% for 2005-06, that would be significantly below the official target of 7.2%, but nonetheless the IMF had words of praise for having achieved such a relatively high level of growth. While revenue performance remains a weak spot, the government has been moving in the direction of creating a better business climate. The IMF projects growth for 2006-07 at 6.5%. Inflation, however, remains relatively high at 8.7% this year, although the IMF expects that it will be reduced to 7.3% next year. Given the pressure on prices caused by the high oil prices, this is considered a satisfying level, not least because the Central Bank intervened promptly to tighten monetary policy and forcing inflation back from a high of 11% in April 2005. Another negative effect of the high oil prices was a rising trade deficit, which reached a record US$6.5 billion during the first half of 2005-06, whereas the government had projected a trade deficit of just US$4 billion for the whole year. Exports did well, but imports grew even faster. Not least because of the earthquake in Azad Kashmir, the budget deficit is expected to increase this year to 3.7% of GDP, before declining to 3.3% next year. Government debt as a percentage of GDP has been steadily declining since 2003-04 and is projected at just below 50% by 2006-07. The increase in the budget deficit (from 3% last year to 3.7%) will be the most noticeable economic effect of the earthquake, as the region hit by the disaster contributes only marginally to the national GDP. 

Investment needed
The IMF's optimism concerning the Pakistani economy is shared by some investment pundits, such as Merrill Lynch, who considers Pakistan one of the best potential returns in the region. The growing pace of market reforms in Pakistan should, in Merrill Lynch's view, offer high returns compared to the larger markets, which are now expected to slow down. Pakistani stocks currently offer a yield of about 5%. Foreign investment in Pakistani stocks trebled in 2005, but still stood at a rather puny US$450 million, in a market whose total value is US$53 billion. Although Pakistani stocks grew by 60% over the last 6 months, they are considered by analysts to still be cheaper than most other Asian stocks. Many companies are expected to be privatised over the next two years and this should stimulate the growth of the market. More in general, foreign investment in Pakistan is growing and is expected to double to US$3 billion this year. 
Nonetheless, the picture coming from Pakistan is not a completely rosy one. Economic growth is reckoned to be held down by the high losses of the power sector, which is affected negatively by corruption and inefficiency. There is currently already a power shortage of 500 megawatts, despite the fact that half of the population does not have access to electricity, and the shortage is projected to grow to over 5,500 megawatts by 2010, increasing at the rate of 1,000 megawatts per year. Although the country has a huge hydroelectric potential, it is not fully exploiting it because of political issues and lack of sufficient funds to invest.

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India, Pakistan hold talks on tri-nation gas pipeline 

Indian Petroleum Minister, Murli Deora, recently started talks with his Pakistani counterpart, Amanullah Khan Jadoon, on a US$7.2-billion Iran-Pakistan-India (IPI) gas pipeline project, officials said. Deora, who was sworn in as India's new petroleum minister in January, will discuss pricing of gas and project structure in the day-long talks with the Pakistani delegation, said a Petroleum Ministry official who did not wish to be named. The possibility of Pakistan permitting export of diesel by the Indian Oil Corporation will also be discussed, the IANS News Agency reported. 
While considerable progress has been made in the Iran pipeline project, issues like pricing of gas, project structure and other legal, technical and financial issues still need to be ironed out at trilateral level, the agency said. Following the talks in Delhi, Pakistan and Iran will meet to discuss the project. Subsequently, a trilateral meet will be held in Tehran in early April which will help evolve consensus before the three sides can execute the ambitious project. The three countries have decided to go ahead with the mega-project despite opposition by the US, saying the pipeline is in the countries' national interest. The three sides have agreed to finalize the pipeline project by April next year. Nicholas Burns, the US undersecretary of state, on a visit to Pakistan in January had dismissed the pipeline project as "impractical." Earlier, Washington said the project will breach the US, Iran and Libya Sanctions Act of 1996, which forbids more than US$20 million of investment in Iranian oil and gas projects.

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