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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

Update No: 053 - (25/06/10)

The siege goes on
Conflict between government and the Supreme Court continues as the latter is now reviewing the decision of the parliament to hand over many of the powers of the president to the prime minister; the Court is also continuing to consider cases of corruption involving President Zardari and is asking the government to approach the Swiss authorities for information. On a separate front the Electoral Commission is now talking of substantial reform in the electoral system, in order to prevent future rigging. The Commission was accused in the past of failing to do anything to prevent rigging but whether the planned reforms will be implemented successfully, remains to be seen.

After the resignation of the Finance Minister some months ago, a new blow to the financial credibility of the Zardari government has come in June with the resignation of Saleem Raza, head of the State Bank of Pakistan. Particularly damaging was the timing: in the middle of negotiations with the IMF and just days ahead of the release of the national budget. Allegedly Raza felt that the government constrained his ability to operate independently.

A budget of controversy
The budget itself is a matter of great controversy for a number of reasons. The introduction of a Value Added Tax (VAT) has been delayed to October, causing some rift with the IMF which had expected it to be introduced in July. The general sales tax has been increased from 16% to 17%, but the tax exemption thresholds have been raised significantly and the salaries of government employees raised by 50%, while their pensions have been increased by 15-20%. Most controversial of all, defence expenditure is increasing by 17% from an already very high 4.04% of GDP. It now going to be 4.47% of GDP, that is 20.14% of the Federal Budget. The debt burden of the Pakistani state rises to 55% of GDP, whereas the budget deficit stands at 4%. Of course the rise in defence expenditure has been justified with the fight against insurgents and terrorists, but nonetheless it is clear that the government is trying to appease the military as well as the public servants and feels isolated and vulnerable. The cut in 10% to the salaries of cabinet members is failing to impress anybody, because everybody knows that they all have land and business activities, as well possibly extra-legal incomes and that salaries account for a small part of their resources.

Partial economic recovery confirmed
The government announced moderately positive economic news in June, with GDP growth reaching 4.1% in the last fiscal year, a significant increase from 1.2% in 2008-9. Official unemployment figures do not mean much in Pakistan, but it increased from 5.2% to 5.5%. The agricultural sector did poorly, but manufacturing and services grew more than expected. Foreign exchange reserves have built back up to US$16 billion, from a low of less than US$6 billion in 2008.

On the energy front, little has moved during June. The Americans have now expressed doubts about the Pakistani-Chinese contract for the construction of two nuclear power stations; it is unlikely that the Chinese will slow because of US objections, but in any case it will take several years for this new source of energy to come on line. Similarly, the deal with Iran over the gas pipeline to Pakistan has been signed, but it is not going to start delivering gas before 2015. US pressure on Pakistan not to sign the deal seems to have been overrun by the country’s desperate need for energy supplies and by the prospect of transit revenue if the pipeline was to be extended to India.   



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