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PAKISTAN


  
  



Key Economic Data 
 
  2004 2003 2002 Ranking(2004)
GDP
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

REPUBLICAN REFERENCE

Area (sq.km)
803,940

Population
162,419,946

Capital
Islamabad

Currency
Pakistani rupee

President
Pervez Musharraf

Update No: 005 - (27/06/06)

How solid is the boom?
With its latest June survey, the ADB continues to view the prospects of the Pakistani economy positively, forecasting GDP growth this year at 6-6.5%, mainly on the strength of the manufacturing sector, which is estimated to be growing by 10% yearly, as shown by rising imports and rapidly growing private sector credit. Manufacturing growth will more than offset the sluggish pace of the agricultural sector. Economic growth is mainly fuelled by remittances, which rose from US$1.5 billion in 2001 to the current US$4 billion, triggering an investment boom, which Prime Minister Shaukat Aziz was ready to endorse with a privatisation plan in the banking, cement, and utilities sectors. However, increasingly economists wonder how solid the boom is, casting a critical eye on the rapid rise of the Karachi stock exchange, which is now considered to be greatly overvalued, and to the rapidly expanding consumer credit, which contributes to fund an imports boom, of which over 60% are consumer goods. The current accounts deficit is forecast by critical observers to rise to at least 4.3% and as much as 5% of GDP this year, adding to the worries.

A 'cannons and butter' budget
Observers have not been too impressed with the newly presented 2006-07 budget, on a number of counts. With the forthcoming elections and the pressure from the IMF and other international organisations to reduce the burden of military expenditure, it was expected that the defence share of the Pakistani budget would have gone significantly down this year. Perhaps a reflection of the increasingly precarious position of President Musharraf, Defence Expenditure will rise by 12%, which will keep defence expenditure close to 5% to GDP according to most estimates. India's still growing military expenditure is also likely to have created the conditions for this increase. Due to the forthcoming elections, social expenditure is also going up, pushing the budget deficit up despite the expected large increase in revenue due to the ongoing privatisation program. The deficit is targeted at a high 4.2% of GDP, although the 2005 earthquake is invoked as an explanation for failing to maintain the previous, lower target. Some observers point out that the government has understated the privatisation proceeds by as much as US$3.4 billion, leaving space for additional expenditure in the months preceding the elections. On the whole expenditure is to go up 19%, with peaks in development spending (up 52.6%), especially health care, utilities and education, but the electoral climate is also evident in the 15% increase in the wages of state employees, the 15-20% increase in pension payments and widespread subsidies for oil products, fertiliser, cement and foodstuff. Despite the government's commitment to expand the revenue base, the measures taken in the budget are modest and will deliver additional revenue corresponding to just 0.3% of GDP. 

Walking the tightrope
The Pakistani government appears to be facing growing difficulties in dealing with internal discontent and at the same time appease its American allies. Islamabad seems to have opted to appease the Taleban militants in Waziristan and to have renounced the military option, possibly judging it too divisive for the country's security agencies. A strong sign in this direction, apart from the decline in the level of fighting, was the appointment of a sympathiser of the Taleban, Ali Muhammad Jan Orakzai, as governor of the North West Frontier Province. However, this attitude is unnerving the Bush Administration, which continues to send signals to Musharraf that it is unhappy about the current trends. In June it was announced that the United States will cut its foreign aid to Pakistan by US$350 million, explicitly citing as a reason Pakistan's failure to improve democracy and human rights. 

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