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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


Update No: 077 - (26/07/12)

Summary: While foreign investment continues its free fall, the government believes that next year could see a turn-around with significant investment in the energy sector. Faith in Pakistan’s economic prospects remains low as government bonds are downgraded and political stability remains a long way off.

Foreign investment reaches new lows, while Islamabad hopes
The government now hopes that foreign direct investment will rise this year to $2.5 billion, as a number of deals seems to be in the making particularly in the energy sector, where foreign investment is particularly needed. In 2011-12, foreign direct investment was just US$813 million, from US$5.4 billion in 2008. Among these projects is a US$600 million wind power plant, to be built by the Norwegians, while investment seems to be forthcoming from South Korean, Chinese and Indian companies. On the energy front the Iranians have offered in July to complete the gas pipeline to Pakistan, which is already being completed on the Iranian side of the border. The sanctions against Iran make it unlikely that foreign companies will show interest in the project, hence the Iranian offer. The Iranians are so keen on completing the project that they have also offered credit to Pakistan for US$500 million to complete the pipeline. These developments are important because resource generation inside Pakistan remains highly constrained and only foreign investment can provide the level of funding required to resolve infrastructural problems and increase economic growth.

Hopes pinned on remittances
The Asian Development Bank believes that growth in Pakistan will accelerate in 2012 because of the growing volume of remittances from Pakistanis working abroad. Workers remittances have increased by 11.9% in the first 11 months of the current financial year, reaching almost US$16 billion. In the meanwhile, however, Pakistan’s sovereign debts and bonds have been downgraded to ‘junk’ by Moody’s, which revised the ratings from B3 to Caa1, that is one notch down. There are several reasons for the downgrade, ranging from the deterioration in Pakistan's balance of payments, to the decline in foreign-exchange reserves, the repayments soon due to the International Monetary Fund (IMF) and more in general the unstable political situation. Pakistan’s current account deficit stood at US$3.8 billion in May, due to falling exports to Europe.

Thaw with US
Pakistan has finally re-opened the Afghan border to NATO traffic, although initially only very few trucks crossed the border due to the outstanding issue of compensation to be paid to the drivers for the very long closure of the border. Counter-terrorism talks between the US and Pakistan are also supposed to be resumed soon. There is no indication for now that this represents anything like a breakthrough in US-Pakistan relations. US economic and military aid might however be resumed as a result of this.

Judicial siege: what next?
The government remains under siege as even the new Prime Minister, approved by the parliament, is tainted by allegations of corruption, particularly concerning rental power projects. It seems that the PPP government now hopes to thread along until the forthcoming elections, perhaps in the expectation that the judiciary, increasingly perceived by the public as being hand in glove with the PML opposition party, will overplay its hand and discredit its anti-corruption campaign as factionally biased, even if President Zardari’s legal defence against the Supreme Court appears very weak, most observers believe that he has something to hide. Some observers now even believe that the Supreme Court might collude with the military in dissolving the democratically elected government and replacing it with an extended caretaker government. Such a development would fall not much short of a coup, but it is not very likely because of the fact that the Supreme Court and the military do not like each other very much and have clashed in the past. Moreover, elections are not that far away and the opposition is widely expected to win them, so why not wait? 

 

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