Pakistan has undergone a remarkable economic recovery

Minister for Finance and Economic Affairs Ishaq Dar Friday said Pakistan has undergone a
remarkable economic recovery over a short period of time, which is widely acknowledged by
independent analysts, particularly international financial institutions. "Even though the
government of Prime Minister Nawaz Sharif inherited a broken economy, it was not deterred by
challenges.
Within a few days of presenting the first budget in June 2013, the government introduced deeprooted
economic reforms, such as tax measures and adjustment in administered prices, without
which meaningful hope for economic revival was not possible," Dar told a big gathering of
students and faculty members of John Hopkins University (USA) on the topic "Pakistan's
Economic Recovery and Its Emerging Role in the Region." Dar who is currently visiting
Washington to attend the IMF and the World Bank meetings, said based on this reform agenda
"we were able to secure a three-year Extended Fund Facility (EFF) programme from the IMF in
September 2013 for nearly $6.4 billion."
The programme, he said entails a rigorous discipline to economic management and so far "we
have completed three reviews under the programme and the 4th Review is under consideration".
Sharing some of the key achievements Pakistan has made in a short period of first fiscal year, he
said economic growth, which had averaged around 3 percent in previous five years, rose to 4.14
percent in FY 2013-14 as compared to 3.7 percent in FY 2012-13.
"This is the highest growth in the last five years," he added. Dar said per capita income, which
stood at $1,340 in FY 2012-13, has increased to $1,386 in FY 2013-14, showing a growth of 3.5
percent. He further said that industrial sector, which grew by a meagre 1.4 percent during FY
2012-13, has registered a growth of 5.8 percent in FY 2013-14, aided by increased availability of
electricity and better management of available gas supplies. "This is also the highest in the last
six years," he said.
The minister told the participants that inflation, which had averaged around 12 percent in the five
years, was recorded at 8.6 percent during FY 2013-14, that too despite the fact that "we had
taken difficult decisions to raise taxes and rationalise energy prices." He said the FBR revenues,
which had registered a mere 3 percent growth in FY 2012-13, are up by 16.4 percent, rising from
Rs 1,946 billion to Rs 2,266 billion during FY 2013-14 adding that fiscal deficit, which was
registered at 8.2 percent of GDP during FY 2012-13, has been brought down to 5.7 percent in FY
2013-14.
"This is the single largest fiscal adjustment in one year. Here, I would like to remind that in the
revised estimates for FY 2012-13, we were told that the fiscal deficit will be 8.8 percent. We had
taken office only a few days earlier but even then in the three weeks of June 2013, concerted
efforts were made to economise on spending. The result was that actual deficit was brought
down to 8.2 percent."
Development spending, he said was recorded at Rs 441 billion in FY 2013-14 against the revised
target of Rs 425 billion. "Thus, unlike in the past when adjustment was achieved by cutting
development spending, our government has made full development spending, which rose by 36
percent from actual spending of Rs 324 billion during FY 2012-13." Ishaq Dar said the credit to
private sector, which was registered at Rs 19 billion during FY 2012-13,increased to Rs 379
billion for FY 2013-14,a growth of 19 times and reflecting increased investment activity in the
private sector.
Government borrowings from State Bank of Pakistan, he said, which were at a level of Rs 1,446
billion during FY 2012-13, were reduced to Rs 303 billion, merely 21 percent of last year's level.
Dar said exports were recorded at $25.13 billion during FY 2013-14 compared to $24.46 billion
during FY 2012-13, registering an increase of 2.73 percent. Imports, he said were recorded at
$45.11 billion during FY 2013-14 compared to $44.95 billion during FY 2012-13, showing a
negligible increase of 0.35 percent. He added that Remittances, which were recorded at $13.93
billion during FY 2012-13, rose to $15.83 billion during FY 2013-14, showing an increase of
13.7 percent, for which "I salute my expatriate Pakistanis for playing such a critical role in the
country's economy."
Exchange rate, he said has depicted a remarkable stability and appreciated during the tenure of
our government. Dar said in the beginning, as the country entered into IMF programme,
speculators caused significant volatility through speculative behaviour, also aided by initial
decline in reserves in the face of heavy repayments due from the previous IMF loan.
"The government has handled the crisis deftly as, on the one hand, while we checked that
speculative behaviour and, on the other, mobilised additional resources to shore up reserves," he
added. "During this calendar year alone, the rupee has appreciated by 7 percent, after having
pushed up to Rs 110 a US dollar in November 2013. It had traded in the range of Rs 98-99 for
nearly three months, and this is the single most important indicator of economic stability," he
added. He said official foreign exchange reserves, which had declined to a precarious level when
in June 2013 they stood at $6 billion, of which $2 billion were due to a swap that was payable in
August.
"More importantly, besides regular debt servicing, a payment of $3.2 billion was due to IMF,
bulk of which was in the first half of FY 2013-14. In February 2014, reserves of the State Bank
had fallen to $2.82 billion. Many had predicted that Pakistan would soon default. It is from such
a precipice that we have pulled the economy back and put it in on a sound footing. It is due to
our prudent economic management and the confidence of our international partners in our
policies that foreign exchange reserves of the country have entered safe territory and no longer
pose any risk to the economy.
As on 1st October, 2014, the reserves stood at $13.92 billion comprising $8.882 billion of the
State Bank," he said. Karachi Stock Exchange 100-index he said, which stood at 19,916 on 11th
May, 2013, the day the elections were held, has continuously scaled new heights and stood at
29,997 on 1st October, 2014 showing an increase of over 50 percent.
"On the other hand, market capitalisation increased from Rs 5.04 trillion to Rs 7.22 trillion for
the same period, showing an increase of 43 percent; and incorporation of new companies, which
was recorded at 3,953 during FY 2012-13 has increased to 4,587 during FY 2013-14, showing an
increase of 16 percent," he added.
Dar told the participants that in addition to the above, "we have achieved following certain
results that have eluded the previous government for its five-year term":
-- Raising of $2 billion through Eurobond after 7 years;
-- Successful auction of 3G-4G licenses. Nearly $1.2 billion were raised and some more licenses
are still available for sale;
-- Resumption of programme lending by the World Bank and the ADB, that has enabled us to
access some $1.5 billion from these institutions during the year;
-- Successful revival and resumption of the privatisation programme, whereby we have already
divested the shares of United Bank Limited (about $400 million) and PPL (subscription Rs 30
billion, which is highest-ever in our stock market history; and realisation of Rs 15.3 billion); and
-- Construction of terminal at Port Qasim to import LNG, which will likely receive 200 mmcfd
of LNG within one year.
He said two other initiatives of our government are also worth mentioning that "We have listed
public securities for trading in the stock exchange to enable individuals who cannot buy them in
the open auction, to invest in such securities; and
Pro-poor expenditures, through the National Income Support Programme, have witnessed a
phenomenal increase from Rs 40 billion in FY 2012-13 to Rs 118 billion in FY 2014-15 (a
nearly 3-fold increase).
Under the programme, the individual stipend has been raised from Rs 1,000 to Rs 1,500 and we
increased the number of beneficiary families from 4.1 million during FY 2012-13 to 5.3 million
in FY 2014-15." Dar informed them that international think tanks and research groups have
recognised Pakistan's impressive economic turnaround in the first year of government.
He added that the JETRO declared Pakistan as likely to be the 2nd choicest place for FDI;
Goldman Sachs forecast that Pakistan which is currently at 44th position, would be world's 18th
largest economy by 2050; OICCI raised Pakistan's index from -34 to +2; Moody's raised our
economic outlook from negative to positive; and in Nielsen's Global Survey of Consumer
Confidence, Pakistan's index rose to 99 in the 1st quarter of 2014 from the lowest level of 86 in
the 3rd quarter of 2011.
While giving an overview of PML-N government's vision for 2017-18, Dar said GDP would
grow gradually to around 7 percent, inflation would remain in single digits, ie, no more than 8
percent, fiscal deficit to be brought down to 4 percent, foreign exchange reserves to be built over
$20 billion, investment-GDP ratio would be increased to 20 percent, industrial sector would
grow by 8 percent, public debt would be brought down to less than 55 percent of GDP, tax-GDP
ratio would be increased to 15 percent and exports would be increased to $32 billion.
He added that current account deficit would be brought down to -2 percent of GDP, Foreign
Direct Investment would be increased to $5.5 billion, spending around 4 percent of GDP on
education and health, poverty alleviation and support to vulnerable sections of the society, power
cuts would be reduced; and shortage of natural gas would be met with enhanced supplies through
increased exploration/production, imports both overland and sea.
Dar said the performance was a result of implementation of a broad-based reform agenda aimed
at restructuring of power sector, public sector enterprises, corporate governance, banking and
financial sector and improvement in investment climate. "It is to be noted that the resources
under the Fund programme have been significantly less than the repayments that were due from
the previous abortive programme," he added.
Briefly sharing that in recent days Pakistan's economic programme has faced certain pressures in
the backdrop of disruption due to politics of long march and sit-ins resorted to by two parties,
one of which has about 10 percent presence in the National Assembly and the other, headed by a
Canada-based cleric, has no representation in the Parliament.
He added that the exchange rate has depreciated by 4 percent and stock market was affected, but
soon recovered. The situation, he said has negatively impacted the evolving feel-good factor that
was ensued by our economic recovery. "We are, however, hopeful that we will overcome these
difficulties and our journey towards economic prosperity will remain on course," he added.
Highlighting Pakistan and its importance in region, he said that with 180-million strong people,
majority being in the age group of less than 25 years, strategic location in the South-East Asia,
vastly endowed with fertile lands and natural resources, Pakistan is the only Muslim nation with
a nuclear capability.
About India, he said that economic recovery and prosperity of Pakistan will play an important
role in the region. "We are keen to settle our disputes with India so that the two countries can
focus on building economic relations. Undoubtedly, a large number of economic opportunities
will benefit both Pakistan and India but we need to resolve our bilateral issues so that economic
relations are not compromised and detracted by those disputes."
About China, he said that China and Pakistan are bound in historical relations since the founding
of the two countries. Regarding Afghanistan, he said "We have supported the process of
elections in Afghanistan and welcomed the resolution of election dispute between the
presidential candidates and eventual transition of power to new democratic government".
About Iran, he said that Iran is a very important neighbour with whom we not only share a very
long border but also, like Afghanistan, strong cultural and religious ties. "We are pleased with
the recent easing of sanctions on Iran and look forward to further improvements in this
direction."