The economy of Pakistan has grown at an average rate of almost 7.0 percent per annum during the last four years (2002/03-2005/06) and over 7.5 percent in the last three year’s (2003/04-2005/06).

GDP

Pakistan’s real gross domestic product growth rate in 2005-06, remained at 6.6 percent which was marred by lower than expected industrial and agricultural production. It missed the year’s target of seven percent remaining much below previous year’s growth rate of 8.6 percent.

The country’s per capita income also increased by 14.1 percent during the current year from $742 to $847 per annum. However during the past four years, overall growth in per capita income registered at 13.9 percent per annum.

The public debt to GDP ratio declined by almost 30 percent to 54 percent in 2005-2006 against 85 percent in 1999-2000, while as a percentage of GDP, it declined from 61.4 percent to 54.7 percent, recording a 6.7 percent decline in a single year.

Agriculture

Agriculture sector did not perform well and the growth is estimated at 2.5 per cent as compared with 6.7 per cent during 2004-06. Cotton production decreased from 14.265 million bales in 2004-05 to 12.417 million bales in 2005-06, a decreased of 13 per cent. Rice production is estimated at 5.547 million tones in 2005-06 as against 5.025 million tones of last year showing an increase of 10.4 per cent. However, sugarcane production has declined by 6.2 per cent in 2005-06 from 47.244 million tones in last year to 44.312 million tones in 2005-06.

Manufacturing

Over all manufacturing recorded growth of 8.6 per cent against the target of 12.0 per cent and last year’s growth of 12.6 per cent. Large scale manufacturing registered growth of 9.0 per cent in the current fiscal year 2005-06 against the target of 14.5 per cent and last year’s achievement of 15.6 per cent.

The main contributors to this growth of 9.0 per cent in July-March 2005-06 over last year are the auto mobile group (29.76 per cent ), engineering goods group (6.46 per cent), non-metallic mineral products (9.49 per cent), leather products (10.91 per cent), chemicals (9.08 per cent), pharmaceuticals (14.83 per cent) and electricals (11.78 per cent).

Investment

The gross fixed capital formation or domestic fixed investment grew by 30.7 percent against a rise of 28.6 percent last year. Private sector investment grew by 31.6 percent against 29.1 percent last year.

National savings as percentage of GDP stood at 16.4 percent this year, slightly lower than last year’s 16.5 percent growth.

Domestic savings stood at 14.4 percent of GDP this year, nominally lower than 14.5 percent.

Inflation

The inflation rate as measured by the changes in consumer price index (CPI) stood at 8 per cent during the first 10 months of fiscal year 2005-06 as against 9.3 per cent in the comparable period of last year.

Food inflation is estimated 7 per cent and non food 8.8 per cent against 12.8 per cent and 6.9 per cent in the corresponding period of last year. The whole sale price index during July 2005 – April 2006 has increased by 10.3 per cent as against 6.9 per cent of last year.

Stock Market

The KSE-100 index crossed the barrier of 12000 mark for the first time in the history of capital market and touched an all time high on April 13, 2006.The KSE-100 index made further inroad and reached 12274 points on April 17, 2006 showing a growth of 64.7 per cent over June 2005. Between December 2005 and April 2006 alone, the KSE share index increased by 25 per cent. Similarly, the total market capitalization also increased to Rs.3419.4 billion on April 17 2006 from Rs.2013.2 billion showing a growth of 70 per cent over June 2005.

Per Capita Income

Per capita income in dollar terms registered an increase of 14.1 percent over the last year, rising from $742 to $847.

Trade Deficit

Exports in nine months of the year rose by 18.6 percent to $12 billion while imports grew by 43.2 percent to $20.7 billion, leaving a trade deficit of $8.6 billion.

Foreign Direct Investment

Foreign direct investment has witnessed an increase of 238.7 per cent in the first 10 months (July-April) this year, whereas net foreign private investment stood at $3.376 billion against $1.027 billion last year, showing an increase of $ 2.349 billion.

Foreign Exchange Reserves

Pakistan ’s total liquid foreign exchange reserves stood at $13.0 billion at the end of April, 2006. Of this, reserves held by the State Bank of Pakistan amounted to $10.6 billion and by banks stood at $ 2.4 billion.

External Debt

Pakistan ’s external debt and liabilities have declined by $3.1 billion – down from $38.9 billion in 1998-99 to 35.834 billion in 2004-05. However, external debt and liabilities increased to $36.557 billion by end – March 2006, thus showing a rise of $0.723 billion in the first nine months of the current fiscal year. The rise is mainly on account of issuance of Sovereign bonds worth $800 million in March 2006.

Remittances

Against the full year target of $4 billion, workers’ remittances totaled $3.63 billion during the first 10 months of the current fiscal year against $3.4 billion in the same period last year. It is likely that workers remittances may touch $4.4 billion in 2005-2006.

Current Account Deficit

The current account deficit, excluding official transfers, stood at $4.7 billion in first nine months of the year against just $1.18 billion last year, showing an increase of 300 percent.

The challenge, now, is to ensure continuity in policies in order to sustain the growth.