USAID Chief Economist for Pakistan Tom Morris has said that much-likely increase in trade with India is a positive development and it will generate growth in Pakistan.
He said trade always brings benefits to the economy. However, he cautioned in the same breath that energy crisis in Pakistan is needed to be tackled down as an immediate problem. He was responding to the queries during his visit to the Business Forum of Punjab along with Economic Officer,USAID Sarah Lane on Wednesday.
Earlier, Mr Ibrahim Qureshi, President Business Forum of Punjab, briefed the visiting delegation about the organizational structure, scope and areas of activities of the Forum.Mr. Amir Aziz, President District board Gujranwala, Mr. Rashid Meher Executive member BFP, Mr. Amir Saeed, CEO Pakpur and Dr. Rehan member BFP were also present on the occasion. The USAID Chief Economist said the province of Punjab was suffering hard due to energy problem. He said the US is trying to help out Pakistan on energy front and will continue to do the same ahead. Tom was quite optimistic about the resilience of Pakistan economy, saying Pakistan has registered economic growth during world recession.
He said the oil prices could go down if world recession continues. He said fuel bill major issue for Pakistan but no overnight change is imminent.
He said the safety valve of Pakistan economy would be the service sector if industrial sector shrinks further due to energy crisis. According to him the IMF will step in to ensure that Pakistan economy is held together, besides the international community having strategic interests here.
He agreed with the fact that both monetary and fiscal policies are less effective as compared with the formal economy mechanism, which is not effective.
According to him, the US assistance will continue and expressed the hope that the new government after elections will also realise the importance of the US-sponsored projects to overcome energy crisis.
He said the fiscal deficit in Pakistan has expanded largely and the trend is going in troublesome direction. The deficit financing is real issue, he stressed. According to him, the net credit to government is 22 percent higher against the corresponding year and the interest payment, subsidies and defence expenditures are the areas where major fiscal expenditure is taking place. He said the electricity tariff subsidies are booming in Pakistan and lack of energy is impacting real economy, as the government cannot control oil prices. The USAID Chief Economist said the current account balance in negative zone, but the remittances seem stable, which is very positive development in terms of poverty reduction.
According to him, the exchange rate is though stable in Pakistan for last few months but things can change very quickly in a situation when trade account deficit is growing. He said Pakistan is vulnerable on trade front. On inflation, he said, it is likely to continue in double digit, as the IMF projects 12.5 percent next year. However, he said, the Wholesale Price Index is going down. Regarding Foreign Direct Investment, the USAID Chief Economist said it seems returned with relatively low level. Also, he said, the portfolio investment relatively low but it is not a major problem. He said the agriculture sector has shrunk heavily and the service sector is over a half of the GDP now. However, he added, the industrial sector facing challenge due to power problem and the informal economy is the safety valve. At the end of the meeting the dignitaries were presented mementos by MD LSE Aftab Ahmed Chaudhry and Directors of the Exchange.
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