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Govt yet to overcome hurdle of debt rescheduling

KARACHI: Although key economic indicators have been showing positive trend, the government is yet to overcome issues like rescheduling of Pakistanis foreign obligations and revenue generation, analysts said on Tuesday.

Pakistan's GDP is finally reaching up to its long-term annual average (FY91-FY99) of 4.5 percent, as the mainstay of Pakistan's economy, agriculture, is expected to fuel overall GDP growth in fiscal year 1999-2000, analysts said.

Backed by strong agricultural output, the manufacturing sector is also seen to show solid growth of 6.3 percent for 1999-2000 period, against 2.7 percent in the last fiscal year.

"Out of the woods, but still some way to go. One of the key things to watch out for in the medium term is the rescheduling of Pakistan's foreign obligations," an analyst with ABN-AMRO said.

He said it would be interesting to see the international donors provide the leeway to Pakistan as it approaches them for a second rescheduling of its foreign loans. Any release of funds by the IMF before June would indicate continued support by the multilateral agency vis-a-vis the expected rescheduling.

The analyst said that another factor to watch out for was the effort on the revenue generation front, which, in turn, would determine the fiscal deficit, which should allow the government to increase spending towards development expenditure.

For improving its revenue generation capability, the government's focus will be on simplifying the tax regime, implementing GST at retail level and bringing the agriculture sector under the tax net.

"Whereas as we believe the policy focus of the government is aimed correctly, it has yet to decide the modus operandi for implementing these measures," the analyst said.

Recoveries of the agricultural front and the fact that the key manufacturing sectors have not fully passed on the impact of oil price increase to the final consmers have kept inflation on hold.

With inflation rate at 3.4 percent during the seven-month period the target for the year is being estimated at 4.7 percent.

Analysts are of the view that the upward journey of the Karachi Stock Exchange index after October 12, 1999 is surely an indicator of the restoration of investor confidence. Fortuna