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SBP flags weaknesses in Pak's economic policies
19 Dec '15
2 min read
The State Bank of Pakistan has pointed out a number of weaknesses in economic policies, including energy strategy, and has asked the government to address the weaknesses.
Pakistan's economy grew 4.2 per cent in fiscal 2015, but investors remain wary of systemic weaknesses, the central bank said in its annual report, urging the government to adopt clearer, more consistent policies on industry and trade. Growth for the financial year to June 2015 fell short of a target of 5.1 per cent, it was slightly better than the 4.0 percent achieved in 2014, the bank said.
According to the report, the economy needs to expand at least six per cent each year to absorb new entrants into the work force from Pakistan's growing population of 190 million.
“Despite a sharp reduction in interest rates and an incre¬ase in public investments, private investments did not recover. Investors' confidence demands the presence of a predictable macroeconomic environment with well-coordinated and consistent long-term industrial and trade policies,” the report said. Another factor daunting do¬me¬stic and foreign investors is the state of domestic energy supplies. Businesses have suffered over the past few years because of frequent power and gas outages.
Although the situation improved slightly in a couple of years, several industries like leather, paper and glass, are still not able to produce at optimal capacities.
“At its core, this shortage of energy also reflects the lack of a coherent policy,” said the report. The absence of an export-oriented growth strategy or a rational import-substitution focus, over the years has resulted in recurring stress on the external account, which did not allow the economy to move towards a high growth trajectory, said the report.
“To increase exports, the government should fix the fundamentals first: stricter regulations should be in place on quality, research and labour institutions must be strengthened, technology up-gradation should be pursued, and efforts must be made to ensure product diversification and tariff rationalisation.” (SH)
Pakistan's economy grew 4.2 per cent in fiscal 2015, but investors remain wary of systemic weaknesses, the central bank said in its annual report, urging the government to adopt clearer, more consistent policies on industry and trade. Growth for the financial year to June 2015 fell short of a target of 5.1 per cent, it was slightly better than the 4.0 percent achieved in 2014, the bank said.
According to the report, the economy needs to expand at least six per cent each year to absorb new entrants into the work force from Pakistan's growing population of 190 million.
“Despite a sharp reduction in interest rates and an incre¬ase in public investments, private investments did not recover. Investors' confidence demands the presence of a predictable macroeconomic environment with well-coordinated and consistent long-term industrial and trade policies,” the report said. Another factor daunting do¬me¬stic and foreign investors is the state of domestic energy supplies. Businesses have suffered over the past few years because of frequent power and gas outages.
Although the situation improved slightly in a couple of years, several industries like leather, paper and glass, are still not able to produce at optimal capacities.
“At its core, this shortage of energy also reflects the lack of a coherent policy,” said the report. The absence of an export-oriented growth strategy or a rational import-substitution focus, over the years has resulted in recurring stress on the external account, which did not allow the economy to move towards a high growth trajectory, said the report.
“To increase exports, the government should fix the fundamentals first: stricter regulations should be in place on quality, research and labour institutions must be strengthened, technology up-gradation should be pursued, and efforts must be made to ensure product diversification and tariff rationalisation.” (SH)
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