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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005
KARACHI STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment:
Although agriculture is declining as a percent
age of total output, this sector remains the
primary economic activity in Pakistan.
Cotton, wheat, rice and sugarcane are the
primary crops, which benefit from an
extensive irrigation system. The annual
cotton crop is of particular importance as it
provides the input to the textile and garment
industry, which is the nation's dominant
export industry. Pakistan is attempting to
increase its information technology sector,
but only 3% of the populace has telephones
at home. Having achieved a degree of selfsufficiency
in the armaments sector, Pakistan
is now promoting arms sales as a means of
generating more diversified export revenue.
In June 2004, President Pervez Musharraf
accepted the resignation of Prime Minister
Mir Zafarullah Khan Jamali,. Jamali
nominated Chaudhry Shujaat Hussain, the
president of the ruling Pakistan Muslim
League, as his interim prime minister. For his
part, Prime Minister Chaudhry Shujaat
Hussain said that former Finance Minister
Shaukat Aziz would be the next prime
minister following elections in the National
Assembly. Shaukat Aziz went on to be sworn
in as prime minister. In July, he escaped
unhurt from an apparent assassination
attempt.
In September 2004, the peace process
between India and Pakistan appeared to be
making some much lauded progress. India's
Prime Minister Manmohan Singh and
Pakistan's President Pervez Musharraf met in
New York on the sidelines of the opening of
the United Nations General Assembly.
Key Information Contacts
Government of Pakistan www.infopak.gov.pk
Ministry of Finance www.finance.gov.pk
Securities & Exchange Commission of Pakistan www.secp.gov.pk
State Bank of Pakistan www.sbp.org.pk
Privatization Commission www.privatisation.gov.pk
ECONOMIC RATIOS
Domestic
savings
Pakistan
Lower-middle-income group
Trade
Indebtedness
Investment
Reports say the talks went well with both
leaders voicing a desire to continue working
together.
The president and chief of army staff,
General Pervez Musharraf, is expected to
remain in power in 2005-06 and beyond. He
has the support of a majority in parliament,
the power to dismiss the prime minister and
the right to suspend parliament. 1
Economic Performance:
Economic activity rebounded in 2002 and
2003 as GDP grew at 4.4% and 5.5%,
respectively, after having slowed in 2001.
The Pakistani economy was firing on all
cylinders, and growth was led by a doubling
of net remittances from abroad due to
favorable external conditions, and sharp
increase in demand for Pakistani exports.
Internal consumption was boosted as well,
as favorable consumer financing led to a rise
in the internal consumption and production
of autos and electronics. Gross capital
formation picked up as well, to 15.5% of
GDP in 2003 from 14.7% in 2002, due to
investment induced by privatization and
deregulation in the oil and gas,
communications, and financial sectors. This
growth led to expanded activity in the
nation’s cement industry, and helped spur
modernization efforts in the textile industry.
The current account deficit, which exceeded
6% of GDP in 1995-1997 was reduced to
1.3% of GDP in 2000 owing to the strength of
textile exports. It then swung into surplus in
2001 despite steeply falling exports-imports
declined as well and overseas remittances
surged as the war on terrorism cracked
GROWTH OF INVESTMENT AND GDP
(%)
6
4
2
0
-2
-4
-6
-8
-10
97
GDI GDP
down on 'underground' systems of
repatriating Pakistani workers' earnings
without using the banking system. As both
exports and imports shot up by 19.6 and
20.1%, respectively, in 2003 due to a more
favorable external environment, the current
account surplus moderated to 5.2% of GDP
from 6.3% in 2002. Pakistan typically runs a
deficit of US$ 1-2 billion in its merchandise
trade account and a deficit on international
services of about US$ 3 billion, but it has
also typically received large amounts in
remittances from Pakistanis working abroad,
many in the oil fields of the Middle East.
These repatriated earnings have made a
significant contribution to the current account
over the years. The movement of such
remittances through the banking system
rather than through informal payment
channels is a major factor in the
improvement in Pakistan's current account
balance. 2
The economy is expected to perform
strongly, with real GDP growth forecast at
8.1% in fiscal year 2004/05 (July-June) and
6.6% in 2005/06. Inflation is forecast to rise
to an average of 8.6% in 2005 before falling
back to 6.4% in 2006. The current-account
deficit will widen to 2.8% of GDP in 2005 and
will stand at 3.1% of GDP in 2006, in line with
the rising trade deficit. 3
1 Pakistan Country Report, Economic and Political Outlook,
The Economist, www.economist.com
2 Economic and Political Overview, County Watch
Incorporated, 2005
3 Pakistan Country Report, Economic and Political Outlook,
The Economist, www.economist.com
98 99 00 01 02 03
* World Bank reports
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