GDP growth to be less than 2%: Salman Shah

[Naveed Yaseen]

LAHORE: Pakistan’s GDP growth would be less than 2 percent, lowest in past one decade, as the growth has been strangulated by the irrational tight monetary policy stance of the State Bank of Pakistan.

Former Adviser for Finance, Dr Salman Shah stated this while speaking at a discussion on economic decline and remedial measures. The discussion was organised by Lahore Economic Journalists Association. President Mansoor Ahmad, Vice President Itrat Bashir, Geral Secretary Sudhir Chaudhry And Finance Secretary Imran Adnan were also present.

Elaborating his point, he said the sensitive price index has been on constant decline since October 2008 and there is no justification in keeping the central bank policy rate at 15 percent that has trifled growth. Dr Shah claimed that based on current inflation scenario, the KIBOR should not be more than two percent and the policy rate of the State Bank of Pakistan should be around 9 to 9.5 percent. He said after accounting for 3 to 5 percent banking margins the industry would get credit at 13 to 14 percent. He said even this interest is high but the productive sector would be able to grow. He said the current high interest rates have marginalised the manufacturing sector of the country. “No industry could grow if it gets credit at 20 percent” he added.

He said more that 54 percent of Pakistani population is under the age of 25 and every year about 4 million of them join the adult workforce. “Pakistan needs to grow at 9 to 10 He said the economic managers of previous regime knew that the high oil prices would put pressure on foreign exchange reserves.

In order to counter this spike in oil prices, we handed over the road map to the government elected last year. He said the plan was to offload small percentage of public sector companies like National Banks, KAPCO etc in the London Stock Exchange in April 2009. He said at that time the stock market was at its peak of 15,800 points and the share prices of these companies were very high. He said government would have obtained $4 to $5 billion from these transactions. He regretted that the new government scrapped the programme.

He said oil rates hike consumed most of the foreign exchange reserves and government had to recourse to the begging bowl.

He said that the rot has not stopped even after IMF deal because the government has stagnated growth and the revenue sources are drying up due to regular closure of industries. “The option to off load stocks is not feasible as the market has lost $45 billion since the assumption of power by this government,” he maintained.

He said revival of industries would not be possible without promoting domestic consumerism. He said exports are important but the competitiveness would come after local industries attain economies of scale through promotion of domestic consumerism. staff report

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