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A look at 1990-91.

With the assumption that the law and order situation would remain the same private sector investment is projected to increase by 3.28 per cent in 1990-91 based on the fact it increased by 3.17 per cent in 1989-90. Public sector investment is likely to grow by 3.0 per cent in 1990-91 based on the figure of 2.5 per cent reached in 1989-90. The rate of inflation may possibly fall to 9.5 per cent in 1990-91 which is close to the figure of 10 per cent we have precasted earlier. There could not be any miraculous change for next year i.e. 1990-91, because the long run economic stability and progress depends on the working environment prevailing within the country to which the economist have no control so it is for the politicians and law enforcing agencies to give this atmosphere so that progress could be pursued.

It is doubtful if the economy would show symptoms of recovery by next year keeping in view the prevailing circumstances within the country. The uncertain political atmosphere along with the slackening of law and order situation are sure to affect our major performance sectors i.e. large scale manufacturing, construction, trade etc. The real GDP is expected to grow by 5.0 per cent in 1989-90 and by 5.30 per cent in 1990-91, but this is not good enough.

The reduction in workers remittances would result in the real GNP to grow by 4.9 per cent in 1989-90 and by 5.10 per cent in 1990-91 while agriculture which is the back bone of our economy is expected to grow only by 4.9 per cent in 1989-90 and projected to grow by 5.0 per cent during 1990-91. The large scale manufacturing sector which grew by 1.2 per cent in 1988-89 would end up by 3.25 per cent rise in 1989-90 and could further improve by 3.85 per cent next year.

The IMF agreement requires a cut of 12.5 per cent in the public sector development programme. Accordingly gross capital formation is likely to grow by 3.14 per cent in 1990-91 based on the fact that 2.70 per cent was recorded a year earlier in 1989-90. As the Government is keen to implement the IMF austerity programme, mainly to reduce the budgetary gap. This could reduce Government consumption spending despite pressures on the Government to increase expenditure. As against a growth rate of 13.6 per cent in 1988-89 the Government consumption spending is likely to grow by 8.45 per cent in 1989-90 and is projected at 9.35 per cent during 1990-91. The growth in private consumption expenditure is expected to slow down somewhat during 1990-91 this may be due to expected fall in real wages and the decline in workers remittances. Thus private consumption is expected to grow by only 5.98 per cent in 1990-91.

With the assumption that the law and order situation would remain the same private sector investment is projected to increase by 3.28 per cent in 1990-91 based on the fact that it increased by 3.17 per cent in 1989-90. Public sector investment is likely to grow by 3.0 per cent in 1990-91 based on the figure of 2.5 per cent reached in 1989-90.

The Government has taken numerous measures to keep the money supply within control. The 9.0 per cent increase in bank credit in 1989-90 may grow to 10.0 per cent by 1990-91. Accordingly money supply could grow from 10.4 per cent in 1989-90 to 11.5 per cent in 1990-91.

Inflation which kept on creeping within our economy is likely to continue i.e. around 10.0 per cent in 1990-91. The declining budgetary deficit and improvement in agriculture and manufacturing sectors during the year being forecasted i.e. 1990-91 should show symptoms of stabilization in its closing days. Nevertheless the increase in the level of indirect taxes and higher utility charges are expected to offset the improvement in inflationary pressure. Accordingly the rate of inflation may possible fall to 9.5 per cent in 1990-91 which is close to the figure of 10 per cent we have precasted earlier.

Regarding exports, they are likely to grow by 6.0 per cent in 1990-91 compared to 7 per cent a year earlier. The fall would be because of a slow down in economic activity in the developed countries as well as a fall in world trade. It may be mentioned that our export base is extremely narrow, only nine major products accounts for 76 per cent on our total export earnings!

Imports are projected to grow by 6 per cent in 1990-91 compared to 5.0 per cent in 1989-90. Accordingly trade balance is likely to deteriorate further. Keeping in view the fact that workers remittances are likely to fall by 2 per cent in 1990-91 compared to 2.7 per cent in 1989-90 the current account deficit would increase by 4.5 per cent of GDP in 1990-91 compared to 4.7 per cent of GDP in 1989-90.

The above analysis though very brief would convey to the reader an impression that there could not be any miraculous change for next year i.e. 1990-91, because the long run economic stability and progress depends on the working environment prevailing within the country to which the economist have no control so it is for the politicians and law enforcing agencies to give this atmosphere so that progress could be pursued.
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Title Annotation:Pakistan economy
Author:Manzoor, Nayyer
Publication:Economic Review
Date:Apr 1, 1990
Words:928
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