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The Annual Report of the State Bank of Pakistan has noted "diverse and uneven developments in the various macroeconomic indicators" during 1990-91 when GDP grew at a higher rate, exports performed impressively, the national economy demonstrated resilience to absorb the adverse effects of the Gulf crisis but nevertheless came under pressure and prices level escalated to the highest level in the last decade and no significant improvement could be seen in the national savings and gross total fixed investment ratios.

The SBP Annual Report has estimated the growth rate in GDP at 5.6 per cent which looks impressive when compared with the GDP growth of 4.6 per cent in 1989-90. However, the comparison has been made with the 1989-90 growth rate and ratios after a virtual across the board revision of the 1989-90 annual report of the SBP which is something unprecedented. According to the 1990-91 report, the improvement in the GDP growth rate was mainly attributable to the commodity producing sectors (agricultural and industrial) which showed an increase of 5.6 per cent compared to the revised growth rate of 4.5 per cent in 1989-90. During 1990-91 agriculture and construction sectors showed significant increases in growth rates but here was a substantial decline in the electricity and gas distribution. The services sector showed a growth of 5.5 per cent while significant increase were seen in the growth rates of wholesale and retail trade, transport, storage and communication sub-sectors.

Despite encountering the marketing difficulties in the Middle Eastern countries because of the Gulf crisis, export showed a remarkable growth of 24.3 per cent in 1990-91 and amounted to well over 6.19 billion dollars. At this level the exports financed 80.9 per cent of the total import bill of the country during 1990-91 which showed a market improvement when compared with 71.5 per cent financing of imports in 1989-90. The report has attributed the increase in exports mainly to the cotton based products. Exports rose by 24.3 per cent to 6.1697 billion dollars during 1990-91 and imports registered a rise of 9.9 per cent over the previous year, aggregating dollar 7628 million in 1990-91. Country's balance of payment position continued to be under severe pressure, rising to 2.1 billion dollars from a record of dollar 1.9 billion in 1989-90. As a percentage of GNP, the deficit during 1990-91 remained unchanged at the preceding year's level of 5.1 per cent.

Increase in the deficit reflected the impact of Gulf developments, sharp decline in terms of trade, expansion in the deficit under |services account' and a fall of 156 million dollars in the net inflow under |private unrequited transfers'. However , it contracted slightly from 2.458 billion in 1988-90 to 2.476 billion dollars in 1990-91 due to a larger increase in exports. The gold and foreign exchange reserves declined from 1.451 million at the end of June 1990 to 1.390 million dollars at the end of June 1991. The pressure on reserves was due to a marked decline in aid inflows.

The terms of trade index which was virtually unchanged last year recorded a sharp decline of 13.1 per cent in 1990-91 due to a rise in import price index and a fall in the export price index. The growth rate of gross fixed investment at current prices showed a rise of 16.3 per cent as compared with an increase of 10.2 per cent in the preceding year. Although the increase occurred in both public and private sectors, the expansion in the former at 14.8 per cent was more pronounced.

National savings increased by 20.5 per cent during 1990-91 as compared to a rise of 10.9 per cent in the preceding year. Public savings went up by 122 per cent whereas private savings by 10.4 per cent. The rate of monetary expansion accelerated for the second year in succession. Its expansion had accelerated from 12.6 per cent in 1989-90 to 17.9 percent in 1990-91.

The price situation, which started deteriorating in 1990 continued during 1991. The 12-month average of the consumer price index rose sharply from 6 per cent in 1989-90 to 12.7 per cent in 1990-91, and recorded the highest rise since 1974-75. The fiscal position of the Government displayed some improvement during 1990-91 in contrast to an increase of 18.8 per cent in the revised estimates of previous years. The revised estimates for 1990-91 showed a decline of 8.9 per cent in the budget deficit over the revised estimates of the preceding year. The consolidated budgetary position, based on revised estimates for 1990-91, showed an overall deficit of Rs. 58.69 billion as against Rs. 64.44 billion in the revised estimates of previous year. The smaller deficit was attributable to higher growth of 16.0 per cent in total resources compared to lower increase at 8.9 per cent in total expenditure.

According to the provisional estimates given in the State Bank Annual Report for 1990-91, the Quantum Index of largescale manufacturing (1980-81-100) rose from 192. 1 in 1989-90 to 201.2 in 1990-91; showing a value-added increase of 4.7 per cent as in the preceding year. This was the third year in succession that this sector has shown a sluggish rate of growth; which stood half the annual average growth rate of 9.1 per cent during the preceding five years. Value-added in the small-scale subsector stood at 8.4 per cent. The overall growth of manufacturing sector also remained unchanged at 5.7 per cent.

Industry-wise production data shows that the output of cotton yarn, which had increased by 20.3 per cent in 1989-90, went up further by 14.2 per cent to 1041.2 million kilograms during 1990-91. At the end of June, 1991, the installed capacity stood at 5,493 thousand spindles as compared with 5,493 thousand spindles as the end of June, 1990. Production of refined sugar, which had declined by 0.1 per cent last year, increased by 4.2 per cent to 1933.8 thousand tonnes during 1990.91.

Production of cement rose by 3.7 per cent of 7762 thousand tonnes in 1990-91 as compared with a rise of 5.1 per cent in the preceding year. Production of chemicals rose by only 1.5 per cent to 325.7 thousand tonnes during 1990-91 as compared to a rise of 7.5 per cent in the preceding year. The increase in output was accounted for by rise in the production of caustic soda (6.0 per cent) and sulphuric acid (3.5 per cent). Production of soda ash and chlorine gas, on the other hand, declined by 1.5 per cent and 6.9 per cent, respectively, during 1990-91.
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Publication:Economic Review
Date:Dec 1, 1991
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