Pakistan’s high growth and economic expansion will boost its business relations with the UAE and globally during fiscal-2015. The higher growth rate and business expansion forecast have been made this week by the International Monetary Fund, the World Bank, Asian Development Bank and several other foreign analysts. These positive economic indicators are buoyed up by the fact that all political parties and the armed forces are now on the same page and the nation now stands united.
Pakistan has suffered an estimated loss of $102 billion and 60,000 civilian and 6,000 army deaths in 13 years of war against terror. As the national action plan against the terrorists goes into action and peace ushers in, losses are expected to be reduced. The business and economic relations with foreign countries, particularly with UAE, have a great potential as the latest economic forecast by the IMF indicated. It said, Pakistan’s GDP will rise to five per cent in the medium term, the highest in the last seven years, in FY-15. It will be “due mainly to easing fiscal adjustment and improvement in structural bottlenecks in the energy sector, public enterprises and the investment climate.”
“Foreign reserves are expected to exceed $14 billion by end June FY-15 — a coverage ratio of over three months of imports,” it said.
“Trade reforms are focusing on simplifying tariff rates, shifting most items to a lower rate and eliminating trade statutory regulatory orders that establish special rates and non-tariff barriers,” IMF report said. The rapid decline in international oil prices has come as a gift to Pakistani economy, because its annual oil import bill of $14.8 billion plus may come down by $2-2.5 billion or so, depending on international prices when FY-15 will close on June 30. Pakistan imports 80 per cent of its annual national requirements. In FY-14 it imported 19 million tonnes of petroleum products at a cost of $14.8 billion. The IMF projects Pakistan’s overall import bill for all items in FY-15 will be $58.9 billion as against exports of $ 36.4 billion. It will leave a trade deficit of $22.5 billion, which will partly be filled by home remittances. But another help will be of around $2 billion — or more — as savings on imported oil at the reduced prices.
Pakistan’s official reserves crossed a historic high of $15.098 billion in December. This major improvement in external balances will help the country expand its industrial output as well as export of food including fresh fruit and vegetable to all parts of the region, especially the UAE, which is a major market of these Pakistani products. As Pakistan will be in a position to import a larger amount of industrial inputs from the UAE and the region, it will also boost the trade between them. The UAE based exporters will get huge opportunities in Pakistani market for their goods, especially industrial input. In the other direction, Pakistan will find a major opportunity to meet the growing demand of food and fresh fruits and vegetables from the UAE. Dr Ishrat Hussein, prominent economist and former Governor of Sate Bank of Pakistan said: “The decline in international oil prices may not impact home remittances flow from overseas Pakistanis working in the UAE, Saudi Arabia, Middle East, US and UK. He said, this is because “the major oil producers have built up high foreign exchange reserves to deal with such eventualities.” “While other parts of the world from Europe to Japan population is declining, Pakistan’s youthful population is an asset to the world if properly invested in.”
Dr Hussain also said: “Pakistan received $16 billion as home remittances in FY-14, which are equivalent to six per cent of GDP. These are expected to reach $ 18 billion in FY-15. Pakistani diaspora is estimated to be seven million worldwide, but can well be higher.”
This historic high amount will be equal to almost two-thirds of Pakistan’s total worldwide exports in FY-14. The remittances already are a major contributor to Pakistan’s forex reserves. As a big contribution to forex reserves and assisting in boosting industrial imports further, it will help expand trade with the UAE, the GCC and Saudi Arabia in FY-15.
Ministry of Overseas Pakistanis said that 60 per cent plus of all home remittances are received from oil producing countries of the Middle East. These include Saudi Arabia 29.5 per cent which is No. 1. The second largest contribution of remittances comes from the UAE, which is 19.5 per cent. The GCC countries provide 11.8 per cent.
The FDI inflows including those from the UAE are rising. This money is going into oil and gas exploration, power generation, telecoms, banks and financial services. The new FDI investment in Pakistan was $422 million in the first five months of FY-15, compared to $354 million in the same period of FY-14, State Bank of Pakistan reported. The central bank also reported this week, the FDI outflows of dividend income and profits in these five months — July-November, FY-15 was $606 million, up 30 per cent from the like period of FY-14.
Rupee is improving against the dollar. Dollar rate on December 26 was 100.40/100.65. The Pakistani currency seems to be gaining in value. In addition, China also signed memoranda of understanding totalling $30 billion by the Chinese government and the public and private sectors. It is due to sign MoUs for yet more investment ranging $10 to $15 billion, as already announced. Pakistani business relations with the UAE are also expanding. The annual bilateral trade between the UAE and Pakistan is set to touch $10 billion, as the number of items and services is increasing. More and more fresh-from-the-farm products are shipped to the UAE by high-speed boats, which will further enlarge the volume of trade. As of now, “the UAE is one of the largest investors in Pakistan with a focus on telecoms, banking, financial services, aviation, real estate and energy. Twenty-seven UAE companies are working in Pakistan in joint ventures, with a $21 billion investment.
“Pakistan is a key recipient of development assistance from the UAE,” Dr Faisal Aziz Ahmed, Deputy Head of Mission, Embassy of the UAE. “The UAE-based banks, including Bank Alfalah, are doing highly profitable business in Pakistan, he said. The International Finance Corporation, an affiliate of the World Bank, has just injected Rs6.66 billion in Bank Alfalah, by acquiring 15 per cent equity investment to help it increase access to finance in Pakistan.
Views expressed by the author are his own and do not reflect the newspaper’s policy.
