Report No. 10223-PAK

PakistanCurrent Economic Situation and ProspectsMarch 16, 1992Country Department IIISouth Asia Region

FOR OFFICIAL USE ONLY

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Document of the World Bank

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This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(annual averages)

Rs per US$1.00 USS per Rs. 1.00

FY81 9.90 0.101FY82 10.55 0.095FY83 12.71 0.079FY84 13.48 0.074iY85 15.17 0.066ff86 16.14 0.062FY87 17.18 0.058FY88 17.60 0.057FY89 19.22 0.052FY90 21.45 0.047FY91 22.42 0.045

/a Since January 8, 1982, the exchange rate for the rupee has been managed

with respect to a weighted basket of currencies.

FISCAL YEAR

July 1 to June 30FY91: JuLy 1, 1990 - June 30, 1991

FOR OMCIAL USE ONLY

LIST OF ABBREVIATIONS AND ACRONYMS

ADP - Annual Development PlanAMG - Allied Management GroupBOP - Balance of PaymentsCPI - Consumer Price IndexDFIs - Development Finance InstitutionsFAC - Fuel Adjustment CostFCA - Foreign Currency AccountFEBCs - Foreign Exchange Bearer CertificatesFIBs - Federal Investment BondsGDP - Gross Domestic ProductGOP - Government of PakistanGST - General Sales TaxHDI - Human Development IndexIDBP - Industrial Development Bank of PakistanUESC - Karachi Electric Supply CorporationMCB - Nuslim Commercial BankMUV - The Manufactured Unit Value IndexNBFIs - Non-Bank Financial InstitutionsNCBs - Nationalized Commercial BanksNDFC - National Development Finance CorporationNFC - National Finance CommissionO&M - Operations and ManagementPSDP - Public Sector Development ProgramYTC - Pakistan Telecommunications CorporationRECP - Rice Export Corporation of PakistanREER - Real Effective Exchange RateSAP - Social Action ProgramSBP - State Bank of PakistanSDP - Special Development ProgramTBs - Treasury BillWAPDA - Water and Power Development Authority

NOTE

1. - Figures in parenthesis are negative2. - n.a. for not available

This document has a restricted distribution and may be used by mecipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank autlorizaltion

COUNTRY DATA - PAKISTAN

WOO e JAy I. IWI)119.8 wWioa 3.1 % 142

Po C eo Cm"a (19 I91) Infh Monttlsy (per 1.000liv rtUi) 107.7Crod. Bhrth R (per S.000) 40.5 Popu.l ponepr Physc 2127 alCrue DeadtRao (per I.M) 10.8 Popldon per HEoial Bed 1535

(% of donel Income) Hlet Quintil. 43.71 % of Urba P.8ouion s0 85

Lowest Quhila 8.02 % of Riwa Popiit 45 59

Cdotie bk w % of Requleml 95.9 Lilry R.(%) 31.6 'Per C9 it Prua ia (WdayXAdti Mab) 73 PMmy School Emoltmu() 9196

(Adult F-k) 64 (% of nrle oqr ar°o)

V ofaNP 19146 I 5W 8 7 m 1m

GNPitMwt P wee 46.1 100.0 6.2 5.0 5.5 4.4 5.1 S.8Gat Domeede l_nvume 8.3 18.1 7.9 4.2 -1.3 7.5 1.3 4.6GromNudotwISavip 6.4 14.0 7.8 15.1 -13.3 5.7 3.2 7.6CvrrnAMoo Ao BaliBc -. 9 -4.1 .. .. ..ftWwofGoods&NFS 7.4 16.0 9.0 12.0 -3.8 8.5 S.3 18.9TwyoafUode&lNFS 10.0 21.6 6.6 -0.2 -t.7 3.9 4.2 0.2GNPpepwcWh(US$)np 404.9 3.0 1.9 2.3 1.3 -1.2 2.6

OUTPUt. BMaWYM.

.IL1 1199D19 ---- Valiu Added------- Vu Added- --- EaO-ia*--- per Worker---.i;ii _ - , ... . ........ ... .. .. I---- --

U9SM S of Total Miliom % of Total USS % of Avwag

AFIcltaue 10276.0 26.0 16.26 49.55 632.0 28.2I _e " 8793.2 22.2 2.24 18.62 3918.5 174.6Mmutfmuxlq 6872.9 17.4 0.17 12.29 40910.3 1823.0Mlnia 279.3 0.7 0.05 0.14 6071.8 270.6CqVoutwoo 1640.9 4.1 2.03 6.18 808.3 36.0

Serle 20529.7 51.8 9.41 28.70 2181.7 97.2U yod _ _ 1.03 3.13 - -

TolAvege 39596.9 10.0 28.9 100.0 1418.6 100.0

--GeIW. Goerame_ --- -- c4ao Clowre---bi. Re. ---- %of GDP---- 81. Re. ---- %ofGDP---

- -s j2BtIu 1302 1

CwretRecadlpl bl 162.1 18.8 16.4 121.3 14.1 13.0C uMBe Ptxep 164.8 19.1 19.4 139.0 15.I 14.8Cwrw Balms -2.7 -0.3 -3.0 -8.6 -1.0 -1.8C_q4d Expeudh 56.1 6.5 8.0 43.3 5.0 6.8

_ -9U/85 19|is 1-- i B9 JQ smi

(n"m of Rup_. nd of perid)Moey Supply 183,9D5 211,111 240.023 269,344 281,638 317.221 374,156Bonk Crdit lo PubWIc Sor 128,456 129,675 141,052 171.474 1'V6,799 182.523 216.344Bam* Ce to Pdv* Setor 92.220 122,570 143,822 lS4.626 172,80 195,966 219.489

o besan c nibe of pbysim ee _t dte segupd w of Pr neicale m DeW Co l id = It mce-wIly pmdneg. om... p2

b/ inotisa surpl frm h _ bods.

.^. ~~~~~~~~~~~~~-2-

------- rceos of index mbea)---------W;5 86 M /87 8Bit low - 1 1

Moneya% ofGDP 38.9 41.0 41.9 39.9 36.6 36.8 36.8Coitmw lnPrceex(1M9041-1 131.8 137.6 142.5 151S. 167.2 17n.3 199.8

Azim petco_4V ohl in:Coeman_r Prlcelzx 4.4 3.6 6.3 10.4 6.0 12.7BSnkCrodto P,llSeSot 0.9 8.8 21.6 3.1 3.2 18.5B k CredttoPritvom S4Aa 32.9 17.3 7.5 11.8 t3.4 12.0

194,3 )9i2@6t 1L87 198J6 MB9 LOOM 1&L

EpotOfo*041ANFS 3326 3793 4419 5227 5579 6232 7294lw4oxwof oodh&NFS 7187 7311 7000 8337 8735 9368 10340

ReotreOeUp--deficit-(-) -3861 .3418 -2581 -3110 -3156 .3136 -3040

nterest Pn" (net) -529 -593 -627 -750 S -872 -942Ote Faor Payem (nt) 23 -47 *48 -78 -73 -93 -283Net Privdt Trehn 2687 2822 2S57 2256 2100 2210 2102Bdemc on Curr. Acet.*xvl. N.tOt Cel Truera -1680 -1236 -719 -1682 -1934 -1891 -2171

NetOffiicia Trusfe 390 468 383 S51 578 529 604BEelm of Cuft. Acet.iwl. Net Ofilci Tnuwfer -t90 .768 -336 -1171 -1356 -1362 -1567

Direct Privt Foreign Invesmnt 109 200 131 166 176 204 240NotMLT Borrowg 424 419 279 607 1239 891 739Dixbwaeme 1061 1073 1017 1312 1888 1590 1542Asnoxizedo -637 -654 -738 -705 -649 -499 -803

SubioV-i 533 619 410 773 1415 1095 979Other Cqiitei (net) amd Cepitaln.eL(Qncl.sehort-termcapital) -31 168 120 282 -146 219 762Inro in Rerv (-) -1036 t46 -46 -4SI 13 153 71

Gmm Reerv (end yew) 672 915 886 438 459 620 572

-__l A__ AvrSe-- -- P-- La1987 1988 1989 1990 1991 Sepmber 91

USCentli 5.82 5.68 5.20 4.66 4.46 4.05bItUSS 17.2 17.6 19.2 21.S 22.4 24.7

W8 MMz_ fiw=" P_e-nDI

Vidue % of Tota Net Debt Seri-ce RPido for 1990191USSM Medium & long-term

iLGufeoaxed Good 3330.1 74.1 Pubic Debt, int. Guaneaeed c. 21.5Odtr Eporw 1047.3 25.9 Noo-Gunrmnt d Pflvvu* Debt

Meecunis Experts (FOB) 4377.3 IO.0 ToMlOuwlaniog & Dlubued 21.5

DM usS MM IPA

uSSMExtr DebO. M on lJty 01. 1991 IBRI/U>)A Lning (Novembw 30, 1991) ----Medium & log-trmPublic Debt. inct. Gurwxed 15094.2 Out ndiug & Dierwd 2057.2 2265.3Noni-Guugsted Priv" Debt 144 Undlsbured 1768.3 1291.3

Tool OutMadlng Wi.

Totl Ouatmding & Dixbursd 15.238 Und_sbuned d' 3825.5 9556.6

cl M print of exporcicutOl dot

dl Dus tD celltiou1 MA excIJNe aw fIIUotoIUSDR vs. US) the total of dixb d and undigborned

ma differ from bta comtism.

SoWre: EmoeoWa SurWy of PkntM 199I91.Pallen DenSWIdc Suey 1988.

NeoWel Nutrition Surwy 1985- 987 & ' Stat Profie on Educaion by Sarfa Kbtje.

PAKISTAN

CURRENT ECONOMIC SITUATION AND PROSPECTS

Table of Contents

SUMMARY OF CONCLUSIONS ................. M

I. CURRENT ECONOMIC DEVELOPMENTS . . . . . . . . . . . . . . . . . 1

A. Introduction . . . . . . . . . . . . . . . . . . . . . . 1

B. Economic Performance in 1990/91 . . . . . . . . . . . . . 2

Agriculture . . . . . . . . . . . . . . . . . . . . . . 3Manufacturing . . . . . . . . . . . . . . . . . . . . . 6Energy .7Transport and Commun1cations . . . . . . . . . . . . . 8

C. Fiscal Developments .9

1989/90 . . . . . . . . . . . . . . . . . . . . . . . . 9The 1990/91 Fiscal Outcome . . . . . . . . . . . . . . 9

D. Deficit Financing. Money. Credit and Prices . . . . . . 11

Increase in Government's Reliance on Bank Borrowing . . 14Monetary Expansion ................ 14Prices . . . . . . . . . . . . . . . . . . . . . . . 15

E. Balance of Payments ........... ... .... . 15

F. Federal-Provincial Relations . . . . . . . . . . . . . . 20

NFC Award 1991 . . . . . . . . . . . . . . . . . . . . 20The Indus Water Accord . . . . . . . . . . . . . . . . 21

G. Economic Developments in 1991/92 . . . . . . . . . . . . . 21

The 1991/92 Budget . . . . . . . . . . . . . . . . . . 22Monetary Developments During 1991/92 . . . . . . . . . 25Prices . . . . . . . . . . . . . . . . . . . . . . . . 27Balance of Payments During 1991/92 . . . . . . . . . . 27

This report was prepared by John W. Wall (Leader), Pedro Alba, ShidehHadian, Hussaia Malik, Hanid Mukhtar, Ghulam Qadir, Shaheen Malik, F. H.Shamsi, Amira Rehman, and Abdul Qadir.

(ii)

II. STRUCTURAL ADJUSTMENT FOR LONGER TERM GROWTH . . . . . . . . . 30

A. Government's Vision of the Economy . . . . . . . . . . . 30

B. Major Structural Reforms Introduced . . . . . . . . . . . 31

Exchange and Payment Reforms . . . . . . . . . . . . . 31Industrial Policy and Investment . . . . . . . . . . . 32Foreign Trade Reform . . . . . . . . . . . . . . . . . 33Privatization of Public Enterprises . . . . . . . . . . 34

C. A Continuing Agenda of Structural Measures Needed . . . . 39

Structural Adjustment Program, 1991/92-1993/94 . . . . 39Industrial and Trade Policy . . . . . . . . . . . . . . 41Financial Sector Adjustment . . . . . . . . . . . . . . 42The Agricultural Sector ...... . . .. . . .. . . 44Physical Infrastructure ...... . . .. . . .. . . 47Population ............ .... .... . . 51Human Resource Development . . . . . . . . . . . . . . 53

III. MACROECONOMIC PROSPECTS AND RESOURCE NEEDS . . . . . . . . . 56

A. General Setting .......... ... .... ... . 56

Macroeconomic Targets and Policies . . . . . . . . . . 56

B. Macroeconomic Outlook ....... .. .. .. . .. . . 58

1991/92-1993/94 . . . . . . . . . . . . . . . . . . . . 59The Medium- to Long-Term Outlook (1994/95 - 2000/01) . 61

C. Balance of Payments Projections. External FinancingReguirements and Creditworthiness . . . . . . . . 63

The Current Account of the Balance of Payments . . . . 63The Capital Account and External Financing Requirements 64

D. Risks . . . . . . . . . . . . . . . . . . . . . . . . 67

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List of Tables in Text

Qmkk One: CURRENT ECONOMIC DEVELOPMENTS

Table 1.1: Indicators of Macroeconomic Performance ...................... 4Table 1.2: Area, Production and Yield of Principal Crops ................ 5Table 1.3: Agriculture Prices .............................. ............ 6Table 1.4: Summary of Fiscal Accounts 1980/81-1991/92 ................... 9Table 1.5: Financing of the Overall Budgetary Deficit ................... 14Table 1.6: Summary of Balance of Payments ............................... 17Table 1.7: Annual Growth Rates of Exports (in US Dollars) ............... 18

ChaRter Three: MACROECONOMIC PROSPECTS AND RESOURCE NEEDS

Table 3.1: Key Economic Indicators, 1987/88-1993/94 ..................... 60Table 3.2: Key Economic Indicators, 1994/95-2001/01 ..................... 62Table 3.3; Balance of Payment Projections ............................... 65Table 3.4: External Financing Requirements .............................. 68Table 3.5: Alternative Scenario ......................................... 71

Suammary of Conclusions

1. Despite all the buffeting from external shocks, Pakistan's real economyhas performed quite impressively in the recent past. GDP grew by more than 62per annum during the 1980s, with agriculture growing by 4% and industry byalmost 7%. Exports grew by almost 9% in US dollar terms. In the most recentyear, 1990/91, the performance was similar, even stronger in some areas,despite the severe shocks of the Gulf Crisis, with GDP at market pricesgrowing by more than 62, both industry and agriculture growing by 5%, andexports growing by 19% in US dollar terms.

2. Nevertheless, during the past decade the economy's fundamental resourceposition became seriously out of balance several times and the underlyingstructure of production developed problems. Pakistan has found it difficultto keep the fiscal and balance of payments deficits within stable ranges.Inflation fluctuated considerably, entering double digits twice, although thedecade's average was only 7%. This reflected the heavy reliance on non-bankborrowing for financing the fiscal deficit. The saving and investment ratesare low, in particular in the public sector. As a consequence, the social andphysical infrastructure of the country is inadequate, reflected in very lowsocial indicators; and in shortages and bottlenecks in energy, transport andcommunications. The population is growing very rapidly, at over 32 per annum.Large parts of economic activity are owned or controlled by the Government,often performing quite inefficiently.

3. During 1990/91, the resource imbalance became quite severe, with arecord budget deficit of 8.8% of GDP'/, and a current account deficit of 4.6%of GNP. Inflation was over 10% (12.7% measured by consumer prices, 10.5% bythe GDP deflator) and the money supply grew by a rate (18%) that, if notseverely reduced, will cause even higher inflation.

4. In mid-1988, the Government reacted to a similar resource imbalance andthe structural problems mentioned above by formulating a medium-termmacroeconomic stabilization and structural adjustment program. This programgained wide international support,, including from the World Bank, the IMF, theAsian Development Bank and bilateral donors. During 1990, the implementationof this program stagnated and there were temporary setbacks in Pakistan'scompliance with its commitments. As a result, it lost much of itsinternational support and left itself vulnerable to the kind of externalshocks that have visited the world with some regularity during the 1970s and19808.

5. A shock did come with a vengeance in August 1990, in the form of theGulf Crisis and the accompanying oil price hike. The Government estimated theadverse impact of the Gulf Crisis on the economy to be $700 million. Another,internal development in 1990, two changes of Government left Pakistan less

I This deficit is on a cash basis and incorporates some transitoryfactors discussed below.

ii

able to deal with tht consequences of this shock and make the necessaryadjustments. The time needed to prepare for elections and the inability ofthe interim Government to take decisive action further weakened theinternational support for Pakistan's reform program. This meant that justwhen the economy's balance of payments financing needs were the greatest, thebalance of payments support was the scarcest. Nonetheless, Pakistansucceeded, despite considerable difficulties, in maintaining its externalpayments obligations in the face of rising oil prices and reduced aiddisbursements; and avoided using import or exchange controls; but externolreserves almost disappeared in October 1990. Pakistan managed to meet itspayments obligations only due to the strength of export performance and theability to arrange high levels of short-term financing from suppliers. Italso received modest financial supportt from Saudi Arabia and the UIAE at thistime.

6. In November 1990, a new Government took office and brought with it avigorous economic agenda. Its vision was of a more rapidly growing, outwar0-oriented economy free from state ownership and control. It immediately setabout to imbed its vision in concrete policy reforms. It resolved long-standing issues on federal-provincial financial relations and the sharing ofIndus Waters. It also began to re-vitalize the macroeconomic stabilizationand structural adjustment program started earlier. In response to the highoil prices in the world market, it raised domestic petroleum product prices by42Z. It announced tax incentives for industrial investment. It began policyformulation to privatizo the public sector banks and enterprises, reformexchange controls, improve taxation, and promote exports to create both fastergrowth and more self-reliance. It took actions that included exchange controlliberalization that opened the capital account much wider than before, byallowing the free import and export of foreign exchange and authorized bothresidents and non-residents to hold foreign cx.change in domestic foreigncurrency accounts; it reduced maximum tariffs from 125Z to 90%, removed importlicensing and reduced the length of the banned and restricted lists; itremoved industrial licensing; it began to auction government debt in markets;it initiated the sale of the nationalized commercial banks (NCBs) by handingover the first 26% of shares and the management of two of them; it advertizedalmost all public industrial firms for sale and was able to consummate thesale of about one-fourth of them; it formulated a budget for 1991/92 thatcontained measures to strongly correct the record fiscal imbalance of 1990/91by raising resources while changing the approach to taxation, restrainingexpenditures and making further progress on trade liberalization. TheGovernment wee able to agree with the World Bank and the IMF on the resumptionof ecOre of its policy-based balance of payments support, which begar.disbursing in December 1991, with the third installment of the StructuralAdjustment Facility (SAF) of the IMF and the release of the second tranches ofthe Second Energy Sector Loan and the Financial Sector Adjustment Loan of theWorld Bank. In several respects, the re-invigorated economic reforms wentbeyond what was originally envisaged under the PFP, SAP and other adjustmentlendings, particularly in the areas of exchange and payments control,privatization and financial sector.

7. Nevertheless, it was clear that the fulfillment of the Government'svision for the economy required further progress on reforms announced todate

iii

and taking further reform measures. The Government began the formulation offurther reforms which it described in a Policy Framework Paper (PFP) itdistributed to the members of the boards of the World Bank and the IMF. Init, the Government explained its policies to establish and maintain a stablemacroeconomic environment, mobilize more resources for development and improvethe structure of taxation and enhance the developmental impact ofexpenditures. It would contract the role of government in the economy, deepenthe on-going reform of the financial sector, further liberalize the traderegime, enhance human resource development by carrying out a Social ActionProgram (SAP), strengthen social and physical infrastructure, addressenvironmental problems and minimize the burden of this structural adjustmentprogram on the most vulnerable groups in se- ty. This is an ambitiousagenda.

8. The need now is to set this framework in a foundation of solid policyformulation and sheathe it in concrete actions. While great strides have beentaken so far, much more needs to take place. The task is formidable: tocontinue the liberalization of the economy while keeping resources in balance.This means incurring the short-term cost sometimes inescapable with long-termstructural and fiscal adjustment while at the same time reducing the fiscaldeficit, in the first year, by 4% of GDP, and then maintaining fiscal balanceinto the future. If the Government is able to meet this challenge of makingboth short- and long-term adjustments, it warrants the support of theinternational ccmmunity, in the form of additional development and balance ofpayments assistance on favorable terms. This would enable Pakistan to makefaster progress on social and physical infrastructure.

9. A vigorous implementation of this adjustment program will be required tofulfill the Government's vision for the economy. Without such vigor, theperformance will disappoint all concerned. With reform, the Government aimsto maintain in the medium-term (1991/92-1993/94) growth above 6% per annum,while reducing annual inflation to around 6% and maintaining the currentaccount deficit no higher than 2.5% of GNP. The major fiscal effort is aimedat raising government revenue to about 212 of GDP and restraining governmentexpenditure to 262 of GDP, while raising development expenditures to at least72 of GDP. This would allow the budget deficit to remain at 4.8% of GDP, asexpected in 1991/92. With national saving rising as expected to 17.51 of GNPand foreign saving contributing 2.51 of GNP, total investment can rise to 201of GNP, a level more consistent with the high GDP growth rate targeted.Exports are expected to continue their boom, by growing at 9% per annum involume ter/',

10. Nevertheless, policy slippages represent an ever-present danger ofthrowing the reform program off-track and frustrating the reform's objectives.Some indications in the first part of 1991/92 point to these kinds ofproblems. There was a tendency on the part of the Government to introduce oraccelerate some infrastructure projects whose financing was to come originallyfrom the private sector on a "build-operate-tran3fer" (BOT) basis. Utilizing"BOT" is a quite welcome development that expands financing options and maytap new sources of financing. Nevertheless, fiscal and macroeconomic problemscan develop when projects originally expected to be financed on a "BOT" basisfail to find such financing, but nevertheless, go forward with public

iv

financing, either cah or credit. Although there was a substantial realincrease in social spending at the level of the provinces, cuts at the federallevel meant total expenditures on the social sectors may stagnate or actuallydecline somewhat in real terms in 1991/92, compared to 1990/91. This iscertainly not the outcome the Government had originally intended to achieve inpursuing its Social Action Program. The growth of Government borrowing fromthe State Bank of Pakistan (SBP) has exceeded the Government's programmedlevel for the first six months of the fiscal year by a large amount. This ispartly on account of switch over from non-bank to bank borrowing as a resultof structural changes in the financial sector. This threatens to underminethe monetary policy and re-kindle inflation. The Government needs to arrestany tendency to slip from its ambitious reform program, as the stakes forPakistan's development are large.

11. Even substantial adjustment and high performance leaves a developmentaldilemma that needs to be addressed. The basic fiscal balance described aboveleaves inadequate scope to improve the social and physical infrastructure asneeded in the long-run to provide the capacity for sustaining such rapidgrowth. The 211 of GDP in government revenues, along with the at most 4.8% ofGDP in tolerable budget deficits, can only finance 261 of GDP in publicexpenditures. If, as at present, interest expense absorbs 5X-5.5Z of GDP,defense absorbs another 6S-6.5Z, subsidies absorb 1.5-2X, and othergovernment consumption costs are such that current expenditures take a totalof 191 of GDP, this leaves only 72 of GDP for development expenditures. Ifspending on the social sectors, which is largely included in currentexpenditure, were more adequate, the residual for development expenditureswould be even lower.

12. This is woefully inadequate. Spending on the social sectors needs to beabout doubled from the current 31-41 of GDP to start to improve the very poorsocial indicators. Another substantial increase, measured as severalpercentage points of GDP, needs to be allocated to long-term projects toimprove infrastructure, starting with hydroelectric dams, but includingimprovements in roads, railways, ports, irrigation and drainage, andtelecommunications. Although the private sector can be given much of theresponsibility, the irreducible residual needed from the government willprobably require at least another 31-41 of GDP in public developmentexpenditures, over the 61-71 of GDP programmed now. Such an increase, ofcourse, cannot be achieved overnight and target of about 10% of GDP fordevelopment expenditures can be reached only in the last half of the 1990s.

13. With a strong economic performance, a stable macroeconomic environmentand successful export drive, it should be possible to mobilize domestically atleast an additional 1.51-2% of GDP to be added to public developmentexpenditures which should be done. Given the need to allocate more resourcesto high priority current expenses, such as education, a remaining 22 of GDP ishence needed as reduction of non-priority current expenditures. It may bepossible to reduce the interest expense in the long-run, after a period ofrestrained government borrowing. But the Government would still need toreduce subsidies and defense expenditures to shift these resources to higherpriority developmental requirements. In addition, to provide further stimulusto the private sector, it would be desirable over the medium-term to reduce

v

the share of non-development expenses further, thereby permitting a reductionof distortionary taxes and a reduction in the overall tax level.

14. With this accomplished, in the last half of the 1990s, Pakistan could beable to sustain growth continuing above 6Z per annum, low inflation, exportsgrowing at least 6.52 per annum and higher domestic saving and investment.This scenario would allow marked improvement in creditworthiness indicators,with falling debt:GDP and debt servicesexports ratios and a-progressive buildup of reserves to more comfortable levels.

15. As Pakistan proceeds with this program, it would justify additionalexternal assistance, which should grow along with the economy over time.After the immediate balance of payments support is supplied for 1991/92,Pakistan would continue to need both project and fast disbursing assistance ofaround $ 3 billion in each fiscal year, 1992/93 and 1993/94. These needswould grow to about $ 5 billion a year by the turn of the century. While inthe short- and medium-term the bulk of this assistance.-802--is expected tocome from official donors, this proportion (and then the volume) is expectedto decline over time, as the growth of Pakistan's creditworthiness fostersgreater direct foreign investment and allows a higher proportion of commercialborrowing.

I. CURRENT ECONOMIC DEVELOPMENTS

A. Introduction

1.01 Pakistan's economy grew relatively rapidly during the 1980s, with strongexport performance and modest inflation, although structural problems plaguedthe economy. GDP grew at over 6% and the dollar value of exports grew byalmost 9% per annum, while the annual inflation rate was about 7%.Agriculture grew by over 4% per annum; industry grew by almost 7%.

1.02 Despite this healthy performance, the underlying structure of theeconomy contained certain weaknesses. The saving rate was low, particularlyin the public sector. The fiscal budget was heavily dependent for revenues ontrade taxes and inelastic domestic taxes. Current expenditures were largelyabsorbed by interest expense, subsidies on food and agricultural inputs anddefense expenditures. Development expenditures were inadequate to build andmaintain the necessary physical infrastructure. Human resource developmentwas mainly the responsibility of the provincial governments, which lacked theresource base to adequately fund social services. The population was growingextremely rapidly, at over 32 per annum. The family welfare program has beenvirtually moribund. As a consequence, social indicators continued to lagbehind those of other countries and Pakistan's needs. The financial sectorand most heavy industry, as well as rail transport and telecommunications,were state-owned and mired in poor performance and inefficiency. The privateeconomy was heavily regulated, with high tariff protection and pervasiveforeign exchange controls.

1.03 The budget deficits grew during the 1980s and reached an unsustainable8.5% of GDP in 1987/88. In the mid-1980s, the bulk of the budget deficit wasfinanced by non-bank borrowing at high interest rates that fed back into thedeficit with high interest payments and caused further distortions in thefi'nancial sector. Foreign borrowing was also heavy and unsustainable, as thedebt service ratio rose from 20% in 1980/81 to over 30% by 1984/85, beforefalling somewhat thereafter.

1.04 In mid-1988, the Government formulated a program of restoringmacroeconomic balance and restructuring the economy. This program attractedthe support of the international community, including the World Bank, the IMF,the Asian Development Bank and several bilateral donors. Performance underthis program was mixed. The growth of the economy slowed slightly to about 52per annum in the next two years, although it revived to exceed 6% in 1990/91.The budget deficit did fall as a proportion of GDP in each of the first twoyears; but revenues remained disappointing and most of the deficit improvementresulted from reductions in both current and development expenditures. Theexternal current account deficit rose rather than fell. External shocks andterms of trade deterioration accounted for this, as volume trade performancewas quite good. A start was made in implementing structural measures infinance and trade policies and the Government made needed price adjustments inenergy and agriculture.

2

1.05 During 1990, the reform impetus stalled and, as a consequence,international financial support for the reform program dried up. In August1990, an unexpected change in Government coincided with the start of the GulfCrisis. The needed adjustments to the external shocks from the Gulf Crisisgot delayed, waiting for a new Government to form. External emergencyassistance to buffer these shocks was not forthcoming because of the inabilityof the interim Government to take decisive measures to adjust to the currentcrisis. The external reserves dwindled to very low levels and the Governmenthad a severe short-term financing problem toward the end of 1990. It coveredits financing gap with a very large increase in short-term borrowing, althoughan unexpectedly strong export performance helped considerably.

1.06 In November 1990, a newly elected coalition formed governments at thefederal and provincial levels. Its election manifesto promised to turnPakistan's economy into a more liberal, outward-looking and rapidlyindustrializing economy with less government ownership and control of privateactivities. It set up committees to review existing policies and formulatenew, long-term structural policies to implement its promise. It began toaddress the short-term economic problems it faced and implement theGovernment's prior commitments to reform. It immediately raised petroleumprices by over 40% to realign domestic with external prices and stem theincrease in the budget deficit. It resumed financial sector reforms. TheGovernment turned its attention to and resolved the long-standing issues ofprovincial financing and water sharing. When the committees reported theirfindings, the Government took action on the recommendations it accepted.(These are discussed in detail in Chapter II.) It formulated its firstbudget, for 1991/92, and incorporated in it many of its new policies, whichare discussed below.

1.07 This report examines Pakistan's current economic situation and theprospects for fulfilling the new Government's objectives for more rapid growthand structural reforms. The first chapter reviews recent macroeconomicdevelopments in the economy, focusing on the performance of 1990/91 and thefirst part of 1991f92. Although this first chapter mentions in passing someof the reforms introduced by the Government since November 1990, thesestructural measures are reviewed and discussed in more detail in the secondchapter. The second chapter also presents other fundamental policy reformsneeded to bring about the kind of economy the Government envisages. The finalchapter discusses the resources required to sustain the more rapid growth anddevelopment desired and presents the medium-term growth and creditworthinessprospects of the economy in quantitative terms.

B. Economic Performance in 1990/91

1.08 In the Government's original reform program formulated in mid-1988, theyear 1990/91 was the one in which the economy was to achieve a sustainablemacroeconomic balance. The growth of the economy was to exceed 52 per annum,the budget deficit was to fall below 5% of GDP, the current account deficitwas not to exceed 2.5% of GNP, the rate of inflation was to fall to 62 per

3

annum, foreign exchange reserves were to ha-s reached comfortable levels andnational savings were to have grown to enable a rise in total investmentdespite the fall in foreign savings. Due to adverse external developments in1988/89, these targets were postponed by one year to 1991/92. Nevertheless,the Government expected that there would be substantial improvement in themacroeconomic outcomes in 1990/91, including economic growth exceeding 5Z perannum, a budget deficit of less than 6% of GDP, inflation less than 10% perannum, some fall in the current account deficit on a path to sustainabilityand some buildup of reserves. In the event, the combination of the externalshocks of the Gulf Crisis and the disruption caused by the change ingovernments caused the macroeconomic situation to deteriorate in severalimportant respects. Although overall economic growth exceeded its target, sodid the fiscal deficit (8.8Z of GDP), current account deficit (4.6% of GNP)and the rate of inflation (12.7%).

1.09 Despite the crisis in the Gulf and a volatile domestic politicalenvironment, the economy achieved an impressive growth rate during 1990/91.GDP (at factor cost) grew by 5.6% (6.5% in constant market prices) (see Table1.1). Although the law and order and the infrastructural problems continuedto plague the manufacturing sector, it registered a growth rate of 6% for thesecond year in succession. The agriculture sector, because of the favorableweather and prices, grew by 5% (vs. 2.7% in 1989/90). Even though theelectricity and gas sectors grew at a healthy rate of 10%, this was lower thanthe growth rate of about 14% in 1989/90. Except for some slow-down in thepublic administration and defense sectors, all other sectors of the economyimproved or maintained their growth performance compared to 1989/90.

1.10 The strains of the external and internal shocks, however, were moreobvious on the fiscal accounts and foreign reserves. Both of thesedeteriorated sharply. The extraordinary increase in the world price of oilled to a 12% increase in imports (3% in 1989/90), and it was only through animpressive performance of exports (which registered an increase of 19%) andheavy short-term non-concessional borrowing abroad, that the country was ableto meet its import and interest payment bills. Similarly, to meet theunprecedented budget deficit, at least partially due to delays in adjusting tothe external shocks, the Government had to resort to an extremely high levelof inflationary financing. Inhlation was already high during the year partlydue to the effects of the Gulf Crisis, and the injection of this excessliquidity in the system threatens the improvement in the price situation in1991/92.

1.11 Agriculture. As mentioned above, the growth in value-added in theagriculture sector improved significantly in 1990/91 (5.1% vs. 2.7% in1989/90). This resulted from good weather conditions, increasedprocurement/support prices of all the principal crops, and induction of theprivate sector in crop procurement process, which improved farmers prospectsof receiving better prices for their crops. As can be seen in Table 1.2,physical output grew substantially only for cotton, out of the major crops;wheat and rice, each grew by less than 2% in 1990/91.

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Table 1.1: Indicators of Macroeconomic Performance

Average80/81-84/85 1986/87 1987/88 1988/89 1989/90 1990/91

1. Growth Rate (%)

GDP at Market Prices 6.3 6.5 7.6 5.0 5.3 6.5

GDP at Factor Cost 6.8 5.8 6.4 4.8 4.6 5.6Agriculture 3.6 3.3 2.7 6.9 2.7 5.0Manufacturing 8.8 7.5 10.0 4.0 5.7 6.0Other 6.9 7.5 9.0 4.5 6.2 7.0

11. Savings and Investment t% of ONP)

Gross Investment 17.4 18.3 17.5 18.4 18.2 18.1Private Fixed Investment 7.0 7.4 7.4 8.1 8.5 8.6Public Fixed Investment \a 8.7 9.3 8.5 8.7 8.1 7.9Changes in Stock 1.7 1.6 1.5 1.6 1.6 1.5

National Savings 14.3 16.2 13.2 13.7 13.6 14.0Private Savings 11.9 15.7 11.9 13.5 12.4 11.6Pubtic Savings 2.4 0.5 1.3 0.2 1.2 2.3

Foreign Savings \b 3.1 2.1 4.3 4.7 4.6 4.6

111. Budget Ratios (X of GDP)

Budget Deficit 6.2 8.2 8.5 7.4 6.7 8.8Foreign Borrowing (net) 1.6 1.5 1.9 2.4 2.7 2.5Dom. Non-Bank Borrowing 2.6 5.1 5.8 4.9 3.6 2.0Dom. Bank Borrowing (net) 2.0 1.6 0.8 0.4 0.4 4.2

IV. Inflation and Exchange Rate ChangesCX change over previous year)

CPI 8.2 3.6 6.3 10.4 6.0 12.7Reat EffectiveExchange Rate (1985=100) -- -15.9 -7.2 -1.6 -8.0 -3.5Rupee/Dollar Rate 9.1 6.4 2.4 9.2 11.6 4.5

\a "Public Sector" as defined here, inctudes the "Government" sector (as reflected by the consolidatedbudget) and public enterprises that remain outside the budget.

\b Derived from Balance of Payments which may differ from National Accounts.

Source: Planning and Development Division, Goverrnment of Pakistan.

1.12 The Government's efforts to induce fas-mers to grow more wheat weremodestly successful. The output of wheat increased by about 2% to 14.6million tons, maintaining production on the high plateau reached in 1988/89(see Table 1.2). The procurement price of wheat was raised by about 13Z inOctober 1990. However, due to the higher cost of production resulting fromhigher energy and fertilizer prices, the procurement price was increased againby an additional 4% at the time of harvest (April 1991). Concurrent with thisincrease in the procurement price, the Government also announced a 191increase in the issue price. Although the domestic procurement price is onlymarginally below the international price, the Government incurs a subsidy to

5

pay for this difference and the handling costs. Although the use of improvedseeds increased by about 30X (for all crops), nonavailability of a timelysupply of phosphatic fertilizer as well as an increase in its price led to aless than anticipated increase in the crop yield.

Table 1.2: Area, Production and YieLd of Principal Crops

1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

AREA (Thousand Hectares)

Wheat 7,403 7,706 7,308 7,730 7,845 7,911

Rice 1,863 2,066 1,963 2,043 2,107 2,113Basmati 759 749 835 990 1,105 1,087Coarse 202 237 175 143 159 185Irri-Pak 902 1,080 953 910 843 841

Cotton 2,364 2,505 2,561 2,619 2,599 2,662

PRODUCTION (Thousand Metric Tons)

Wheat 13,923 12,016 12,675 14,415 14,315 14,565

Rice 2,919 3,487 3,241 3,200 3,220 3,261Basmati 883 791 943 1,042 1,217 1,220Coarse 251 317 228 173 206 209trri-Pak 1,785 2,379 2,070 1,985 1,797 1,832

Cotton 1,218 1,320 1,468 1,426 1,456 1,634

YIELD (Kilogram per Hectare)

Wheat 1,881 1,559 1,734 1,865 1,822 1,842

Rice 1,567 1,688 1,651 1,566 1,525 1,543Basmati 1,163 1,056 1,129 1,053 1,072 1,122Coarse 1,243 1,338 1,303 1,210 1,080 1,130Irri-Pak 1,979 2,203 2,172 2,181 2,124 2,178

Cotton 515 527 573 544 560 614

1.13 The rice crop also registered a modest increase (1.4%) although theoutput of Basmati rice stagnated. Despite a fall in export price of rice, theprocurement price of Basmati was increased by 5S, while that of Irri wasincreased by 6%. (See Table 1.3.) These price increases, however, provedineffective in raising production by much because of a sharp increase in thecost of production. The export price of Basmati fell by about 28%, mainlybecause of the lower price accepted by Pakistan as a result of huge build-upof stocks after several years of higher production. In the previous twoyears, export volumes had been hurt by marketing problems and inflexibility inexport prices.

1.14 The boom in cotton production, domestic processing and export of cotton-based manufactures continued strongly in 1990/91. In response to asubstantial increase in the export price of cotton during 1989/90, theprocurement price of cotton (for the 1990/91 crop) was increased by a notable

.4

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margin (about 16% on the average). Also, due to strong international demandfor yarn, demand for cotton from the domestic mill sector increased. Theprivate sector was permitted to procure cotton directly from the farmers and

Table 1.3: Agriculture Prices(Rs. per 100 Kilograms)

1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

heatGovernment Procurement Price 200.00 200.00 206.25 212.50 240.00 280.00Issue PrIce 170.29 170.29 208.00 230.00 260.00 310.00Free Market Retail Price 249.00 241.00 235.00 257.00 275.00 311.00

RiceProcurement Price (paddy)

Basmati 232.50 255.00 325.00 337.50 358.75 375.00Irri-6 137.50 137.50 142.50 156.25 171.25 182.00

Export Price (milted rice)assmati 1075.37 1218.08 1275.02 1323.02 1463.03 1062.00Others 258.23 262.50 361.53 471.08 387.88 391.92

Free Market Wholesale Pricesasmati 674.80 710.05 774.05 771.32 837.28 1067.00Irri-6 251.00 262.50 268.50 270.00 333.61 354.20

Cotton _seed cotton)Procurement Price 462.50 462.50 462.50 470.00 507.50 587.50Ginnery Sale Price (lint) 1192.00 1192.00 1200.00 1207.00 1287.50 1537.00Free Market Wholesale Price \a 1205.33 1397.73 1413.80 1425.63 1580.47 2399.35

Fertitizer PriceGovernment Retail Price

Urea \b 256.Of 256.00 256.00 --DAP 292.00 292.00 322.00 370.00 434.00 498.00SOP 100.00 100.00 120.00 144.00 214.00 300.00

\a TilL 1987/88, the price is for NT Sindh RC, afterwards it is for Nayab 78-RG.\b Price of Urea was dereguLated in 1987/88.

some of the higher return on cotton yarn filtered down to the cottonproducers. All these factors contributed to a record output of cotton (9.7million bales). This significant increase in cotton output (12%) was due moreto an increase in the yield (10%) than the increase in acreage (2%). Exportof raw cotton was below (7Z in value and 5% in volume terms) last year's leveland its share in total exports fell from 9% in 1989/90 to 6% in 1990/91,reflecting high absorption by the domestic textile industry.

1.15 -Manufacturina. The performance of the manufacturing sector remainedsubstantially belowi the long-term trend in 1990/91. The growth in value-addedof the large-scale manufacturing sector failed to improve from the last year'slevel (4.7%). Nevertheless, continued favorable prices in the internationalmarket, substantial pervious investments and the Government's policy forproviding cotton to the textile sector at below international prices, kept thespinning sector extremely buoyant. The output of cotton yarn increased by 15Z(on top of a 20% increase in 1989/90). This led to a 422 increase in exportof cotton yarn--33% in volume and 9% in export price. The production ofcotton cloth in the large-scale sector, however, declined marginally (-1%).

1.16 The Government of Pakistan introduced a series of policy reforms during1990/91, described elsewhere in this report, designed to stimulate investment

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in manufacturing. These reforms included removal of industrial licensing,removal of import licensing, liberalization of exchange controls, easieraccess to credit, tax incentives and more equal treatment of foreign anddomestic investment. The Government, along with the Multilateral InvestmentGuarantee Agency (MIGA), held an investment promotion conference in Pakistanduring November 1991, that attracted wide-spread interest and attendance.

1.17 One sign that these reforms and investment promotion actually hasattracted increased investment is the marked increase in the import ofinvestment goods (machinery and equipment) during the first part of 1991/92,as discussed below. There are other indirect indications of increasedinvestment, mainly in the form of proposals and intentions to invest. Anotherpositive indicator is the increase in loans by the development financeinstitutions (DFIs) and commercial banks for investment. Because investmentlicensing is now abandoned, that indictor of investment activity is no longeravailable.

1.18 The Foreign Investmerit Advisory Service (FIAS--a joint facility of theInternational Finance Corporation and MIGA) studied the investment environmentin Pakistany. This report concluded that while there are many positiveelements in Pakistan's investment promotion policy, such as establishment ofInvestment Promotion Board, there are several negative elements as well.Perhaps the biggest problems are law and order and the very weakinfrastructure, which put Pakistan at a competitive disadvantage compared toother countries such as Thailand or Turkey. Also, compared to these and othercountries, Pakistan's trade regime is still heavily protectionist and createsan anti-export, import substitution bias. Many investors have complained ofconsiderable confusion in the interpretation and implementation of thepromotional and in&centive policies recently introduced, suggesting that thechanges on the policy level have not always filtered quickly down to theadministrative level. The investment incentives, both past ones and thoserecently introduced, cannot substitute for the supportive environment thatalready exists elsewhere and the report suggests these incentives be reviewedfrom the point of view of reducing or eliminating them. The report alsorecommends the strengthening of the investment promotion function, as opposedto the investment control function, to facilitate the path of new investors.

1.19 Energv: Electricity. Better water availability, increases in installedcapacity of thermal electricity (by 24%) and increased supply of gas to thepower sector helped to improve the electricity supply situation during1990/91. Total installed capacity increased by 15%, whereas total generationincreased by 9%. Hydro power generation, which due to water shortagesdeclined by 1% in 1989/90, increased by 7% in 1990/91. The thermal powersupply increased by 10% (16% last year) to 22,500 Gigawatt Hours. Theseincreases in power supply helped to significantly reduce power shortages inthe country.

jI "Foreign Investment Environment in Pakistan", Foreign InvestmentAdvisory Service, Washington, D.C., February 1992.

8

1.20 In July 1990, electricity tariffs were raised by 8Z. However, anincrease in the production cost of thermal electricity, caused by a sharpincrease in oil prices, forced a further increase of 12Z in electricitytariffs in April 1991. The increase in tariffs was not uniformly applied toall types of consumers. Tariff increases for consumers already paying higherrates were greater than those paying lower rates (small domestic consumers andagriculture), thereby increasing the effective (cross) subsidy to the lattergroups. Commercial, industrial and large domestic consumers' aVerage tariff(Rs 2.20 per unit) is significantly above the estimated long-run marginal cost(about Rs 1.60 per unit).

1.21 Oil and Gas. The crisis in the Middle East led to a sharp increase inthe import price of crude oil and oil products in August 1990. With the 10s

of supplies from Kuwait (the main supplier of petroleum products to Pakistan)the country also faced serious supply constraints. Compared to a 12% increasein the US dollar value of total imports, the growth in import of oil and oilproducts was 45%. Due to political uncertainties the domestic price ofpetroleum was not increased until November 1990, when the price was raised byan average of 42%. However, with the end of conflict in the Gulf and the fallof international price of oil, the domestic price of oil was rolled back by anaverage of 11% (March 1991). At the same time, the Government announced anincrease in the prices of other energy sources. In addition to the increasein electricity tariffs, the price of natural gas was increased by 18% for thehousehold sector and 15% for the commercial and industrial consumers in April1991.

1.22 Thepenergy crisis prompted the Government to increase the utilization ofindigenous sources of energy supply, especially that of oil. Not only was theextraction of crude oil increased by 20%, to an average of about 64,500 bpd(from 53,500 bpd in 1989/90), but also the Government started efforts toincrease the domestic refining capacity of oil.

1.23 The supply of gas increased by 4% over the year. Due to theGovernment's effort to supply more gas to power plants in order to save onfuel oil, the use of natural gas in power generation increased by more thantwice as much, by about 9% and constituted 40% of total demand.

1.24 Five new oil and gas discoveries were made during 1990/91. Despite theaccelerated extraction of oil during the year, these discoveries have helpedto improve the overall (recoverable) reserve position of oil by 28% (to 207million US barrels), of natural gas by 33S (25.93 trillion cubic feet) and ofassociated gas by 20% (2 trillion cubic feet).

1.25 Transport and Communications. The transport and communications sectorrecorded the highest growth rate since 1977/78, (8.4%). A major portion ofthe increase in value-added of the sector could be attributed to the increasein railway fares (by 12% for passenger and 15Z for freight transport) and roadtransport tariffs, and to the Government's decision to allow imports oftransport vehicles at new low duties (for four months) in order to neutralizethe inflationary impact of the increase in POL prices.

9

C. Fiscal Developments

1.26 1989/90. Due to restrained public expenditures in 1989/90, the budgetdeficit fell to 6.7Z of GDP, despite a poor revenue performance (Table 1.4).This was due to a sharp drop in revenues from the petroleum surcharge. Due toescalation of tensions along the borders with India, the defense budget wasincreased by more than 13.5% (to 6.7% of GDP), thus thwarting the Government'sefforts to reduce the budget deficit even further, to the previously agreedmacro target of 6.32 of GDP.

1.27 The 1990191 Fiscal Outcome. The fiscal accounts remained under constantpressure during 1990/91. The budget deficit was expected to fall from 6.72 to5.72 of GDP in the original May 1990 budget (and even lower, to 5.52 of GDP inthe Government program formulated earlier, in December 1989). The crisis inthe Gulf and unforeseen developments at home, however, dashed theseexpectations and despite some serious corrective measures--e.g., the Novemberpetroleum price increases and the Spring electricity and natural gas priceincreases--adopted by the Government to keep the budget from going off themark, a drastic reversal occurred in the fiscal balance.

Table 1.4: Summary of Frac Accounts, 1980/81 1991/92 (percent of GOP)

1980/81 1987/88 1988/89 1989hO0 1990/91 1991192Item Actual Actual P.Actual P.Actual Budget RevisedudgetTotal Rwvenues 17.8 18.4 18.9 18.8 18.7 16.8 20.4Current Revenue, 18.9 17.3 18.1 18.0 17.8 5.8 19.5

Tax Rvenues 14.0 13.8 14.3 14.0 13.9 12.9 14.7Domestic 7.3 5.5 8.0 8.1 8.1 5.9 89

oirmet 2.8 1.8 1.9 1.9 2.0 2.0 2.4Indlrect\a 4.5 3.7 4.1 4.2 4.1 3.9 4.5

Developnmeit Surcharge\b 0.6 1.9 1.9 1.3 1.2 1.2 1.5Cudtom DutIes 6.0 8.4 8.5 6.0 8.8 5.7 8.3

Import Duties\c 5.8 5.9 5.9 8.1 8.1 5.3 5.7Export DutIes 0.3 0.5 0.8 0.8 0.5 0.4 0.8

NonT.ax Revenues 2.9 3.5 3.7 39 3.8 2.7 4.8Contof Autonomous Bodies\d 0.7 1.1 0.9 0.8 1,1 1.0 0.9

ToW Esxendltures 22.9 28.9 28.3 25.5 24.4 26.4 25.20urrt 14.5 20.1 20.1 19.1 18.2 189 18.4

Federal 11.2 15.7 15.9 15.3 14.9 14.9 14.5Defense hS 7.0 8.8 8.7 8.2 8.4 8.0Interest Paym. 2.0 4.7 4.7 5.1 5.2 4.2 5.3Gubidler,\e 1.4 1.C 1.6 1.2 0.8 0.9 0.7Other\f 2.3 3.1 2.9 2.3 2.7 3.3 2.4

Prwincial 3.3 4.4 4.2 3.8 3.2 4.0 3.9Development\g 8.4 8.8 8.3 6.4 8.2 8.5 8.7

Deficit *5.3 *8.5 *7.4 *6.7 45.7' 48.8 4.8

DefIct FlnancIng 5.3 8.5 7.4 6.7 5.7 8.8 4.8External Resources (net 2.8 1.9 2.4 2.7 2.1 Z.5 1.8DoMestIc Non-Bank 2.0 5.8 4.9 3.6 2.9 2.0 1.7Bank FInancing 0.5 0.8 0.1 0.4 0.7 4.2 1.2

\a Excludes sates Tax on Imports, which Is Included as Import duty.\b The FAC subsidy to KESC Is not netted out of the Surcharge on gas.\c Includes tqra Surcharge.\d From 1987/88 Includes WAPOA hook-up charges.\e Incrludes he FetIlIzer subsIdy and the FAC subsIdy to KESC.\f Iricludes all foeeral Govemment expenditures other than defense, Iterest payments and subsldies.

The 190/9 revWed estimates als Include unaccunted expenditures of R 2.2 billion.\9 Excludes the FertIlMIer subsidy but Includes WAPDA hooK-up charges

1.28 The overall budget deficit is estimated at 8.82 of GDP, which is anoutcome of major slippages on both the revenue and expenditure sides. Total

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revenues increased by a meager 4.2Z above their 1989/90 level (despite a riseof 182 in nominal GDP), and fell as a proportion of GDP by more than 2percentage points (to 16.62 vs. 18.82 in 1989/90). Revenue collection fellshort of the initial budget target by Rs 21.4 billion. This amount iscomposed of the shortfalls in almost all revenue categories. Tax revenuesfell short of their target by Rs 10.2 billion, the non-tax by Re 10.4 billionand the surplus of autonomous bodies by Rs 0.8 billion. Expenditures, on theother hand, exceeded their budget target by Re 9.7 billion.

1.29 Lower tax revenues resulted from shortfalls in the collection of allmajor taxes (except the development surcharge). A shortfall of about Rs 2billion in domestic taxes was caused partly by the delay in implementing theGeneral Sales Tax (GST), which led to a loss of one month's collection (aboutRe 1 billion) in sales taxes. The Government's effort to clear a largebacklog of duty drawback claims, when subtracted from receipts, wasresponsible for a portion of the shortfall in custem duties. A large portionof the shortfall in custom duties, however, is due to the adaptive behavior ofimporters. In order to avail themselves of the continued Government policy oflowering import tariffs, importers delayed the arrival/clearance of theirshipments into early 1991/92. Similarly, exemptions!' from import duty,particularly those for machinery imported under the Rural IndustrializationProgram and for the Industrial Estate of Gadoon, is another important factorin the less than anticipated collection of custom duties. The shortfall (Rs862 million) in export duties resulted from the lowering of duty rates (oncotton) and less than anticipated export volume of raw cotton. Developmentsurcharges achieved their budget target, mainly on account of the 422 increasein the domestic price of petroleum products, which just offset the negativeeffects of higher world prices of fuel during the Gulf Crisis and the rapiddepreciation of rupee in the last quarter of the fiscal year.

1.30 The shortfall in the non-tax revenues, on the other hand, was partlycaused by the conversion of the Telephone and Telegraph Department into anautonomous federal corporation (Pakistan Telecommunications Corporation) anddue to the delays on part of WAPDA in paying Rs 3 billion in interest to theFederal Government.

1.31 Government expenditures, except interest payments, registered increasescompared to their budget estimates. Interest payments showed a modestincrease (3.252) from their 1989/90 value. However, the payments were Rs 10billion less than originally expected, mainly because of the delay inintroducing the auction system and the consequent need to use captive and low-cost ways of financing the Government borrowing requirement. The overallexpenditures are estimated to have been about Rs 10 billion (about 12 of GDP)higher than the budget estimates of May 1990. Development expenditures showan escalation of Rs 2.3 billion, while current expenditures rose by Re 7.4billion. The bulk of latter was caused by a payment of an additional month of

'J Includes the elimination of import duty on public transport vehiclesfor four months.

11

salary to government employees (about Rs 5 billion"), and an increase infederal subsidiesV and other expenditure over-runs, mainly in the category of'Organs of State', by both the federal and provincial governmentsY.

1.32 Public sector development expenditures registered a notable declinewith the start of the structural adjustment program in 1988/89. From anannual average of 7.1% of GDP during the Seventh Five-Year Plan (1983184-1987/88) period, the annual development program of the federal and provincialgovernments on average came down to 6.3% of GDP during the 1988/89-1990/91period. When the development expenditures of the corporations outside thebudget are also included, total development expenditures decline from 9.2% ofGDP to 7.72 of GDP per annum on average over the same two periods. Almost allmajor sectors of the economy showed declines. However, in terms of theirproportion of total development expenditures; power, rural development andsocial sectors increased at the expense of agriculture, irrigation, industry,transport and communications (mainly railways) and physical planning andhousing.

D. Deficit Financing.-Money. Credit and Prices

1.33 The need to finance a larger than expected budget deficit along withthe introduction of long-planned (and somewhat delayed) structural reformsintroduced much turbulence in Pakistan's financial sector. The key financialsector reforms included: 1) the introduction of a market-based auction systemfor the funding of public debt; 2) the privatization of the previouslynationalized commercial banks (NCBs); 3) the opening of commercial banking tothe private sector; and, 4) the increase in administratively-determinedconcessional interest rates and the acceptance of flexible, market-determinedinterest rates. As will be seen below, there were some teething problems inthe implementation of these structural reforms, although there was substantialprogress during the year. In several important respects, the financial sectorreforms went well beyond what were originally envisaged in the reform of thefinancial sector. This section first discusses the origin of the basicproblems in the financial sector, the reforms introduced to address theseproblems and the experience so far with these reforms.

1.34 Distortions in the Structure of Rate of Return and Their Effects.Financial disintermediation and the stunted growth of the banking system has

1 The salary for the month of July 1991, was paid in end-June as perGovernment's tradition of paying advance salary to the employees before Eid.

V This increase resulted from higher (US$ 630 per ton) than budgeted(US$ 510 per ton) price of edible oil.

Y The overage on the Federal expenditures resulted from reliefmeasures, expenses incurred on elections, bridge financing for crude oil andthe cost of repatriation of displaced Pakistani workers from Iraq and Kuwait.

12

resulted from large differentials between the low rates of return paid on bankdeposits and much higher rate&, paid on National Saving Schemes (NSSs) withsimilar maturity in the recent past. During the second half of the 1980s, thegrowth of broader money aggregate, made up of currency in circulation, demandand time deposits with scheduled banks, NSSs and deposits with non-bankfinancial institutions (NBFIs), was almost twice as fast as that of monetaryassets (M2), consistiag of currency and deposits with scheduled banks only,indicating disintermediation from the formal financial institutions. As theState Bank controls the growth of M2 only, this development has reduced theeffectiveness of monetary control. The rates of return on bank deposits haveremained low, among other reasons, because of the legal requirement for thebanks to invest at least 30Z of their deposit liabilities in government paper,the bulk of which consisted of low-yielding 6-month Treasury Bills (TBs) (withannual rate of return of 6Z before March 1991) in recent years. Anotherdistortion is interest rates of concessional credit schemes, under which thebanks have to extend credit for some specified purposes at rates of return aslow as 6%-8% and some even lower. These lead to a mis-allocation of resourcesand wasteful use of scarce funds.

1.35 Finanpial Sector Reforms During 1990/91 and 1991/92: The Governmentintroduced an auction system for its debt during the second half of 1990/91with the original intention to allow the market to set the rate of return onthe auctioned debt. Serving as a bench-mark, it would allow other rates ofreturn in the system, particularly the return on bank advances and deposits,to rise to the market level and reverse the trend of financialdisintermediation, which started in 1986/87. Market-determined rates ofreturn on government debt were also expected to facilitate the development ofsecondary market in government paper and allow the State Bank to conduct itsmonetary policy through open market operations, rather than through the use ofcredit ceilings. During the 10 months' period that the auction system hasbeen in place, a great deal of progress has been made in the development ofthe system, but much remains to be done to achieve the ultimate objectives ofthe program.

1.36 In the auction of the 6-month TBs, the Government, despite pre-announcing the amounts to be raised in the first two auctions held in March1991, did not accept the whole of pre-announced amounts, as the rate ofinterest in that case would have been higher than it wanted to accept.Thereafter, the practice of pre-announcing the amount was discontinued for thenext eight months and resumed again in December 1991 During this period, theGovernment chose an interest rate and accepted all the bids at or below thatrate. Nevertheless, the rate of return was allowed to rise from 62 (pre-auction) to 10% in November 1991 and over 122 in January 1992.

1.37 Since the after-tax rate of return on TBs remained significantly belowthe rate of inflation until December 1991, the non-bank public was slow todevelop an interest in purchasing these bills, which also slowed the growth ofa secondary market in these bills. As a result, their purchases were largelyconfined to banks, for whom these bills were useful for fulfilling theirliquidity requirements. As the demand for TBs was limited to banks, itdeclined sharply, when the requirement of special cash deposit equivalent to72 of their outstanding credit was imposed on banks in October 1991 with a

13

view to mop up their liquidity. The requirement was later withdrawn inJanuary 1992 and deposits refunded to banks. Some of the above problems weredue to the auction markets being new, narrow and thin. It takes time todevelop smoothly functioning markets, particularly secondary markets.

1.38 The other Government paper wnich is being auctioned since April 1991are Federal Investment Bonds (FIBs) with the maturity periods of 3, 5 and 10years and carrying coupon rates of 13%, 14% and 15%, respectively. Because ofthe pent-up demand of investors for longer-term securities, their preferencefor coupon instruments to discount instruments, and substantially higher ratesof return on FIBs as compared to TBs till December 1991, FIBs have found agreater acceptability with the non-bank public compared to TBs.

1.39 Because of very attractive rates of return on FIBs and theireligibility for meeting liquidity requirements of banks, FIBs were readilyabsorbed at or above par by banks and non-bank financial institutions in theinitial period after the introduction of the auction system, leaving verylittle for the general public. With a view to push banks to unload a part oftheir holdings to the non-bank public, in May 1991, the Government imposed aceiling of 15Z± on the amount of long-term securities (i.e., FIBs) that couldbe used to fulfill banks' liquidity requirements. After the imposition of therestriction, the banks did unload a part of their holdings of FIBs to the non-bank public, but the total subscription in the primary auctions virtuallydried up. The restriction was later withdrawn in September 1991 and the saleof FIBs in the primary auctions did revive.

1.40 Since the introduction of the auction system in March 1991, there hasbeen a dramatic shift in the stock of outstanding internal public debt fromnon-marketable and "whitener" securities to marketable securities. Theoutstanding amount of auctioned TBs and FIBs at present accounts for about 21%of the total stock of internal debt, which is a significant achievement inabout 10 months' period that the auction system has been in place.

1.41 in addition to allowing interest rate on TBs to increase from 6% toover 12% (January 1992), the Government also increased some concessional ratesof interest on bank loans to equal the expected rate of inflation during1990/91. However, as the actual rate of inflation during the year turned outto be much higher than anticipated, the enhanced rates of interest had againbecome negative by the end of the year. The interest rate determined by theauction also remained a problem, as the rate on TBs (until December 1991) wastoo low to attract all the funds GOP required to fully fund its debt. Sincethis funding turned out to be greater than expected, due to the need to redeemmaturing fixed-rate instruments and repay short-term foreign debt, theGovernment had to borrow more than expected from the SBP, which caused its netdomestic assets to rise more than programmed. Furthermore, the after-taxrates of return on both TBs and FIBs still compare unfavorably with some of

. Banks' holdings of securities with maturity of one year or longerwere restricted to a maximum of 15% of their deposit liabilities for thepurpose of counting towards their liquidity requirements.

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the non-marketable debt instruments like Defence Saving Certificates, MahanaAmdani Certificates, etc.

1.42 increase in Government's Reliance on Bank Borrowing. The Governmenthad to resort to heavy borrowing from the banking system during 1990/91 tofinance the larger than expected budgetary deficit. It also had to make upfor reduction in the contribution of National Saving Schemes (NSS) towardsfinancing the deficit. Government borrowing through NSS, which had been amajor non-bank source of financing budgetary deficits in recent years, came toa virtual standstill after the replacement of the 3-year Khas DepositCertificates by Special Saving Certificates with the same maturity, butsomewhat lower rate of return, in February 1990. Because of the lower rate ofreturn, non-availability of the facility of automatic reinvestment of profitsand the ineligibility of corporate bodies to purchase the new financialinstrument, the new certificate has not been as popular as its predecessor andfunds mobilized through its sale were not sufficient even to redeem thematuring Khas Deposit Certificates during 1990/91. As a result, thecontribution of NSS to financing the budgetary deficit during the yeardeclined sharply to only Re 6.5 billion from Rs 21.6 billion in the precedingyear. Thus the Government could not borrow much from the non-bank public tofinance the budgetary deficit. The share of external financing also declined(although the absolute amount increased), leaving the largest share to befinanced by banks, as is shown in Table 1.5 below.

Table 1.5: Financing of the Overall Budgetary Deficit(Billion Rs)

1987/88 1988/89 1989/90 1990/91

Overall Deficit 57.6 59.2 57.9 89.2External Financing (12.7) (18.2) (23.6) (25.5)Domestic Financing (44.9) (41.0) (34.3) (63.7)Banking System ((13.9) (( 3.2)) (( 3.5)) ((43.0))Non-Bank Public ((30.9) ((38.0)) ((30.8)) ((20.8))

1.43 Monetary Expansion. As a result of an unprecedented increase of Rs 43billiony--31%--in Government borrowing for budgetary support, the growth ofmoney supply, which had increased from 5% in 1988/89 to 13S in 1989/90,accelerated further to 13% during 1990/91. Had it not been for thecontraction in credit outstanding to the Government for commodity operations,net retirement of claims of the banking system against public sectorenterprises, subdued growth of credit to the private sector, andcontractionary impact of net foreign assets of the banking system (inclusive

' Excludes the effect of Zakat Fund deposits with the SBP, but includescredit to four autonomous bodies (WAPDA, OGDC, NFC and PTV).

15

of valuation adjustments), the increase in the money supply would have beenmuch larger. The low growth of credit to the private sector was unplanned andmay be attributed to: 1) crowding out by heavy borrowing by the government;and 2) greater scrutiny by banks of the credit-worthiness of loan applicantsfrom the private secto. after the court proceedings against a number of seniormanagers of banks who had sanctioned loans to private business groups forother than strictly financial considerations.

1.44 Prices. The rate of inflation, as measured by annual changes in the12-month average of the Consumer Price Index (CPI), has moved like a rollercoaster during the last four years. From a very moderate increase of 6% in1987/88, inflation accelerated to over 10% in 1988/89 beca7use of the earlierincrease in liquidity in the economy, cost-push factors and slowing of theeconomic activity during the year. Reflecting the lagged effect of slowergrowth in money supply during 1988/89, the rate of inflation decelerated to 6%in 1989/90, but started accelerating again towards the end of the year. Thepressure on prices intensified further during 1990/91 and the rate ofinflation increased to 12.7% during the year.

1.45 Both demand-pull and cost-push factors contributed to the accelerationof inflation during 1990/91. The sharp increase in the growth of money supplyand shift in its composition towards more liquid assets during the last twoyears boosted the aggregate demand without a matching increase inavailabilities. On the cost-push side, an increase of 14.6% in the rupeeprices of imports during 1989/90, and a further increase of 17.6% in 1990/91'pushed up the cost of production in the economy, as the bulk of imports intoPakistan are made up of capital goods and raw materials. Also, increases inthe administered prices of fertilizers and petroleum products in March 1990,that of petroleum products again in November 1990, and those of wheat flour,gas, electricity and railway fares in April 1991, also pushed up the generalprice level during 1990/91.

E. Balance of Payments

1.46 The balance of payments position has been under considerable strain fora long time (see Table 1.6). The situation became acute in 1987/88 when thecurrent account deficit reached US$ 1.7 billion, or 4.3% of GNP. A severeterms of trade shock in the following year aggravated the situation further byraising the current account deficit to US$ 1.9 billion, or 4.7% of GNP. Thecurrent account deficit marginally improved in 1989/90 to 4.6% of GNP. TheGulf Crisis significantly contributed to yet another sharp deterioration inthe terms of trade, by 13% in 1990/91, and also to a decline in workers'remittances by 5%. This would have created a much worse situation for thebalance of payments in the absence of a very impressive performance of exportsin 1990/91. Nevertheless, the current account deficit rose to US$ 2,110

±' These are increases in the rupee prices of imports and hence theeffect of the substantial nominal and (real) depreciation of rupee is alreadyreflected in these numbers.

16

million in 1990/91, unchanged from last year's level of 4.62 of GNP (but muchhigher than the structural adjustment program's target of 3.22 of GNP).

1.47 Exports in US dollar terms grew on average by 17% per annum between1984/85 and 1990/91. Exports more than doubled in value terms over the sameperiod. Most of this growth came from increases in volumes. One of the mainfactors contributing to the exports boom has been the sound exchange ratepolicy followed by the Government. The real effective exchange rate (REER)index has consistently declined (i.e. the rupee depreciated in real terms)over all these years. Since June 1985, there has been more than a 401 declinein the REER index. The decline in the index in 1990/91 was about 4%.

1.48 Exports, on the basis of payments received in 1990/91, reported inTable 1.6, grew by 20%. Total exports reported in Table 1.7, based on customsdata, grew by 24% in 1990/91 in US dollar terms±'. A good domestic cottoncrop, higher prices of cotton manufactures in the international market, alarge carried-over stock of rice and the sound exchange rate policy of theGovernment assisted in achieving this high growth rate.

1.49 Rice exports grew by a large amount in 1990/91, due to a substantialdrawdown in stocks. These stocks were mainly of Basmati (fine, long-grain,aromatic) rice which had built up over the previous few years due to increasedproduction from a new variety of Basmati which did not sell well. To reducethe stocks of Basmati rice, large quantities of this variety were sold by theRice Export Corporation of Pakistan (RECP) to Saudi Arabia and Iran atsubstantially lower prices than had prevailed earlier. Exports of Basmatirice in volume terms registered a growth of 124%, but the lower pricerestricted the growth in value terms to 54% only. Other varieties of rice,mainly Irri, had an export growth of 32% in value terms reflecting mostly thevolume growth. Overall, rice exports grew by 45% in value terms and 62% involume terms.

V Customs data are on a shipment basis. The balance of payments dataare based on the adjusted exchange record of the State Bank. Owing todifferences in timing and coverage of transactions in the two cases, the twodata sets can differ.

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Table 1. 6: Summary Balance of Payments(million USS)

................................. .........................................................................

Item 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91.... ..... ... .... .. ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Trade Balance -3042 -2294 -2557 -2573 -2486 -2483Exports (f.o.b) 2942 3498 4362 4634 4926 5902Inmorts (f.o.b) -5984 -5792 -6919 -7207 -7412 -8385

Services (net) -1016 -982 -1381 -1461 -1614 -1790Invisible Receipts 963 1013 970 1081 1417 1630Invisible Payments -1979 -1995 -2351 -2542 -3031 -3420(Freight & Insurance) (543) (499) (602) (630) (642) (709)(interest) (593) (627) (750) (805) (872) (942)

Private Transfers (net) 2822 2557 2256 2100 2210 2102(workers' Remittances) (2596) (2278) (2013) (1897) (1942) (1848)

CURRENT ACCOUNT BALANCE -1236 -719 -1682 -1934 -1890 -2171

CAPITAL ACCOUNT BALANCE 1255 913 1566 1847 1843 2354

Official (Grant) Transfers (net) 468 383 511 578 529 604(Refugee Assistance) (135) (129) (164) (132) (140) (112)

Long-term CapitaL (net) 633 465 818 1261 1141 1038Public & Publicly Guaranteed 433 334 652 1085 937 798Project,food,comnodity aid 419 279 607 1239 891 739Disbursements 1073 1017 1312 1888 1590 1542Amortization /a -654 -738 -705 -649 -699 -803

Other public (net) lb 14 55 45 -154 46 59Private (net) 200 131 166 176 204 240

Short-tern Capital (net) 154 65 237 8 173 703(FEBCs) (148) (64) (112) (29) (85) (93)

Errors and Omissions -26 48 -32 -33 -11 -66

OVERALL BALANCE -7 242 -148 -120 -58 117

Net Foreign Assets (- = increase) 7 -242 148 120 58 -117

State Bank of Pakistan -379 -391 39 110 -95 -55Gross reserves (- = increase) -146 46 451 -13 -153 71IMF (net) -250 -358 -322 140 83 -120Purchases 0 0 0 363 246 0

SAF 144 212 0S8A 219 34 0

Repurchases -250 -358 -322 -223 -163 -120Others 17 -79 -90 -17 -25 -6Foreign Currency Deposits 496 403 155 201 266 476Other Bank Deposits (net) /c -110 -254 -46 -191 -113 -569

MEMO ITEMS:...... ...

Gross Official Reserves 915 886 438 459 620 572Reserves in weeks of importsof goods and services 6.0 5.9 2.5 2.4 3.1 3.4

Current account deficit88 X of GNP 3.4 2.1 4.3 4.7 4.6 4.6

/a Adjusted for debt relief./b Mainly commercial bank borrowing of over one year maturity, including IMF Trust Fund, and

rescheduled amortization./c Includes outstanding export bills, authorized dealersa and bilateral balances.

Source: Ministry of Finanrce and Economic Affairs, and IMF.

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Table 1.7: Annual Growth Rates of Exports (in US Dollars)by Conmmodity Groups

1988/85 1965/86 1986/87 1987/88 1988/89 1969/90 1990/91

Raw Cotton 111.4 83.9 *12.9 36.5 52.5 -52.4 -7.0Rice -47.4 54.1 -12.6 21.4 -16.3 -21.4 44.8Cotton Based

Manufactures -6.4 19.1 44.8 17.1 5.3 27.2 30.7Other Exports\a -13.1 4.6 20.9 20.0 -9.4 21.1 19.0

Totsl Exports -10.0 23.2 20.1 20.9 4.6 6.3 23.8

\a Other exports (with 35X share in total exports in 1990/91) include carpets end rugs (4X),synthetic textiles (6X), fish and fish preparation (2X), leather (5%), leather manufactures(4X), sports goods (2X) and many other small items (12X).

Note: Based on customs data which are on a shipment basis.

1.50 Pakistan is one of the world's leading producers of raw cotton andcotton manufactures. The Government has been following a policy of taxing theexport of raw cotton to encourage the domestic processing of cotton. It hasmanipulated this tax in the course of the year in pursuit of this policy.Despite an increase of 131 in domestic production of raw cotton in 1990/91,exports of raw cotton in volume terms declined by 41. Exports of raw cottonremained quite low during the first eight months of the fiscal year and pickedup in the remaining part of the year when the export duty on raw cotton waslowered in February 1991. Exports of the cotton-based manufactures, whichform more than 50% of total exports of the country, grew by 31X in US dollarterms. Cotton yarn exports increased by 42Z in value terms, as a result of33Z growth in volume terms and 91 increase in the price. Substantialincreases were recorded in exports of cotton cloth (211), ready-made garments(261), tarpaulin and canvas goods (176%) and 'other textiles' (22%).

1.51 The remaining exports, a diversified group including leather and leathermanufactures, carpets and rugs, fish and fish preparations, synthetictextiles, sports goods and many small items, have been growing at around 201per annum between 1985/86 and 1989/90, except in 1988/89 when they had anegative growth. Their growth at 191 in 1990/91 was also in line with thegrowth rate of the previous years.

1.52 Imports have been growing in value terms over the past several years ata much lower rate than exports and have been virtually stagnant in volumeterms. Imports in 1990/91 were 331 higher in US dollar terms than in 1985/86,versus the 1001 increase in export dollar value. Again, this can beattributed partly to the sound exchange rate policy of the Government. Total

19

imports in US dollar terms increased by 132 in 1990/91±'. Much of theincrease is directly attributable to the Gulf Crisis. Growth in oil importswas 45Z, while the increase in non-oil imports was only 7%. Crude oil imoortsin value terms went up by 44Z, due to 15% growth in volume terms and 261increase in the price.

1.53 Workers' remittances have been on a downward trend since 1985(86, exceptin 1989/90, due to the deterioration in employment conditions in the Gulf forexpatriates, following the fall after 1985 in the oil incomes of Gulf States.Workers' remittances in 1990/91 turned out to be higher than most had expectedat the start of the Gulf Crisis. In the earlier months of the Gulf Crisis,workers in the Middle Eastern countries remitted their savings in large sumsfor fear of losing them and this partly compensated for the loss of theremittances from Kuwait. Workers' remittances for the full fiscal year1990/91 were US$ 1,848 million, only 5% below the previous year's level.

1.54 The increase in the current account deficit in 1990/91 created a needfor additional capital. However, problems on the capital account developedwith the stoppage of new commitments of aid from the USA and the inability ofthe IMF and the World Bank and other donors to disburse much needed balance ofpayments support due to lack of full compliance with policy commitments. Thelong-term capital (net) at US$ 1038 million in 1990/91 was lower by 91 largelydue to lower disbursements of food aid, higher amortization payments and someretirement of long term commercial debt of over one year maturity. The grossofficial reserves became dangerously low during the year. The Governmenttackled this adverse situation mainly through short-term borrowing. Netinflow of short-term capital rose fourfold in 1990/91, to US$ 703 million,resulting mostly from higher suppliers' credit availed by the Government (toimport crude oil) and the private sector. In addition, the United ArabEmirates provided a cash grant of US$ 50 million and Saudi Arabia extended anin-kind (crude oil) grant of US$ 75 million, which contributed to 121 increasein official grants in 1990/91.

1.55 A capital account surplus larger than the current account deficitresulted in US$ 117 million surplus in the overall balance of payments.Foreign c"rrency deposits also registered an increase of UIS$ '76 million,negating the fears expressed at the time of liberalization of foreign exchangecontrols that it would result in flight of capital out of the country.However, due to repurchases of US$ 120 million from the IMF and a largeincrease in outstanding exports bills, gross official reserves declined by US$71 million. The gross official reserves stood at US$ 569 million by the endof the fiscal year 1990/91, a very low level sufficient to finance less thanthree weeks of imports of goods and services.

± This growth rate is based on payments data and in FOE terms. Thecustoms data are on arrival basis and in CIF terms. Defense related importsare included in the payments data only. Therefore, the two data sets differin valuation, coverage and timing. The rate of growth of imports on the basisof customs data was 101 in 1990/91.

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F. Federal-Provincial Relations

1.56 NFC Award 1991. In Pakistan, expenditure requirements of provincialgovernments far exceed their revenues. To remedy the situation, a part of therevenues collected by the Federal Government is transferred to the provinces,according to the formula devised by the National Finance Commission. TheCommission is to be constituted at intervals not exceeding 5 years, and giveits award on the distribution of financial resources between the federal andprovincial governments. However, no award had been given since 1975 becauseof the lack of agreement among the provincial governments. Over this period,the resources provided for provinces in the 1975 Award had become inadequateto meet their increasing expenditures.

1.57 To overcome this problem, the federal government started making ad hoc,non-obligatory grants to provinces to meet deficits in the current accounts oftheir budgets. This arrangement undermined the financial autonomy ofprovinces and also reduced the incentives for them to mobilize revenues ontheir own. Also, because of the uncertainty regarding the amount of non-obligatory grants, the provinces had been generally dissatisfied with this adhoc arrangement and had persistently asked for the constitution of theNational Finance Commission to give a new award.

1.58 In response to their demand, the President had constituted the NationalFinance Commission in July 1990. It could not proceed with its work becauseof the dismissal of the Government in August 1990 and its replacement by aninterim Government, which obviously had neither the mandate nor willingness toresolve this long-standing issue. The new Government, after assuming power inNovember 1990, immediately reconstituted the Commission in December 1990. TheCommission formulated a unanimous Award, which was announced on April 20,1991. It was possible to get an agreement among the provinces on the 1991Award primarily because the governments in the center and provinces belongedto the same political alliance.

1.59 The new award, which was effective from July 1, 1991, has substantiallyincreased the transfer of fiscal resources from the Federal Government to theprovinces. The divisible pool of taxes--taxes whose receipts are to be sharedwith provinces--has been enlarged to include the excise duty on tobacco andtobacco manufactures and the excise duty on sugar. Outside the divisible poolof taxes, the net proceeds of the development surcharge on natural gas and thenet amount of royalty from crude oil are to be paid to provinces according toproduction in each province. In addition, the net profit from the generationof hydro electricity in a power station is to be distributed to the provincewhere the station is located. These two new features of the award meet thelong outstanding demands of Balochistan, NWFP and Sindh.

1.60 As a result of the above measures, the total amount of transfers toprovinces, excluding grants, has been budgeted at Rs 65 billion for 1991/92.This amount will continue to grow in future years as the receipts of divisibletaxes grow. Under the 1975 Award, the provinces would have received Rs 40billion only. Although all the four provinces are to benefit from the award,the largest benefit will go to smaller provinces. The intention of the

21

National Finance Commission, and all the governments involved, is to settle ina fixed manner the transfer from the federal to the provincial level. As aresult, the provinces will need to mobilize their own resources or effecteconomy in expenditures to make their budgets balance in the future. Theintention is to review this award after five years to refine the agreement inlight of future developments in provincial finance. One of the structuralproblems of the award is that the efficient taxes--income and sales taxes--arein the divisible pool, leaving the Federal Government full use of trade andcentral excise taxes, which are more distorting. As it is the FederalGovernment that usually initiates new tax measures, this division of revenuespresents a policy dilemma.

1.61 The Indus Water Accord. The dispute regarding the distribution of theIndus water among the four provinces had persisted for the last seventy years.The provinces had long been demanding the convening of the meeting of theCouncil of Common Interests to resolve this issue. The Council reached anaccord on the apportionment of the Indus water on March 21, 1991. Prior tothis agreement, the four provinces together were using 104 MAF of irrigationwater, leaving about 30-35 MAF of water to flow into the sea. After theaccord, an additional 10-13 MAF of (excess/flood) water is to become availablefor use by the provinces, and it is to be divided among them as follows:

Province Share (%)

Punjab 37Sindh 37NWFP 14Balochistan 12

1.62 For the implementation of the accord, an Indus River System Authority(IRSA) was to be set up. Furthermore, the provinces were allowed to set uptheir own water development authorities (like WAPDA) which will draw up plansfor the use of the allocated water, for both irrigation and hydro electricitygeneration purposes.

G. Economic DeveloRments in 1991/92

1.63 For 1991/92, the Government has formulated ambitious targets formacroeconomic balance while sustaining growth at above 62 per annum. Thiswill be an especially daunting task considering the need to recover from theconsiderable reversal in fiscal performance in 1990/91. Restoring fiscalrestraint is the key to restoring this balance. This will reduce the growthof money and credit, and hence inflation; and restrain overall demand, andhence improve the balance of payments. From 8.8% of GDP in 1990/91, thefiscal deficit is expceted to drop to 4.8% of GDP in 1991/92. The balance ofpayments' current account deficit is targeted to fall to 3.4% of GNP in1991/92, from 4.6% in 1990/91. Inflation is targeted to fall tc about 8Zduring the year.

22

1.64 The 1991/92 Budget. Roughly half of the expected fall in the budgetdeficit results from steps taken in 1990/91; the other half will result fromambitious new measures for 1991/92. The leads and lags and one-time factorsthat partly explained the unexpectedly large budget deficit in 1990/91--i.e.,the 13th month salary, the payment of 1990/91 interest owed to Government in1991/92, the shifting of import duty payments--also partly explain the largedrop in the deficit expected even before new measures were introduced.Furthermore, some measures introduced in 1990/91--e.g., the large petroleumprice increase in November 1990 and the energy price increases in April 1991--will have a full year's effect in 1991/92, which will further reduce thedeficit. Finally, additional measures have been adopted to reduce thedeficit.

1.65 The 1991/92 budget projects total expenditure to be about 25% of GDP,virtually the same as the last year's level (25.4%). Due to a very heavy andincreasing interest expense burden, there was little scope for reducing thedeficit through expenditure reduction. Interest payments are expected toincrease from 4.2% of GDP in 1990/91 to 5.3% in 1991/92. Much of the increasein interest expense is on domestic debt and is due to the introduction of amarket-based financing mechanism and the avoidance of distortionary captivesource of finance, which had previously hidden the true economic cost ofgovernment debt. The interest expense on domestic debt is expected toincrease by about 1% of GDP (to 4% of GDP). The interest on foreign debt,however, is expected to show a more modest increase--from 1.3% of GDP in1990/91 to 1.4% of GDP in 1991/92. Because of the expected fall infertilizer, wheat and soybean oil subsidies, cash subsidies are expected toregister a modest overall decline in 1991/92 (from about 1% of GDP in 1990/91to 0.7% of GDP). Defense expenditure, though projected to increase by about92 in nominal terms, is expected to remain at 6.4% of GDP, the same as in1990/91. On the aggregate, the current expenditures are expected to fallmarginally, to 18.4% of GDP, from 18.9% last year.

1.66 To reverse the declining trend of public sector development expendituresas a percentage of GDP in recent years, larger allocations for developmentexpenditures have been made for 1991/92. The total public sector developmentprogram (PSDP) allocations (including corporations outside the budget) rise to8.6% of GDP for 1991/92, from 7.8% for 1990/91. Excluding the off-budgetcorporations, the allocations for development programs of the federal andprovincial governments show an increase of about half a percentage point ofGDP in 1991/92 over the previous fiscal year.

1.67 Some major structural shifts have take-n place in the composition of thePSDP for 1991/92v Several federally funded programs of physicalinfrastructure have been allocated large increases. Compared to last year,allocations for power are up by 62%, transport and communications by 66%,physical planning and housing by 21% and agriculture by 27%. Allocations forirrigation received a drastic cut at the federal level and the increase inallocations for the sector at the provincial level was not enough to offsetthe drop at the federal level. On the whole, allocations for irrigation are14% lower in 1991/92 compared to last year.

23

1.68 With the new award of the National Finance Commission, more resourceshave been placed at the disposal of the provinces and about 30% of theprovincial development programs are to be financed from their own budgetarysurpluses. Before 1991/92, the provinces contributed nothing to theirdevelopment programs. Despite the stoppage of federal funding for the specialdevelopment program (SDP) of the provinces, the size of the provincial annualdevelopment program has gone up by 182 in 1991/92. Social sectors, which areprimarily the responsibility of the provinces, have received a 402 increase inallocations in provincial ADPs. However, cuts at the federal level in thedevelopment program of the social sectors have left the overall size of theprogram for 1991/92 not much different than that for 1990/91. With theincreased availability of resources due to the NFC award, the provincesincreased their allocations, at the budget time, for social sector currentexpenditures as well. However, under the post-budget austerity measures, allthe provinces made cuts in their current expenditures in all areas, includingthose for social sectors. Total allocations for current and developmentexpenditures of the federal plus provincial governments for social sectors nowshow an increase of 8% in 1991/92 over 1990/91. As the rate of inflation isexpected to be at least at this level, real expenditures on the social sectorsare expected to stagnate or slightly decline in 1991/92. This is a situationthat needs to be reversed in future budgets.

1.69 It is increases in revenues that make the greatest contribution toreducing the deficit. The 1991/92 budget introduces several changes intaxation designed to increase yields and bring more taxpayers into the taxnet.Due to the direct tax budgetary measures, the share of direct taxes in totalfederal tax collection is expected to increase to 17% (from 16% in 1990/91).Similarly, the share of taxes on domestic production in total taxes is toincrease to 47% (vs. 46% in 1990/91). On the other hand, the share of customduties (including sale tax on imports) is expected to fall to 43% (45% in1990/91). Following is a brief summary of various fiscal measures announcedby the Government.

1.70 Income tax measures aim at broadening the base by eliminatingexemptions'; simplifying the tax structure by imposing presumptive taxes; andreducing the cost of compliance to the taxpayers by reducing the marginal taxrates and reducing the arbitrary powers of the tax collecting agents andagencies.

1.71 An important measure introduced in the 1991/92 budget is the impositionof a 10% tax on unearned income, i.e., income from dividends, interest andprofits from bank deposits. Interest income from National Saving Schemes, theFEBCs, and the foreign exchange and dollar accounts has, nevertheless,remained exempted from payment of income tax. The flat aspect of the tax and

11 These includes (i) 30 exemptions provided under Part-I of Schedule-2of Section-14 of the Income Tax Ordinance 1979; (ii) all tax credits; and(iii) all tax rebates, except those given to exporters and companiesregistered on the stock exchange. However, 9 exemptions announced before July1, 1991 under the agricultural, industrial and trade policies became operativeduring the first half of the fiscal year.

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the exemptions granted reduces the progressivity of the tax and createsvertical and horizontal inequity.

1.72 A 0.52 tax is levied on the declared turn-over of any company, which forany reason, is either not paying any tax or is paying tax of less than 0.5% ofits turn-over. Presumptive taxes (at 1.52 to 32 of contracted amount) areimposed on contractors, importers and suppliers of goods and services. Thesemeasures not only broaden the income tax base, but also increase the taxelasticity by reducing the amount of rebates payable to contractors, importersand suppliers. To bring the commerce sector under the taxnet, the Governmenthas imposed a fixed tax (of Rs 900 per annum in large cities and Rs 600 perannum in small towns) on shops, stores and retail outlets. The net revenueimpact of the new income tax measures is expected to be about Rs 2.8 billion.However, collection from the turnover tax and the presumptive tax on smallbusinesses suffered due to legal bottlenecks and procedural delays and duringthe first four months of the fiscal year and only a nominal amount wascollected.

1.73 The new excise measures include capacity tax and consultative assessmentfor selected major industries', increase in excise duty on cotton yarn (fromRs 4 to Rs 6 per kilogram), and bank cheques (from Rs 0.5 to Rs 1 per cheque)and imposition of 25% excise duty on local and in-country long distancetelephone service. The decision to impose capacity-based, rather than output-based, excise duties is expected to eliminate the evasion of tax which isthought rampant due to collusion of taxpayers and the tax collectors based inthe factory premises. Similarly, the consultative assessment scheme, whichinvolves the respective trade representative in the tax assessment process,also inteAds to check tax evasion. The expected yield from these measuresamounts to Rs 6.7 billionV.

1.74 Efforts for establishing a sound system of Generalized Sales Tax (GST)have been underway for the last two years. Attempts, although very modest,have been made in this direction in the 1991/92 budget by removing some moreexemptions from the tax. Nonetheless, certain new measures are adopted in thebudget, including the extension of GST coverage (exemptions are withdrawn from9 items of import and 16 items which are locally produced), and increase intax rate on processed fabrics (from Rs 0.25 to Rs 0.5 per square yard). Likethe income tax, the base-broadening efforts were somewhat thwarted by the newexemptions extended under the industrial, agricultural and export policies.

'J Capacity tax has been levied on three items--cement, electric bulbsand florescent tubes. Consultative assessment scheme applies to nineitems/services (electric batteries, iron, paints, soaps, metal containers,glass, wires, ceramic and hotels and restaurants).

' In November-December 1991, the Government announced a reduction inthe export tax on raw cotton to 602 and a reduction in the excise and exportduties on cotton yarn by Rs 1 per kilo, in response to falling farm-gateprices for cotton. This will decrease the yield below the expected amount.

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1.75 Import duty on 1,391 items haa been reduced from 95 to 90%X on 161items from 95% to 80%s on 12 items from 80% to 60%; and on another 7 itemsfrom 0S to 40%. Further, in contrast to previous years, the reduction intariff rates is not offset by increases in import surcharge. The Governmenthas introduced a series of administrative measures designed to increase customduty collection despite lower rates. The new custom duty measures areexpected to add Rs 3.4 billion.

1.76 Telephone charzes were increased for all types of service by asubstantial margin. Rate for local calls is increased by 25% and for longdistance (in-country and international) calls by 20%. This measure isexpected to generate Rs 4.1 billion in additional revenues.

1.77 The railway tariffs for both freight and passenger transport have beenincreased by 5%. These new tariffs are made effective from September 1 and20, 1991 for the freight and passenger transport, respectively. This newmeasure is expected to yield an additional Rs 0.6 billion to the PakistanRailways (PR), thus making it possible for the Government to reduce its grantto PR by the same amount.

1.78 One additional measure is an increase in postal charges by 5%, which isexpected to generate additional revenues of Rs 0.3 billion.

1.79 Fiscal Outcome for Julv-Deceinber 1991. The half-yearly review of thefiscal situation indicates, that despite an overall increase over 20% in thefederal taxes (compared to the corresponding period last year), the increasein revenues fell short of expectations. Although the federal expenditureswere mostly on track, an acceleration in the provincial expenditures led to anexpenditure overage of Rs 8 billion in the consolidated budget. The fiscaldeficit for the first six months of 1991192, therefore, is estimated to besomewhat higher than half the full year's target.

1.80 The G8vernment has taken some corrective meastres to reverse the fiscalslippages. In order to improve the performance of the federal excise dutiesand the GST, the Government has intensified anti-evasion measures; andstronger audit regulations were introduced, giving the tax administrationpowers to visit the business premises and solicit necessary information for amore comprehensive assessment of tax liability. Similarly, a 10% cut wasimposed on all Federal Government current and development expenditures (otherthan defense, interest, subsidies, grants and social sectors). This lastmeasure is expected to generate savings of about Rs 5 billion.

1.81 Monetary DeveloDments During 1991/92. Monetary assets, which haddeclined throughout the first quarter of 1991/92, took a sharp upturnthereafter, which continued unabated till the middle of January 1992. As aresult, the cumulative monetary expansion during the first six and a halfmonths of the year amounted to Rs 40.6 billion, or 10.9% as compared to anincrease of 12.1% for the whole year envisaged in the Annual Credit Plan.Expansion in domestic credit at 15.7% during the period has already exceededthe planned annual expansion of 10.6%. This has, however, been partlycounterbalanced by substantial contractionary impact of foreign assets (net)of the banking system. Heavy borrowing by the Government from the banking

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system during the first six and a half months of 1991/92 was caused primarilyby: 1) a redemption of Rs 23.7 billion worth of Bearer National Fund Bonds(BNFBs) during the July-December 1991 period, of which an amount of only Re4.3 billion could be rolled over; and 2) repayment of short-term foreign loan.contracted in the wake of the Gulf crisis and suspension of aid from theUnited States. Besides, even though revenue collection during the first sixmonths of the year was much larger than in the corresponding period of lastyear, it fell short of the target and that combined with the overrun ingovernment expenditure led to a somewhat larger-than-anticipated fiscaldeficit, which in turn resulted in unanticipated borrowing. Credit to theprivate sector was more or less as programmed.

1.82 Government's Borrowing from the State Bank. Out of the total netborrowing of Re 59.4 billion for budgetary support, Rs 41.5 billion has comefrom the SBP. Keeping in view the intention of the Government to switch overfrom the direct method of monetary management used so far to an indirectmethod effective from July 1992, excess of high-powered money in the systeminjected through this borrowing could pose a threat to monetary stability infuture.

1.83 Change in the ComRosition of Monetary Assets, For the first time inlast six years, the ratio of currency in circulation to total monetary assetsdeclined over the first six and a half months of 1991/92 by about onepercentage point, giving the first indications of the reversal of the trend offinancial disintermediation. The ground lost by currency was appropriatedmainly by demand deposits, while the share of time deposits increased onlymarginally. Greater effort by banks to mobilize deposits after the transferof two public-owned commercial banks to private sector management andinduction of some new commercial banks in the private sector may partlyexplain the recent change in the composition of monetary assets. Large-scaleredemption of Government debt instruments like BNFBs and Khas DepositCertificates held by non-bank public, particularly the corporate sector, mayhave also resulted in the swelling of demand deposits, while these investorsare evaluating the new Government paper being auctioned since March 1991.

1.84 The Stock Market. The stock market, though limited in size, showedstrong growth (an increase of 41% in market capitalization) in 1990/91. Themarket experienced even greater upsurge during the first six and a half monthsof 1991/92, when the market capitalization of shares listed on the KarachiStock Exchange increased by 206%. The turnover of shares on the Karachi StockExchange also increased by 51% during 1990/91 compared to the preceding year(for details see Box 1).

1.85 Federal Shariat Court's Decision on Interest. Another importantdevelopment during the fiscal year 1991/92 is the declaration by the FederalShariat (Islamic) Court by which all laws pertaining to the payment or receiptof interest and mark-up have been declared as repugnant to Islam. The Courthas also ruled against the indexation of financial assets in times ofinflation because of the perceived implementational difficulties. The Courthas directed the federal and provincial governments to amend relevant laws tobring them in conformity with the injunctions of Islam by June 30, 1992. Theruling, if implemented, can have far reaching impact on the domestic financial

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sector and the foreign capital inflows. How-ver, three banks, including thetwo privatized recently, have filed appeals against the decision. Theadmission of these appeals for hearing has made the deadline for amending thelaws inoperative untill the final decision of the higher court. Also it hasgiven the Government some time to devise alternative modes of financialtransactions in the event of a rejection of these appeals.

1.86 Pricess The rate of inflation, which showed an upward trend throughout1990/91, stabilized during the first four months of 1991/92, and thendecelerated during the next three months of the year. Measured by an increasein the 12-month moving average of the CPI, the annual rate of inflation duringthe first four months of 1991/92 hovered around 12.72, the same as for thevhole of 1990/91. During the next four months, inflation decreased steadilyto 11.32 by end-January 1992. The comparison of the 3-month moving average,which captures more recent trends better, has shown a declining trend rightfrom the beginning of 1991/92. Calculated on the 3-month moving averagebasis, the annual rate of inflation declined steadily from 142 in May 1991 to8.2Z in January 1992.

1.87 One possible explanation of this recent deceleration in the rate ofinflation may be that the increase in the administered prices of petroleumproducts affected in November 1990 and those of gas, electricity, wheat flour,and railway fares in April 1991 may have fully worked their way through thesystem. Furthermore, decrease in monetary assets during the first quarter of1991/92 may be having its lagged effect on prices. Similarly, the continuingshift in the composition of monetary assets towards less liquid assets mayhave a dampening effect on spending. However, if the acceleration in thegrowth of money supply witnessed in the last three and a half months, isallowed to continue, prices are bound to come under pressure.

1.88 Balance of Payments During 1991/92. The strong performance of exportscontinued for the first four months (July-October) of the fiscal year 1991/92when exports grew at 21% in US dollar terms over the same period last year.However, the growth rate dropped down considerably from November 1991, and byJanuary 1992 (for the July-January period) has come down to 9.7% as comparedto the same period last year. This decline in the growth rate is mainlyattributed to the poor performance of cotton yarn, which faced lower pricesand a tougher competition in the international market.

1.89 Total imports, on the other hand, grew at a even higher rate of 23%during the same period. The strong increase in imports, during the first fewmonths of the fiscal year, wae mainly because of importers delaying clearancesto take advantage of the lower tariffs that apply in the new fiscal year.Nevertheless, a major portion of the increase in imports, during the lattermonths, resulted from a huge increase in import of machinery (which during theJuly-January period increased by about 70% as compared to the imports duringthe same period last year), reflecting various incentives for investment.Similarly, high increases were also observed in the import of wheat (43%),plastic materials (1262) and chemicals (2382) (other thani the medicinalproducts and insecticides).

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1.90 In September 1991, the export duty on raw cotton was raised from 802 to1002 of the difference between the benchmark price (pegged by the Governmentfor payment to exporters) and the minimum export price (which changes almostdaily, based on the world market price). These moves are designed todiscourage the export of raw cotton in order to encourage domestic processingby maintaining a low domestic price for cotton. This distorting policy notonly discourages farm production of cotton, it also creates a manufacturingbias toward lower value-added products, away from higher count yarn andmanufactured cloth and garments. However, due to a declining trend of rawcotton prices both in domestic and international markets in recent months,export duty on raw cotton has been lowered to 90% of the difference inNovember and to 60% in December 1991. To provide a similar relief to thetextile industry, the export duty on cotton yarn has also been reduced from Re6 to Rs 5 per kilogram. This lower tax on cotton exports, as well as lowercotton exports themselves, have reculted in lower export duty yields.

1.91 Workers' remittances have declined by 30% during the seven months of thecurrent fiscal year as compared to the same period last year. This sharpdecline is partly explained by large remittances from the Middle Easterncountries last year when there was a rush of transfers at the start of theGulf Crisis. Rules regarding foreign currency accounts (FCAs) have beenliberalized and residents, like non-residents before, can open and maintainsuch accounts, fed by workers' remittances among other sources. The declinein workers' remittances may partly be due to diversion of the remittances toFCAs, which have grown in the first half of the current fiscal year by aboutUS$ 474 million. If the current trend of the remittances is projected, on thebasis of experience of some previous years, the remittances for the fullfiscal year 1991/92 would be somewhere between US$ 1350 million to US$ 1450million, much lower than US$ 1848 million, the amount remitted in 1990/91 andUS$ 1942 million in 1989/90, and even lower than the level projected for1991/92 in this report, based on the longer term trends.

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Box # 1

Recent Chaes In the Stock Market

Pakistan has two stock exchanges, one in Karachi and the other one in Lahore, with the Karachi Stock Exchange beingthe older, more active and the targer of the two. In the past, these exchanges have played onLy a limited rote inmobilizing and altocating financial resources. The total amount of funds coimnitted in the Karachi Stock Exchange, asindiceted by the market capitalization of shares listed there, was only 31% of the outstanding investment In theNotionat Saving Schemes as of end-June 199.° The retarded growth of the equity market in the past has been due toclosed famity ownership and control of most of the firms listed on these exchanges, which has resulted in a lack ofinterest aong the general public in owning the equity of most of these firms. Five fewer shareholders held 50% or moreof the equity in 55 out of 93 spinning firms listed on the Karachi Stock Exchange on Septemxer 30, 1990. In the case offirms whose public issues get an overwhelming response from the pubtic because of their good track record in thedistribution of dividends, rigid and conservative ruLes for prIcIng the new issues have discouraged the pubtlic offer oftheir shares. The policy of keeping the interest rates low on bank advances has also encouraged firms to raise fundsthrough borrowing rather than through the issue of equity.

Although the role of the stock market ir. mobilizing funds has remained relatively small in the overall financialsector of Pakistan in the past, it has been growing faster than the overall economy in the past few years. AfterFebruary 1991. there has been an unprecedented expansion in the market. The State Bank General Index of Share Prices(1980/81100), which stood at 317 as on end-February 1991, rose sharply to 783 by January 15, 1992. Marketcapitalization of shares also increased by almost four times from Rs. 55 billion to Rs. 208 billion over this period--i.e., it rose by almost 150% in less than one year. There was a sharp correction in the following month, which causedshare prices to falt by more than 15%. Nevertheless, by the end of February 1992, shares were stilt more than doubte,and market capitalization samost triple their levels one year earlier. The volume of trading in the market more thandoubled with 617 mitlion shares changing hands during 1991 as compared to only 255 million scrips traded in thepreceding year. The boom in the market, however, is not fully reflected in the amount of funds mobilized through thefmrket during the year, which were only 36% more than in the last year.

The major factors contributing to the recent boom in the market were: 1) liberalization of regulations regardingboth domestic and foreign investment in general and those governing foreign investment in Pakistani stocks inparticutar, announced in February 1991; and 2) privatization of a number of public sector enterprises, including twocoowereial banks. At present, there are no restrictions on foreigners investing in listed shares and repatriation ofcapital and profit is freely allowed. As shares listed on the stock market in Pakistan were underpriced at the timeIwhen the tiberatization of exchange contols was announced, foreign investors responded very favorably to the opening upof the stock market to them. Foreign institutional funds amounting to about USS60 million were invested in the stockmarket. The injection of foreign funds produced a dramatic rise in share prices in a market where the supply of scripsIs severely restricted. Attracted by large capital gains, which have been exempted from any taxation for some years inthe past, domestic investors also seem to have entered the market. The collapse of cooperative finance companies and asharp decline in real estate prices in its aftermath also led to the flow of funds, previously tied up in these sectors,to the stock market. Besides, there seems to have been a circular upward movement, with each capital gain attractingmore buyers, resulting in further gains.

In addition to the recent policy measures favorable to the stock market, a number of positive steps had been takenearlier on. In the Federal budget for 1985/86, the rate of income tax for the listed companies was reduced from 50% to40% and all dividend income received by individual shareholders from listed companies was exempted from tax. Eventhough the exemption of dividend income from income tax was partially withdrawn in the 1989/90 budget and completetydiscontinued in the 1991/92 budget, it is still being taxed at the modest flat rate of 10%. Changes in the interestrate policy of the Government brought about since February 1990 also helped the stock market. Before February 1990, avery high and taxf ree return on Khas Deposit Certificates (KDCs) discouraged investment in shares. Since then the KDCshave been replaced by another instrument with a lower rate of return. As a result of the acceleration In the rate ofinflation to 13% during 1990/91, the real rate of return on most bonds came down to zero, which led to a shift offinancial savings from bonds to shares. Graduat liberalIzation of the rules regarding the pricing of new issues, whichhas occurred since 1986/87, may have atso encouraged more companies to resort to the stock market for ralisng funds.

The recent surge in the stock market will encourage entrepreneurs to raise funds through equity rather than throughborrowing from banks, which will be a healthy development. On the demand side, greater activity in the market providesgreater liquidity and encourages more people to invest their savings in the corporate sector. Eventualty, it could leadto a greater dispersal of the ownership of equity and weakening of family control of business enterprises. that In turncould lead to a greater scrutiny of the affairs of firms by comon shareholders, reduction in the corporate malpracticesand better altocation of resources. However, a dramatic rise in share prices In the absence of proper regulatoryframework in which the market is to function can also lead to problems and malpractices.

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II STRUCTURAL ADJUSTMENT FOR LONGER TERM GROWTH

A. Government's Vision of the Economy

2.01 The IJI Government that assumed office on November 6, 1990 hadpledged in its election manifesto an economic program that will ensure arapidly growing economy, with the private sector playing a leading role. Torealize this vision, it had committed itself to deregulate the economy inorder to enable the people to participate in country's development withoutunnecessary bureaucratic controls and hindrances. The sphere of the activityof the private sector was to be widened through privatization of major publicsector industries and financial institutions and by giving it access tocertain economic activities which had been reserved for the public sector inthe paost. With the reduction in its scope of activities, the public sectorcould then concentrate better on the provision of public goods and services,development of physical and social infrastructure and improvement of law andorder, which would serve as a catalyst for private investment. The overallobjective was "to accelerate the pace of economic development in order todouble the country's national income within this decade."

2.02 In a speech, the Minister of Finance said, "The basic thrust ofthe (GOP's) accelerated reforms is readily summarized as privatization,deregulation and unleashing the potential of the private sector to accelerateeconomic growth while maintaining macroeconomic stability and self-reliance.At the same time, intensified efforts are to be made for better public sectorperformance particularly for human resource and physical infrastructuredevelopment and environmental protection..... Our basic aim is to makePakistan a middle income developing country before the end of this century."'

2.03 Fulfilling this vision is a daunting task. The starting point isan economy that, despite its long history of rapid growth, has experiencedserious macroeconomic imbalances; is heavily protected from outsidecompetition by high tariff and non-tariff barriersl is overly regulated inareas of industrial investment, imports, foreign exchange transactions andpricing; has public ownership of not only all basic infrastructure but alsomuch of the manufacturing sector and a considerable portion of tradel has anoverly strained physical infrastructure that presented bottlenecks at everyturn; has an inadequate social infrastructure with the result that Pakistanwas left with some of the world's lowest social indicators; that has a fiscalsystem that was quite inelastic and inefficient in mobilizing publicresources; and has an inefficient and unresponsive financial system formobilizing and allocating private resources.

1 Address on "Structural Adjustment and Macroeconomic Policy Issues" atthe IMF/Administrative Staff College Seminar, Lahore, 26th October, 1991.

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2.04 The new Government set about to address this long agenda with aseries of structural measures that introduce fundamental reform in a number ofareas in the direction needed. The first part of this chapter describes thesereforms and comments on them. Nevertheless, there are several items on thisagenda that are not yet adequately addressed and require stronger policyreforms. These include industry, trade and financial sector policies;agricultural policiAs; the provision of physical infrastructure; and humanresource development. These are -discussed in the last part of the presentchapter.

B. Major Structural Reforms Introduced

2.05 Exchange and Payment Reforms. On February 7, 1991, the PrimeMinister announced reforms that essentially opened Pakistan's capital accountmuch more widely than befor-. This has allowed a much freer flow of privatecapital and has moved the rupee much closer to free convertibility. There isno restriction now on residents, non-residents, Pakistanis or foreigners tobring in, keep or take out of the country any amount of foreign exchange incaeh, traveller cheques or any other form. Export proceeds of both goods andservices still need to be converted to local currency in the domestic bankingsystem. Remittances and capital transactions are now unconstrained.

2.06 To facilitate freer foreign exchange transactions, the Governmentcreated (or considerably liberalized the use of) instruments to easily andlegally move foreign exchange in and out of the country. Pakistanis, bothresidents and non-residents, foreigners and even trusts and foundations canopen foreign currency accounts in domestic or foreign banks, at home orabroad. These accounts can be fed by cash, traveller cheques, proceeds fromforeign exchange bearer certificates and inward remittances, with no questionasked about the source. Funds from these accounts can be shifted abroad atthe owners' discretion, with no justification needed. Only export proceedscannot be used to feed these accounts. Individuals have been allowed toborrow domestic currency against these deposits as security. In addition tothe Foreign Exchange Bearer Certificates that existed since 1986, theGovernment has also introduced one-year Dollar Bearer Certificates. As thesecertificates are dollar-denominated, they are free of exchange risk. Giventhe lack of exchange controls on these instruments, they can be used readilyto exchange local for foreign currency at mutually agreed rates of exchangeand move in and out of the country easily.

2.07 Many previously existing regulations that blocked or seriouslyrestricted capital movements were lifted or eased. Foreign companies' accessto domestic credit and domestic companies' access to foreign credit has beenliberalized. Local as wel', as foreign companies have been given generalpermission to raise foreign currency loans. Foreigners and Pakistanis havenow been allowed to make investments on a repatriable basis, including sharesof existing firms, by purchasing them in the stock market against the paymentof foreign exchange. Remittance of Profits by branches of foreign companies

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already operating in Pakistan, except banks, insurance companies, foreignairlines, and foreign shipping companies, which are subject to specialprocedures, will be allowed without any prior approval from the State Bank.

2.08 These reforms have gone a long way in removing irksome constraintsin transacting business abroad, in removing distinctions between local andforeign firms engendering confidence in holding assets within Pakistan andstrengthening the acceptance of Pakistani currency abroad. At the time of theintroduction of the exchange reforms, fears were expressed that these wouldresult in the flight of capital out of the country and cause problems for thebalance of payments. A sharp depreciation in the value of the rupee comparedto other currencies was also expected. The possibility of capital flightexisted even before in the form of foreign exchange bearer certificates. Infact, these exchange reforms helped in relieving pressure on the balance ofpayments which developed in the wake of the Gulf crisis last year. Foreigncurrency deposits increased by US$ 476 million in 1990/91 compared to US$ 266million in 1989/90. Moreover, now the Pakistani rupee can easily be convertedinto other currencies at many major financial centers of the world. There wasno abrupt or drastic fall in the value of the rupee; the steady depreciation,as expected, continued.

2.09 Even more reforms, including removing remaining anomalies stemmingfrom now obsolete regulations, such as the need to obtain an export permit,are needed to carry through the opening of the capital account. Eventually,the rupees can be made fully convertible, meaning the ability and willingnessof the banking system to transact any amount of currency conversion for anyreason on demand.

2.10 Industrial Policy and Investment. Far reaching incentives forindustry were announced by the Prime Minister on December 7, 1990. Some weresignificant steps in the right direction, others were backward steps thatintroduced further distortions. The new policies included the elimination ofsanctioning (i.e. industrial licensing), new tax holidays, duty concessions onimport of machinery, equal treatment of domestic and foreign investment andeasing of credit restrictions. Some export-oriented industries were, inaddition, beneficiaries of tax incentives announced separately for increasingexports. Some tax concessions on import of raw material for industries in theCadoon Amazai Industrial Estate were withdrawn. The Pakistan Steel Mill wasgiven mor'e freedom in setting prices of its products.

2.11 In order to simplify and deregulate the industrialization process,the Government has abolished the sanctioning restrictions from all industriesexcept those on the specified list--arms and ammunition; security printing,currency and mint; high explosives and radio active substances. A three yeartax holidas has been granted for the industries to be set up between December1, 1990 and June 30, 1995 in any part of the country. For industries set upin the rural areas and specified backward areas, the tax holiday periodincreases to 5 years and 8 years respectively. Total exemption from thepayment of customs duties and import surcharge on the import of machinery hasbeen extended to the industries set up in the rural areas and various othertaxes have been reduced. Access to credit has been eased. The nationalized

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commercial banks (NCBs) have been instructed to allow higher debt equityratios for all projects involving imported machinery, up to 70:30 (from60:40), while for projects involving locally manufactured machinery this ratiois allowed up to 80:20.

2.12 The tariff exemptions on imported raw material and components thathad been available to investors in the Gadoon Amazai Industrial Estate(Gadoon) in NWFP were withdrawn in May 1991. These concessions were resultingin a big loss of Government revenues on account of foregone custom duties andother taxes. These tariff exemptions, designed to wean poppy growers fromthat crop, had made operating in this area very profitable and had raisedstrong objections from other industrialists in Pakistan who did not enjoy suchextraordinary benefits. Locating in the Gadoon area still carries incentivesof 50% tariff concession on electricity consumption and financing at aconcessionary rate of 3%, unmatched in any other part of the country.

2.13 Eliminating investment controls and easing access to domesticcredit are great strides forward; but introducing yet more tax concessionsfurther distorts the structure of domestic investment and production anderodes the tax base. Removing investment licensing is a necessary step towardintroducing more competition in the domestic market, which in turn isnecessary to the development of greater efficiency and low cost production.Removing restrictions on both foreign and domestic firms' access to credit isquite helpful in overcoming the private credit constraint that pervades theeconomy. Although tax holidays and exemptions for investors are quite commonin other countries, it is also quite common to find that the effect of theseconcessions is the opposite of what governments who introduce them want--shallow, capital-intensive, import-intensive, low value-added investment of adistorting and inefficient kind. The concessions also further weaken the taxsystem, which wide experience suggests is best left as neutral as possible todifferent forms of investment and production.

2.14 Foreign Trade Reform. Foreign trade policy was an area where theGovernment continued the somewhat tentative reforms to which it had committeditself earlier, withoiit embarking on the sweeping trade reform needed to bringabout the long-run efficiency gains needed to fulfill its vision. The stepstaken were, for the most part, in the right direction; yet it left the tradesystem still overly protected, complicated and distorted.

2.15 Foreign companies were permitted to undertake export trade as ofFebruary 1991. On the recommendations of the Committee for IncreasingExports, some promotional measures for exports were announced on April 22,1991, including streamlining of the Duty Drawback Scheme and reductions in thenegative and restricted lists. In the Federal Budget for 1991/92, the maximumimport duty was reduced from 952 to 90%.

2.16 The requirement of obtaining an import license for "freelylmportables", items not on the Negative and Restricted lists, has beenabolished with effect from March 1, 1991. All authorized dealers in foreignexchange have been allowed to open letters of credit for imports and collectthe 6X prescribed fee. This is an important measure to liberalize imports.

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2.17 Non-tariff barriers have been reduced over the recent past to lowlevels and further progress was made in the past year. Over the past fiveyears, 482 items or groups of items were removed from the negative list. Ofthe remaining 118 groups on the negative list, 31 are candidates for removal,the remaining being justified on the basis of accepted criteria (e.g.,religious, health or national security grounds). Of these candidates, 14 havebeen removed by the 1991/92 Import Policy, and 9 were removed in October 1991,leaving 8 for subsequent removal. During the past five years, 128 items orgroups have been removed from the restricted list, leaving 61 groups at theend of 1990/91. In the new Trade Policy, all the 11 groups restricted bysource of import have been removed. Moreover, the private sector has beenallowed to import 6 items which previously could be imported only by thepublic sector.

2.18 There was a minor streamlining of the Duty Drawback Scheme. TheCentral Board of Revenue will endeavour to expedite procedures and notifychanges in the duty drawback rates within one month of changes in theimport/excise duties. Decisions on the fresh applications for fixation ofduty drawback rates will be finalized within a period of three months.

2.19 Procedures governing the import of machinery have beenliberalized. Importers using their own sources of foreign exchange can importwithout ceilings, as can importers with foreign exchange provided by loans andcredits. In addition, importers of machinery seeking to purchase foreignexchange from the State Bank of Pakistan for domestic currency (cash) areautomatically provided with foreign exchange up to a ceiling, which has beenincreased by 25Z in rupee terms for 1991/92.

2.20 Pakistan is still left with a complicated, overly protective, andinefficient trade regime. The maximum tariff is quite high--90%, not countingalcohol and luxury automobiles which have prohibitive tariffs. Given thetailor-made, special interest nature of the tariff system, with high tariffsfor some protected goods, low tariffs for certain raw materials imports, bansfor some products, tariff exemptions for others, the rat6s of effectiveprotection vary enormously and foster rent-seeking activity rather thanefficiency in production. The proliferation of import taxes--custom duties,import surcharge, Iqra (education cess) surcharge, import license fee andsales tax on imports only--complicates the administration of the system and,when combined with tax concessions and duty exemptions, make it highlydiscretionary and open to abuse. Export taxes on raw cotton and cotton yarndistort production incentives toward lower value-added textile manufacturingat the expense of greater export and employment in upstream textilemanufacturing.

2.21 Privatization of Public Enterprises. The Government that tookoffice on November 6, 1990 was publicly committed to privatizing the publicenterprises that had been acquired by the state through nationalization in theearly 1970s and those that had started since. The Prime Minister constituteda Deregulation and Disinvestment Committee on November 13, 1990 to advise theGovernment, among other things, on the disinvestment of public sector

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enterprises. Subsequently, a Privatization Commission was formed on January22, 1991 to assist in implementing its privatization policy. Almost allpublic sector industrial units '115) are to be privatized. In addition, thetelecommunications entity and 45 other public enterprises not regarded as"industrial" units (e.g., rice mills, cotton ginning, etc.) will be privatizedby the Commission as well. Public entities in steel, power, railways andcertain strategic companies have not yet been targeted.

2.22 To safeguard the welfare of the emglovees of the publicenterprises to be privatized, the Prime Minister set up a ministerialcommittee headed by the Federal Labor Minister to work out a relief packagefor the employees through negotiations with their representatives. Afterprolonged negotiations between the ministerial committee and therepresentatives of the employees, an agreement on the relief package waseoncluded on October 15, 1991.

2.23 The agreement contains three packages. Under package A, foremployees continuing in their units after privatization, the employees wouldbe offered 101 share of the unit at a mutually agreed rate. Moreover, theservices of the employee cannot be terminated for 12 months afterprivatization of the unit. For employees whose services are terminated after12 months, the Government will give them priority for overseas vacancies,will provide them training in new professions and trades and credit on easyterms facilitating their self employment. As long as employees remainjobless, they will be entitled to an unemployment benefit at the rate of Rs1000 per month for a maximum period of two years. Under package B, foremployees opting for a golden hand-shake, an employee will get 5 months oflast-drawn basic salary for each year of service. Under package C, employeesbuy-out, employees will be given concessions through negotiations if they aredeclared successful bidders. The employees can use their gratuity andprovident funds, subject to Government rules, for the purchase of their units.

2.24 The labor accord was crucial to creating the proper environmentfor the successful sale of public enterprises; yet further improvements can bemade. Without the labor accord, it is unlikely that the October auction wouldhave attracted much interest, because of the previous uncertainty surroundingthe residual obligations of the new owners. Nevertheless, the main elementsof the accord are income support during the transitory period and not enoughemphasis on dynamic labor measures to reduce frictional and structuralunemployment over time. The accord does contain at least some elements oftraining, credit to entrepreneurs and help in job search. These should bestrengthened and broadened.

2.25 The Privatization Commission began advertising some units for salein February 1991 and continued to advertise other units in batches of varioussizes in the Spring. By the end of the Summer, only two sales had takenplace--the controlling interests in the Muslim Commercial Bank and AlliedBank. By late Summer, the Government instructed the Privatization Commission(PC) to advertize all units for sale through an auction.

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2.26 The PC had advertized around 100 units starting in September foropening bids on October 17, 1991. It did receive bids for 89 of the 100 unitsand sold 22 units by March 1992. The PC also decided to enter intonegotiations with the bidders for the other units in efforts to improve thebids to the point they could be accepted.

2.27 Now that the first phase of the privatization process is passed,the Government needs to take stock and decide how to proceed further. Thesale of 22 or so firms in less than one year after the initial s ep is aconsiderable achievement. The Government has gained much market informationfrom the various bids received and from the process itself. It now needs aplan to dispose of the remaining entities. This plan should contain elementsto sell those units which have received promising bids to one or another ofthe bidders. Those firms which have received no bids, which are likely to bethe same firms whose accounts show a negative net worth, should be liquidated.The plan should contain improvements in the sale process to avoid pitfallsrevealed so far. The future sale should be accompanied with clear statementsabout the changing nature of the regulatory environment in which the newlyprivatized firms will operate. Finally some inescapable legal issues shouldbe addressed.

2.28 If the Government is able to consummate the sale of 22 of the 89firms that received bids, it should be possible to sell most of the remaining67 firms RS going concerns to one or another of the bidders. To do this theGovernment may have to remove the reserve price and simply sell to the highestbidder.

2.29 Those entities remaining unsold after removing the reserve priceand those which never received any bids are candidates for liquidation.Almost one-fourth of the companies on the sale list are technically bankrupt,in the sense their book assets are less than their book liabilities. Thesecompanies will either have to be financially restructured or liquidated,meaning the sale of assets, without expecting the company would continue inbusiness. The Commission needs to identify which units to liquidate anddevelop plans for their orderly closure. If any firms are to be salvagedthrough financial restructuring, these should be identified, restructured andthen re-auctioned.

2.30 To improve the efficiency of the sale, and to ensure the bids arefrom bona fide buyers, the Government should strengthen the down-paymentrequired from the successful bidder at an auction. Previously, no immediatedown-payment was required from the high bidders at the time of the auction;these bidders were given a period in which to assemble the money and theGovernment recently decided to offer a two-year bridge loan for 602 of theagreed price. There is the danger in this system that the buyer couldmanipulate his finances such that he puts little or no real equity into thefirm he is buying. This would result in extremely high leverage and lack ofreal interest on the part of the new buyer, with the attendant dangers ofrapid bankruptcy. To avoid this problem, the Commission should ensure thatthe down-payment represents real equity and that sound letters of credit are

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available for the refinancing of the Government's bridge financing. Ofcourse, ensuring the bidding process is open and above-board, and is seen assuch, so that each step is completely transparent, is important in encouragingbidders and in maintaining the integrity of the process.

2.31 The auctions have proceeded without clear statements as to thefuture incentive environment in which the firms will operate. In particular,the future levels of protection from foreign competition and the levels ofinput subsidies (such as natural gas) were not made clear to the buyers. Toavoid future litigation, the Government should clearly inform potentialbidders that the environment in which these firms operate may well change inthe future in ways that are not yet clear. Better than this would be a clearcompetition policy announcement, clarifying that the Government's intention isto reduce protection to low and uniform levels and to remove input subsidiesaltogether.

2.32 The Government is aware that the legal status of the units forsale must be clear. New buyers need to know the status of property rights ofprevious owners, the disposition of liabilities and where land disputes exist.Selling units before some legal problems are solved often requires much moretrouble in resolving post-sale problems.

2.33 The Government has committed itself to the sale of allnationalized commercial banks and has actually handed over the management oftwo of them. It decided to retain in the public sector the National Bank ofPakistan, which was always a public sector commercial bank. It has allowedfor the first time in several decades the establishment of new privatecommercial banks and has allowed also new investment banks to open. The Banks(Nationalization) Act, 1974 was amended to enable the Federal Government tosell the nationalized commercial banks. The management of the MuslimCommercial Bank (MCB) was transferred in April 1991 to its new private sectorowners, who purchased its 26% shares. Within six months (i.e. by October,1991) of the change in the management, 25% of the shares were to be offered tothe public with underwriting from MCB's new management at the price paid forthe 26% shares. This has been done in February 1992. The Government intendedto sell the remaining 49% shares within the next two years. The first 26% ofthe shares of Allied Bank Limited (ABL) were offered to the Allied ManagementGroup (AMG), formed by 7,325 employees of the Bank, after negotiating the saleprice at Rs 70 per share. On August 11, 1991, the Prime Minister handed overthe formal letter of acceptance for the sale of 26% of the shares of the Bankto the Chairman of AMG. At the same time, the Prime Minister announced agrant of Rs 50 million to the AMG, which reduces the effective share price toRs 63 for 26% of the shares sold to the group. Within one month of sale of26% of shares to AMG, another 8% of the Bank's equity was to be offered toNational Investment Trust and 6% to the general public at Re 70 per share.This has not occurred yet. Another 25% of the shares are to be offered to thegeneral public within one year with ANG being the underwriter.

2.34 The sale of the remaining two publicly-owned nationalizedcommercial banks--Habib Bank and United Bank--were advertized with November30, 1991 as the last date for receiving the bids. None of these bids were

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found to responsive and no sale took place. Nevertheless, the Governmentremains committed to sell these banks. The GOP wants to sell its developmentfinance institutions (DPIs) and the sale of the two DFIs, namely IndustrialDevelopment Bank of Pakistan (IDBP) and the National Development FinanceCorporation (NDFC), was advertized with the same last date for receiving thebids as for the commercial banks, with the same non-responsive result.

2.35 Under the directive of the Prime Minister, a "Privatization Fund"has been established in the State Bank of Pakistan into which the saleproceeds of privatized manufacturing enterprises will go. Proceeds of thesale of the nationalized commercial banks (NCBs) and the DFIs will go to theinstitutions which own them--i.e., the State Bank of Pakistan for the NCBs anda variety of agencies for the DFIs. These proceeds will remain outside theconsolidated budget account and will not be utilized to finance the budgetdeficit. The Privatization Fund is to be administered by the Prime Ministerhimself and the uses of this fund include one portion to assist theprivatization process itself, such as the rehabilitation of workers displacedas a result of privatization. The remaining fund would be used for debtreduction; and for development works like establishment of schools andhospitals. The Privatization Commission will administer the funds set asidefor rehabilitation of displaced workers. The use of this fund must bemonitored closely to ensure it does not create macroeconomic or structuralproblems. Its uses to finance the privatization process itself and to reducedebt are not likely to create problems. The remainder to be spent fordevelopment should be consistent with the priorities of the public expenditureprogram.

2.36 PreRaration of a Social Action Pro&ram. An important element ofthe Government's election manifesto was an improvement in the livingconditions of its population. With the encouragement of the PakistanConsortium, the Government undertook to prepare a Social Action Program (SAP),with the objective to improve the provision of basic social services(education, health, family planning and water supply/sanitation) through: a)implementation of priority actions; b) a medium-term program aiming atimproved expenditure programing, resource mobilization, increased efficiencyand private sector involvement; and c) decentralization/communityparticipation. The Government constituted a SAP Steering Committee, thatincluded senior federal and provincial government officials, as well asprominent representatives of non-governmental organizations. The Governmentprovided this committee with a high-quality secretariat. This effort hasattracted the assistance of several external agencies, including the WorldBank, UNDP and bilateral aid agencies. It has met regularly under thechairmanship of the Secretary of Planning and has formulated a program ofwork. This program will culminate in its first stage in a Social Action Planin early 1992.

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C. A Continuing Agenda of Structural Measures Needed

2.37 Starting in November 1990, the Government began to pursue itseconomic vision for the country and in the process revitalized its structuraladjustment program, making it considerably broader and deeper than before. Itundertook the fundamental and, in some cases, sweeping reforms going beyondthe original program described above. These reforms were substantial steps inthe right direction and will go a long way in laying the foundation for thekind of economic growth and development needed to fulfill the Government'svision.

2.38 As significant and necessary as these reforms were, it should berecognized that they are not sufficient in themselves to bring about theeconomic conditions the Government seeks. To these measures must be addedothers to build on the solid foundation already laid. The Government hasbegun the daunting task of freeing private investors from irksome foreignexchange, import and credit controls; unfair and inefficient competition frompublic enterprises; and a meddlesome and sometimes corrupt tax collection.Nevertheless, providing for the rapid growth of investment, production andexports requires more than these conditions.

2.39 Structural Adjustment Program. 1991/92-1993/94. The Governmentcommitted itself anew to a three year macroeconomic and structural adjustmentprogram for the period 1991/92-1993/94, which it explained to external donorsin its Policy Framework Paper circulated to the members of the World Bank andIMF in December 1991. The program includes medium-term commitments of theGovernment to:

a) establish and maintain a stable macroeconomic environment,including GDP growth of over 6% per annum, a budget deficit below5% of GDP, a current account deficit of no more than 2.5% of GDP,inflation falling to 6% per annum and a steady rise in foreignexchange reserves to at least six weeks of imports by the end of1993/94;

b) mobilize more resources for development and at the same time,improve the structure of taxation, by extending the base of bothdirect and indirect taxes, making it more oquitable and elastic,by taking structural measures to increase receipts of income andwealth taxes and general sales and federal excise taxes, as aproportion of GDP; take structural measures in external tradetaxes, not to increase yields but to decrease the level andvariation of protection t, improve efficiency in domesticproduction; shift the proportion of tax revenues frominternational to domestic sources;

c) enhance the developmental impact of expenditures while restrainingtheir growth, the Government intends to bring about a fundamental

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contraction in the role of government in the economy, restrain thegrowth of defense expenditure, reduce subsidies and more carefullymonitor expenditures in all areas; these efforts should then payoff in making a higher proportion of resources available to publicdevelopment expenditures, which would be more focused oninescapable public responsibilities, most importantly on highpriority physical and social infrastructure;

d) continue and deepen the reform of the financial sector, whilemaintaining monetary and price stability; this needs moreeffective management of the auctions system for government debt,of the supervisory functions of the State Bank of Pakistan, theprogram to pr!vatize the nationalized commercial banks and theestablishment of new private sector banks;

e) enhance domestic competitiveness and facilitate the expansion ofexports by strengthening the on-going trade reform program; thisinvolves converting the remaining non-tariff barriers to tariffs;reducing maximum and raising minimum tariffs, while incorporatinginto the customs duty the various ad hoc import taxes; andremoving the various exemptions and concessions from customsduties;

f) strengthen government efforts in human resource development byformulating a Social Action Program (SAP), focusing on increasingthe share of spending on the social sectors, improve targetingwithin the sectors and clarifying the roles of the federal andprovincial governments, as well as the private sector, localcommunities and non-governmental organizations, in the provisionof social services;

g) embark on a program of strengthening social ond physicalinfrastructure in the education, health, water supply, energy,transport, communications, agricultural and industrial sectors;in all of these sectors, given the resource limitations ofgovernments, cost recovery and delegation to local communities,non-governmental organizations and to the private sectors, need tobe pursued;

h) address environmental problems through the newly appointedMinister of Environmental Affairs and the newly establishedEnvironmental/Protection Agency; the list of issues to be facedare long and problematic: soil erosion and flooding; salinity andwaterlogging; air, water and marine pollution; sewerage anddrainage in urban areas; and excessive use of pesticides in ruralareas; and

i) minimize the burden of this structural adjustment program on thevulnerable groups in society; in addition to the elements in theprogram designed to improve the lot of the poorest (e.g., theimproved targeting of social services), the Government will pursue

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alleviation of the burden on the most vulnerable through the Bait-ul-Mal program, an extra-budgetary welfare fund financed byearmarked taxes.

2.40 Industrial and Trade Policy. The many and varied industrialinvestment incentives and trade policy improvements, along with the wiseexchange rate policy introduced in the recent past, have been reviewed aboveand will not be repeated once again here. Nevertheless, Pakistan's structureof domestic production remains on the whole a high-cost, inward-oriented,internationally uncompetitive one. Some improvement is to be expected basedon measures recently irt--.ced. Yet fundamental changes in efficiency andcompetitiveness requi,e more fundamental changes in industrial and tradepolicies.

2.41 Pakistan has made great progress in removing non-tariff barriersto trade (although some minor further progress is needed). However, thetariff system is still highly protective of domestic industry and creates aserious anti-export bias to domestic production. Import tariffs, which rangefrom 0% to 113. (including exemptions at the low end and surcharges at thehigh end, not counting those for alcohol and luxury vehicles which range up to450%) are still quite high and, more worrisome, highly varied. The system ofhigh tariffs for finished goods, and low or zero tariffs for inputs into thesegoods, creates high incentives to produce for the protected domestic marketand also creates the high-cost that bars much of this production fromcompeting successfully in the international market. A progressive reductionof the average level and range of tariffs, by reducing the maximum andestablishing a minimum, while eliminating special interest exemptions, is animportant, even crucial, step toward opening the economy to internationalcompetition. This will provide it the benefits of international markets thatare needed for the growth of exports that are envisaged.

2.42 Although export taxation is relatively limited, the exception is amajor one. The Government has been taxing the export of raw cotton, and at alesser rate, cotton yarn, in pursuit of a cheap cottor. and low-cost cottonyarn policy. This policy along with conditions in the international markets,has been quite successful in stimulating low-value added, cotton basedexports--mainly of yarn but also of some made-up goods. Pakistan has acomparative advantage in cotton production and cotton processing across a muchwider range of value-added products than encouraged by this policy. Thispolicy also reduces the incentive for Pakistani farmers to grow cotton. TheGovernment should review its cheap cotton policy and analyze its potential toimprove productivity by higher-valued uses of cotton.

2.43 To encourage transfer of technology and promotion of domesticengineering industries, the Government has a domestic content, or "deletionpolicy". Under this policy, firms undertake to produce domestically, orarrange production of, specified parts or components within a given period.If firms agree, they receive tariff concessions on the import of parts andcomponents. The effect of this policy is to magnify the protection that isalready high in the tariff system for the "deleted" parts, adding to the

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already very high cost of production of these parts and end products. TheGovernment should review this with an eye to delete this "deletion policy"from its industrial incentives.

2.44 As long as there is a highly protective and distorting importtariff regime, an effective duty drawback scheme for exports is crucial todeveloping internationally competitive domestic production. Some minorstreamlining of Pakistan's Duty Drawback Scheme was introduced in April 1991,when other export promotion measures were announced. Still exporters complainof procedural delays and some observers feel the system is still not workingwell enough. The Government should review this again to ensure that it has aneffectively functioning duty drawback system to at least partially protectexports from the high costs of the current tariff system.

2.45 The present Government has added considerably to the alreadyexisting income and import tax holidays, exemptions and concessions. Thesehave been introduced to favor specific industries and locales. Othercountries have found that these sort of incentives usually foster inefficientproduction, often do not achieve the objectives originally sought andneedlessly complicate and weaken the fiscal system. The Government shouldreview this set of measures with an eye to simplifying and ultimatelyeliminating these special interest incentives.

2.46 Financial Sector Adiustment. The Government has committed itselfto a thorough-going reform of Pakistan's financial sector aimed at allocatingcredit in response to market signals, improving the health and efficiency ofthe banking system and establishing a more efficient system to issuegovernment debt. The main objectives of the reform program are to reducesegmentation of financial markets and develop capital markets by introducing asystem of auctioning government debt, raising concessional rates of interestand limiting directed credit schemes. The Government is also strengtheningthe health of the banking system and increasing competition by recapitalizingand privatizing the nationalized commercial banks, improving prudentialregulations and bank supervision and allowing private domestic banks to enterthe market. The substantial progress made in fulfilling this commitment, andindeed going beyond its original commitment, has been discussed above.

2.47 Yet the creation of a private, dynamic, effective financial sectoris still incomplete in the following major policy areass (i) domestic debtand monetary management; (ii) directed credit and concessional interest rateschemes; (iii) regulation and supervision of banks and non-bank financialinstitutions; (iv) strengthening of the State Bank of Pakistan (SBP); (vi) theprivatization of the banking system, and (vii) regulation of capital markets.

2.48 The next stage of reform should involve the development ofsecondary markets and appropriate institutional arrangements to integrate debtmanaaement and effective and indirect monetary control (in lieu of creditceilings). This stage would include the introduction of monetary programming,open market operations, instruments to manage bank liquidity and a newdiscount facility, and the eventual elimination of credit ceilings. These

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measures will further reduce segmentation in the financial markets and promotecapital market develoainent.

2.49 The next stage also will require movement toward market-basedsetting of lending rates, through the phasing out of directed credtt schemesand concessional interest rate schemes. As long as concessional interestrates exist, their implicit subsidies will have to be reflected in the budget.The Government also should limit further the SBP's credit lines to specializedfinancial institutions to encourage them to mobilize their own resources forlending.

2.50 Pakistan will need a rezulatory framework that would provide alevel playing field for all financial institutions and that ia appropriate fora private financial system. In late 1990, the Government started theprivatization of the Nationalized Commercial Banks (NCBs) and the induction ofnew private banks. Private nonbank financial institutions has also grownrapidly in the past few years. Experiences of many countries show thatprivate financial systems require appropriate regulation to contain abuses oncredit operations, provide a neutral tax treatment across institutions, andimplement a clear policy on deposit insurance. These will require: (i) theupgrading of capital adequacy requirements to internationally acceptedstandards, policies on loan concentration and other areas of creditoperations, and entry requirements; (ii) improvement of accounting andauditing standards and procedures (to internationally accepted standards) anddisclosure requirements, which will improve the transparency of the operationsof financial institutions; and (iii) the extension of prudential regulationsto development financial institutions. Also needed ares the design andorganization of a mechanism for resolving bank failures (with or withoutdeposit insurance); and measures to strengthen SBP's capability to supervisefinancial institutions, banks and non-banks.

2.51 Attention needs to be given to the overall strenxthening of theLBP, in addition to its supervisory capacity. As mentioned, SBP willadminister a new system of debt management for the government, implementindirect monetary policy as well as oversee a private financial sector. Withthese tasks, it should exert tremendous influence on Pakistan's economicpolicy, as central banks in many countries do. SPB's capability to carry outits functions may be enhanced only if it is able to pursue monetary andregulatory policies and manage its institution independently. Pakistan ismoving toward a more independent SBP as the Government stops relying on theSBP and the banking system to finance its deficit. In addition, appropriatemeasures have still to be taken, such as removing practices that will conflictwith SBP's role as regulator and that are fiscal ones, e.g. assuming foreignexchange risks. SBP also needs to be developed as an institution, and thisentails organizational and personnel policy changes.

2.52 Despite progress made, there is still need to pursue theDrivatization of NCBs and the induction of a nrivate banking system inPakistan. In April and September 1991, the controlling shares of MuslimCommercial Bank and Allied Bank, respectively, have been transferred toprivate management. The Government expects to privatize two other NCBs soon.

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Meanwhile, the SBP has authorized the entry of 10 new private banks, althoughthe issue of the transparency of the entry requirements prevails.

2.53 Pakistan needs a more appropriate legal, tax, and regulatoryframework governing private security and equity issues in Pakistan. Existingregulations have impaired the development of capital markets. For example,pricing of issues is administered, conversion to public status is forced forlarge companies, a few institutions are given privileged positions in themarket, and auditing and reporting standards are poor.

2.54 The Agricultural Sector. The performance of the agriculturesector in Pakistan over the last decade has been quite impressive, though attimes uneven. The healthy growth of the agriculture sector has mainly beenresponsible for the nominal increase in food prices despite demand pressuresfrom a rapidly growing population and income. Similarly, the buoyant growthof the industrial and export sectors has, at least partly, been because of thestrong growth in cotton, which made possible the provision of raw material tothe industrial sector at below world market prices, and sufficient exportablesurpluses to maintain their significant share of primary commodities in totalexports.

2.55 Due to its central role in income and employment generation, foodavailability and exports, strong growth of the agriculture sector is essentialto meet the Government's policy targets of rapid and sustained growth of theeconomy, industrialization and poverty reduction. A rapidly growing andindustrializing economy needs a reliable, low-cost source of wage goods forits labor force. In a low-income country like Pakistan, most of these wagegoods inevitably must come from domestic agricultural production. Given thecomposition of the manufacturing sector investments, the reliance on agro-based industries will remain in the medium-run. A vibrant agriculturalsector, therefore, is a pre-requisite for achieving the level of growthtargeted for the manufacturing sector.

2.56 The ambitious export targets of the Government can only be met bya strong performance from the agriculture sector, at least in the short andmedium-term. Primary commodities are expected to maintain a significant sharein exports. Also the increase in high value-added exports is expected to comefrom the spinning and/or the weaving sectors, which will require an increasedsupply of quality cotton at relatively low prices.

2.57 The agriculture sector has, of late, been operating close to itslimits as far as quality land and water resources are concerned. Anysignificant improvement in the performance of the (crop) agricultural sectorcan only be achieved by increasing the farming intensity and by increasing theoverall productivity of the sector. The implied increase in crop yields canonly be achieved by a substantial increase in the use of modern inputs.Similarly, increased farming intensity, which is constrained by waterscarcity, can only be increased by a more efficient use of scarce surface andground water resources.

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2.58 The agricultural revolution of the 1970s still needs to becompleted and consolidated in Pakistan. Use of fertilizer registered aphenomenal increase (approaching 100 kg per hectare) over the last twodecades. However, this still falls well short of the optimal levels (100-150Kg. per hectare). The recent tapering off in the use of fertilizer has beendue more to supply constraints and scarcity of water than to the priceincreases. The use of improved seeds has been limited. Publicly produced andcertified seeds meet only 15Z of seed requirements. Use of poor qualityseeds, which is caused by limited supply and farmers' unawareness of theirbenefits, has been one of the major reasons for low crop productivity.Increased supply of all modern inputs (all types of fertilizer and improvedvarieties of seeds) is a necessary, albeit not sufficient, condition forincreasing agricultural productivity. Efforts also have to be made toincrease the presently extremely thin coverage of extension services.

2.59 As any significant increase in surface water irrigation is notpossible, the solution to water scarcity lies in more efficient use of theexisting water resources. Structural weaknesses and physical constraintsreduce the overall efficiency of the irrigation system. These constraintsinclude long farm channels, necessitated by fragmentation of holdings; lossesfrom water courses due to leakages, spillage, weeds and grass; overuse ofirrigation channels, which have to be used beyond their designed capacity; andsiltation of the major dams and reservoirs.

2.60 The efficiency of the irrigation system is further eroded by theheavy reliance on surface irrigation because of its inability to respond todemand flexibly. Further, due to poor water management, inefficientirrigation and lack of drainage facilities; the canal based irrigation systemhas resulted in service problems of water logging and salinity." Althoughthe use of groundwater irrigation has been increasing at a much faster ratethan that of surface water, the poor quality of ground water makes itnecessary to strike an optimal balance between the use of surface and groundwater modes of irrigation.

2.61 The Indus Water Apportionment Accord is a step in the rightdirection, but more needs to be done in terms of increasing the irrigationefficiency. The groundwater table has to be controlled by improving theallocation of water, checking the seepage and providing appropriate drainagefacilities. The physical decay of the irrigation facility demands asignificant increase in operations and maintenance (O&M) expenditure in thissector. An appropriate revision of water charges would not only produce amore efficient use of surface water resources but would also generateadditional revenues for the irrigation departments which could help in makingthe required O&M expenditures.

2.62 Attention also has to be paid to the non-crop agriculture, notonly because this sub-sector (especially livestock) has recently been more

-About 25Z of the irrigated land is saline, of which 60% is not fit forcultivation.

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buoyant (than the crop sub-sector) and now commands a significant share in theoverall agricultural value added, but also that the demand for the product ofthis sub-sector is expected to grow even faster than increases in income. Theproductivity of this sub-sector could be greatly increased by increasing foodsupplies through better fodder crops and improved pasture.

2.63 Over the past several years the Government pursued a structuralreform program in agriculture to promote competitiveness and enhanceproductivity and growth. Its reform program was designed to mobilize domesticresources by cost recovery and subsidy reductions; rationalize the investmentprogram in the agricultural and water sectors; and introduce institutionalimprovements. Under this program, the Government began to phase out subsidiesfor phosphate and potash fertilizers, having already left the price ofnitrogenous fertilizers to be set by the market. It began the privatizationof public tubewells in fresh groundwater areas and moved towards full recoveryof irrigation operation and maintenance costs. It also took steps to improveplanning and formulate a core investment program in the agriculture and watersectors and strengthen institutions that deal with agricultural pricing, riceand cotton export, and water sector investments.

2.64 There is much left to accomplish in this reform program. Althoughthe prices of phosphate and potash fertilizers have been raised, a substantialsubsidy still remains. The privatization of tubewells, while off to a healthystart, still has a long way to go. The 1991/92 development plan reducedexpenditures on irrigation in a drastic way and these need to be restored.The Agricultural Prices Commission, the Rice Export Corporation, the CottonExport Corporation (CEC) and the institutions involved in water planning needcontinual strengthening to do their jobs better.

2.65 The structure of agricultural pricing needs to be improved tostrengthen the competitiveness and export orientation of Pakistan'sagriculture. The export tax on cotton has ranged between 40% to 50% in manyyears of the past decade, although in the latest period it has fallen belowthese levels. Pakistan's natural advantages and improvements in cottonresearch have led to increased yields and production of cotton, despite thispricing policy. Cotton has been the base of much of Pakistan's export boom,because of Pakistan's comparative advantage. This could be further exploitedif farmers were given the incentive to produce more cotton by giving farmers ahigher proportion of the world market price and hence raise farmgate prices.The same level of taxation that applies to cotton applies to Basmati riceproduction. In this case, Pakistan clearly has an influence over the worldmarket price and some taxation is in its own interests. The same pricingsituation as for cotton prevails in wheat pricing. The (implicit) tax islower--10Z-30% over the past decade--but the idea is the same. The net tax,after considering the subsidy in the pesticide, phosphate and potash prices,is a bit less than when considering output prices alone. Nevertheless, thetaxation is still quite substantial and presents farmers with a signal to growless than they otherwise would. It is inefficient and distorting to taxfarmers by depressing their output prices, even if offsetting this somewhatwith input subsidies and avoiding directly taxing them. All of the above arequite complex issues which have been examined by the National Commission on

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Agriculture and will be further analysed in the study on pricing policy to beinitiated shortly.

2.66 Past management has led to severe degradation of Pakistan's agro-ecological resources. Excessive grazing and timber cutting in high areas iscausing heavy soil erosion and flooding which in turn is silting-up irrigationdams and damaging agricultural production. Mismanagement of irrigation anddrainage on the plains is increasing waterlogging and soil salinity.Overgrazing on arid and semi-arid rangelands is leading to desertification.Until recently policy-makers and farmers have focused almost exclusively onquestions related to agricultural production, and have given insufficientconsideration to developing sustainable resource use systems. Pakistan muststrengthen its natural resource management policies and programs to ensure theconservation of its agro-ecological resources and future productivityincreases in agriculture.

2.67 Physical Infrastructure. Pakistan's physical infrastructure--itsroads; railways; ports; canals; dams; the electricity, oil and gas supply; andthe postal and telecommunication systems--have received much attention and theoverwhelming bulk of public development expenditures in the past.Nevertheless, the capacity and reliability of this infrastructure is alreadystrained at the current levels of economic activity. It is clearly inadequateto accommodate a much accelerated level of activity. The organization andmanagement of this infrastructure must be considerably improved and usercharges (tolls, tariffs, water charges and energy prices) increased to financea higher overall level of investment. To a certain extent, some of theserequirements can be met by making more use of private expertise and capital.Nevertheless, much of the country's physical infrastructure inevitably willremain in public hands and the government must formulate infrastructuredevelopment programs to improve its capacity and functioning.

2.68 The Government has embarked on a program of structural reforms inthe transport sector to improve overall transport efficiency and to meetfuture transport demands. The emphasis is on road and rail transport,especially the former as it accounts for more than 80% of domestic trafficvolume. Key reforms involve strengthening highway administration andmaintenance, and restructuring the railways to enable them to continue to beviable in a competitive transport sector. Additional measures include:strengthening the trucking industry; improving trade logistics; beginning toaddress environmental issues in the sector; and strengthening transportcoordination and planning.

2.69 Although Pakistan's basic transport network is in place and theroad transport industry is competitive, transport costs are high. There is aclear need for rehabilitation of highway infrastructure, for improvement inoperational efficiency and for the adoption of new transport technology. Thepoor state of the overall transportation system results in part from thecumulative effects of inadequate past maintenance and upgrading. This,together with and the expectation that transport demand will more than doubleby 2005, presents transport policy makers with the challenge of how best toensure that, within the limited amount of resources available, the capacity

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and quality of Pakistan's transport system is expanded to meet the growingneeds of Pakistan's economy.

2.70 Most of Pakistan's trade logistics system (storage, handling,freight forwarding, transport and associated information and financialactivities) is the responsibility of the private sector. Those regulationsand public sector practices that constrain the growth and development of theprivate sector therefore need to be eliminated. These include:

(i) modifying automotive industry policies to permit truck and busoperators to have access to a wide range of modern vehicles;

(ii) loosening the regulation of bus fares to permit quick and adequateadjustment to cost increases (inadequate fare increase has beenthe primary cause of inadequate growth of bus operations in urbanand intercity services);

(iii) curtailing GOP's cost-plus practices of paying for the costs ofstorage, handling and transport of strategic commodities such asfoodgrains, fertilizers and petroleum products. Such practiceshave been a disincentive for encouraging logistical efficiency orinvestment in modern systems; and

(iv) simplifying trade facilitation procedures which have handicappedPakistan's international trade.

2.71 Public sector involvement in transport goes beyond the provisionof highway, port and aviation infrastructure and also includes railways,airline, bus and shipping operations. Greater autonomy and accountability isneeded in most cases to improve institutional and financial performance.Loss-making government bus and shipping operations should be curtailed sinceequivalent services are being provided by other operators at no burden toGOP's budget. Private sector participation needs to be encouraged in railway,port and aviation development both to reduce the requirement for public sectorfunds, and to introduce innovative approaches into these activities. Thescope for participation is more limited in the highway sector.

2.72 Professionally capable institutions are needed to managePakistan's rapidly growing highway program and the implementation of moderncost effective maintenance planning, supervision and execution methods.Moreover, rapidly growing traffic levels have made existing efforts torehabilitate and dualtze existing roads insufficient to improve the quality ofintercity roads on Pakistan's major transport corridor linking Karachi,Lahore, Rawalpindi, and Peshawar. Ribbon development and uncontrolled accessgreatly reduce the capacity of existing roads. A phased program to modernizethe intercity highway network needs careful consideration. GOP is proposing aRs 66 billion program for this purpose. Financing and cost recovery will,however, be critical constraints to such a program which also would call intoserious question Pakistan's overall developmental priorities and macroeconomicframework. Proper construction and maintenance will require greatly increasedcapability of highway institutions, as well as a major upgrading of

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contractors, who have to date had great difficulty in performing adequately onexisting roads. Tolls revenues can provide a partial source of financing formodern intercity roads, but totally privately funded BOT schemes are unlikelyto prove viable except in a few cases of urban expressways. Budgetaryrequirements for road programs will inevitably increase, and GOP andProvincial Governments will need to take full advantage of the scope forraising additional resources from major increases in diesel fuel taxes andannual license fees on vehicles.

2.73 Immediate action is needed to reverse Pakistan Railways (PR)financial and operational decline; losses have now reached Rs 2.5 billionannually. Heeded actions include shifting traffic capability (locomotives)from passenger to freight, adequate procurement of spare parts and sub-assemblies needed for proper maintenance of locomotives, continued laborattrition, and twice yearly tariff increases at least as great as inflation.In addition PR has to develop a commercial approach to marketing and decisionmaking. However, large cost increases in recent years have reduced PR'scompetitiveness with road transport, and a major cost reduction program isneeded if PR is to remain viable by the year 2000. Labor costs amount to 50Zof total costs, and most traffic is carried on a small part of the system andhandled at a fraction of PR's 900 plus stations. A major rationalization ofits network, stations and labor force is needed.

2.74 PR requires corporate status to sustain the degree of autonomyneeded to be viable in a competitive transport sector. The development ofautonomy will also be asserted by PR's plans to involve the private sector inits activities, such as the development of container services, commercialdevelopment of railway property, and in railway manufacturing activities.

2.75 Improved management of Pakistan's ports is needed. There is alsoconsiderable scope for private BOT schemes for developing container and bulkhandling facilities. The aviation sector is notable for substantial crosssubsidies. Heavily used airports, specifically Karachi, subsidize much of therest of the airport network, much of which is very lightly used. SimilarlyPIA's profitable international and primary domestic services subsidize thelosses incurred by its domestic secondary and feeder services. Introducingprivate sector into airport and aviation activities would therefore not onlypermit innovative approaches to the sectors development, it would also forcethe subsidies to be made transparent and permit GOP to decide on thepriorities for aviation subsidies relative to other budgetary requirements.

2.76 Energy. As is the case in most developing countries, the growthof energy demand in Pakistan has exceeded the rate of growth of the overal'leconomy in the past. Although the two rates are expected eventually toconverge, for the medium-term, Pakistan will need to supply a rapidly risingenergy consumption. Although Pakistan has a considerable untapped domesticenergy potential, nevertheless imports a significant share of its energyneeds--about one-third. When domestic potential exists for low-cost energydevelopment, importing more energy than would otherwise be required is anunnecessary drain on the balance of payments that should be reduced by aprogram of accelerated exploration and development of domestic energy

50

resources, effective demand management through conservation and price policyand improved management and organization of the key energy supply entities.

2.77 The forecast through the year 2010 calls for energy demandincreasing at an average annual rate of about 7% up to the mid-1990s anddeclining gradually thereafter to about 6Z, partly as a result of a projectedincrease in energy efficiency, particularly in the industrial sector. As aresult, although the output of domestic energy resources is forecast toincrease in absolute terms, their share in total energy supply (relative tothat of imported energy) is expected to remain steady at about 65% over theforecast period. In order to meet the forecast demand at least cost, theshare of coal (both imported and domestic) in total consumption is forecast toincrease from 72 in 1987/88 to about 13% in 2010 to substitute for highervalue petroleum products and gas. Despite this, the share of petroleumproducts would increase from the present level of 39% to 50% in 2010. Thisincrease in demand could be reduced by substantially increasing the supply ofgas either from new gas discoveries and matching investments in the pipelineinfrastructure, or from gas imports by pipeline or in the form of LiquefiedNatural Gas. In the absence of such supplementary supplies, the share of gasmight decline to as little as 18%. To avoid this, there is a strong need tofurther enhance investments in gas development by mobilizing resources fromthe private sector, through incentive oriented policies, to complement thoseof the public sector in gas infrastructure development. Such policy measuresshould include not only increases in the producer price of gas, but alsomodifying the gas allocation policy to enable the appropriate expansion of gasinfrastructure and its end-use, as a substitute for high value importedpetroleum products. Given the long lead time and resources required todevelop the country's major hydro sites, the hydropower contribution to theoverall supply of energy is expected to increase only marginally to about 202.

2.78 The Government has committed itself to accelerate and rationalizethe development of energy through a core investment program, correctdistortion in energy pricing, streamline the institutions and agencies in thesector and mobilize private sector involvement in the development, productionand delivery of energy. To carry through on this commitment and accommodatethe consumption and supply trends while reducing the dependence on imports,the Government needs to continue refining a strategy for: (a) rationalizinginvestments in the sector and accelerating the development of domestic energyresources, including large and small hydro sites, oil and gas, and coal, aspart of the least-cost energy investment program; (b) adjusting the level andstructure of energy prices to restrain the growth of demand for energy andmobilize resources for the sector; (c) reducing losses in the production andtransport of energy through the rehabilitation and retrofitting of powerplants, refineries and energy intensive industries as well as through theexpansion and reinforcement of the transmission and distribution networks; and(d) strengthening the operations and management of institutions in the sector.Given the sector's substantial investment requirements, the Government shouldcontinue to place major emphasis on increasing private sector investment,while facilitating the mobilization of additional resources from externaldonors.

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2.79 Pakistan has been unable to keep pace with the growing demand fortelecommunications services, which has resulted in serious constraints on theexpansion of the economy. Currently Pakistan has about 860,000 directexchange lines serving a population of approximately 114 million, whichrepresents a density of 0.8 lines per l00 population. This compares poorlywith the average density of 5.9 lines per 100 population among the (higherincome) twelve developing countries of Asia. Only just over half ot "excessdemand" for telephone services has been met (i.e., of the potentialsubscribers on registered waiting lists). In addition, service is inadequate,with average call completion rates of only 35%, 12% for domestic long distancecalls and 13Z for subscriber dialed international calls. In light of thefiscal constraints faced by the Government, it is unlikely that the Governmentsector will be able to finance sufficient capital investment in the sector tomeet all current unsatisfied demand for telecommunications services inPakistan. The Government has therefore proposed that a framework be developedto encourage private sector investment in the telecommunications sector.

2.80 In December 1990, a Presidential Ordinance was approvedestablishing the Pakistan Telecommunications Corporation (PTC) as a semi-autonomous agency. Previously telecommunications services in Pakistan hadbeen provided by the Telegraph and Telephone Department of the FederalMinistry of Communications. The Government has decided both to liberalize thetelecommunications sector and to sell 51% of PTC to private sector investors,with the Government maintaining a 49% holding in PTC. The Government hasformally announced its intention to privatize PTC and has received expressionsof interest from fifty telecommunications companies. In addition, two privatesector operators of cellular mobile networks have been authorized with liberalpolicies for interconnection of the cellular networks to the fixed wire publicnetworks.

2.81 As a prelude to the privatization of the telecommunicationscompany, there is a critical need for the GOP to establish a regulatoryframework to promote efficient operation of the sector, quality of service andthe desired level of competition. This should be established prior toprivatization in order to ensure the framework is operational, once PTCbecomes a private company. There is also a need to assist in preparing PTCfor privatization and in implementing the divestiture of GOP-held shares inPTC to private investors, in terms of valuation, legal issues, and promotingthe sale of shares in local and international markets. The World Bank and theGovernment of Japan are assisting the Government in preparing for theprivatization process.

2.82 PoRulation. Pakistan's population of over 110 million makes itthe tenth largest country in the world. The current population growth rate isestimated to be 3.2% per annum, which is among the highest in Asia. This rateis the result of a slow, steady decline in mortality and of very little, ifany, change in fertility. If this rate of growth continues, the populationwill double in the next 21 years; much of this growth is now unavoidable. Theoverall age distribution of the population is typical of countries with highgrowth rates, with 45% of the population under 15 years of age. The sex ratiois skewed towards males (111 males to 100 females in the 1981 census) mainlydue to high female mortality relative to that of males. Although the urban

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population is increasing at about 4.6Z per annum, only about one third of thepopulation lives in towns. The high overall rate of population growthpresents very serious problems and constraints for the further economic andsocial development of the country.

2.83 The shortcomings of past government population planning efforts,which had to operate in a most hostile social environment, includes (a)frequent changes in administration and organization; (b) a family planningsupply orientation with weak demand creation; (c) inadequate evaluation andunrealistic target setting; (d) shifting political commitment; and (e)insufficient access to quality family planning services and particularly thelack of family planning services at health facilities. The health anddemographic implications are severe and form a vicious circle of highfertility, frequent births, high maternal mortality and morbidity, and highinfant mortality--which in turn maintains the high birth rate.

2.84 Population policy has been notable for its changes in direction.Between 1965, when Pakistan first adopted a population policy, and 1980 therewere at least three major shifts. From 1980, the then Population WelfareDivision of the Ministry of Planning and Development had a responsibility forpopulation matters; in June 1990, the Division was elevated to Ministry status--the Ministry of Population Welfare (MPW). MPW has its own clinics andservice delivery system which are largely independent of government healthfacilities. The approach is multi-sectoral, and aims to involve a widevariety of public and private institutions in the population program;ambitious demographic targets have been set, but not met. Government healthfacilities do no generally offer family planning services" despite governmentpolicy being explicit, since at least 1985, that all government healthfacilities should offer such services. Both the 1990 health policy and theproposed 1991/92 'Measures' reinforce the importance of rectifying thisomisdion. This will require strengthening provincial health services, whichhave some difficulties in fulfilling their current responsibilities evenbefore adding family welfare services. During 1991, the government took stepsto revitalize the population program. These included: (a) increasedpolitical support publicly expressed"; (b) the appointment of an Adviser tothe Prime Minister on Population Welfare, with ministerial rank; and (c)federal Cabinet approval on an 'accelerated program' which aims, within ten

-The exception is the reproductive health (i.e. sterilization) programwhich largely functions from government hospitals.

'&'or example, see the Prime Minister's address to the National PopulationConference, July 1991.

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months, to expand service delivery and improve efficiency through some twelvespecified measures.

2.85 Since 1980, and notwithstanding the recent developments,population policy has been largely unchanged. The current multi-sectoralapproach is the one most likely to be effective. However, as for haalthpolicy, the implementation of population policy has not matched the plans (itis too early to be able to judge whether the 1991 initiatives are having anyeffect). Even allowinig for the hostile cultural environment, contraceptiveuse remains very low and, although there has been some improvement, littlepriority is still given to the program by most politicians and administrators.It is still seen by many as a sensitive subject. Perhaps the most immediatelypressing issue is the integration of family planning services in the regularprovincial health delivery system.

2.86 Human Resource Development. Despite impressive economic growth inthe recent past, Pakistan's indicators of human resource development--literacy, life expectancy, nutrition and infant mortality--continue to lagbehind those of countries at similar stages of development. Even worse, ineach one of these areas, the indicators for females are markedly worse thanfor males. According to United Nations Development Program's HumanDevelopment Index (HDI), which incorporates per capita income, adult literacy,average years of schooling and life expectancy, Pakistan's ranking is as lowas 120 in a group of 160 developing countries. Individual indicators of humandevelopment present a pathetic picture. Only 31% of the adult population (15years and above) are literate; only 40% of children of primary school goingage are enrolled in school; only 55% of the population has access to healthfacilities; and 52% of children suffer from malnutrition. Even though publicexpenditure on education has increased somewhat in recent years from 1.9% ofGNP in 1985/86 to 2.2% in 1990/91, it still lags behind the average of 3.7%for developing countries. The same is the case for Government expenditure onhealth services.

2.87 The indicators of women's welfare are extraordinarily low.Pakistan is one of the few countries where men outnumber women, and men livelonger than women. Both of these are summary indicators of well-being; ormore to the point, summary indicators of neglect and lack of well-beingleading to early death. Female enrollment rates in primary education areamong the lowest in the world and about half that of male rates; and they aremuch less than half for secondary and higher education. The combination ofhigh fertility rates and poor health result in extraordinarily high maternalmortality. Investing in women's welfare--better health and education--andlowering birth rates are Pakistan's highest priority expenditures.

2.88 Sustaining the currently high growth and achieving the even highergrowth targets of the future will not be possible without substantiallyimproving the quality of human resources. As future economic growth inPakistan will be dependent upon the adoption of new technologies, more andmore educated labor force will be needed. An illiterate labor force will notbe able to handle these technologies. This is true of both agriculture andmanufacturing. Also, to develop indigenous technologies suited to Pakistan'sresource endowment and environment, highly educated scientists, technicians

02

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and professionals will be needed. Thus, along with the coverage and qualityof basic education, the quality of higher education also needs to be improved.

2.89 Health facilities need to be improved and made accessible to thecommon people. Particular attention has to be paid to the health andnutrition of children, as deficiencies in the early stage of life have lastingeffects throughout their life. Better health of the general population willreduce the loss in production due to frequent sickness and absence from thework-place. In addition, safe drinking water and sanitation facilities needto be provided as a number of diseases spread because of their non-availability.

2.90 To improve both education and health facilities, the Governmentneeds to allocate more resources to these sectors and at the same time improvethe efficiency with which these resources are used. To this end theGovernment has embarked on the preparation of a Social Action Program, whichholds great promise in addressing Pakistan's human resource needs byidentifying policy and implementation barriers at all levels and finding waysto overcome them. The key actions identified so far are:

a) implementation of an improved information system for the socialsectors;

b) preparation of a three-year expenditure program for schooleducation;

c) improvement in the budgeting for the social sectors;

d) improvement in the selection and ranking of social sector projectsin the provinces;

e) improvement of resource mobilization and efficiency of resourceuse in the provinces;

f) revised user charges and increased cost recovery;

g) improvement of staffing (especially females) of basic socialservice facilities in rural areas;

h) provision of family planning services through health centers;

i) expansion of the coverage of water supply and sanitation; and

j) increase in decentralization, accountability and responsiveness tocommunity demand.

2.91 The experience in 1991/92 in funding more adequately the socialsector current and development expenditures turned out to be somewhatdisappointing. The original hope was that despite the cuts at the federallevel in the social sector development expenditures, the large increase inresources transferred to the provinces as a result of the National FinanceCommission award would result in a substantial increase in social sector

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spending, particularly on non-capital items. This hope was strengthened bythe appearance of the federal and provincial budgets at the start of the year,when social spending, including federal and provincial, current anddevelopment spending, was planned to increase by substantially more than therate of inflation. Unfortunately, after post-budget cuts, mainly at theprovincial level, the net increase in social sector allocations for 1991/92increase by less than the rate of inflation. This is largely due to thelingering effects of the recruitment ban, which affected teachers and healthworkers along with all other categories of public sector workers. This banwas lifted in only January 1992, and so the provinces could not spend thehigher allocations for these workers' salaries. Nevertheless, the first yearof the new fundinz arrangements for the social sectors should not set apattern for future years.

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III. MACROECONOMIC PROSPECTS AND RESOURCE NEEDS

A. General Setting

3.01 Macroeconomic Targets. The Government's medium-term macroeconomicobjectives are to achieve an annual average GDP growth rate between 6%-6.5%while reducing the budget deficit below 5% of GNP, inflation to about 6% p.a.and the external current account deficit to about 2.5%. However, theseobjectives are achievable only if the Government fully implements the reformprogram described in the previous chapters of this report and attains a seriesof difficult intermediate targets.

3.02 In fact, notwithstanding Pakistan's strong economic potential andgood growth performance since independence as well as the strong policyreforms implemented since 1988, there are a number of key constraints thatneed to be overcome if per-capita income and other development indicators areto continue to improve. Only a sustained effort by the authorities toformulate and implement the macroeconomic and structural adjustment programwould enable Pakistan to attain its short - and medium-term economicobjectives. The medium-term outlook discussed below assumes that theGovernment will continue to implement in a timely and effective manner theeconomic reform program.

3.03 Macroeconomic Policies. The most important tasks to be undertakenby the Government are thuj following:

a. Improve Public Expenditure Performance. Pakistan's unmetexpenditure needs are large. In order to reduce poverty andstrengthen growth prospects by reinforcing the human capital andinfrastructure base, the Government will have to sharply improveits expenditure performance. It needs to channel additionalresources (perhaps in the order of 4%-6% of GDP) towards thesocial sectors (2%-3Z of GDP), and power and basic infrastructure(2%-3% of GDP).' Some of these resources will have to be providedthrough additional resource mobilization but a significantcomponent should be generated by reducing non-developmentexpenditures, by careful screening of expenditures and improvementin the setting of priorities. Moreover, the large stock of

1/ This is only a very preliminary estimate of the increases in current anddevelopment expenditures required to make significant progress ineradicating poverty, improve social indicators, reduce power shortages andprovide a sound infrastructure base. The Social Action Program beingprepared by the authorities and the Public Expenditure Review to becompleted this fiscal year will provide a firmer basis for these numbers.

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committed but undisbursed foreign aid currently available toPakistan, also indicates that the Government's absorptive andmanagement capacity needs to be significantly enhanced byimproving expenditure programming and monitoring, and effectivelytackling project implementation constraints.

b. Reinforce Macroeconomic Management. A successful structuraladjustment program requires a stable macroeconomic environment towork. Large fiscal deficits coupled with excessive monetizationof this deficit leading to pressures on domestic prices and theBOP have been a recurring problem in Pakistan. The Governmentmust both increase budgetary resources and sharply restructurepublic expenditures in order to reduce the overall budgetarydeficit to a level consistent with internal and external balance(estimated to lie between 4%-5% of GDP)2 while increasing prioritypublic expenditures required to reduce poverty and satisfy themany urgent development needs in the social sectors and basicinfrastructure. In this regard, depending on how successful theauthorities are in rationalizing public expenditures andincreasing cost recovery, total budgetary revenues over themedium-term have to increase to about 21-23% of GDP compared tothe 18.5% of GDP achieved on average during the late 1980's.Since fiscal revenues are currently highly dependant on tradetaxes (39% of tax revenues), and the average nominal tariff levelis excessive, the effort to be made on raising revenues fromdomestically based taxes, both direct and indirect, iscorrespondingly higher.

C. Promote Private Activity and Investment. Despite the expectedexpenditure and savings effort by the public sector, increasedprivate sector investment and saving (both domestic and foreign)are crucial to maintain growth and improve the balance ofpayments. Past gross investment levels, averaging roughly 18.5%of GDP during the 1980's, are low for a country such as Pakistanwith many development needs and intending to grow, as in therecent past, above 6% p.a. To achieve this growth target, grossinvestment would need to increase to 23-24% of GDP in the medium-term, with private sector investment rising in parallel from 12%to 14-15% of GDP. However, unless gross disbursements fromofficial sources increase sharply from their current levels,

This overall budgetary deficit target is a preliminary estimate. Although,given projected growth and export growth rates, the target is consistentwith improving external creditworthiness indicators and a decliningdomestic debt burden, further analysis is needed to determine with moreconfidence its sustainability and consistency with the projected behaviorof other key variable such as private investment. It should be understoodthat the sustainability of a budgetary deficit depends on factors such asthe composition of the deficit, growth rates being achieved by the economy,and the terms at which the deficit is being financed among others.

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projected net inflows from these sources will be insufficient toprovide all the foreign exchange requirements of the investmenteffort. Hence, net inflows of private foreign capital would needto basically double between 1991/92 and the end of the century.The strong trade, investment and exchange deregulation andliberalization measures recently undertaken by the Government, theprivatization program, as well as the flexible exchange ratepolicy, are strong steps in the right direction to promote privateinvestment and attract foreign capital. These improvements in thepolicy environment are believed to have been an important factorbehind the large increases (12% p.a.) in direct foreign investmentsince 1987/88. In order to 4ncrease private sector confidence,this favorable policy framework needs to be maintained andcomplemented by a steady improvement in creditworthiness resultingfrom continued good macroeconomic management; and

d. Incentives for Export Growth. Perhaps the most favorabledevelopment in 1990/91 was the excellent broad-based exportperformance. This export expansion was instrumental for theeconomy to weather the sharp shock resulting from the Gulf Crisisand was the driving force behind the strong increase in value-added in manufacturing. In order to continue to provide a strongimpetus to the manufacturing sector, to reduce the current accountdeficit to a sustainable level and avoid strangling the economythrough a shortage of foreign exchange, it is essential thatexports should continue to expand strongly, at minimum in volumeterms at about the same rate as GDP. Government policies since1988 have favored exports, in particular, the flexible managementof the exchange rate leading to substantial depreciation of thereal effective exchange rate since December 1988, theliberalization of trade and exchange controls, and the reductionin the anti-export bias of the tax system, especially for cottonbased manufactures. These policies should be continued andreinforced by completing the import liberalization program,strengthening export promotion schemes and most importantlyimplementing a tariff reform to reduce the anti-export bias of thetrade regime. In this regard, the increase in the tax effortdiscussed above will also depend on the size and pace of thetariff reform and the resulting revenue loss.

B. Macroeconomic Outlook

3.04 In the modium- to long-term, the successful implementation of thereform program will cause a qualitative change in the structure of Pakistan'seconomy. The public sector is currently over-extended and scarce publicmanagement and financial resources are spread too thinly. The role of thepublic sector would be redirected and concentrated towards providing a stablepolicy and regulatory environment and complementing private sector activityand investment in those areas where the public sector has a comparative

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advantage.' The reduction in public sector borrowing requirements (to theextent that total savings increase) would free scarce resources that wouldbecome available to the private sector. Private sector activity would also beenhanced and made more efficient, as tax and regulatory distortions areeliminated and markets are allowed to allocate resources towards thoseactivities with the highest returns. Private investment and private capitalinflows in the balance of payments would increase in relative importance asrates of return and creditworthiness strengthen. Finally, Pakistan wouldbecome more outward looking and exports and imports would increase theirrelative share in economic activity as protection and the anti-export bias ofthe incentive regime are reduced. At the same time, however, the economywould become less dependent on foreign savings and on official capital sourcesto meet resource needs as national savings, in particular public savings,increase.

3.05 The expected future performance of Pakistan's economy can bebetter analyzed by dividing the projection period into two distinct sub-periods: the near-term, 1991/92-1993/94 period, covered by the recentlyprepared Policy Framework Paper (PFP) and oriented primarily towards fiscaladjustment and reducing the external imbalance; and the medium- to long-term,from 1994/95 to the beginning of the next century, when investment needs toincrease sharply to lay the foundation for sustained rapid growth.

3.06 1991/92-1993194. The current PFP period is expected to becharacterized by a strong macroeconomic adjustment effort to control inflationto 6% per annum and reduce the external current account deficit to asustainable level of 2.5% of GNP through strict demand management policies.In addition, there will be continued efforts to promote private sectoractivity, exports and investment through further improvements in the incentiveand regulatory framework and a wide-ranging privatization program. The maineconomic indicators for this period are shown in Table 3.1.

3.07 The fiscal adjustment to be realized over these three years isvery strong, especially on the revenue side. In this regard, totalexpenditures are expected to increase by about 0.5% points of GDP to 262,mainly because of the planned increase in public investment from 6.5Z of GDPto 72 as a first step towards a greater effort to meet the many outstandingdevelopment needs. Hence, total revenues need to expand from roughly 18.52 ofGDP on average during the 1980's to about 212 by the end of this period inorder to achieve and maintain a fiscal deficit target of 4.82 of GDP. In1991/92 the revenue effort will be exceptionally strong in order to recoverfrom the abnormally high overall fiscal deficit of 1990/91 resulting primarilyfrom a shortfall in revenue. This enhanced resource mobilization effort willoriginate primarily from structural improvements in domestic taxes (about 2.5Zpoints of GDP), and increased revenue from petroleum product surcharges (about

3/ An important example refers to the social sectors in which more intenseeffort. would reduce poverty significantly over the next decade, improveeducation and health indicators and finally over time lead to a moreproductive labor force and provide a better basis for social and politicalstability.

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0.5% points of GDP) resulting mostly from the increases in energy consumerprices already enacted in 1990/91. Higher revenue from domestic taxes wouldalso permit the authorities to implement the first phase of the tariff reform,which preliminary estimates suggest would result in a revenue loss of about0.5% of GDP in international trade taxes.

3.08 There is great potential to increase tax revenues from domesticsources in Pakistan in particular through structural measures to expand thetax base of both direct and indirect taxes. The Government believes thatduring the near-term period at minimum the yield of domestic indirect anddirect taxes can

Tabte 3.1 Key Economic Indicators 1988/89-1993/94

Actual Prelim. P r o i e c t e d1988/89 1989/90 T17M1 1991/92 1992/93 19739 I

- growth in constant prices -GDP 5.6 5.3 6.5 6.2 6.3 6.4Real p.c. Consumption 3.2 2.5 0.7 1.1 1.2 2.4Exports GNFS 13.8 1.1 10.6 13.5 7.9 6.5Imports GNFS 8.3 -3.5 -2.6 7.1 2.9 5.2

- Savings/investment Balances (in percent current prices -Gross Investment/GDP 17.5 18.6 18.3 19.0 19.6 20.0Domestic Savings/GDP 12.2 10.9 11.6 13.6 15.1 15.9National Savings/GDP 12.6 14.0 13.7 15.6 16.9 17.5Goverrnment Investment/GDP 6.3 6.4 6.5 6.8 6.9 7.0Government Savings/GDP -1.0 -0.4 -2.3 1.7 2.1 2.2Private Investment/GDP 11.2 12.2 11.8 12.2 12.7 13.0Private Saving/GDP 13.6 14.4 16.0 13.9 14.8 15.3

- Fiscal Accounts (in percent current prices) -Total Revenue/GDP 18.8 18.3 16.6 20.6 21.0 21.2Tax Revenue/GDP 14.3 13.7 12.9 14.9 16.1 16.2Total Expend1ture/GDP 26.5 25.0 25.4 25.7 25.8 26.0Overall Fiscal Balance -7.7 -6.7 -8.8 -4.8 -4.8 -4.8

- External Accounts (in percent except when indicated) -Export GNFS (X change in USS) 6.7 11.7 16.2 16.5 11.8 11.3Imports GNFS (X change In USS) 4.8 7.3 9.7 6.6 6.9 9.4Labor Remft. tX change In USS) -5.8 0.1 -4.8 3.2 3.0 3.0Current Account (mil USS) -1959 -1890 -2107 -1606 -1375 -1404Exports GNFS/GDP 14.1 15.5 16.0 18.1 18.5 18.9imports GNFS/GDP 20.3 23.2 22.7 23.5 23.0 23.1Current Account/GDP -4.9 -4.7 -4.6 -3.4 -2.7 -2.5

- Creditworthiness Indicators (in percent unless indicated) -Total Debt Service (mil USS) NA 2210 2184 2357 2343 2457Debt Outstanding/GDP NA 47.5 45.7 46.8 45.2 43.7Debt Service/Current Receipts NA 25.8 23.2 22.1 19.9 19.0

- Price Indicators (percentage change) -GDP Deflator 9.2 6.2 10.7 8.0 6.0 6.0TOT NA NA -7.7 3.6 -0.2 0.8Real Effec. Exchange Rate -1.9 -7.1 -2.4 0.0 0.0 0.0

be increased by 0.5 and 0.25S points of GDP p.a., respectively. With regardto indirect taxes, excise taxes will be extended to the service sector whilethe base of the GST will be expanded through horizontal (to sectors currentlyexempt) and vertical (to the wholesale level) extensions as well as throughbetter surveying techniques in order to increase the number of taxpaying unitsunder existing definitions. The base of direct taxes will be increased bygradually eliminating tax holidays, rebates and other exemptions and byefforts to reduce evasion. In addition, direct taxes need to be simplified

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and made more progressive. However, in view of the weak results of pastresource mobilization efforts, this program is quite ambitious.

3.09 Growth performance is expected to remain strong during the periodthrough 1993/94. Driven mainly by exports and increased investment efforts,real GDP growth is expected to remain above 6% p.a. despite the contractionaryeffect of the efforts to reduce the budgetary deficit. Falling budgetdeficits which allow more funds to be channeled to the private sector,together with the improving policy environment and the increase incomplementary public development expenditure, are expected to promote privateinvestment activity. Total gross investment is projected to increase itsshare in GDP from an average of 18.5% during the 1980's to 20% by 1993/94,financed by the increase in the national savings rate, from about 14.5% of GDPto 17.5% with much of the increase from public saving. Exports, however, willbe the main source of growth during this period. As in 1990/91, export growthis projected to remain strong, averaging some 9.2% p.a. in volume terms duringthis period. As explained above, economic policies have in general beenfavorable to the export sector and are expected to be reinforced furtherduring the period. While cotton based manufactures will probably be theleading sector, the export expansion is expected to remain broad-based andinclude non-traditional manufactured exports.

3.10 The Medium- to Long-Term Outlook (1994/95 - 2000/01). After theinitial adjustment period during which internal and external disequilibria areprojected to be reduced, the medium- to long-term outlook is more favorableand economic policies would become more growth oriented. In this regard,investment and savings rates would need to increase in order to providePakistan with a better basis for sustained growth in the long-term. Furtherfiscal efforts would also be required to provide sufficient resources toincrease spending in the social sectors and implement a wide-ranging power andinfrastructure development program. Prudent demand management policies shouldbe followed so as to provide a stable and favorable macroeconomic frameworkfor enhanced private sector activity. Table 3.2 shows the key economicindicators consistent with these strong policy assumptions. This tablepresents an assumed fiscal deficit of 4.8% of GDP continuing into the future,through the year 2001. This is a reasonable working assumption for thepresent; but a different, perhaps lower, level may be more appropriate in thefuture. The appropriate level of fiscal deficit depends on a whole host ofconsiderations, including how it is financed, inflationary targets, the growthof private sector credit, along with structural measures needed to underpurthe growth effort. Further analysis is needed to refine the target for futurefiscal deficits.

3.11 A key characteristic of this period is the need to increase publicexpenditures in the social sectors, infrastructure and power by another 4%-5%of GDP. :t order to avoid a deterioration in the fiscal deficit, furtherrevenue efforts and redirecting scarce resources within expenditure categoriesare required. While there is potential for additional revenue gains,especially in direct taxes and in user charges, these gains would also need tocompensate for the revenue losses associated with completing the tariff reformprogram. A strong resource mobilization effort could perhaps raise anadditional 1.5X-2% of GDP on a net basis mainly from direct taxes and better

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cost recovery, especially in the irrigation subsector. Hence, the authoritieswould still need to reduce non-priority expenditures by 2Z of GDPI subsidiesand defense expenditures should be the primary category to be reduced. Ofcourse, the less successful the resource mobilization effort, the larger willbe the expenditure reductions required in the non-priority areas.3.12 During this period, the main sources of grrwth on the supply sidewill be manufacturing, power and the construction sector, driven by exportsand especially investment activities. With the subsequent increases indomestic savings, especially public savings, gross investment is projected toincrease by 3Z-4% of GDP between 1994/95 to 2000/01 and will represent some23%-24% of GDP by the beginning of the next century. Exports are projected toincrease at about 6.5% per annum in volume terms, somewhat lower than in the1991/92-1992/93 period but still at a high rate. These developments willenable Pakistan to sustain a GDP growth rate of 6%-6.5Z during this period.

Table 3.2 Key Econrmic Indicators 1994195-2000/01

P roected1994/95 195/96 1996/97 1997i98 1998/99 1999/00 2000/01

- growth in constant prices -GDP 6.5 6.5 6.5 6.5 6.5 6.5 6.5Real p.c. Consumption 2.3 2.4 2.1 2.1 2.0 3.0 3.0Exports GNFS 6.0 6.2 6.4 6.4 6.6 6.7 6.7Imports GNFS 5.1 5.3 5.6 5.6 5.6 5.3 5.3

- Savings/Investment Balances (in percent current prices -Gross Investment/GDP 20.6 21.1 21.9 22.7 23.5 23.5 23.5Domestic Savings/GDP 16.7 17.4 18.3 19.2 20.1 20.3 20.6National Savings/GDP 18.1 18.6 19.3 20.0 20.8 20.8 20.9Govermnent Investment/GDP 7.3 7.5 8.0 8.5 9.0 9.0 9.0Government Savings/GDP 2.5 2.7 3.2 3.6 4.1 4.2 4.3Private Investment/GOP 13.3 13.6 13.9 14.2 14.5 14.5 14.5Private Saving/GDP 15.6 15.9 16.1 16.4 16.7 16.5 16.6

- Fiscal Accounts (in percent current prices) -Total Revenue/GDP 21.2 21.8 22.1 22.4 22.7 23.1 23.1Tax Revenue/GDP 16.2 16.6 16.9 17.2 17.5 17.9 17.9Total Expenditure/GOP 26.0 26.6 26.9 27.3 27.6 27.9 27.8Overall Fiscal Balance -4.8 -4.8 -4.8 -4.9 -4.9 -4.8 -4.7

External Accounts (in percent except when indicated) -Export GNFS (X change in USS) 11.4 11.5 11.1 11.3 11.9 11.8 10.5Imports GNFS (t change in USS) 10.1 10.8 10.6 10.8 11.1 10.7 9.0Labor Remit. (X change in USS) -1.2 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0Current Account (mil USS) 1520 -1717 -1964 -2241 -2556 -2837 -2970Exports CNFS/GDP 19.0 19.0 19.1 19.2 19.3 19.4 19.4Imports GNFS/GDP 22.8 22.7 22.7 22.7 22.7 22.6 22.3Current Account/GDP -2.5 -2.5 -2.6 -2.7 -2.7 -2.7 -2.6

Creditworthiness Indicators (in percent unless indicated)Total Debt Service (mit USS) 2447 2716 2864 3095 3425 3710 4022Debt Outstanding/GDP 41.5 39.5 37.8 36.1 34.5 33.2 32.1Debt Service/Current Receipts 17.3 17.5 16.8 16.5 16.6 16.3 16.1

Price Indicators (percentage change) -GDP Deflator 6.0 6.0 6.0 6.0 6.0 6.0 6.0TOT 0.5 -0.2 -0.2 -0.2 -0.3 -0.4 0.0Real Effec. Exchange Rate 0.0 0.0 0.0 0.0 0.0 0.0 0.0

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C. Balance of Pavments Proiections. External Financing Reguirementsand Creditworthiness

3.13 The Current Account of the Balance of Payments. Barring majorunexpected shocks, timely and effective implementation of the adjustmentprogram and continued sound demand management policies is expected to lead toa decline in the current account deficit of the balance of payments (Table3.3) from about 4.6% of GNP in 1990/91, to 3.4% of GNP in 1991/92, 2.72 in1992/93 and 2.5% in 1993/94, despite a massive increase in imports over theprojection period (about 150% in USS terms). Beyond 1993/94, the projectionsshow the current account remaining steady between 2.5 - 2.7% of GNP. Theprincipal factor behind this favorable result is the continued excellentexport performance.

3.14 Pakistan's external terms of trade are expected to remainrelatively constant throughout the projection period; the projected shift inthe composition of Pakistan's exports in favor of manufactured products (para.3.15) will contribute to this outcome. Global average prices of manufacturedgoods (the manufactured unit value index-MUV) are projected to increase slowlyat about 2.5% p.a. on average during 1991/92 - 1993/94 accelerating to about4% p.a. on average for the remainder of the projection period. The averageimport price of oil (cif) in 1991/92 is projected at US$ 17 per barrel risinggradually to about US$ 19.2 per barrel by 1994/95; beyond 1994/95 oil pricesare expected to increase in real terms (deflated by the MUV) by about 5% p.a.and attain US$ 31 per barrel (in current terms) by the end of the century.With regard to cotton, world prices are projected to decline by about 9.5%during 1991/92 -1992/93 and to increase thereafter at about 5.5% p.a.4

3.15 Exports are projected to perform well during the projectionperiod. Determined efforts to improve the incentive regime for exports,including maintaining a flexible exchange rate policy, will help sustain anaverage growth in the volume of merchandise exports of 7.9% p.a. (i.e. byhigher a rate than total exports, including services) which translates into anincrease of 12.6% p.a. in current US dollar terms. The great majority of theprojected export growth originates from manufactures. Following the excellentperformance of 1990/91, the volume of cotton based manufactured exports isexpected to grow by 13% p.a. during the 1991/92-1993/94 period and beyond thenat a more moderate rate of 7% p.a. Policy reforms which are expected toaccelerate the ongoing shift towards higher value-added items, together withbetter utilization of quotas in importing countries, will ensure a steadygrowth in cotton based export earnings. Other manufactured exports, whichwill also be favored by the improvements in the incentive regime, areprojected to expand by about 8.5% p.a. in volume terms an average during theprojection period following increases of similarmagnitude in the past.

4/ With respect to other developments in the world economy, according toWorld Bank projections, economic growth in the industrial economies isprojected to be about 2% in 1991/92 and increase to about 3% p.a. for theremainder of the projection period. The volume of world trade is expectedto increase by slightly more than 5% p.a. during the 1990's.

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3.16 Traditional commodity exports--raw cotton and rice--are incontrast not projected to perform well. Exports of raw cotton are expected todecrease in volume terms on average by about 6% p.a. throughout the projectionperiod, reflecting sharply increasing demand for raw cotton from the domestictextile industry and uncertainties regarding the possibilities for increasingagricultural yields. Also because of these uncertainties, rice exports areconservatively projected to increase annually on average by about 3% p.a. involume terms during the projection period.

3.17 Despite the expected improvement in demand management policies,import growth rates are projected to be significantly higher than in the past.This fundamental change in import behavior reflects the increased openness ofthe economy resulting from trade and exchange liberalization and the expectedincrease in exports and investment over the projection period. Already in1990/91 imports expanded by 12.3% in US dollar terms and import growthremained strong during the first few months of 1991/92. Hence, althoughimports increased on average in volume terms during the 1980's only by 3.8%p.a. (implying an average elasticity w.r.t. GDP of 0.6), during the projectionperiod, real imports are projected to expand on average by 5.4% p.a.(elasticity of 0.8). The import categories showing the highest growth are:project-related imports, consistent with the increase in public investment;petroleum and products, consistent with the unfavorable supply/demand balancesresulting from little growth in domestic oil production and the increasing useof oil-based products in the production of electricity until domestic hydroand gas energy resources come on stream; and other private imports that areassumed to expand in line with GDP. In addition, if agricultural yields donot improve, imports of wheat and edible oils would become an increasingstrain on the balance of payments.

3.18 Workers' remittances have been an important, albeit declining,source of foreign exchange for Pakistan. Following the sharp fall inremittance in 1990/91 resulting from the Gulf War, the expected return ofPakistan workers to the Middle East is projected to result in a temporaryincrease in these reflows during the period 1991/92-1993/94. Beyond thisinitial period, remittances are projected to decline gradually in both realand nominal terms.

3.19 The Capital Account and External Financing Requirements. Thebalance of payments projections assume that Pakistan will finance itsborrowing needs not only through medium- to long-term capital from traditionalofficial bilateral and multilateral sources but also by increasing financingfrom private sources. Pakistan's debt disbursement/service profile suggeststhat unless there is a sharp increase in commitments and gross disbursementsfrom official sources, net official disbursements will only increasemarginally from some US$ 0.8 billion in 1989/90 to about US$ 1 billion in

Table 3.3: Balance of Payments Projections (USS million)

1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000J01Resource Balance -3159 -3138 -3036 -2519 -2277 -2304 -2393 -2561 -2753 -2971 -3188 -3339 -3339Export of Goods and NFS: 5577 6232 7243 8440 9438 10507 11710 13060 14516 16157 18072 20207 22326o/w Goods 4634 4926 5851 6925 7830 8809 9879 11069 12354 13806 15492 17379 19245o/w Cotton Nanufactures - 2489 3251 3905 4606 5300 5970 6699 7484 8371 9389 10525 11641Non-Factor Services 943 1306 1392 1515 1608 1698 1831 1991 2162 2351 2580 2828 3081Import of Goods and NFS: 8736 9370 10279 10959 11715 12811 14103 15621 17269 19128 21260 23545 25664o/w Goods 7207 7413 8324 8811 9444 10370 11430 12700 14095 15871 17480 19421 21192Won-Factor Services 1529 1957 1955 2148 2270 2441 2673 2920 3174 3457 3780 4124 4472Factor Services Net: -875 -963 -1125 -1213 -1294 -1367 -1383 -1405 -1454 -1508 -1602 -1730 -1861Factor Services Receipts 138 111 92 98 129 163 192 225 266 303 324 346 380Factor Services Payments 1013 1074 1217 1311 1422 1530 1575 1630 1720 1811 1926 2076 2241o/w Interest 825 873 938 1022 1117 1213 1244 1287 1363 1440 1540 1674 1823

Net Current Transfers 2100 2211 2054 2126 2195 2267 2255 2249 2243 2238 2234 2232 2230o/w Workers' Remittances 1897 1942 1848 1905 1965 2024 2000 1980 1960 1941 1921 1902 1883

Current Account Balance -1934 -1890 -2107 -1606 -1375 -1404 -1520 -1717 -1964 -2241 -2556 -2837 -2970

Capital Account: 1847 1832 2257 1494 1839 1780 1890 2276 2447 2524 2842 3227 3318

Nedium-Long Term Capital (net) 1830 1558 1456 1758 1740 1680 1730 2036 2157 2164 2392 2662 2698PPG NLT Capital Flows 1654 1338 1228 1481 1436 1378 1388 1628 1714 1670 1798 1978 1979Grants 578 528 592 371 335 255 263 290 340 370 390 430 460Net Official Debt 1230 864 738 1007 1063 1311 1107 1131 1122 1021 1053 1100 1050o/w Disbursements 1888 1540 1542 1903 1946 2171 2068 2224 2318 2353 2558 2726 2795Amortization 658 676 804 896 883 860 961 1093 1196 1332 1505 1626 1745Net Private Debt -154 -54 -102 103 38 -189 17 207 252 279 355 448 469o/w Disbursements 176 128 202 409 204 74 180 360 405 460 600 710 780Amortization 330 182 304 306 166 263 163 153 153 181 245 262 311Private MLT Capital Flows 176 220 228 277 304 302 343 408 443 494 594 684 720Foreign Direct Investment 176 204 227 227 303 300 314 337 345 376 410 446 487Net Debt Flows 16 1 0 1 2 29 71 99 119 185 237 233

Short-Term and Other Capital (net) 17 274 801 -264 99 100 160 240 290 360 450 565 620

Overall Balance -121 -58 150 -112 464 376 370 558 483 283 286 391 348

For MemorancksnGross Official Reserves 620 569 748 1162 1459 1771 2167 2520 2693 2889 3194 3487in weeks of inports 2.4 3.1 2.6 3.2 4.6 5.3 5.9 6.5 6.9 6.7 6.5 6.5 6.5Current Account/GDP C%) -4.9 -4.7 -4.6 -3.4 -2.7 -2.5 -2.5 -2.5 -2.6 -2.7 -2.7 -2.7 -2.6Growth Imports GNFS (X) 6.7 11.7 16.2 16.5 11.8 11.3 11.4 11.5 11.1 11.3 11.9 11.8 10.5Growth Exports GNFS (X) 4.8 7.3 9.7 6.6 6.9 9.4 10.1 10.8 10.6 10.8 11.1 10.7 9.0Growth Workers' Remittances (X) -5.8 0.1 -4.8 3.2 3.0 3.0 -1.2 -1.0 -1.0 -1.0 -1.0 -1.0 -1.0

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2000/01.5 Net transfers (i.e., after payment of interest) from these samesources are projected to follow a declining trend from US$ 450 million to onlyUS$ 100 million, respectively. Hence, despite the projected decline of theprimary (net of interest) current account deficit as a percentage of GNP from2.9% to 1I during the projection period, Pakistan will need to relyincreasingly on private capital sources to meet its financing needs. In orderto be able to attract private foreign capital, it is critical for Pakistan tocontinue to improve the policy regime and its creditworthiness.

3.20 There will be a significant improvement in Pakistan'screditworthiness if the adjustment program is adhered to. The decline in theprimary current account deficit as a percentage of GDP will slow down debtaccumulation leading to a reduction !.n debt service ratios. At end 1990/91,Pakistan's external outstanding civilian debt stood at US$ 20.7 billion, or46Z of GDP. Projections indicate that this debt/GDP ratio will decline to 321by 2000/0i while the ratio of debt service to current receipts will declinefrom 24Z to 17Z. The implementation of strong adjustment measures, fallingdebt service ratios and increasing reserves should enhance Pakistan'sinternational creditworthiness.

3.21 With respect to official gross reserves, the projections envisagea gradual buildup of reserves from US$ 0.5 billion (about 3 weeks of importsof goods and services) at end 1990/91 to US$ 3.5 billion (about 6.5 weeks ofimports of goods and services) by 2000/01 to establish a safer cushion againstexternal shocks. However, to avoid high-cost, short-term borrowing thereserve buildup will be marginal in 1991/92. Given Pakistan's current highdebt service ratios and low reserves, it is important that the Governmentpursue both restrictive demand management policies and a prudent external debtstrategy to be able to avoid a drawdown on reserves and rely on officialcapital sources rather than expensive short-term borrowing.

3.22 Pakistan is facing manageable balance of payment gaps (Table 3.4).In the near term, Pakistan's external financing requirements are projected toremain steady, at about US$ 3 billion p.a. during the period 1991/92-1993/94,despite the sharp fall in the primary current account deficit, partly due tothe need to accumulate reserves. Official sources of capital are projected toprovide some 802 of these financing needs. In 1991/92, unless there areslippage in the implementation of the adjustment program that could bothincrease the current account deficit and lead donors to postpone balance ofpayments support, the remaining gap (after the balance of payments support tobe provided by the World Bank, IMF and other donors) to be financed would bein the order of US$ 140 million. The Government has asked its officialcreditors to help finance this gap through additional quick disbursingassistance. Extraordinary assistance over and above the US$140 million wouldfurther strengthen the reserves position. No financing gap is projected inlater years, assuming that official commitments and disbursements continue at

5/ However, mainly because of the expected fast disbursing support fromofficial donors to Pakistan's adjustment program, official net transfersare expected to increase temporarily in the current and the next two years.

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recent levels and that the projected increase in private capital flows isforthcoming.

3.23 Beyond 1993/94, debt service payments are projected to increasefrom about US$ 2.3 billion in 1993/94 p.a. to US$ 4 billion at the end of theprojection period. In parallel to the rapidly expanding economy, the primarycurrent account deficit is also projected to increase from US$ 0.1 billion toabout US$ 1.1 billion during this same time period. In total, Pakistan'sexternal financing requirements are expected to expand to about US$ 5.5billion p.a. by the beginning of the next century. For reasons explainedabove, official sources of capital are projected to decline in relativeimportance and will only provide some 60-65% of these requirements; privatecapital would fill the residual.

3.24 These trends in external financing will lead to changes in thecomposition of Pakistan's external debt by the beginning of the next century.The share of concessional debt in total official debt outstanding is expectedto decline to 64Z in 2000/01 from 732 at end 1990/91, while the share ofprivate creditors in total medium- to long-term debt outstanding is projectedto increase to 12Z from 4% over this same period. With these shifts in thecomposition of external debt outstanding, the average interest rate is alsoprojected to increase by 70 basis points to 6.1% by the end of the projectionperiod, and average grace and maturity periods will shorten.

D. Risks

3.25 There are substantial risks that this high-case scenario will notbe realized even if the policy reforms included in the PFP are implemented asscheduled. First, unfavorable changes in the external environment may affectPakistan's growth prospects; especially important are those assumptions thatare critical for exports, for example the projected growth in world trade andcontinued access to major markets for Pakistan exports, in particular cottonbased manufactures. In addition, Pakistan is still highly vulnerable toexternal terms of trade shocks, in particular changes in internationalpetroleum prices as a result of delays in developing domestic energy sources.It is estimated that the current account of the balance of payments woulddeteriorate by some US$ 90 - 100 million per US$ 1 per barrel increase incrude oil prices.

3.26 Workers' remittances, which in 1990/91 provided foreign exchangeto finance about 45% of the deficit on the goods and services account, arealso important for Pakistan's balance of payments. However, with the recentintroduction of financial assets denominated in foreign exchange (foreign

Table 3.4: ExternaL Financing Requirements

1990/91 PROJECTEDProv.

Actual 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01

FINANCING REQUIREMENTS 3384 3036 2915 2926 3035 3542 3818 4069 4637 5178 5461(USS miltion)

Primary Current Account Deficit (1) 1169 584 258 191 276 430 601 801 1016 1162 1147Interest Payments 938 1022 1117 1213 1244 1287 1363 1440 1540 1674 1823Amortization 1126 1230 1076 1146 1144 1266 1371 1545 1796 1951 2143Repurchase INF 120 99 150 99 58 163 130 110 90 85 55Changes in Gross Reserves -72 179 414 297 312 396 353 173 196 306 293Other Reserves Changes 102 -84 -100 -20 0 0 0 0 0 0 0

FIKANCING SOURCES (USS million) 3384 2896 2915 2926 3035 3542 3818 4069 4637 5178 5461

Public Capital NLT 2134 2580 2281 2426 2331 2514 2658 2723 2948 3156 3255o/w Grants 592 371 335 255 263 290 340 370 390 430 460

INF Purchases 0 308 0 0 0 0 0 0 0 0 0IBRD + IDA Disbursements 473 615 724 816 732 794 791 814 863 880 887Other Donors Disbursements 1069 1288 1222 1355 1336 1430 1528 1540 1695 1846 1908

Private Capital NLT 449 680 535 399 544 787 870 986 1240 1456 1587o/w Direct Foreign investment (net) 227 277 303 300 314 337 345 376 410 446 487 OD

Guaranteed Debt 202 269 204 74 180 360 405 460 600 710 780Non-Guaranteed 20 34 28 25 50 90 120 150 230 300 320

Other 801 -264 99 100 160 240 290 360 450 565 S 0Financing Gap 0 140 0 0 0 0 0 0 0 0 0

Memorandum Item:

Distribution Financing Sources (X) 100 100 100 100 100 100 100 100 100 100 t00o/w Public Sector MLT 63.1 89.1 78.2 82.9 76.8 71.0 69.6 66.9 63.6 61.0 59.6

Private Sector NLT 13.3 20.0 18.4 13.7 17.9 22.2 22.8 24.2 26.7 28.1 29.1Other 23.7 -9.1 3.4 3.4 5.3 0.8 7.6 8.8 9.7 10.9 11.4Gap 0 4.8 0 0 0 0 0 0 0 0 0

Financing Requirements Total (as X of GDP) 7.5 6.5 5.7 5.3 4.9 5.2 5.0 4.8 4.9 5.0 4.7o/u Primary Current Account 2.6 1.3 0.5 0.3 0.4 0.6 0.8 1.0 1.1 1.1 1.0

Debt Service 4.8 5.1 4.6 4.4 4.0 4.0 3.8 3.7 3.7 3.6 3.5Changes in Reserves 0.1 0.2 0.6 0.5 0.5 0.6 0.5 0.2 0.2 0.3 0.3

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exchange accounts) with yields tied to LIBOR, Pakistani emigrants areincreasing>y directing their transfers through this new channel rather thanthrough traditional remittances. Changes in the stocks of these financial assetsare for the purposes of the balance of payments projections reflected in thecategory other short-term capital.° The high-case projections assume that thissubstitution effect will only become significant in the latter years of theprojection period, once the temporary increase in workers' remittances projectedfor the period 1991/92 - 1993/94 (para. 95) reverses itself. If -this temporaryincrease in remittances does not materialize because of the substitution effect(i.e. if foreign exchange is channeled through the capital rather than thecurrent account), it will be very difficult to achieve the current accounttargets. While the overall balance of payments would remain unchanged, netforeign liabilities would be larger and Pakistan's creditworthiness indicatorswould be adversely affected (i.e. the total stock of debt and interest paymentswould be larger).

3.27 The lukewarm performance of the agricultural sector during the1980's, if not corrected, may reduce growth prospects. Pakistan's potential forexpanding agricultural land is very limited and further increases in output willneed to originate principally from improvements in yields. In these projections,it is assumed that agriculture will expand at about 4% p.a. on average on thebasis of recent actions undertaken by the Government authorities. However,without further decisive action, and given the long-term nature of some ofagriculture's constraints, the sector may be hard pressed to achieve the targetgrowth rate.

3.28 Another set of risks relates to slippage in the policy area thatwould significantly affect Pakistan's macroeconomic prospects. Using the past asa guide, the most important risks regard public finances, in particularimprovements in resource mobilization and absorptive capacity, and restructuringpublic expenditure. The reform program in these areas is quite ambitiousentailing very significant increases in public sector revenues from the averagelevels achieved in the 1980's, and additional to those generated by the measuresalready introduced in 1991/92. Moreover, sharp increases in priority current anddevelopment expenditures will be needed, while at the same time curtailingexpenditures in non-productive areas.

3.29 These structural reform measures are required Inot only for short-termstabilization but also for strengthening the economy's base for sustained growthand social development. If the resource mobilization effort does not succeed inraising resources as quickly as projected, the Government would be faced with thedilemma of either postponing critical investments and expenditures in the socialsectors or running higher budgetary deficits. In the former case, growth,poverty reduction and improvements in social indicators would be postponed, with

6/ This is an unconventional way of classifying these inflows of foreignexchange. Part of these inflows (foreign exchange accounts held by non-residents in domestic commercial banks) should be classified below theline as increases in foreign exchange liabilities. However, to simplifythe modeling, we have decided to account for all these inflows above theline as increases in short-term debt.

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negative political and social consequences. Large budgetary deficits, iffinanced through domestic borrowing would lead to inflationary pressures andveaken Pakistan's balance of payments and reserve situation, and/or would crowdout private investment and reduce growth prospects. If, however, the budgetarydeficits are financed through external borrowing (if it is forthcoming), such apolicy would worsen Pakistan's creditworthiness as well as perhaps lead to anappreciation of the real exchange rate and a loss of competitiveness.

3.30 Slippage and adverse developments, if not corrected, would negativelyaffect Pakistan's growth prospects. This is particularly important for delays inimproving resource mobilization, increasing public expenditures and reducing theoverall fiscal deficit, as well as for adverse developments such as lower thanexpected workers' remittances and weaker performance of the agricultural sectorthan in the high-case. In such circumstances, without quick corrective actions,the high investment levels would remain suboptimal (as a result of the publicsector's tighter resource constraint) the pace of reducing the overall budgetarydeficit would be substantially slower, the improvement in the current account ofthe balance of payments would be both smaller and more gradual because of lowerworkers' remittances and exports, and higher agricultural imports, and the:oreign exchange reserve situation would remain weak and a source of constantconcern.

3.31 For illustrative purposes, the projected outcome of one combinationamong the many possible of adverse external developments and policy slippage ispresented in Table 3.5. The main differences between this alternative scenarioand the high-case scenario in the assumptions regarding policy implementation andexternal environment are: (i) a slower pace in implementing revenue enhancingmeasures; (ii) lower public development expenditures as the Government cuts backon outlays in order to attain the overall fiscal deficit target and is lesssuccessful in improving absorptive capacity and eliminating projectimplementation constraints; (iii) less private sector investment in reaction tothe less favorable economic environment resulting from slippage in the fiscal aswell as in the incentive/regulatory front: (iv) a weaker performance of theagricultural sector which only expands marginally above the population growthrate during the early 1990's; and (v) a sharper and faster decline in workers'remittances which never recover from the negative shock of the Gulf Crisis.

3.32 This combination of policy slippage and external shocks, while notcatastrophic, would significantly reduce growth and development prospects duringthe 1990's. Investment rates would be significantly below the rates achieved inthe high-case scenario, and growth would remain below 6% p.a. throughout theperiod. Export growth, while remaining strong in the initial three year period,would decline in the medium-term, in line with the growth of GDP and the moremoderate inv3stment levels. The overall budgetary deficit target would beachieved, but the fiscal adjustment would be slow and at the cost of developmentexpenditures. Hence, critical infrastructure and social improvements would needto be postponed. On the external front, despite that import growth would be lessstrong than in the high-case scenario because of less growth and investment, thecombination of lower exports and workers' remittances would result in highercurrent account deficits as a percentage of GDP. The improvement in externalcreditworthiness indicators would be very gradual, and private capital would be

71

less forthcoming and Pakistan's reliance on foreign saving and official sourcesof capital would continue to be large.

Table 3.5: Alternrtive ScenarioSelected Key Indicators

1991/92 - 1993/94 1997/95 - 2000/01Indicator High ALternate High A ternate

Case Case Case Case

- Growth Indicators (% change in constant prices)

GDP Growth 6.3 5.5 6.5 5.9Exports GNFS 9.2 8.8 6.5 5.8Inport GNFS 5.1 5.0 5.4 4.5

- Savings Investment Balances (X of GDP)

Gross Investment 19.1 19.3 22.4 20.8Domestic Savings 14.9 14.2 18.9 17.4National Savings 16.7 15.5 19.8 17.7

- Public Sector Accounts (% of GDP)

Govermnent Investment 6.9 6.9 8.3 7.6Goverrent Saving 2.0 1.7 3.5 2.8Overal Fiscal Balance -4.8 -5.3 -4.8 -4.8

- External Sector Accounts (% of GDP unless otherwise indicated)

Current Account Balance -2.9 -3.7 -2.6 -3.1Debt Outstanding -45.2 -46.3 36.4 39.4Debt Service/Current Receipts 20.3 21.0 16.5 18.2

3.33 While the above description of the effects of policy slippage may indicatethe direction of change, it may not fully capture its true severity. Theprojection model used for these scenarios naively assumes a smoothly adjustingeconomy, which minimizes the effects of such slippages. The effects may not beminimal, at all. While the "high case" contains an assumption on the mutuallyreinforcing value of policy measure, leading to a virtuous cycle of vigorousmacroeconomic and structural adjustment, serious "policy slippage" can lead to avicious cycle of high fiscal deficits, high inflation, high balance of paymentsdeficits, low development expenditures and low growth, which became mutuallyreinforing in a downward spiral that is hard to stop.

3.34 In summary, Pakistan's macroeconomic performance will depend critically onthe strength of the policy reforms measures undertaken by the Government. Withdecisive and sustained actions on the economic policy front, Pakistan's largeeconomic potential can be realized. The recent improvements in macroeconomicmanagement, the important trade, financial and supply side reforms implemented bythe authorities since early 1991 give reason for optimism. However, theadjustment program is ambitious and the recent adjustment efforts would need tobe considerably strengthened for the high-case scenario described above in thischapter to be fully realized.

72

STATISTICAL APPENDIX

Table of Contents

Table No.

POPULATION

1.01 Mid-Year Population Esrriates. 1961-911.02 Percentage Distribution of Employed Labor Force by Occupation Groups, and by

Rural and Urban Areas, 1974/75-1989/901.03 Labor Force by Major Industry, 1960/81-1989/901.04 Labor Force by Major Industry (Percent) 1981/81-1989/90

NATIONAL ACCOUNTS

2.00 Sectoral Growth Rates at Constant Factor Cost, 1982/83-19901912.01 Gross Domestic Product at Current Factor Cost, 1982183-1990/912.02 Gross Domestic Product at Constant Factor Cost, 1982183-1990/912.03 Gross Domestic Expenditure at Current Market Prices, 1982183-1990/912.04 Gross Domestic Expenditure at Constant Prices, 1982/83-1990/912.05 Gross Domestic and National Savings at Current Prices, 1982/83-1990/912.06 Gross Domestic and National Savings at Constant Prices, 1982/83-1990/912.07 Fixed Capital Formation by Economic Sector at Current Prices, 1982/83-1990/91

TRADE, BAIANCE OF PAYM ENTS AND FOREIGN ASSISTANCE

3.01 (Summary Balance of Payments. 1985/86.1990/913.02 Gold and Foreign Excnange Position. Assets and Liabilities of Scheduled Banks

and Use of IMF Credit. 1982/83-1990/913.03 Composition of Merchandise Exports. 1983/84-1990/913.04 Composition of Merchandise Imports, 1983/84-1990/913.05 Exports by Destination, 1982183-1990/913.06 Imponrs by Source, 1982183-1990/913.07 Merchandise Expons and Imports by Economic Categories, 1983/84-1990/913.08 Unit Value Indices of Exports and Imports, and

Terms of Trade, 1980/81-19901913.09 Workers' Remittances by Month 1981182-19901913.10 Workers' Remittances by Country 1982183-19901913.11 Foreign Exchange Rates, 1985/86-1990191

EXTRtNAL DEBT

4.01 Medium and Long Term Pubric and Public Guranteed Loans & Grants AnnualCommitments, Disbursements, Service Payments and External Debt Outstanding

4.02 Medium & Long-Term Public and Public Guranteed Debt Disbursed andOutstcnding by Credtor Countries/Agencies

4.03 Net Flows and Net Transfer of Developedment Assistance by CreditorCountrIes/AgencI", 1990191

4.04 Disbursements of Foreign Economic Assistance oans & Grants) by Type& Source, July 1990 to June 1991

4.05 Commitments and Disbursements of Foreign Economic Assistance (duringJuly 1990 to June 1991)

PUIBIJC FINANCE

5.00 Summary of Public Finance, 1984/85$1990W915.01 Consolidated Federal and Provincial Govemment Tax and Nontax

Revenue, 1984/85-1990/91

73

Tble No. .2.

MONEY AND BANXINNG

6.01 Monetary Survey. 1982183-1990/916.02 Factors Affecting Domestic Liquidity, 1982/83-1990/916.03 Interest Rates on Bank Deposits and Advances. 1982-91

AGRICULTURE

7.01 Indices of Agricultural Production, 1981/82-1990/917.02 Area under Cultivation. 1981/82-1990/917.03 Agricultural Production, 1981/82-1990/917.04 Yield Per Hectare of Agricultural Crops, 1981/82-1990/917.05 Area end Production of Rice by Variety, 1981/82-19901917.06 Area and Production of Wheat by Variety, 1981182-19901917.07 Foodgrain Utiliztion. 1981/82-1990/917.08 Fertilizer Balance Sheet, 1981/82-1990/917.09 Irrigation Water Supply, 1960/61-1990/917.10 Sale Prices of Fenilizers. 1981/82-1990/917.11 Procurement and Minimum Prices for Agricultural Commodities, 1981/82-1990/91

INDUSTRY

8.01 Production of Seleted Industrial Items, 1982/83-1990/918.02 Indices of Manufacturing Output, 198V83-1989/90 & 1990/91 (July-Dec)8.03 Gross Fixed Capital Formation In Industry, 198219901918.04 Gross Fixed Capital Formation In Private Large and Medium-Scale Industry. 192583-1990/918.05 Gross Fixed Capital Formation in Small-Scale Industry. 198213-1990/91

ENERGY

9.00 Commercial Energy Supplies, 1982/83-1990/919.01 Energy Balance Sheet. 1982/8-119901919.02 Energy Consumption by Sector. 1982/83-1990/919.03 Energy Consumption by Residential Sector, 198253*-19901919.04 Energy Consumption In the Industrial Sector,1962/63-1990/919.05 Field-Wise Production of Crude Oil. 1982183-1990/919.06 Production of Natural Gas by Fields, 119213119901919.07 Production of Assoeiad Gas by Fields. 19183-9iO1919.06 Field-Wise Production of Coal, 1982183-1990/919.09 Installed Capactiy of Electricity Generation. 1986283-1990/919.10 Generation of Electricity by Source, 1982183-19901919.11 Fuel ConsumpUon (Mix) for Thermal Power Generation, 1982M3-1990/91

PRICES

10.01 Wholse Price Index Numbers. 19883-1990,9110.02 index Numbem of Wholesale Prioes by Commodtee, 10 3199W9110.03 Consunwr Prico Inrex Number. 1962183-119091

74

Table 1.01: MID-YEAR POPULATION ESTIMATES, 1961-1991

Year Population(thousands)

1961 46,9211962 48,2761963 49,6701964 51,1041965 52,579

1966 54,0951967 55,6541968 57,2581969 58,9091970 60,607

1971 62,4251972 64.9051973 66,8791974 68,9241975 71,033

1976 73,2051977 75,4441978 77,7521979 80,1301980 82,581

1981 85,1181982 87 7581983 90,4801984 93,2861985 96,180

1986 99,1631987 102,2381988 105,4091989 108.6781990 112,0491991 115,524

Notes on estimation:

1. Mid-year estimates refer to July 1 of the year.2. The estimates for individual years have been computed by the Federal Bureau of Statistics

on the basis of decennial Censuses plus constant geometric growth rates derived from thefive-year projections of the Planning.

Source: Federal Bureau of Statistics.

75

TabLe 1.02: DISTRIBUTION OF EMPLOYED LABOR FORCE BY OCCUPATION GROUPS,----------- AND BY RURAL AND URBAN AREAS, 1970/71-1989/90

Item 1974/75 1978/79 1982/83 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Professional and technical 3.0 3.1 3.1 3.5 3.3 3.8 3.8 3.8 3.8Ads., executive and managerial 0.7 0.7 0.9 0.9 1.1 0.7 0.7 0.7 0.7Clerical 2.7 2.9 3.0 3.5 3.4 4.0 3.8 3.8 3.8Salesmen 10.0 10.1 10.2 10.2 10.2 11.3 10.9 10.9 10.9Farmers, Fishermen, etc. 54.7 52.6 52.8 50.1 53.5 48.8 50.6 50.6 50.6Miners, quarrymen and related - - - * - - -

Production and related workers\a 24.3 25.9 25.2 27.2 24.1 26.9 25.7 25.7 25.7Service, sports, recreation 4.5 4.6 4.8 4.5 4.4 4.3 4.3 4.3 4.3Workers not classified 0.1 - 0.3 0.1 0.1 0.1 0.1 0.1

Urban total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0... ......

Professional and technical 6.3 6.3 6.4 6.7 7.0 7.5 7.8 7.8 7.8Ads., executive and managerial 2.4 2.6 2.8 2.5 3.6 2.2 2.3 2.3 2.3Clerical 8.2 8.1 7.1 8.1 8.4 9.0 8.8 8.8 8.8Salesmen 23.1 22.0 23.1 22.6 24.1 23.7 24.2 24.2 24.2Farmers, fishermen, etc. 6.3 5.7 6.8 7.5 6.6 6.4 6.0 6.0 6.0Miners, quarrymen and related - - -Production and related workers\a 44.7 46.0 46.0 44.6 42.4 43.9 42.7 42.7 42.7Service, sports, recreation 8.9 9.3 7.9 7.5 7.8 7.2 8.0 8.0 8.0Workers not classified 0.2 - - 0.5 0.2 0.1 0.2 0.2 0.2

Rural total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Professional and technical 1.8 2.0 2.0 2.3 2.0 2.5 2.4 2.4 2.4AdD., executive and managerial 0.1 0.1 0.2 0.3 0.2 0.1 0.2 0.2 0.2Clerical 0.7 1.3 1.7 1.7 1.5 2.2 2.0 2.0 2.0Salesmen 5.3 6.4 6.1 5.5 5.3 6.7 6.1 6.1 6.1Farmers, fishermen, etc. 71.9 67.4 67.8 66.0 70.4 64.7 66.8 66.8 66.8Miners, quarrymen and related - - - - - -

Production and related workers\a 17.1 19.6 18.5 20.6 17.5 20.5 19.5 19.5 19.5Service, sports, recreation 2.9 3.1 3.8 3.4 3.2 3.3 3.0 3.0 3.0Workers not classified 0.1 - 0.2 0.0 0.1 0.1 0.1 0.1

\a includes data on workers in transportation.

Note: Data from 1972 onwards not strictly comparable with those for previous years.Total may not add up to 100 due to rounding effect.

Source: Federal Bureau of Statistics.

76

Table 1.03: LABOR FORCE DV MAJOR INDUSTRY, 1977/78-1989/90 a........ - z(Thousands)

1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 i988/89 1989/90

Agriculture, huntingforestry and fishing 13,207 13,616 13,633 14,056 13,631 14,597 14,133 14,831 15,292 15,766

Mining and quarrying 35 36 26 26 46 70 66 43 45 46anufacturing 3,642 3,755 3,475 3,582 3,685 3,552 4,018 3,682 3,794 3,912

Construction 1,234 1,272 1,241 1,279 1,510 1,417 1,725 1,850 1,908 1,967Electricity, gas and

water 185 191 292 301 186 141 209 171 177 182Conmrce 2,779 2,865 3,087 3,18 3,LT 3,082 3,458 3,456 3,564 3,674transport. storageand comuunicetions 1,187 1,223 1,186 1,224 1,402 1,195 1,507 1,418 1,462 1,508

Finaialt institutiopaand Insurance 215 222 212 219 237 254 221 206 212 219

Services 2,533 2,612 2,634 2,716 2,984 2,706 3,295 3,303 3,405 3,511Activities notadequately described 68 69 70 72 169 19 71 35 i6 37

Uneetoyed 923 952 1,049 1,082 1,042 1,018 903 937 966 996

Totat 26,008 26,813 26,905 27,740 28,003 28,051 29,606 29,932 30,861 31.818

Sa Estirates as of January 1.

Source: Federal Bureau of Statistics based on Labor Force Surveys.

Table 1.04: LABOR FORCE BT MAJOR INDUSTRY, 1977/78-1989/90 No----- SFFc (Percentage of total)

1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/8 1987/88 1988/89 1989/90

Agriculture, huntingforestry and fishing 50.8 50.8 50.7 50.7 *8.7 52.0 47.7 49.6 49.6 49.6

Mining end quarrying 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.1 0.1 0.1Manufacturing 14.0 14.0 12.9 12.9 13.2 12.7 13.6 12.3 12.3 12.3Construction 4.7 4.7 4.6 4.6 5.4 5.1 5.8 6.2 6.2 6.2Electricity, gas and

water 0.7 0.7 1.1 1.1 0.7 0.5 0.7 0.6 0.6 0.6Coaerce 10.7 10.7 11.5 11.5 11.1 11.0 11.7 11.6 11.6 11.6Transport, storage

and coajwnicstions 4.6 4.6 4.4 4.4 5.0 4.3 5.1 4.7 4.7 4.7financilt institutions

and insurance 0.8 0.8 0.8 0.8 o.a 0.9 0.8 0.7 0.7 0.7Services 9.7 9.7 9.8 9.8 10.7 9.6 11.1 11.0 11.0 11.0Activities not

adeoustoty described 0.3 0.3 0.3 0.3 0.6 0.1 0.2 0.1 0.1 0.1UnewWoyed 3.6 3.6 3.9 3.9 3.7 3.6 3.1 3.1 3.1 3.1

total 100 100 100 100 100 100 100 100 100 100

Note: lotat esy not add to 1OO due to rounding effect.

Source: table 1.03

Table 2.00: SECTORAL GiROTH RATES AT CiSTANT 1980/81 FACTOR COST, 192-/31990/91 a/(atmt percent rate)

Item 1982/83 1"3/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 190/91

Agriculture 4.40 -4.82 10.92 5.95 3.25 2.73 6.87 2.74 5.09Mining ond quarrying -0.26 1.46 13.46 23.66 7.54 13.66 2.07 9.27 9.50Manufacturing 7.03 7.89 8.09 7.5S 7.53 9.98 3.96 5.70 5. 74Construction -2.71 0.9? 9.40 6.69 12.46 4.94 2.26 3.12 4.65Electricity, gas wd water 6.67 13.54 2.62 11.70 10.11 16.34 13.20 13.83 9.85Transport, storge t cmmun. 7.95 8.27 7.94 4.95 7.23 6.82 4.01 6.81 8.42Ctrce 8.40 5.60 11.71 6.72 5.96 8.99 5.28 3.87 5.29Finsncfat inst. 15.51 16.92 -0.17 3.48 0.80 3.74 3.08 2.90 3.71Ownrship of dwltings 14.46 14.69 10.18 5.28 5.28 5.25 5.28 5.28 5.28Putlic uifsetration t defense 10.01 7.92 3.12 5.30 5.45 4.18 7.90 2.73 1.97Services 6.53 6.53 6.53 6.53 6.53 6.53 6.53 6.53 6.53COP it factor coat 6.79 3.97 8.71 6.36 5.81 6.44 4.81 4.63 5.58

a/ figures for 1989/90 are revised ard for 1990/91 are provisloio .

Sowree Pluming and Devetopent Division.

77

Table 2.01: GROSS DOMESTIC PRODUCT AT CURRENT FACTOR COST 1982/83-1990/91 a/----- (million rupee)

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Agriculture 99,380 104,550 121,293 128,801 135,308 156,375 184,074 196,071 230,388Major crops 50,147 44,903 53,797 58,102 59,199 64,934 75,804 82,053 93,523Minor crops 18,410 23,742 26,329 24,723 24,162 27,864 35,938 32,216 44,072Livestock 26,740 31,396 36.391 40,858 46,450 57,438 65,038 74,237 84,699Fishing 3,111 3,347 3,524 3,793 3,960 4,492 5,442 5,662 5,792Forestry 972 1,162 1,252 1,325 1,537 1,647 1,852 1,903 2,302

Mining and quarrying 1,342 1,599 2,064 3,281 3,681 4,811 4,932 5,389 6,262Manufacturing 50,200 60,398 67,596 75,881 85,850 100,917 113,517 132,296 154,091

Large scale 37,357 45,518 49,856 54,823 61,826 73,248 80,745 93,703 108,660Small scate 12,843 14,880 17.740 21,058 24,024 27,669 32,772 38,593 45,431

Construction 13,666 14,716 17.116 19,052 22,508 25,109 27,706 32,052 36,790Electricity, gas and water 7,284 8,270 8,740 10,639 11,789 15,690 17,093 21,935 28,898Transport, storage &

comuDnications 31,092 35,199 38,219 41,196 44,624 51,047 54,316 60,915 72,822Cormerce 49,957 58,221 67,632 72,742 80,886 100,585 115,810 128,976 152,416Financial Institutions andinsurance 9,383 12,079 13,370 14,855 16,334 18,496 20,060 21,615 24,497

Ownership of dwellings 15,734 18,836 21,535 23,462 25,472 27,776 30,243 34,126 38,961Public administration & defense 26,467 33,133 36,714 42,053 51,018 57,309 65,179 69,115 75,459Services 23,907 27,348 30,785 34,357 37,961 42,910 50,208 56,859 67,223GDP at factor cost 328,412 374,349 425,064 466,319 515,431 601,025 683,138 759,349 887,807Indirect taxes less subsidies 35,975 45,453 47,093 48,213 57,048 74,364 86,607 103,103 128,921GDP at market prices 364,387 419,802 472,157 514,532 572,479 675,389 769,745 862,452 1,016,728

a/ Figures for 1989/90 are revised and for 1990/91 are prSource: Planning and Development Division.

Table 2.02: GROSS DOMESTIC PRODUCT AT CONSTANT FACTOR COST OF 1982/83-1990/91 a/----- (million 1980/81 rupees)

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Agriculture 83,532 79,502 88,187 93,433 96,473 99,108 105,917 108,820 114,360Major crvis 42,837 36,710 43,390 46,212 46.965 48,452 51,842 51,844 55,849Minor crops 15,156 15,668 16,109 16,742 17,317 16,756 18,205 19,260 18,933Livestock 21,664 22,956 24,356 25,865 27,351 28,906 30,614 32,481 34,105Fishing 2,963 3,130 3,293 3,544 3,650 3,776 3,999 4,117 4,180Forestry 912 1,038 1,039 1,070 1,190 1,218 1,257 1,118 1,293

Mining and quarrying 1,164 1,181 1,340 1,657 1,782 2,029 2,071 2,263 2,478Manufacturing 45,592 49,187 53,166 57,180 61,484 67,622 70,300 74,309 78,576

Large scale 33,847 36,455 39,365 42,220 45,267 50,043 51,244 53,652 56,184Smell scale 11,745 12,732 13,801 14,960 16,217 17,579 19,056 20,657 22,392

Construction 11,910 12,025 13,155 14,035 15,784 16,563 16,937 17,466 18,278Electricity, gas and water 6,425 7,295 7,486 8,362 9,207 10,711 12,125 13,802 15,162Transport, storage & comuun. 27,971 30,283 32,688 34,305 36,785 39,293 37,716 40,285 43,678Commerce 44,397 46,440 51,876 55,361 58,661 63,932 67,305 69,909 73,609Financial institutions andinsurance 7,498 8,767 8,752 9,057 9,111 9,452 9,743 10,026 10,398

Ownership of dwellings 14,125 16,200 17,849 18,791 19,784 20,828 21,928 23,086 24,305Public administration & defense 21,490 23,192 23,916 25,183 26,556 27,666 29,852 30,667 31,271Services 20,563 21,905 23,336 24,860 26,483 28,212 30,054 32,017 34,108GDP at factor cost 284,667 295,977 321,751 342,224 362,110 385,416 403,948 422,650 446,223Indirect taxes less subsidies 31,806 36,526 35,996 35,205 39,672 47,003 49,918 55,384 62,989GDP at market prices 316,473 332,503 357,747 377,429 401,782 432,419 453,866 478,034 509,212

a/ Figures for 1989/90 are revised and for 1990/91 are provisionat.Source: Planning and Development Division.

78

Table 2.03: GROSS DOMESTIC EXPENDITURE AT CURRENT MARKET PRICES, 1982/83-1990/91 a/......... (million rupees)

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 I990/91

Available Resources 402,344 464,381 527,021 565,906 611,747 725,725 826,233 923,692 1,075,273...................

Consumption 333,882 387,680 440,496 469,361 502,207 604,059 680,663 762,924 888,738...........

Private 292,276 336,939 383,370 403,699 424,725 499,305 551,462 633,362 751,235Public 41,606 50,741 57,126 65,662 77,482 104,754 129,201 129,562 137,503

Gross Domestic Investment 68,462 76,701 86,525 96,545 109,540 121,666 145,570 160,768 186,535.........................

Gross fixed Investment 61,761 69,212 77,925 87,545 100,040 111,266 133,170 146,768 170,737Private 26,758 31,419 35,840 39,959 44,349 51,769 64,162 75,255 88,658Public 35,003 37,793 42,085 47,586 55,691 59,497 69,008 71,513 82,079

Changes in stocks 6,701 7,489 8,600 9,000 9,500 10,400 12,400 14,000 15,798

External Resource Balance b/ -37957 -44579 -54864 -51374 -39268 -50336 -56488 -61240 -58545. . . . . .....................* .. .....

Exports (G. & N.F.S.) 46,040 50,563 52,833 64,939 80,922 96,606 111,668 139,704 165,038Imports (G. & N.F.S.) 83,997 95,142 107,697 116,313 120,190 146,942 168,156 200,944 223,583

GDP at Market Prices 364,387 419,802 472,157 514,532 572,479 675,389 769,745 862,452 1,016,728

Net fector income frorabroad 31,442 31,098 29,395 31,437 26,921 20,732 19,316 20,699 16,187

GNP at Market Prices 395,829 450,90) 501,552 545,969 599,402 696,121 789,061 883,151 1,032,915

a/ Figures for 1989/190 are revised and for 1990/91 are provisionat.b/ Derived from balance of payments.Source; Planning and Development Division.

Table 2.04: GROSS DOMESTIC EXPENDITURE AT CONSTANT PRICES, 1982/83-1990/91 a/----- (million 1980/81 rupees)

Itern 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/1

Available Resources 343,465 365,935 396,218 410,701 428,301 459,812 479,566 502,198 520,532......... .. . ...

Consumlption 280,039 299,476 323,000 334,323 348,726 381,261 395,119 416,646 431,031

Private 243,751 258,760 279,533 286,497 294,568 324,744 327,067 350,751 364,292Pubtic 36,288 40,716 43,467 47,826 54,158 56,517 68,052 65,895 66,739

Gross Domestic Investment 63,426 66,459 73,218 76,378 79,575 78,551 84,447 85,552 69,501..... ....... . ......

Gross fixed investment 57,502 60,441 66,648 69,806 72,969 71,977 77,300 78,033 81,782Private 24,987 27,470 30,663 31,651 31,438 32,308 35,197 37,477 42,466Public 32,515 32,971 35,985 38,155 41,531 39,669 42,103 40,556 39,316

Changes in stocks 5,924 6,018 6,570 6,572 6,606 6,574 7,147 7,519 7,719

External Resource Balance b/ (26,992) (33,432) (38,471) (33,272) (26,519) (27,393) (25,700) (24,164) (11,320)........ .. ... .. ...

Exports (C. & N.F.S.) 43,369 42,572 42,498 54,704 61,281 58,942 63,964 69,298 82,366Imports (G. & N.F.S.) 70,361 76,004 80,969 87,976 87,800 86,335 89,664 93,462 93,686

GDP at Market Prices 316,473 332,503 357,747 377,429 401,782 432,419 453,866 478,034 509,212

Net factor income fromabroad 26,338 24,843 22,100 23,7s' 19,668 12,181 10,300 9,627 6,783

GNP at Market Prices 342,811 357,346 379,847 401,207 421,450 444,600 464,166 487,661 515,995

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.b/ Derived from balance of payments.Source: Planning and Development Division.

79

Table 2.05: GROSS DOMESTIC AND NATIONAL SAVINGS AT CURRENT PRICES, 1982/83-1990/91 a/----- (million rupees)

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

GNP at market prices 395,829 450.900 501,552 545,969 599,402 696,121 789,061 883,151 1,032,915............. .................. ...

GOP at market prices 364,387 419,802 472,157 514,532 572,479 675,389 769,745 862,452 1,016,728Consumption 333,882 387,680 440,496 469,361 502,207 604,059 680,663 762,924 888,738

Gross domestic savings 30,505 32,122 31,661 45,171 70,272 71,330 89,082 99,528 127,990,......................

Net factor income from abroad 31,442 31,098 29,395 31,437 26,923 20,732 19,316 20,699 16,187Gross national savings 61,947 63,220 61,056 76,608 97,195 92,062 108,398 120,227 144,177......................

Public savings 4,630 8,500 1,810 8,810 2,823 9,012 1,499 10,843 24,074Private savings 57,317 54,720 59,246 67,798 94,372 83,050 106,899 109,384 120,103

Gross domestic savings rate b/ 8.4 7.7 6.7 8.8 12.3 10.6 11.6 11.5 12.6. *..........................

Gross national savings rate c/ 15.6 14.0 12.2 14.0 16.2 13.2 13.7 13.6 14.0.... ...... ........ .............. ....

Public savings rate 1.2 1.9 0.4 1.6 0.5 1.3 0.2 1.2 2.3Private savings rate 14.5 12.1 11.8 12.4 15.7 11.9 13.5 12.4 11.6

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.b/ Percent of GDP.c/ Percent of GNP.Source: Planning and Development Division.

Table 2.06: GROSS DOMESTIC AND NATIONAL SAVINGS AT CONSTANT PRICES, 1982/83-1990/91 a/----- (million 1980/81 rupees)

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

GDP at market prices 316,473 332,503 357,747 377,429 401,782 432,419 453,866 478,034 509,212. ..................

Terms of trade effect (4,803) (2,180) (2,777) (5,586) (2,167) (2,182) (4,420) (4,320) (13,212)Gross domestic income 311,670 330,323 354,970 371,843 399,615 430,237 449,446 473,714 496,000.. ..................

Consumption 280,039 299,476 323,000 334,323 348,726 381,261 395,119 416,646 431,031Gross domestic savings 31,631 30,847 31,970 37,520 50,889 48,976 54,327 57,068 64,969

Net factor incometo/from abroad 26,338 24,843 22,100 23,778 19,668 12,181 10,300 9,627 6,783

.................

Gross national savings 57,969 55,690 54,070 61,298 70,557 61,157 64,626 66,695 71,752

GNP at market prices 342,811 357,346 379,847 401,207 421,450 444,600 464,166 487,661 515,995

Memo items:Exports as capacityto inport 38,566 40,392 39,721 49,118 59,114 56,760 59,544 64,978 69,154

Exports at constant 43,369 42,572 42,498 54,704 61,281 58,942 63,964 69,298 82,366(1980/81) prices

Terms of trade effect (4,803) (2,180) (2,777) (5,586) (2,167) (2,182) (4,420) (4,320) (13,212)

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.Source: Planning and Developwent Division.

80

Table 2.07: FIXED CAPITAL FORMATION BY ECONOMIC SECTOR AT CURRENT MARKET PRICES,----- 1982/83 - 1990/91 a/

CmilLion current rupees)

Sectors 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Totat Fixed Capital Formation 61,761 69,212 77,925 87,545 100,040 111,266 133,170 146,768 170,737

Private 26,758 31,419 35,840 39,959 44,349 51,769 64,162 75,255 88,658

Agriculture 5,972 7,359 8,157 8,141 9,052 10,075 11,711 13,931 15,075Mining and quarrying 69 78 87 102 113 137 174 198 224Large scale manufacturing 5,478 7,073 8,346 10,322 11,445 13,936 20,032 24,637 29,186SmalL scale manufacturing 1,328 1,493 1,665 1,945 2,126 2,602 3,260 3,735 4,548Construction 485 322 493 477 494 507 782 1,936 1,638Electricity and gas - - - - - - -Transport and communication 1,936 2,390 3,157 3,676 4,373 5,197 6,365 6,120 8,718Financial Inst. & Insuran. 115 90 117 150 160 194 281 319 286Ownership of dwellings 8,715 9,653 10,576 11,457 12,483 14,198 15,700 17,790 20,700Wholesale & Retail Trade 392 448 509 585 656 776 951 1,099 1,326Services 2,268 2,513 2,733 3,104 3,447 4,147 4,906 5,490 6,957

Public 35,003 37,793 42,085 47,586 55,691 59,497 69,008 71,513 82,079

Government enterprises 2,688 2,677 3,194 3,728 4,815 3,961 3,583 4,400 5,538Railways 1,350 993 1,358 1,790 1,734 1,410 196 572 1,257Post Office & T&T 1,338 1,684 1,836 1,938 3,081 2,551 3,387 3,828 4,281

19,175 20,613 22,642 25,389 29,559 30,925 39,522 38,177 43,338Indus basin 987 569 244 280 336 250 142 134 207

222 824 953 2,050 2,760 1,953 3,112 1,691 1,886Large scale manufacturing 5,117 5,686 3,818 4,565 3,162 3,030 2,560 2,103 2,611Small scale manufacturing 27 14 53 57 28 37 63 92 133Electricity and gas 6,195 6,136 7,949 8,356 11,687 13,226 22,411 23,455 24,722Financial Inst & Insurance 414 564 526 655 662 661 437 470 598Agriculture 1,320 1,360 1,433 1,766 1,821 2,199 1,826 1,606 1,787Wholesale & Retail Trade 53 51 81 71 58 159 77 90 105Services 859 916 866 1,363 1,871 2,272 1,438 1,322 2,409Others 3,981 4,493 6,719 6,226 7,174 7,138 7,456 7,214 8,880

General Government 13,140 14,503 16,249 18,469 21,317 24,611 25,903 28,936 33,203Federal 4,313 4,696 5,564 6,245 7,097 7,752 8,927 9,165 9,989Provincial 6,626 7,568 8,341 9,314 10,889 12,974 12,373 13,999 16,466Local 2,201 2,239 2,344 2,910 3,331 3,885 4,603 5,772 6,748

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.Source: Planning and Development Division.

81

Table 3.01: SUMMARY BALANCE OF PAYMENTS, 1985/86-1990/91...---.... (million USS)

1985/86 1986/87 1987/88 1988/89 1989/90 1990/91Itemn (prov.)

Trade Balance -3042 -2294 -2557 -2573 -2485 -2483Exports (f.o.b) 2942 3498 4362 4634 4926 5902Imports tf.o.b) -5984 -5792 -6919 -7207 -7411 -8385

Services (net) -1016 -982 -1381 -1461 -1616 -1790Invisible Receipts 963 1013 970 1081 1398 1630Invisible Payments -1979 -1995 -2351 -2542 -3014 -3420(Freight & Insurance) (543) (499) (602) (630) (643) (709)(interest) (593) (627) (750) (805) (872) (942)

Private Transfers (net) 2822 2557 2256 2100 2210 2102(Workers' Remittances) (2596) (2278) (2013) (1897) (1942) (1848)

CURRENT ACCOUNT BALANCE -1236 -719 -1682 -1934 -1891 -2171,.......................

CAPITAL ACCOUNT BALANCE 1255 913 1566 1847 1843 2345....................

Official Transfers (net) 468 383 511 578 529 604(Refugee assistance) (135) (129) (164) (132) (140) (112)

Long-term Capital (net) 633 465 818 1261 1141 1038Public & Publicly guaranteed 433 334 652 1085 937 798Project,food,commodity aid 419 279 607 1239 891 739Disbursements 1073 1017 1312 1888 1590 1542Amortization a/ -654 -738 -705 -649 -699 -803

Other public (net) b/ 14 55 45 -154 46 59Private (net) 200 131 166 176 204 240

Short-term Capital (net) 154 65 237 8 173 703(FEBC's) (148) (64) (112) (29) (85) (93)

Errors and Omissions -26 48 -32 -33 -11 -66

OVERALL BALANCE -7 242 -148 -120 -59 108..............

Net Foreign Assets (- a increase) 7 -242 148 120 58 -290

State Bank of Pakistan -379 -391 39 110 -95 -197Gross reserves (- increase) -146 46 451 -13 -153 -71IMF (net) -250 -358 -322 140 83 -120Purchases 0 0 0 363 246 0Repurchases -250 -358 -322 -223 -163 -120

Others 17 -79 -90 -17 -25 -6Foreign Currency Deposits 496 403 155 201 266 476Other Bank Deposits (net) c/ -110 -254 -46 -191 -113 -569

MEMO ITEMS:..........

Gross Official reserves 915 886 438 459 620 572Reserves in weeks of ifports

of goods & Services 6.0 5.9 2.5 2.4 3.1 2.5Current account deficitas X of GNP 3.6 2.1 4.3 4.7 4.6 4.6

a/ Adjusted for debt relief.b/ Mainly commercial bank borrowing of over one year maturity, including IMF

Trust fund, and rescheduled amortization.c/ Includes outstanding exports bilts, autho.ised dealer's and bilateral balances.

Source: Ministry of Finance and Economic Affairs and IMF.

82

Table 3.02: GOLD AND FOREIGN EXCHANGE POSITION, ASSETS AND LIABILITIES*---- OF SCHEDULED BANKS AND USE OF IMF CREDIT, 1982/83-1990/91 a/

(million USS)

1990/91Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989190 (prov.)

State Bank Reserves b/ 1,911 1,731 672 926 902 438 459 622 572....................

Special Drawing Rights 29 36 3 28 16 11 6 2 3

Foreign exchange 1,819 1,604 581 898 886 427 453 620 569

Reserve position in the Fund 63 91 88 - - - - -

Scheduled Banks, Net (69) (146) (64) (473) (763) (886) (1,040) (1,051) (1,133)....... ....................... (

Foreign assets c/ 482 492 534 643 797 810 853 1,117 1,538Foreign liabilities 551 638 598 1,116 1,560 1,696 1,893 2,168 2,671

Total 1,842 1,585 608 453 139 (448) (581) (429) (561)

Use of IMF Credit d/ 426 (15) (82) (250) (358) (322) 140 83 (120)

Goid Holdings at SBP 1,862 1,865 1,900 1,934 1,940 1,945 1,949 1,949 1,949

(Thousand Ounces)...................

Memo Item:Gross reserves as weeksof imports e/ 13.9 11.7 4.5 6.0 5.9 2.5 2.4 3.1 2.5

a/ As of end of fiscal year. Not including claims pending settlement with Reserve Bank of Indiab/ Excluding gold holdings.cl Foreign assets have been revised by excluding figures of import bill purchased by the scheduled banks since June

d/ Not including trust fund borrowings.e/ Foreign exchange reservestincluding SORs & Reserve position in the Fund) as weeks of imports of goods & services.

Source: State Bank of Pakistan

83

Table 3.03:COMPOSITION OF MERCHANDISE EXPORTS, 1983/84-1990/91 a/---------- (million USS)

1983184 1984/85 1985/86 1986/87 1987/88 1988/89 1989/10 1990/91

CottonValue 132 279 513 447 610 930 443 412Volume (000 MT) 98 263 638 641 502 840 295 282Price (S/Kg) 1.3 1.1 0.8 0.7 1.2 1.1 1.5 1.5

RIceBasmati RiceValue 244 110 173 133 160 156 142 218Volume (00) MT) 405 174 260 188 222 228 208 466Price (S0/T) 602.5 632.2 665.4 707.4 720.7 684.2 682.7 467.8

Other VarietiesValue 177 112 169 166 203 148 97 128Volume (000 NT) 859 545 1,056 1,083 988 626 536 738Price (S/MT) 206.1 205.5 160.0 153.3 205.5 236.4 181.0 173.4

COTTON BASED MANUFACTURES 983 920 1,096 1,587 1,858 1,956 2,489 3,253Cotton YarnValue 218 260 279 507 541 601 834 1,183Volume (M.Kg) 102 126 158 259 211 292 375 503Price (O/Kg) 2.1 2.1 1.8 2.0 2.6 2.1 2.2 2.4

Cotton ClothValue 360 306 315 346 485 465 559 676Volume (N.Sq.Ntr) 664 688 727 693 849 845 1,018 1,063Price (S/Sq.Mtr) 0.5 0.4 0.4 0.5 0.6 0.6 0.5 0.6

Ready made Garments 162 132 206 355 350 335 394 497Made-up articles 123 130 210 259 318 347 399 484

(including Towels)Hosiery 56 43 55 97 134 167 274 334Tents & Canvas 64 49 31 23 30 41 29 79

OTHER TRADITIONAL EXPORTS 514 411 478 708 859 700 813 960LeatherValue 146 153 180 238 285 243 279 276Voltume (M.Sq.Mtr) 17 16 18 20 20 16 21 18Price (SJ/q.Ntr) 8.6 9.6 10.0 11.9 14.3 15.2 13.3 15.2

Carpets & RugsValue 172 134 166 200 252 230 229 222Volume (M. Sq.Mtr) 4.7 2.1 2.7 2.8 3.1 3.2 3.3 3.5Price (S/Sq.Mtr) 36.6 63.8 61.5 71.4 81.3 71.9 69.4 63.4

Fish and PreparationsValue 75 82 83 113 124, 110 94 115Volune (M.Kgs) 28 36 36 40 44 45 45 48Price (S/Kg) 2.7 2.3 2.3 2.8 2.8 2.4 2.1 2.4

SynthetIc Textiles 121 42 49 157 198 117 211 347NON-TRADITIONAL EXPORTS 718 659 641 645 765 772 970 1,162Leather Garments 14 22 45 68 96 104 159 219Leather Gloves 19 26 3V 35 39 38 36 43Sport goods 49 44 49 58 65 69 107 136Surgical Coods 32 51 52 55 57 62 70 83Fruits & Vegetables 40 38 42 43 50 47 54 51our gus finished product 24 22 27 34 52 40 42 29Pet. A Pet. products 41 34 32 26 27 18 44 99Footwear 16 16 15 16 21 19 23 32Spices 12 12 11 12 20 17 13 14Raw Wool and animal hair 14 19 18 20 19 20 19 10Crude animal materials 8 9 11 12 16 18 18 20Tobacco & products 11 11 12 13 18 1 10 5Chemicals & Pharmec.products 18 12 8 10 17 17 28 22Others 420 343 285 243 268 302 347 400EXPORTS (c.f.f) 2,768 2,491 3,070 3,686 4,455 4,662 4,954 6,133Adjustments b/ (99) (34) (128) (183) (92) (27) (28) (231)EXPORTS (f.o.b) 2,669 2,457 2,942 3,503 4,363 4,635 4,926 5,902

a/ The breakdown of total cif exports Is based on customs data. After adJustments forleads, lags and freight the value of total exports (fob) on payment basis Is determined.

b/ AdJustments account for freight, fnsurance, and lead/lagsbetween custom declarations and payments.

Source: Planning and Development Division.

84

Table 3.04: COMPOSITION OF MERCHANDISE IMPORTS, 1983/84-1990/91 a/....... ---- (million USS)

1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

WHEATValue 64 181 293 69 105 362 402 14.VolumetOOOMT) 291 980 1,909 378 601 2,171 2,047 972Unit value(/MT) 218.9 185.0 153.2 182.3 174.9 166.5 196.5 145.1

TEAValue 190 231 135 154 128 153 180 166VolumeCmil.kg) 96 84 83 92 90 105 108 104Unit value 2.0 2.7 1.6 1.7 1.4 1.5 1.7 1.6

EDIBLE OILValue 480 450 375 225 410 438 373 402VolumeCOOOMT) 752 653 815 687 958 859 940 959Unit value(S/MT) 639.0 689.8 459.7 328.0 428.0 510.0 396.6 419.2

SUGAR b/Value - - 58 161 54 11 90 160VolumetOOOMT) - - 258 749 250 43 209 433Unit value(S/MT) 222.9 214.7 216.8 244.2 428.8 369.5

PULSESValue 24 10 22 33 28 83 30 33Volume(OOOMT) 71 46 71 118 98 204 75 88Unit value(S/MT) 337.1 225.9 301.5 281.8 290.3 405.7 394.1 375.0

CRUDE OILValue 903 948 662 412 510 362 422 609VolumeCGOOMT) 4,108 4,365 3,727 3,714 3,810 3,566 3,516 4,038Unit v2lue($/MT) 219 8 217.2 177.6 110.9 133.9 101.5 120.1 150.8

POL PRODUCTSValue 519 484 382 400 538 588 741 1,082Volume(OGOMT) 2,015 1,954 1,950 3,001 3,776 4,387 5,084 4,337Unit valueCS/MT) 257.6 247.7 195.9 133.3 142.5 134.0 145.7 249.5

FERTILIZERSValue 114 120 128 188 180 189 207 264Voliume(OOT) 490 496 544 1,018 885 752 1,128 1,177Unit value($/MT) 232.9 241.9 235.3 184.7 203.4 251.6 183.3 224.0

IRON & STEEL %Value 229 211 207 208 221 297 269 255VolumerOOONT) 953 799 543 694 543 542 526 561Unit valueCS/MT) 240.5 264.5 380.3 300.0 407.7 547.8 511.9 455.2

IRON & STEEL SCRAPValue 15 11 18 29 87 79 47 71Volum(eOOOMT) 137 93 168 225 659 501 322 483Unit value($/MT) 112.4 121.5 107.7 128.9 132.0 156.7 146.4 147.8

ARTIFICIAL SILK YARNValue 118 104 82 95 124 131 107 88Volume(OOOMT) 32 26 22 24 30 33 32 27Unit value(S/MT) 3724.7 4011.5 3796.3 3979.0 4140.0 3969.7 3382.9 3270.9

INSECTICIDES 51 78 87 109 101 70 58 65MEDICINAL PRODUCTS 133 130 140 154 162 173 174 197PLASTIC MATERIAL 88 94 94 121 154 223 23 25OTHER CHEMICALS 251 242 273 345 404 450 716 666ELECTRICAL MACHINERY 177 163 192 182 209 258 198 217MACHINERY NON-ELECTRICAL 803 884 927 910 1,114 1,376 1,185 1,291MOTOR VEHICLES 338 300 325 322 396 390 405 445RUBBER TYERS & TUBES 35 35 26 30 29 31 37 34RUBBER CRUDE 25 21 21 26 29 36 29 31OTHER IMPORTS 2,214 2,097 2,343 2,409 2,915 2,539 2,362 2,852

TOTAL IMPORTSValue (CIF) 6,772 6,796 6,786 6,583 7,898 8,236 8,054 9,094Value (FOB) 5,993 6,009 5,984 5,79% 6,919 7,207 7,411 8,385

a/ The breakdown of total imports is based on customs data, except for "other imports" whichin addition to small items of customs data include defence related imports and other adjustmentsto make the data on payments basis.

b/ Sugar Inpert in 1983/84 & 1984/85 were negfligible.Source: Planning and Development Division.

85

Table 3.05: EXPORTS BY DESTINATION, 1982/83-1990/91 a/-- ---... (X share in total exports)

Item 1982/83 19a3/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

North America b/ 7.7 9.6 11.4 11.5 11.4 12.5 13.1 15.0 12.6.............

Canada 0.6 0.7 0.9 1.0 1.1 1.4 1.5 1.6 1.7United States 6.2 8.7 10.4 10.4 10.1 11.0 11.5 13.2 10.8Others 0.9 0.2 0.1 0.1 0.2 0.1 0.1 0.1 0.1

South America 0.0 0.2 0.0 1.3 0.6 0.1 0.1 0.1 0.2..................... *

Western Europe 20.1 21.2 27.6 29.5 34.0 35.5 30.0 36.3 35.3..............

-egiium 0.5 0.9 1.3 1.3 1.7 1.4 1.1 1.6 1.7France 1.8 2.0 2.6 2.8 3.3 3.2 2.9 3.7 3.8Germany 4.6 4.8 5.7 6.0 7.0 7.0 6.2 8.0 8.9Italy 3.1 3.5 4.1 4.4 5.8 5.8 4.6 4.8 3.8Netherlands 1.0 1.2 1.5 1.8 1.6 2.1 1.7 2.0 2.0United Kingdom 5.0 4.4 6.7 5.5 7.1 6.8 6.2 6.8 7.3Other 6.1 4.4 5.7 7.7 7.4 9.3 7.4 9.5 7.9

Eastern Europe 4.4 4.5 5.5 6.0 3.7 4.1 2.3 3.6 3.3..............

U.S.S.R. 2.1 2.6 2.5 2.4 2.4 2.4 1.6 1.5 0.9Others 2.3 1.8 3.0 3.7 1.3 1.7 0.8 2.1 2.4

Middle East 36.2 37.4 19.8 17.8 15.0 12.0 9.9 10.5 11.8......... ..........

Iran 12.8 16.2 3.0 2.1 1.5 0.6 1.6 1.8 1.6Iraq 0.9 0.4 0.4 0.1 0.1 0.1 0.0 0.2 0.1Saudi Arabia 9.6 7.8 6.9 7.0 7.1 5.0 2.4 2.6 3.6Others 12.9 12.9 9.5 8.7 6.3 6.3 5.9 5.8 6.6

Africa 4.4 5.5 6.3 5.7 5.2 4.9 4.8 4.0 4.1

Asia 26.5 20.6 28.1 26.9 28.7 29.4 37.8 28.9 31.2

China 5.0 2.1 2.7 0.6 0.5 1.1 4.1 1.4 1.0Japan 8.6 8.6 12.0 9.6 10.9 11.3 11.6 9.2 8.3Hong Kong 4.5 1.3 2.8 2.6 2.8 3.5 5.6 4.2 6.0Others 8.4 8.6 10.5 14.2 14.5 13.5 16.5 14.0 16.0

Oceania 0.8 1.1 1.2 1.2 1.5 1.5 1.9 1.5 1.4

ALL COUNTRIES 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0.............

a/ Excludes re-exports.b/ Includes Central America.

Source: Federal Bureau of Statistics.

86

Table 3.06: IMPORTS BY SOURCE, 1982/83*1990/91.......... (X share in total inports)

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 ¶990/91

North America a/ 11.3 12.9 13.7 14.4 12.3 12.4 17.3 14.7 13.1.. ,..*.... .....

Canada 1.4 1.3 1.4 2.4 1.1 1.2 1.3 0.8 1.1United States 9.9 11.5 12.3 11.9 11.0 11.1 15.7 13.8 11.8Others 0.1 0.1 0.0 0.1 0.2 0.2 0.2 0.2 0.1

S-ith America 0.8 1.1 1.5 1.3 1.1 1.0 1.1 1.1 1.7...........

Western Europe 24.0 24.8 22.3 27.6 30.3 30.3 27.1 25.5 28.5...... W.......

Selgium 0.9 1.0 1.0 0.8 1.3 1.2 1.2 1.4 1.5France 1.8 1.9 1.8 1.5 2.6 4.4 2.7 1.9 2.9Germany 5.8 6.5 5.8 8.6 7.5 7.8 7.2 7.8 7.5Italy 3.4 2.9 2.4 3.8 2.8 2.4 2.9 1.8 3.5Netherlands 1.4 1.1 1.1 1.6 2.7 1.9 1.9 1.6 1.8United Kingdom 6.5 6.7 5.9 6.6 6.7 6.8 5.9 5.3 4.9Others 4.3 4.8 4.4 4.7 6.8 5.8 5.2 5.7 6.5

Eastern Europe 2.7 3.5 1.9 2.4 2.6 2.3 2.3 2.4 1.9

U.S.S.R. 0.5 0.7 0.5 0.6 0.6 0.6 0.4 0.9 0.7Others 2.2 2.8 1.4 1.8 2.0 1.7 1.8 1.5 1.2

Niddia East 31.8 26.2 26.1 20.5 18.0 19.5 16.6 20.5 17.3...........

Abu Dhabi 5.2 5.1 4.4 2.2 1.8 1.3 0.6 0.9 1.3Kuwait 9.5 8.1 7.9 6.6 7.4 8.2 8.3 10.7 0.7Saudi Arabia 13.6 10.0 10.7 7.4 5.3 5.0 4.1 4.5 6.3Others 3.5 3.0 3.1 4.3 3.4 5.1 3.7 4.4 9.1

Africa 1.0 1.9 2.3 1.7 2.3 1.2 1.4 2.1 2.4

Asia 26.4 28.3 29.4 28.8 31.7 31.2 31.8 30.7 33.1

China 2.7 2.5 2.7 2.1 3.9 3.5 4.4 3.9 5.1Japan 13.6 14.4 13.4 14.9 16.4 15.0 13.8 12.6 13.0Hong Kong 0.3 0.3 0.4 0.4 0.3 0.4 05 0.4 0.5Others 9.8 11.1 12.9 11.4 11.1 12.3 13.1 13.7 14.6

Oceania 2.0 1.3 2.9 3.2 1.9 2.0 2.4 3.1 2.0

ALL COUNTRIES 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0. ..... . ..

a/ Includes Central America.Source: Federal Bureau of Statistics.

87

Table 3.07: MERCHANDISE EXPORTS AND IMPORTS BY ECONOMIC CATEGORIES....... (Shares in X of total)

Item 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

EXPORTS

Primary commodities 28.9 28.9 34.6 26.5 28.3 32.8 20.3 18.7Semi-manufactures 13.9 17.5 15.9 20.9 19.5 18.8 23.6 24.4Manufactured goods 57.2 53.5 49.5 52.6 52.3 48.4 56.0 56.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

IMPORTS

Raw materials 54.2 51.7 45.4 45.8 49.9 46.4 48.4 51.4Consumer goods 48.3 46.3 40.0 39.2 42.8 39.1 41.4 44.6Capital goods 5.9 5.4 5.5 6.7 7.1 7.3 7.0 6.7

Consumer goods 14.0 16.0 18.1 17.5 14.2 17.2 19.1 15.7Capital goods 31.8 32.3 36.5 36.6 35.8 36.4 32.5 32.9

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: Federal Bureau of Statistics.

88

Table 3.08: UNIT VALUE INDICES OF EXPORTS AND IMPORTS,......... AND TERMS OF TRADE, 1980/81-1990/91

(1980/81=100)

In terms of USS In terms of Rupees.. .. .. .-----------------... ------ ------ -----

Years Export Inport Terms Export Import Terms----- Price Price of Trade Price Price of Trade

Index Index Index Index

1980/81 100.0 100.0 100.0 100.0 100.0 100.0

1981/82 92.3 104.0 88.8 98.4 110.8 88.8Xchange (7.7) 4.0 (11.2) (1.6) 10.8 (11.2)

1982/83 82.7 93.0 88.9 106.2 119.4 88.9Xchange (10.5) (10.5) 0.1 7.9 7.8 0.1

1983/84 87.2 91.9 94.9 118.8 125.2 94.9Xchange 5.5 (1.1) 6.7 11.9 4.9 6.7

1984/85 81.1 86.8 93.5 124.3 133.0 93.5%change (7.0) (5.6) (1.5) 4.7 6.3 (1.5)

1985/86 72.8 81.1 89.8 118.7 132.2 89.8Xchange (10.3) (6.6) (3.9) (4.5) (0.6) (3.9)

1986/87 76.1 78.9 96.5 132.1 136.9 96.5%change 4.5 (2.7) 7.4 11.2 3.5 7.4

1987/88 92.2 95.7 96.3 163.9 170.2 96.3%change 21.2 21.3 (0.1) 24.1 24.3 (0.1)

tn 1988/89 86.5 96.6 89.6 168.0 187.5 89.6%change (6.1) 0.9 (7.0) 2.5 10.2 (7.0)

1989/90 89.0 99.2 89.7 192.9 215.0 89.7%change 2.9 2.7 0.2 14.8 14.6 0.2

1990/91 86.9 111.5 78.0 197.1 252.8 78.0%change (2.4) 12.3 (13.1) 2.1 17.6 (13.1)

Note:i) % change denotes the change over previous yearil) The indices in US$ terms are actuaLty the indices in rupeeterms adjusted for exchange rate.Source: Planning and Development Division

89

Table 3.09: WORKERS' REMITTANCES BY MONTH 1981/82-1990/91 /a--------- (mitlion US$)

1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/68 1988/89 1989/90 1990/91

July 149 192 236 223 237 205 160 129 167 154August 177 239 260 192 195 170 155 130 171 182September 160 197 201 190 220 189 163 134 141 224October 158 232 238 205 237 212 175 151 166 149November 170 252 239 212 188 181 181 153 164 158December 196 243 219 202 216 175 184 168 162 153January 178 259 252 220 242 208 191 217 183 192February 192 246 248 197 227 191 180 182 175 118March 231 296 225 217 237 220 174 167 170 118Aprit 205 256 211 204 206 176 142 156 131 139May 214 243 204 181 194 158 151 152 155 129June 197 230 204 203 197 195 156 159 157 132

Total 2,225 2,886 2,737 2,446 2,595 2,279 2,013 1,897 1,942 1,848................................................... ..... ......... ... .. ....... ........... .............. .............................. .....................

Source: State Bank of Pakistan

Table 3.10: WORKERS* REMITTANCES BY COUNTRY---------- (million USS)

Country 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1990/91Share inTotal (X)

Middle East 2,408.4 2,344.5 2,069.5 2,028.9 1,675.9 1,422.4 1,357.1 1,322.5 1,234.8 66.8..........

Abu Dhabi 163.7 169.9 144.7 145.0 101.4 75.8 66.1 67.0 91.9 5.0Babrain 46.8 52.5 51.1 61.9 51.6 41.1 42.4 46.0 45.5 2.5Dubai 143.5 110.3 112.1 114.8 126.8 112.3 97.1 83.7 83.6 4.5Iran 3.4 2.4 2.5 2.6 0.9 1.6 1.8 0.8 1.3 0.1Iraq 22.2 13.7 6.1 4.7 1.3 2.2 1.1 1.1 2.3 0.1Kuwait 210.9 239.4 205.4 225.2 208.2 193.9 172.0 167.3 21.1 1.1Libya 99.3 50.1 31.7 10.6 3.2 2.7 2.5 3.5 4.4 0.2Qatar 92.2 67.4 59.1 63.7 52.9 34.0 34.8 30.7 29.6 1.6Saudi Arabia 1,442.0 1,441.1 1,245.2 1,162.9 945.5 827.8 820.0 792.2 829.1 44.9Sharjah 37.5 28.8 45.2 51.6 50.0 28.3 28.2 30.2 33.5 1.8Sultanat-e-Oman 147.1 168.9 166.4 185.9 134.1 102.7 91.1 100.0 92.5 5.0

Other Countries 477.2 392.9 376.7 566.5 602.8 590.5 530.9 619.8 613.5 33.2. .... .... ......

Germany 49.9 36.2 36.4 35.3 34.8 35.8 27.9 31.5 32.6 1.8Norway 14.3 13.8 13.5 21.5 24.8 29.2 22.3 19.8 21.3 1.2United Kingdom 161.7 141.8 136.0 223.3 204.9 215.1 170.9 178.2 180.1 9.7Canada 7.0 7.8 6.5 7.7 8.6 9.9 11.2 14.0 11.3 0.6USA 133.5 105.8 105.4 194.5 191.9 178.3 174.8 209.2 190.2 10.3Others 110.8 87.5 78.9 84.2 137.8 122.2 132.8 167.1 178.0 9.6

........ ...... ..................................... ................ .............................................. ........ ................. ................... ..........

Totat 2,885.7 2,737.4 2,446.2 2,595.4 2,278.7 2,012.9 1,897.0 1,942.3 1,848.3 100.0

Source: State Bank of Pakistan.

90

Table 3.11: FOREIGN EXCHANGE RATES

Nominal Real EffectiveiA Exchange Rate a/ Exchange Rate bl

RW/USM (June 1985 100)

1985/86 16.131 87.464

Q1 16.007 95.705Q2 16.003 89.653Q3 15.980 85.31304 16.535 79.184

1986/87 17.165 73.578

01 16.886 76.53402 17.189 75.96103 17.269 71.89404 17.316 69.922

1987/88 17.555 68.315

01 17.508 71.20502 17.502 68.29803 17.522 66.66704 17.689 67.089

1988/89 19.176 67.195

01 18.205 71.21902 18.653 67.527Q3 19.236 66.13504 20.608 63.899

1989/90 21.393 61.834

Q1 21.054 63.71502 21.268 62.388Q3 21.423 60.54404 21.826 60.689

1990/91 22.369 59.674

Q1 21.746 60.94102 21.834 58.99203 22.243 59.058Q4 23.654 59.706

a/ Average for the period.b RNP staff estimates of the rupee vis-a-vis a basket

of eleven currencies by using data provided in INF's IFS.

91

TABLE 4.01: MEDIUM AND LONG TERM PUBLIC AND PUBLICLY GUARANTEED DEBTANNUAL COMMITMENTS, DISBURSEMENTS, SERVICE PAYMENTS

AND EXTERNAL DEBT OUTSTANDING(Million US $)

Debt outstanding Transactions during period Debt Servicing as X of a/end of period .................................................... ..................--.-.....

Year ---- .-----.-.---- Comfitments Disbursements Service Payments b/ Exports Foreign GNP(mp)Disbursed Undisbursed ......................... Receipts Exchange Current

Principal Interest Total Earnings Prices

1975/76 5755 1811 951 1064 141 108 249 21.9 13.7 1.8

1976/77 6341 1914 1111 960 175 136 311 27.3 15.3 2.0

1977/78 7189 2041 963 856 165 162 327 24.9 11.2 1.7

1978/79 7792 2514 1395 948 233 203 436 25.6 12.0 2.1

1979/80 8658 2586 1658 1470 350 234 584 24.7 11.9 2.3

1980/81 8765 2579 973 972 360 243 603 20.4 10.6 2.0

1981/82 8799 2921 1620 1102 288 203 491 19.9 8.8 1.5

1982/83 9312 3087 1587 1301 390 244 634 23.5 9.6 2.0

1983/84 9469 3436 1989 1176 453 274 727 26.3 10.9 2.1

1984/85 9732 4321 2311 1257 513 275 788 31.6 12.9 2.3

1985/86 11108 5242 2294 1528 603 303 906 29.5 13.5 2.6

1986/87 12023 6113 2626 1399 723 378 1101 29.9 15.5 3.1

1987/88 12913 7070 2687 1824 691 426 1117 25.1 14.7 2.8

1988/89 14190 7372 3313 cf 2619 \c 685 440 1125 24.1 15.5 2.7

1989/90 15094 8582 3424 c/ 2342 \c 750 506 1256 25.4 15.6 3.0

1990/91 15853 9291 2586 2156 783 534 1316 21.8 13.6 2.8

c/ Debt service ratios presented here refer to only MLT public and publiclyguranteed debt, which accounts for 80K or more of external civilian debt.Note that for FY90, the ratio of total civilian debt service to exports of goods andservice (plus workers' remittances) was about 28%.

b/ Excludes interest on short term borrowing and IMF charges.c/ Inclusive of IMF (SAF) Loan.Note: Data for FY91 is provisional while FY92 projects the estimated figures.Source: Economic Survey of Pakistan/Economic Affairs Division.

92

TABLE 4.02: I4EDIUW & LONG-TERM PUBLIC AND PUBLICLY GUARANTEEDOIJTS1ANDING DEBT BY CREDITOR COUMTRIES/AGENCIES

(MILLION USS)

DEBT DISBURSEMENTS REPAYMENTS REVISED a/DISBURSED AND OF LOANS FROM PRINCIPAL DEST

P A R T I C U L A R S OUTSTANDING JULY 01, 1990 JULY 01, 199 OUTSTANDINGAS ON TO TO AS ON

JULY 01, 1990 JUNE 30,1991 JUNE 30, 1991 JUNE 30. 1991(p)(1) (2) (3) (4) (2+3-4=6)

I-Consortiun 13426.6 1473.4 649.4 14250.6

(a) Bilateral 7788.3 415.5 476.5 7727.31. BeLgiusm 34.6 20.0 2.2 52.42. Canada 519.8 0.3 12.1 508.03. France 416.2 9.1 23.1 402.24. Germany 1310.2 123.3 61.3 1372.25. Italy 239.9 2.3 14.0 228.26. Japan 1915.4 94.4 77.7 1932.17. Nethertand 214.0 4.9 11.6 207.38. Norway 2.2 0.2 0.0 2.49. Sweden 10.5 6.9 1.9 15.510.U.K 55.3 0.0 29.6 25.711.U.S.A. 3070.2 154.1 243.0 2981.3

(b) Multilateral 5638.3 1057.9 172.9 6523.31. ADS 1931.6 519.9 72.4 2379.12. IBRO 1605.2 346.0 78.6 1872.63. IDA 2014.0 190.7 20.7 2184.04. IFAD 87.5 1.3 1.2 87.6

Il-Non-Consortium 1667.6 67.8 133.1 1602.3

(c) Bilateral 1150.8 67.8 107.9 1110.71. Austria 14.7 0.5 1.8 13.42. Bulgaria 0.3 0.0 0.1 0.23. China 191.7 3.4 13.7 181.44. Czechoslovkia 8.1 0.0 0.3 7.85. Demnark 15.9 0.0 1.4 14.56. Finland 8.0 3.4 0.3 11.17. Romania 69.5 0.0 4.9 64.68. Switzerland 34.8 0.8 1.6 34.09. USSR 227.5 59.5 32.1 254.910.Yugoslavia 0.3 0.0 0.1 0.211.Iran 27.5 0.0 13.6 13.912.Kuwait 106.2 0.0 8.0 98.213.Libya 41.2 0.0 1.9 39.314.Qatar 5.7 0.0 0.0 5.715.Saudi Arabia 286.2 0.2 20.7 265.716.UAE 113.2 0.0 7.4 105.8

(d) Multilateral 516.8 0.0 25.2 491.61. IDB 48.5 0.0 11.7 36.82. IFC 44.7 0.0 5.4 39.33. IMF Trust & SAF 368.1 0.0 2.7 365.44. OPEC Fund 55.5 0.0 5.4 50.1

TOTAL (1+11): 15094.2 1541.2 782.5 15852.9

a/ The figures have been revised by applying exchange rate as on June 30, 1990.Source: Economic Affairs Division ( R & DM) Wing.

93

TABLE 4.03 :NET FLOWS AND NET TRANSFERS OF ECO0NOIC ASSISTANCE BY CREDITOR COUNTRIES/AGENCIESDURING 1990,91

(MILLION USS)

GR(S5 PRINCIPAL NET INTEREST NETDISBURSEMENT REPAYMENTS FLOWS PAYMENT TRANSFERS

P A R T I C U L A R S LOANS+GRANTS JULY 011990 (2-3) JULY 01,1990 (4-5)JULY 01,1990 to TO 10JUNE 30, 1991 JUNE 30,1 91 JUNE 30,1991

(1) (2) (3) (4) (5) (6)

I-Consortium 1851.0 649.4 1201.6 501.9 699.7(a) Bilateral 749.4 476.5 272.9 243.0 29.9

1. Belgiun 20.0 2.2 17.8 0.5 17.32. Canada 29.1 12.1 17.0 2.1 14.93. France 9.1 23.1 -14.0 18.3 -32.34. Germany 123.3 61.3 62.0 27.1 34.95. Itaty 5.0 14.0 -9.0 5.4 -14.46. Japan 159.6 77.7 81.9 67.0 14.97. Netherland 35.7 11.6 2,.4 6.1 18.08. Norway 6.6 0.0 6.6 0.1 6.59. Sweden 6.9 1.9 5.0 0.6 4.410.U.K 23.6 29.6 -6.0 9.7 -15.711.U.S.A. 330.5 243.0 87.5 106.1 -18.6

(b) Multilateral 1101.6 172.9 928.7 258.9 669.81. ADB 519.9 72.4 447.5 94.3 353.22. IBRD 346.0 78.6 267.4 147.6 119.83. IDA 190.7 20.7 170.0 16.1 153.94. IFAD 1.3 1.2 0.1 0.9 -0.85. ECC 13.3 0.0 13.3 0.0 13.36. UN System 30.4 0.0 30.4 0.0 30.4

i) WFP 0.1 0.0 0.1 0.0 0.1ii) UNDP 24.2 0.0 24.2 0.0 24.2iii)UNHCR 5.4 0.0 5.4 0.0 5.4iv) UNFPA 0.7 0.0 0.7 0.0 0.7

Il-Non-Consortiun 193.2 133.1 e0.1 32.0 28.1Cc) Bilateral 193.2 107.9 85.3 27.0 58.3

1. Austria 0.5 1.8 -1.3 0.9 -2.2

2. buLgaria 0.0 0.1 -0.1 0.0 -0.13. China 3.4 13.7 -10.3 4.6 -14.94. Czechoslovkia 50.0 0.3 49.7 0.2 49.55. Denmark 0.0 1.4 -1.4 0.0 -1.46. Finland 3.4 0.3 3.1 0.5 2.67. Romania 0.0 4.9 -4.9 1.1 -6.08. Switzerland 1.2 1.6 -0.4 1.3 -1.79. USSR 59.5 32.1 27.4 7.2 20.210.Yugoslavia 0.0 0.1 -0.1 0.0 -0.111.1ran 0.0 13.6 -13.6 0.6 -14.212.Kuwait 0.0 8.0 -8.0 3.1 -11.113.Libya 0.0 1.9 -1.9 0.4 -2.314.Qatar 0.0 0.0 0.0 0.0 0.015.Saudi Arabia 75.2 20.7 54.5 2.8 51.716.UAE 0.0 7.4 -7.4 4.3 -11.7

td) Muttilateral 0.0 25.2 -25.2 5.0 -30.21. IDB 0.0 11.7 -11.7 0.7 -12.42. IFC 0.0 5.' -5.4 2.0 -7.43. IMF Trust & SAF 0.0 2.7 -2.7 1.9 -4.64. OPEC Fund 0.0 5.4 -5.4 0.4 *5.8

III-RELIEF ASSISTANCE FORAFGHAN REFUGEES 111.5 0.0 111.5 0.0 111.5

IV-OTHERS 0.0 0.0 0.0 78.9 -78.9-Interest on Shortterm 0.0 0.0 0.0 35.5 -35.5-IMF Charges 0.0 0.0 0,0 43.4 -43.4

TOTAL (I1II+1114IV): 2155.7 782.5 1373.2 612.8 760.4

Source: Economic Affairs Division ( R & DM) Wing.

94

TABLE 4.04: MEDIUM AND LONG-TERM PUBLIC AND PUBLICLY GUARANTEEDDISBURSEMENTS OF FOREIGN ECONOMIC ASSISTANCE (LOANS & GRANTS)

BY TYPE AND SOURCEJULY 1990 TO JUNE 1991

Non-Project Aid TotalsCOUNTRY/AGENCY ProJect ............................

Aid Non-Food Food Aid BOP/Cash Sub-totalReceipts Non-Project

(1) (2) (3) (4) (5) 6x(3+4+5) 7u(2Z6)

IMonsortium 1339.6 376.1 135.3 0.0 511.4 1851.0Loan 1015.7 322.4 135.3 0.0 457.7 1473.4Grant 323.9 53.7 0.0 0.0 53.7 377.6

(a) Bilateral 562.6 95.2 135.3 0.0 230.5 793.1Loan 238.7 41.5 135.3 0.0 176.8 415.5Grant 323.9 53.7 0.0 0.0 53.7 377.6

1. Betgiun 20.0 0.0 0.0 0.0 0.0 20.0Loan 20.0 0.0 0.0 0.0 0.0 20.0Grant 0.0 0.0 0.0 0.0 0.0 0.0

2. Canada 29.1 0.0 0.0 0.0 0.0 29.1Loan 0.3 0.0 0.0 0.0 0.0 0.3Grant 28.8 0.0 0.0 0.0 0.0 28.8

3. France 9.1 0.0 0.0 0.0 0.0 9.1Loan 9.1 0.0 0.0 0.0 0.0 9.1Grant 0.0 0.0 0.0 0.0 0.0 0.0

4. Germary 99.3 24.0 0.0 0.0 24.0 123.3Loan 99.3 24.0 0.0 0.0 24.0 123.3Grant 0.0 0.0 0.0 0.0 0.0 0.0

5. ItaLy 5.0 0.0 0.0 0.0 0.0 5.0Loan 2.3 0.0 0.0 0.0 0.0 2.3Grant 2.7 0.0 0.0 0.0 0.0 2.7

6. Japan 148.3 11.3 0.0 0.0 11.3 159.6Loan 94.4 0.0 0.0 0.0 0.0 94.4Grant 53.9 11.3 0.0 0.0 11.3 65.2

7. Netherland 18.8 16.9 0.0 0.0 16.9 35.7Loan 4.9 0.0 0.0 0.0 0.0 4.9Grant 13.9 16.9 0.0 0.0 16.9 30.8

8. Norway 0.2 6.4 0.0 0.0 6.4 6.6Loan 0.2 0.0 0.0 0.0 0.0 0.2Grant 0.0 6.4 0.0 0.0 6.4 6.4

9. Sweden 6.9 0.0 0.0 0.0 0.0 6.9Loan 6.9 0.0 0.0 0.0 0.0 6.9Grant 0.0 0.0 0.0 0.0 0.0 0.0

10.U.K 23.6 0.0 0.0 0.0 0.0 23.6Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 23.6 0.0 0.0 0.0 0.0 23.6

l1.U.S.A 158.6 36.6 135.3 0.0 171.9 330.5Loan 1.3 17.5 135.3 0.0 152.8 154.1Grant 157.3 19.1 0.0 0.0 19.1 176.4

12.WFP 0.1 0.0 0.0 0.0 0.0 0.1Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 0.1 0.0 0.0 0.0 0.0 0.1

13.EEC 13.3 C.0 0.0 0.0 0.0 13.3Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 13.3 0.0 0.0 0.0 0.0 13.3

14.UNDP 24.2 0.0 0.0 0.0 0.0 24.2Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 24.2 0.0 0.0 0.0 0.0 24.2

15.UNHCR 5.4 0.0 0.0 0.0 0.0 5.4Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 5.4 0.0 0.0 0.0 0.0 5.4

16.UNFPA 0.7 0.0 0.0 0.0 0.0 0.7Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 0.7 0.0 0.0 0.0 0.0 0.7

(b) Multitateral 777.0 280.9 0.0 0.0 280.9 1057.9Loman m.o 280.9 0.0 0.0 280.9 1057.9Grant 0.0 0.0 0.0 0.0 0.0 1039.8

1. ADB 319.3 200.6 0.0 0.0 200.6 519.9Loan 319.3 200.6 0.0 0.0 200.6 519.9Grant 0.0 0.0 0.0 0.0 0.0 692.0

95

cont .... from /1 .2-

Non-Project Aid TotalsCOUNTRY/AGENCY Project ----------------------------------------

Aid Non-Food Food Aid BOP/Cash Sub-totalReceipts Non-Project

(1) (2) (3) (4) (5) 6u(3+4*5) 7=(2+6)

2. IBRD 265.7 80.3 0.0 0.0 80.3 346.0Loan 265.7 80.3 0.0 0.0 80.3 346.0Grant 0.0 0.0 0.0 0.0 0.0 381.4

3. IDA 190.7 0.0 0.0 0.0 0.0 190.7Loan 190.7 0.0 0.0 0.0 0.0 190.7Grant 0.0 0.0 0.0 0.0 0.0 2.6

4. IFAD 1.3 0.0 0.0 0.0 0.0 1.3Loan 1.3 0.0 0.0 0.0 0.0 1.3Grant 0.0 0.0 0.0 0.0 0.0

I1-Non-Consortiun 68.2 75.0 0.0 50.0 125.0 193.2Loan 67.8 0.0 0.0 0.0 0.0 67.8Grant 0.4 75.0 0.0 50.0 125.0 125.4

Sc) 8ilateral 68.2 75.0 0.0 50.0 125.0 193.2Loan 67.8 0.0 0.0 0.0 0.0 67.8Grant 0.4 75.0 0.0 50.0 125.0 125.4

1. Austria 0.5 0.0 0.0 0.0 0.0 0.5Loan 0.5 0.0 0.0 0.0 0.0 0.5Grant 0.0 0.0 0.0 0.0 0.0 0.0

2. China 3.4 0.0 0.0 0.0 0.0 3.4Loan 3.4 0.0 0.0 0.0 0.0 3.4Grant 0.0 0.0 0.0 0.0 0.0 0.0

3. U.A.E. 0.0 0.0 0.0 50.0 50.0 50.0Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 0.0 0.0 0.0 50.0 50.0 50.0

4. Finland 3.4 0.0 0.0 0.0 0.0 3.4Loan 3.4 0.0 0.0 0.0 0.0 3.4Grant 0.0 0.0 0.0 0.0 0.0 0.0

5. Switzerland 1.2 0.0 0.0 0.0 0.0 1.nLoan 0.8 0.0 0.0 0.0 0.0 0.8Grant 0.4 0.0 0.0 0.0 0.0 0.4

6. USSR 59.5 0.0 0.0 0.0 0.0 59.5Loan 59.5 0.0 0.0 0.0 0.0 59.5Grant 0.0 0.0 0.0 0.0 0.0 0.0

7. Saudi Arabia 0.2 75.0 0.0 0.0 75.0 75.2Loan 0.2 0.0 0.0 0.0 0.0 0.2Grant 0.0 75.0 0.0 0.0 75.0 75.0

(d)Multilateral 0.0 0.0 0.0 0.0 0.0 0.0Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 0.0 0.0 0.0 0.0 0.0 0.0

1. IDS 0.0 0.0 0.0 0.0 0.0 0.0Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 0.0 0.0 0.0 0.0 0.0 0.0

2. IFC 0.0 0.0 0.0 0.0 0.0 0.0Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 0.0 0.0 0.0 0.0 0.0 0.0

3. IMF(SAF) 0.0 0.0 0.0 0.0 0.0 0.0Loan 0.0 0.0 0.0 0.0 0.0 0.0Grant 0.0 0.0 0.0 0.0 0.0 0.0

III-Relief Assist-ance for AfghanRefugees 0.) 111.5 0.0 0.0 111.5 111.5

Loan 0.) 0.0 0.0 0.0 0.0 111.5Grant 0.) 111.5 0.0 0.0 111.5 0.0

Total(l111+II1) 1407.8 562.6 135.3 50.0 747.9 2155.7Loan 1083.5 322.4 135.3 0.0 457.7 1541.2Grant 324.3 240.2 0.0 50.0 290.2 614.5

Source: Economic Affairs Division ( R & DM) Wing.

96

TABLE 4.05:COMYITMENTS AND DISBURSEMENTS OF FOREIGN ECONOMIC ASSISTANCE(During Juty 1990 to June 1991)

(MILLION US$)

lindisbureed Ftesh Aid Total Disbursement UndisbursedP A R T I C U L A R S Blanrce on Committ6d Avaitable balance on

June 30,1990 June 30,1991

(1) (2) (3) 4=(2+3) (5) 6u(4-5)

A - PROJECT AID 9055.4 1945.1 11000.5 1407.8 9592.7: ~~~~~..... .. .. ..

Loan 7816.3 1856.5 9672.8 101' 8589.3Grant 1239.1 88.6 1327.7 3. 1003.4

I-Consortiun 7774.6 1610.2 9384.8 1249.4 8135.4Loan 6588.6 1521.6 8110.2 925.5 7184.7Grant 1186.0 88.6 1274.6 323.9 950.7

1. Belgius 15.7 0.0 15.7 12.8 2.9Loan 15.7 0.0 15.7 12.8 2.9

2. Canada 123.7 5.6 129.3 28.8 100.5converted to 3rant 14.7 0.0 14.7 5.2 9.5Grant 109.0 5.6 114.6 23.6 91.0

3. France 204.2 111.1 315.3 9.1 306.2Loan 202.0 111.1 313.1 9.1 304.0Grant 2.2 0.0 2.2 0.0 2.2

4. Germany 124.7 82.4 207.1 28.3 178.8Loan 115.5 70.9 186.4 28.3 158.1Grant 9.2 11.5 20.7 0.0 20.7

5. Italy 52.0 0.0 52.0 5.0 47.0Loan 42.0 0.0 42.0 2.3 39.7Grant: 10.0 0.0 10.0 2.7 7.3

6. Japan 758.2 160.8 919.0 148.3 770.7Loan 663.4 150.0 813.4 94.4 719.0Grant 94.8 10.8 105.6 53.9 51.7

7. Netlerland 62.5 20.6 83.1 15.5 67.6.oan 14.9 0.0 14.9 1.6 13.3

Grant 47.6 20.6 68.2 13.9 54.38. Norway 4.6 4.0 8.6 0.0 8.6

Grant 4.6 4.0 8.6 0.0 8.69. U.K 177.9 0.0 177.9 23.6 154.3

Grant 177.9 0.0 177.9 23.6 154.310.U.S.A 618.1 0.0 618.1 158.6 459.5

Loan 9.0 0.0 9.0 1.3 7.7Grant 609.1 0.0 609.1 157.3 451.8

11.UFP 0.8 0.0 0.8 0.1 0.7Grant 0.8 0.0 0.8 0.1 0.7

12.EEC/UNICEF 89.3 11.9 101.2 13.3 87.9Grant 89.3 11.9 101.2 13.3 87.9

13.UNDP 0.0 0.0 0.0 24.2 -24.2Grant 0.0 24.2 24.2 24.2 0.0

14.UNHCR 7.5 0.0 7.5 5.4 2.1Grant 7.5 0.0 7.5 5.4 2.1

15.UNFPA 9.3 0.0 9.3 0.7 8.6Grant 9.3 0.0 9.3 0.7 8.6

16.IBRD 1601.4 0.0 1601.4 265.7 1335.7Loan 1601.4 428.1 2029.5 265.7 1763.8

17.1DA 1300.6 249.0 1300.6 190.7 1109.9Loan 1300.6 249.0 1549.6 190.7 1358.9

18.ADB 2624.1 512.5 2624.1 319.3 2304.8Loan 2624.1 512.5 3136.6 319.3 2817.3

!I-Non-Consortiun 1097.4 272.1 1369.5 158.2 1211.3Loan 1045.3 272.1 1317.4 157.8 1159.6Grant 52.1 0.0 52.1 0.4 51.7

19.IFC 8.4 0.0 8.4 0.0 8.4Loan 8.4 0.0 8.4 0.0 8.4

20.Japan 150.1 0.0 150.1 0.0 150.1Loan 150.1 100.0 250.1 0.0 250.1

21.Canada(EDC Credits) 21.1 0.0 21.1 0.3 20.8Loan 21.1 0.0 21.1 0.3 20.8

97

cont....from /1

Undisbursed Fresh Aid Total Disbursement UndIsbursedP A R T I C U L A R B Balance on Committed Available balance on

June 30,1989 June 30,1990

(1) (2) (3) 4v(2+3) (5) 6.(4-5)

22.Bolgwum 2S.5 0.0 25.5 7.2 18.3Loan 25.5 0.0 25.5 7.2 18.3

23.IFAD 63.7 25.4 89.1 1.3 87.8Loan 63.7 25.4 89.1 1.3 87.8

24.Germany 154.8 58.1 212.9 71.0 141.9Loan 154.8 58.1 212.9 71.0 141.9

25.Netherland 9.9 0.0 9.9 3.3 6.6Loan 9.9 0.0 9.9 3.3 6.6

26.Norway(NIB) 6.2 13.0 19.2 0.2 19.0Loan 6.2 13.0 19.2 0.2 19.0

27.Sweden 18.8 0.0 18.P 6.9 11.9Loan 18.8 0.0 18.8 6.9 11.9

28.Switze.rand 82.3 0.0 82.3 1.2 81.1Loan 30.2 0.0 30.2 0.8 29.4Grant 52.1 0.0 52.1 0.4 51.7

29.UK 92.7 0.0 92.7 0.0 92.7Loan 92.7 0.0 92.7 0.0 92.7

30.Austria 1.5 0.0 1.5 0.5 1.0Loan 1.5 0.0 1.5 0.5 1.0

31.China 139.3 75.6 214.9 3.4 211.5Loan 139.3 75.6 214.9 3.4 211.5

32.Czechoslovaka 24.4 0.0 24.4 0.0 24.4Loan 24.4 0.0 24.4 0.0 24.4

33.Finland 12.9 0.0 12.9 3.4 9.5Loan 12.9 0.0 12.9 3.4 9.5

34.Denmark 0.4 0.0 0.4 0.0 0.4Lo*n 0.4 0.0 0.4 0.0 0.4

35.USSR 285.4 0.0 285.4 59.5 225.9Loan 285.4 0.0 285.4 59.5 225.9

III-lslamic Countries 183.4 62.8 246.2 0.2 246.0Loan 182.4 62.8 245.2 0.2 245.0Grant 1.0 0.0 1.0 0.0 1.0

36.Kuwait State Credit 11.2 20.8 32.0 0.0 32.0Loan 11.2 20.8 2.5 0.0 2.5

37.Kuwait Guaranteed Credit 2.5 0.0 2.5 0.0 2.5Loan 2.5 0.0 2.5 0.0 2.5

38.Saudi Arabia 64.2 13.4 77.6 0.2 77.4Loan 64.2 13.4 77.6 0.2 77.4

39.1DB 70.9 19.6 90.5 0.0 90.5Loan 69.9 19.6 89.5 0.0 89.5Grant 1.0 0.0 1.0 0.0 1.0

40.OPEC Fund 34.6 9.0 43.6 0.0 43.6Loan 34.6 9.0 43.6 0.0 43.6

B - NON-PROJECT AID 576.6 529.5 1106.1 747.9 358.2

Loan 485.3 393.8 879.1 457.7 421.4Grant 91.3 135.7 227.0 290.2 -63.2

I-Non-Food 512.5 396.2 908.7 501.1 407.6Loan 423.3 260.5 683.8 322.4 361.4Grant 89.2 135.7 224.9 178.7 46.2

(a) Consortium (Non-Food) 512.5 221.2 733.7 376.1 357.6Loan 423.3 210.5 633.8 322.4 311.4Grant 89.2 10.7 99.9 53.7 46.2

1. France 4.1 0.0 4.1 0.0 4.1Loan 4.1 0.0 4.1 0.0 4.1

2. Germany 7.4 16.6 24.0 24.0 0.0Loan 7.4 16.6 24.0 24.0 0.0

3. Japan 78.7 2.3 81.0 11.3 69.7Loan 69.7 0.0 69.7 0.0 69.7Grant 9.0 2.3 11.3 11.3 0.0

4. Notherland 19.5 5.1 24.6 16.9 7.7Loan 0.0 0.0 0.0 0.0 0.0Grant 19.5 5.1 24.6 16.9 7.7

98

cont... .from /2

Undisbursed Fresh Aid Total Disbursement UndisbursedP A R T I C U L A R S Balance on Committed Avallable balance on

June 30,19A9 June 30,1990

(1) (2) (3) 4=(2+3) (5) 6=(4-5)

5. Norway 6.5 S.3 9.8 6.4 3.4Grant 6.5 3.3 9.8 6.4 3.4

6. U.S.A 90.4 0.0 90.4 36.6 53.8Loan 36.2 0.0 36.2 17.5 18.7Grant 54.2 0.0 54.2 19.1 35.1

7. ADO 100.6 193.9 294.5 200.6 93.9Loan 100.6 193.9 294.5 200.6 93.9

8. IBRO 205.3 0.0 205.3 80.3 125.0Loan 205.3 0.0 205.3 80.3 125.0

(b) Non-Consortium 0.0 50.0 50.0 0.0 50.0Loan 0.0 50.0 50.0 0.0 50.0

1. Japan 0.0 50.0 50.0 0.0 50.0Loan 0.0 50.0 50.0 0.0 50.0

(c) Islamic Countries 0.0 125 394.8 125 124.2Grant 0.0 125 394.8 125 124.2

1. Saudi Arabia 0.0 75 197.4 75 62.1Grant 0.0 75 197.4 75 62.1

2. U.A.E. 0.0 50 197.4 50 62.1Grant 0.0 50 197.4 50 62.1

I1-Food Aid 64.1 133.3 197.4 135.3 62.1Loan 62.0 133.3 195.3 135.3 60.0Grant 2.1 0.0 2.1 0.0 2.1

(a) Consortiun 23.9 0.0 23.9 21.8 2.1Loan 21.8 0.0 21.8 21.8 0.0Grant 2.1 0.0 2.1 0.0 2.1

1. U.S.A 21.8 0.0 21.8 21.8 0.0Loan 21.8 0.0 21.8 21.8 0.0

2. EEC 2.1 0.0 2.1 0.0 2.1Grant 2.1 0.0 2.1 0.0 2.1

(b) Non-Consortiun 40.2 133.3 173.5 113.5 60.0Loan 40.2 133.3 173.5 113.5 60.0

1. CCC (USA) 40.2 133.3 173.5 113.5 60.0Loan 40.2 133.3 173.5 113.5 60.0

I51-Relief Assistance forAfghan Refugees 0.0 111.5 111.5 111.5 0.0

TotaL Project & Non-Proje^t Aid 9632 2586.1 a/ 12218.1 2155.7 a/ 10062.4Loan 8301.6 2250.3 10551.9 1541.2 9010.7Grant 1330.4 335.8 1666.2 614.5 1051.7

C - SHORT-TERM CREDITS 5.8 108.3 114.1 90.7 23.4

I-IOB Credits 5.8 108.3 114.1 90.7 23.4

I1-Commerciat/Cash toans/Short-term credits 0 0.0 0.0 0.0 0.0

Note: Exchange rate adjustments have been included.a/ Exclusive of short term credits.Source: Economic Affairs Division.

_99

Table 5.00: Summary of Public Finances, 1984/85-1990/91 a/..----.... (billion rupees)

Actuals Prov. Irov. Prov.Actuats Actuals Actuals

1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Total Revenue 80.0 92.8 105.7 124.3 145.8 162.1 168.7

Tax and Non-Tax 77.4 89.9 103.9 117.0 139.1 154.8 158.7Tax 61.2 72.6 82.9 93.5 110.3 121.1 130.9Non-Tax 16.2 17.2 20.9 23.6 28.8 33.7 27.8

Surplus of Autonomous Bodies 2.6 2.9 1.8 7.3 6.7 7.3 10.0

Total Expenditure andnot lending 116.8 134.5 152.4 181.9 202.7 220.0 256.2

ExpenditureCurrent 85.3 97.1 117.4 135.8 154.5 164.8 189.9of which:

Defence 31.9 35.6 41.3 47.0 51.1 57.9 65.3Interest Payments 16.5 19.7 24.0 31.7 36.5 44.0 43.1S-ubsidies 9.5 8.1 6.9 6.5 12.6 10.1 9.5

Development b/ 31.5 37.4 35.0 46.1 48.2 55.2 66.3

Net Lending and Equity 0.0 0.0 0.0 0.0 2.3 0.0 0.0perticipation c/

Unaccounted 0.0 0.0 0.0 0.0 0.0 0.0 1.8

Program fiscal deficit d/ (36.8) (41.6) (46.7) (57.6) (59.2) (58.0) (89.3)

Financing 36.8 41.6 46.7 57.6 59.2 58.0 89.3External (net) 5.2 11.0 9.5 12.7 18.2 23.6 25.5Domestic (net) 31.6 30.7 37.2 44.9 41.1 34.3 63.8Banking System 19.4 5.7 11.4 13.9 3.2 3.5 43.0Non-bank (net) 12.2 24.9 25.8 30.9 37.9 30.8 20.8

a/ Includes finances of the federal and provincial goverrments including railways, post office, telephone &telegraph and four autonomous bodies (k4PDA, OGDC, NFCP & PTV).

b/ Beginning %1987/88, the data Include an estimate of a charge to WAPDA consumers for hook-up expenses.c/ In the presentation of the budget, net lending and equity participation activity is treated as nonbank

finmncing. The figure for 1988/89 also includes an estimate of net onlending of external resources to domesticimporters and the purchase of PRs 1.2billion of U.S. treasury bills for the purpose of guaranteeing refinancedmilitary debt.

d/ The overall fiscal deficit target for program purposes excludes net lending and equity participation.

Source: Ninistry of Finance and Economic Affairs.

100

Table 5.01: Consolidated Federal an d Provincial Goverrment---... Tax and Nontax Revenue, 1984/85-1990/91 a/

(million Rupees)

Actuals Prov. Prov. Prov.Actuals Actuals Actuals

1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Tax Revenue 61,212 72,393 82,882 93,456 110,338 121,097 130,902Direct Taxes 9,730 10,267 11,105 12,441 14,586 16,295 20,636Income and Profits 9,071 9,591 10,354 11,528 13,407 15,000 19,050Property 659 676 751 913 1,179 1,295 1,586

Taxes on goods and Services 20,122 20,544 21,867 26,303 34,932 40,912 42,010Excises 15,448 15,616 15,458 17,560 20,232 22,341 25,101

Federal 15,317 15,515 15,316 17,399 20,038 22,171 24,739Provincial 131 101 142 161 194 170 362

Sales Tax 4,674 4,928 6,409 8,743 14,700 18,571 16,909On imports 3,542 3,568 5,127 5,176 7,514 8,636 7,788On damestic transactions 1,132 1,360 1,282 3,567 7,186 9,935 9,121

Not development surcharges 5,240 9,310 13,247 12,974 14,497 11,051 12,294Petrolurm b/ 3,098 5,725 11,272 9,899 10,524 6,209 5,950Natural gas 1,359 3,183 1,975 3,075 3,973 4,842 6,344Fertilizer 783 402 - . -

International Trade 23,371 29,343 33,364 38,001 42,362 48,584 50,527Import duties 22,882 28,353 33,089 34,711 37,878 43,705 46,442Export duties 489 990 275 3,290 4,484 4,879 4,085

Other taxes 2,749 2,929 3,299 3,737 3,961 4,255 5,435Stamp duties 919 1,017 1,352 1,671 1,778 1,789 2,209Motor vehicle taxes 665 701 814 856 892 994 1,119Other c/ 1,165 1,211 1,133 1,210 1,291 1,472 2,107

Nontax revenues 16,200 17,484 20,946 23,565 28,770 33,663 27,845Interest and dividends 4,987 5,273 7,458 6,382 10,019 10,121 9,490Trading profits 299 203 55 613 363 2,005 473Post office and Telegraph

& Telephone d\ 2,357 2,769 3,560 4,103 5,250 7,031Civil administration 4,568 3,808 4,575 9,216 11,729 12,534 15,683Other 3,989 5,431 5,298 3,251 1,409 1,972 2,199

Tax and Nontax 77,412 89,877 103,828 117,021 139,108 154,760 158,747

(In percent of GDP)Tax revenue, of which: 13.0 14.1 14.5 13.8 14.3 14.0 12.9Direct Taxes 2.1 2.0 1.9 1.8 1.9 1.9 2.0Income and Profits 1.9 1.9 1.8 1.7 1.7 1.7 1.9Property 0.1 0.1 0.1 0.1 0.2 0.2 0.2

Goods and Services 4.3 4.0 3.8 3.9 4.5 4.7 4.1Excises 3.3 3.0 2.7 2.6 2.6 2.6 2.5Sales Tax 1.0 1.0 1.1 1.3 1.9 2.2 1.7

Net development surcharges 1.1 1.8 2.3 1.9 1.9 1.3 1.2International trade taxes 4.9 5.7 5.8 5.6 5.5 5.6 5.0

Nontax revenue 3.4 3.4 3.7 3.5 3.7 3.9 2.7

Tax and Nontax 16.4 17.5 18.1 17.3 18.1 17.9 15.6

Memorandum item:GDP (at mp; billion of Rs.) 472 515 572 675 770 862 1,017

a/ Excludes the surplus of autonomous bodiesb/ Net of KESC fuel adjustment charge subsidy.c/ Including foreign travel tax receiptsd/ The PTC deposits with SBP, corresponding to PTC profits transfers to the federal government

amounting to Rs. 4178 million have been netted out of bank financing in 1990/91Source: Ministry of Finance and Economic Affairs.

101

Table 6.01: MONETARY SURVEY, 1982/83-1990/91 \a-------- (million rupees)

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91Prov.

Foreign Assets (Net) 6518 3643 -13829 -15948 -17332 -20531 -27651 -22646 -33277............... ...................

Foreign assets (gross) 14634 13587 1076 8563 14344 24446 30378 39976 53332Foreign tiabilities 8116 9944 14905 24511 31676 44977 58029 62622 86609

Credit to Public Sector (Net) 71368 78881 97154 94782 105394 134623 142240 147455 191477

Central Goverrvnent 62631 70607 90967 97060 109080 136243\e 141267 136965 177066

Claims on Central Goverrvnent 64759 71774 91590 97704 109905 136949 142177 138236 182672Budgetary support 59738 66862 84262 93775 106643 130542 134981 123377 171521Commodity operations 5021 4912 7328 3929/c 3262 6407 7196 14859 11151

Deposits with banks -2128 -1167 -623 -644 -825 -706 -910 -1271 -5606\f

Provincial Governments 8737 8274 6187 -2278 -3686 -1620 973 10490 14411

Claims on Provincial Government 9813 8877 6663 -1492 -2994 -1062 1780 11654 15717Budgetary support -1093 -880 33 -4223 -6166 -6110 -3659 2523 8194Commodity operations 10906 9757 6630 2731/c 3172 5048 5439 9131 7523

Deposits with banks -1076 -603 -476 -786 -692 -558 -807 -1164 -1306

Credit to Public Sector Enterprises 24135 27425 31302 34893 35658 36851 34559 35068 32239... . . .. . ..... . ...... ..

Credit to Private Sector 62766 78301 92220 122570/d 143822 154626/e 172809 195966 219488..... ...... .....

Counterpart Funds -2353 -2102 -2012 -1643 -1390 -717 -311 -508 -330

Long-Term Foreign Borrowings -1359 -1702 -2361 -3077 -4342 -6054 -7802 -8647 -9546

Other Items (Net) -15050 -21179 -18569 -20466 -21787 -29454 -32206 -29467 -25893

Domestic Liquidity \b 146025 163267 183905 211111 240023 269344 281638 317221 374158.... ..........

Money supply 96542 103445 118968 134831 159625 184970 204533 236980 284925Currency 45767 52039 56447 63276 74703 87785 97508 115067 136967Demand deposits 50775 51406 62521 71555 84922 97185 107025 121913 147958

Time and savings deposits 49483 59822 64937 76280 80398 84374 77105 80241 89233

\a As of last working day of June.\b Domestic tiquidity comprises money suppty (i.e. currency in circulation and demand deposits with

scheduled banks and SBP) and time and savings deposits with scheduled banks.\c Includes retirement of Rs 11 blilion from the receipts of Special National Fund Bonds.\d Includes Rs 11 billion advanced by commercial banks against S.N.F. Bonds.\e Includes effect of retirement of S.N.F. Bonds.\f Includes Rs.4.060 billon on account of Pakistan Telecommunication Corporation's deposits with Scheduled Banks.

Source: State Bank of Pakistan.

102

Table 6.02: FACTORS AFFECTING DOMESTIC LIQUIDITY, 1982/83-1990/91- - ---- (mIllion rupees)

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91Prov.

Foreign Assets 10010 -2875 -17472 -2119 -1384 -3199 -7120 -2366\d -3260\d..............

Domestic Credit (Net) 19505 20117 38110 29325 30296 32520 19414 37949\d 60197\d.....................

Credit to Public Sector (Net) 9199 7513 18273 8623 10612 18234\c 7617 12586\d 36650\d.............................

Budgetary support 5534 7337 18313 5257 10925 12960\c 6890 1949\d 46442\dComnodity operations 3567 -1258 -711 3697\a -226 5021 1180 11355 -5315Deposits 98 1434 671 -331 -87 253 -453 -718 -477

Credit to Public Enterprises 3975 3649 3877 3591 765 1193 -2292\e 509\e *2829\e........................

Credit to Private Sector 10923 15176 13919 19355\b 21252 '799/c 18183 23157 23523

Counterpart Funds -55 251 90 369 253 673 406 -197 178

Other Credit Items (Net) -4537 -6472 1951 -2613 -2586 -9379 -4500 1894 2675........................

Long-term foreign borrowings -235 -343 -659 -716 -1265 -1712 -1748 -845 -899Other -4302 -6129 2610 -1897 -1321 -7667 -2752 2739 3574

Domestic Liquidity 29515 17242 20638 27206 28912 29321 12294 35583 56937..................

Money 15616 6903 15523 15863 24794 25345 19563 32447 47945Currency 8117 6272 4408 6829 11427 13082 9723 17559 21900Demand deposits 7499 631 11115 9034 13367 12263 9840 14888 26045

Time and savings deposits 13899 10339 5115 11343 4118 3976 -7269 3136 8992

\a Includes retirement of Rs 11 billion from the receipts of Special National Fund Bonds.\b Includes Rs 11 billion advanced by commerciaL banks against Special National Fund Bonds.\c Adjusted for Rs 11 billion on account of inipact of retirement of Special National Fund Bonds.\d Adjusted for Rs.7.371 billion of first and second SAF loans to reflect correct position of govermnent

budgetary support and net foreign assets of the banking system.\e Inclues impact of issue of bonds by Federal Govermnent to banks amounting to Rs.4.3 billion in 1988/89 and

Rs.0.7 billion in 1989/90 and Rs.3.6 billion in 1990/91 in settlement of loans given earlier by banks toPublic Sector Enterprises.

Source: S:ate Bank of Pakistan.

103

Table 6.03: INTEREST RATES ON BANK DEPOSITS AND ADVANCES. 1982-91 \o....-.-- (percent)

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991Prov.

PLS Deposits (weighted average)......... ................. .. .. .

Savings Deposits: 8.6 8.4 7.5 8.4 7.3 6.6 6.6 6.6 7.7 7.6.................

Time or Fixed Deposits 12.1 12.2 11.3 12.6 10.6 9.1 9.0 9.2 10.5 10.4. *.....................

For 3 months and over but tess than 6 month - - 9.7 8.7 8.1 7.8 8.1 7.5 7.3For 6 months and over but less than 1 year 10.9 10.6 9.5 10.9 9.8 8.8 8.6 8.9 9.5 9.3For 1 year and over but less than 2 years 12.1 11.8 10.5 11.4 10.1 9.0 8.8 9.0 10.0 9.9For 2 years and over but less than 3 years 12.6 12.4 11.0 12.3 10.9 9.7 9.8 10.2 10.4 10.2For 3 years and over but less than 4 years 13.4 13.2 11.8 13.4 11.8 10.6 10.4 10.7 11.3 11.1For 4 years and over but less than 5 years 14.2 13.9 12.5 14.4 12.5 11.2 11.2 11.3 12.2 11.9For 5 years and over 14.6 14.4 13.5 15.3 13.5 12.0 12.0 11.9 12.4 12.8

Interest Rates on Bank Advances...............................

Ceilings on Advance Rates.........................

General c 14.0\c 14.0\c 14.0\c \d \d \d \d \d \d \dFixed industrial investment 11.0 11.0 11.0 \d \d \d \d \d \d \dFixed agricultural investment 11.0 11.0 11.0 \d \d \d \d \d \d \dExport finance \b 3.0 3.0 3.0 \d \d \d \d \d \d \d(SBP refinance rate) 0.0 0.0 0.0 \e \e \e \e \e \e \e

MInimun Advance Rates.....................

Finished goods (except capital goods) 13.0 13.0 13.0 \d \d \d \d \d \d \dOther advances 11.0 11.0 11.0 \d \d \d \d \d \d \d

Weighted Average Interest Rates.... ........... .......................

Deposits \g 6.1 6.2 6.4 5.8 8.8 7.9 7.7 8.0 9.9Ouasi-money deposits \g 8.9 8.9 9.0 9.1 8.7 11.0 10.7 9.1 10.53\dAdvances \h 10.7 10.6 10.8 10.5 10.9 11.0 10.7 10.9 10.7

Call (inter bank) Money Rate 10.1 7.5 9.8 9.0 7.1 6.3 6.4 6.3 7.3 5.6........ ............... ... ...........

Bank Rate 10.0 10.0 10.0 \f \f \f Vf Vf \f Vf

\a As of June 30.\b The Export Finance Scheme is intended mainly for non-traditional and newly emerging exports. At present the scheme

covers all exports except: 1) Raw Cotton; 2) Cotton Yarn; 3) Fish other than frozen and preserved; 4)Mutton & Beef;5) Jewelery exported under the entrustment scheme; 6) Live Animals 7) Hides and Skins 8) Leather Wet Blue 9) Wool andAnimal Hair; 10) All Grains including Grain Flour; 11)Petroleum Products; 12)Crude Vegetable materials 13) Crude AnimalMaterial; 14) Feed-stuff for Animals; 15) Stone, Sand and Gravel; 16) Waste and Scrap of all kinds; 17) FertilizerCrude; 18) Oilseeds, Nuts and Kernels; 19) Inorganic Elements, Oxides, etc.; 20) Crude Minerals; 21) Works of Arts andAntiques; 22) All Metals; 23) Fur Skins 24) Wood in rough or squared.

\c Effective March 1, 1981, financing of trading operations of RECP, CEC and TCP has been on the basis of a mark-up inprice instead of interest. The mark-up was 3.5X for 90 days.

104

-2-

Nd Rates of profit to be derived by banks for trade-related and investment type modes of financing are as under:

R a n g e o f P r o f i t

Trade-related Investment typeModes of financing Modes of financing

Minimum Maximum Minimum Maximun

(i) For exports under the Export Finance Scheme No min. 7X* No min. 7X*(ii) For Part-I (Local Sales) of the Scheme for

Financing Locally Manufactured Machinery 8X** 8Xtiii) For Part-II (Export Sales) of the Scheme for

Financing Locally Manufactured Machinery(a) Preshipment stage 7X*** 7X***(b) Postshipment stage 7K 7X

(iv) For other purposes for which specificinstructions have not been issued separately 10X 20 10 No max.

* revised from 6X effective 7/11/90.i* Effective from 8/1/91. Formerly it was 7-1/2X from 7/1/1985 to 6/30/86,

and 3X from 7/1/86 to 6/26/88 and 6% from 6/26/88 to 7/10/1990 and7K from 7/10/90 to 8/1/91.

*** Effective from 7/10/90. Prior to that it was 6X.

\e Effective from July 11, 1990 and July 10, 1990. respectively, the maximum rate of return on refinanceprovided by the State Bank to Banks\development finance institutions under export finance scheme and local andexport sale (pre-shipment stage) of locally manufactured machinery has been increased to 4 percent (exportfinance scheme) and 5 percent (tlocaL and export sale of locally manufactued machinery). Prior to that themaxinum rate of return on refinance under export finance scheme and export sale (pre-shipment stage) of locattymanufactured machinery was 3 percent from 7/1/1986 to 7/10/1990. For SBP refinance provided for loans for thelocal sale of locally manufactured machinery, the maximum rate of return was 4 percent during 1988/89 and1 percent during 1986/87 and 1987/88. As regards refinance provided for the export sale (post-shipmentstage) of loctlly manufactured machinery, the maximum rate of retun has been 4.5 percent since7/1/1986.

:f With effect from January 1, 1985 Finance is provided by State Bank on profit and loss sharing basis.\g Other than PLS deposits.\h Advances other than those under Islamic mode of financing.

Source: State Bank of Pakistan.

105

Table 7.01: INDICES OF AGRICULTURAL PRODUCTION, 1981/82-1990/91---- --- (1980/81u100)

Item 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Food crops 102 109 103 104 114 115 109 118 120 122

Rice 110 110 107 106 93 112 104 102 103 105Wheat 99 108 95 102 121 105 111 126 125 132Barley 90 105 80 75 76 76 64 70 74 77Jowar (Sorghtn) 98 97 97 100 95 103 79 108 114 111Bajra (Millet) 127 103 120 133 121 109 63 94 95 90Maize 96 104 105 106 104 115 116 124 122 122Gram 87 146 155 155 174 173 110 135 167 173

Non-food crops

Sugarcane 113 101 106 99 86 92 102 114 110 111Rape and nustard 94 97 86 93 99 84 81 98 92 94Sesawun 91 59 48 74 81 68 39 55 83 89Tobacco 103 96 119 130 116 103 104 110 101 101

Cotton 105 115 69 141 170 185 205 199 204 229. .... ;p

Atl crops 105 109 96 101 120 124 127 134 135 142

Source: Ministry of Food, Agriculture and Cooperatives.

*106

Table 7.02: AREA UNDER CULTIVATION, 1981/82-1990/91.......... (thousand hecteres)

Item 1981/82 1982/83 198L/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Foodgrain cereals....... ............ *

Rice 1,976 1,978 1,998 1,998 1,863 2,066 1,963 2,043 2,107 2,113Wheat 7,223 7,398 7,343 7,259 7,403 7,706 7,308 7,730 7,845 7,911BeJra (Mtilet) 559 438 553 606 561 510 293 510 512 491Jowar (Sorghuu) 393 390 391 395 372 399 320 431 440 447maize 739 790 798 809 804 816 854 866 858 856Barley 222 263 200 190 189 182 145 159 155 157

Pulses

Gram 902 893 920 1,014 1,033 1,082 821 979 1,006 1,081Hash 67 74 71 84 89 78 75 79 86 79Masoor 74 82 42 49 57 81 76 76 76 73HMwg 66 79 91 94 105 114 94 97 144 142Other pulses 214 208 176 175 168 167 157 165 184 n.a.

O tseeds

Rape and mustard 391 385 313 347 351 303 269 334 307 340Sesamum 43 29 22 34 38 33 18 25 38 53Cottonseed 2,214 2,263 2,221 2,242 2,364 2,505 2,561 2,619 2,599 2,662Groundnuts 60 69 73 59 55 63 67 68 80 83

Cash crops

Cotton (Lint) 2,214 2,263 2,221 2,242 2,364 2,505 2,561 2,619 2,599 2,662Sugarcane 947 912 897 904 780 762 842 877 842 884Tobacco 43 41 46 50 46 39 42 43 41 42

Codiments and spices....................

Onions 43 45 47 48 49 51 55 58 59 57Garlic 5 6 6 7 7 7 7 7 6 n.a.ChiLties 59 63 69 67 68 65 61 58 60 71

Vegetables..........

Potatoes 43 51 50 55 63 61 58 64 80 73Other vegetables 128 144 150 150 161 185 192 198 206 n.a.

Source: Ministry of Food, Agrfculture and Cooperatives.

107

Teble 7.03: AGRICULTURAL PRODUCTION, 1981/82-1990/91----- -- t(thousand metric tons)

Item 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Foodgrain cereals

Rice 3,430 3,445 3,340 3,315 2,919 3,487 3,241 3,200 3,220 3,261Wheat 11,304 12,414 10,882 11,703 13,923 12,016 12,675 14,415 14,316 14,565Bajra (milLet) 272 222 256 284 258 233 135 201 205 196Jowar (sorghum) 225 222 222 230 219 236 187 248 262 262Maize 930 1,005 1,014 1,028 1,010 1,110 1,128 1,204 1,179 1,185Barley 158 l85 140 132 134 134 112 123 120 120

Pu(ses

Gram 294 491 522 524 586 584 372 456 570 583Mash 33 36 39 47 49 30 35 32 39 37Masoor 31 30 22 26 31 33 31 33 35 32Mung 32 40 42 45 49 55 43 41 57 57Other pulses 98 97 85 84 82 81 75 80 67 n.a.

Oilseeds

Rape and nmustard 239 246 217 235 250 213 204 249 233 237Sesamum 17 11 9 14 15 13 7 10 15 22Cottonseed 1,498 1,648 990 2,018 2,436 2,668 3,030 2,852 2,912 1,691Groundnuts 72 84 88 69 63 75 52 78 85 89

Cash crops

Cotton (lint) 749 824 495 1,009 1,218 1,320 1,468 1,426 1,456 1,634Sugarcane 36,580 32,534 34,287 32,140 27,856 29.,926 33,029 36,976 36,188 35,989Tobacco 69 65 80 87 78 69 70 74 68 68

Condiments and spices

Onions 452 475 503 515 525 577 633 707 713 701Garlic 42 51 51 53 54 57 61 61 48 n.a.Chillies 100 104 97 96 99 92 84 75 101 n.s.

Vegetables

Potatoes 477 518 510 543 618 594 563 645 831 730Other vegetables 1,617 1,803 1,917 1,906 2,065 2,452 2,518 2,627 2,751 n.a.

Source: Ministry of Food, Agriculture and Cooperatives.

108

Table 7.04: YIELD PER HECTARE OF AGRICULTURAL CROPS, 1981/82-1990/91........ (kgs per hectare)

Item 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Foodgrain cereals

Rice 1,736 1,742 1,67n 1,659 1,567 1,688 1,651 1,566 1,528 1,543Uheat 1,565 1,678 1,482 1,612 1,881 1,559 1,734 1,865 1,825 1,841Bajra (millet) 487 507 463 469 460 457 41 394 400 399Jowar (sorghun) 573 569 568 582 589 591 585 575 595 586Naize 1,259 1,272 1,271 1,271 1,257 1,360 1,321 1,391 1,374 1,384Barley 711 703 700 694 711 735 771 772 774 764

Pulses

Gram 326 550 567 517 567 540 453 466 567 539mash 491 486 548 561 550 385 467 410 456 465Masoor 419 365 524 531 543 407 407 434 466 442Mung 485 507 461 479 467 482 460 425 396 399Other Pulses 458 466 483 479 486 485 481 483 364 n.a.

0ilseeds

Rape and mustard 611 639 693 678 713 704 759 746 759 697Sesamun 396 383 412 407 399 392 400 406 400 415Cottonseed 677 728 446 900 1,030 1,065 1,183 1,089 1,120 635Groundnuts 1,202 1,214 1,205 1,168 1,145 1,196 783 1,140 1,021 1,021

Cash Crops

Cotton (lint) 338 364 223 450 515 527 573 544 560 614Sugarcane 38,629 35,668 38,234 35,567 35,721 39,293 39,227 42,166 42,989 40,702Tobacco 1,605 1,575 1,734 1,734 1,706 1,774 1,671 1,711 1,661 1,619

Condiments and spices

Onions 10,439 10,480 10,715 10,694 10,628 11,316 11,428 12,232 12,083 12,214Garlic 8,649 7,877 7,877 7,571 8,242 8,275 8,315 8,444 8,474 n.a.Chillies 1,693 1,647 1,406 1,429 1,445 1,430 1,391 1,297 1,688 n.a.

Vegetables

Potatoes 11,093 10,157 10,163 9,939 9,810 9,790 9,694 10,091 10,386 10,008Other vegetables 12,633 12,515 12,768 12,695 12,794 13,241 13,126 13,242 13,354 n.a.

Source: Table 7.02 and Table 7.03 (Yield per Hectare has been computed dividing production by Hectare).

109

Table 7.05: AREA AND PRODUCTION OF RICE BY VARIETY, 1981/82-1990/91

Item 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Total Hectares \a 1,976 1,978 1,999 1,998 1,863 2,066 1,963 2,043 2,107 2,113

easmatl 844 836 825 779 759 749 835 990 1,105 1,087Coarse 259 226 232 245 202 237 175 143 159 185Irri-Pak 873 916 941 974 902 1,080 953 910 843 841

Total Production \a 3,430 3,445 3,340 3,315 2,919 3,487 3,241 3,200 3,220 3,261

Basmati 1,055 1,010 965 958 883 791 943 1,042 1,217 1,220Coarse 354 311 305 318 251 317 228 173 206 209Irri-Pak 2,021 2,124 2,070 2,039 1,785 2,379 2,070 1,985 1,797 1,832

Total Kg per Hectare 1,736 1,741 1,671 1,659 1,567 1,688 1,651 1,566 1,525 1,543................

Basmati 1,250 1,208 1,170 1,230 1,164 1,056 1,129 1,053 1,072 1,122Coarse 1,366 1,374 1,315 1,297 1,244 1,338 1,302 1,210 1,080 1,129irri-Pak 2,315 2,319 2,199 2,093 1,978 2,203 2,173 2,181 2,124 2,178

Total Tonnes per Hectare 1.7 1.7 1.7 1.7 1.6 1.7 1.7 1.6 1.5 1.5

\a Area in thousand hectares and production in thousand metric tons.

Source: Ministry of Food, Agriculture and Cooperatives.

Table 7.06: AREA AND PRODUCTION OF WHEAT BY VARIETY, 1981/82-1990/91

Item 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Total Hectares \a 7,223 7,398 7,343 7,259 7,403 7,706 7,308 7,730 7,845 7,911

Local variety 1,051 1,031 845 712 681 651 432 361 565 n.a.Nexi-Pak variety 6,172 6,367 6,498 6,547 6,722 7,055 6,876 7,369 7,279 n.a.

Total Production \a 11,304 12,414 10,882 11,703 13,923 12,016 12,675 14,415 14,316 14,565................

Local variety 905 993 669 556 606 519 316 340 523 n.a.Nexi-Pak variety 10,400 11,422 10,213 11,147 13,317 11,497 12,359 14,075 13,793 n.a.

Total Kg per Hectare 1,565 1,678 1,482 1,612 1,881 1,559 1,734 1,865 1,825 1,841....................

Local variety 861 963 792 781 889 797 731 942 925 n.a.Nexi-Pak variety 1,685 1,794 1,572 1,703 1,981 1,630 1,797 1,910 1,895 n.a.

Total Tonnes per Hectare 1.6 1.7 1.5 1.6 1.9 1.6 1.7 1.9 1.8 1.8...... ....... . . . ..

\a Area in thousand hectares and production in thousand metric tons.

Source: Ministry of Food, Agriculture and Cooperatives.

110

Table 7.07: FOCOGRAIN UTILIZATION, 1981/82-1990/91 \a-...... -(thousand metric tons)

Item 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Stocks at the beginning ofthe year \b 1,311 2,246 2,545 2,833 2,728 2,153 3,539 n.e. n.a. n.o.

Production \c 16,490 16,381 17,386 15,871 16,243 19,123 16,812 17,681 19,415 19,363Seed, foed and wastage \d 1,608 1,631 1,827 1,709 1,756 2,041 1,813 1,928 2,096 2,089lmports \e 136 - 5 545 1,562 325 601 2,171 1,603 627Exports \f 951 990 1,456 772 1,318 930 1,210 854 744 1,350Stocks at the end of the 2,246 2,545 2,833 2,728 2,153 3,539 2,040 n.e. n.a. n.a.Avaltability 13,132 13,461 13,815 14,040 15,306 15,091 15,889 17,191 17,395 16,551

935Population (million) 84.8 88.3 91.9 94.7 97.7 100.7 103.8 107.0 110.3 113.7Annual per capita consump-

tion (kgB) 154.9 152.5 152.0 150.1 156.? 149.9 153.0 160.7 157.7 145.5Daily per capita consump-

tion (gCs) 424.5 417.0 416.4 411.3 429.0 411.0 419.0 440.0 432.0 399.0

\a Includes rice, wheat, maize, barley, bajra and jowar.\b These stocks comprise government's stocks of wheat (as of beginning of the wheat crop year, May 1) 4d rice

(as of beginning of the agriculture year July 1). Stocks from 1988/89 to date are being compiled by theconcerned agency.

\c Production in any agricultural year (July 1 - June 30) is assumed to be available for consumption inthat year in the case of rice, maize, Jowar and bajra. Production of wheat, however, is assumed to be availableonly In the following wheat crop year (May 1 - April 30).

\d Seed, feed and wastage are assumed to be 10X in the case of wheat; 6X in the case of rice; and 16X in thecase other foodgrains.

\e Inports comprise wheat imports during the specified wheat crop year (May 1 - April 30).\f Exports comprise rice, maize and barley during the specified agricultural crop year (July 1 - June 30).

Source: Ninistry of Finanrce and Economic Affairs.

III

Table 7.08: FERTILIZER BALANCE SHEET, 1981/82-1990/91........ (thousand nutrient tons)

Item 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Opening Balance \a 538 366 555 553 545 256 337 345 278 176...............

Nitrogen 328 293 430 424 395 192 201 226 146 63Phosphate 188 57 115 118 143 50 118 89 117 99Potash 22 16 11 10 7 14 18 30 15 15

Local Production 768 1,076 1,107 1,119 1,130 1,213 1,164 1,196 1,230 1,227................

Nitrogen 701 1,003 1,015 1,029 1,037 1,120 1,077 1,108 1,130 1,124Phosphate 67 73 92 90 93 93 88 88 100 103

Total Imports 133 403 296 342 271 610 615 509 696 749.............

Nitrogen 89 133 79 87 67 210 246 181 328 425Phosphate 28 250 189 233 164 354 305 319 310 268Potash 16 20 27 21 40 46 64 9 58 56

Total Exports.............

(Nitrogen) - 46 158 210 173

Total Availability 1,438 1,798 1,800 1,803 1,773 2,079 2,117 2,050 2,204 2,251, .................

Nitrogen 1,117 1,384 1,366 1,329 1,326 1,522 1,524 1,514 1,604 1,673Phosphate 283 380 396 442 400 497 511 497 527 507Potash 38 34 38 32 47 60 82 39 73 71

Consumption 1,080 1,244 1,203 1,253 1,512 1,784 1,720 1,740 1,876 1,922,...........

Nitrogen 833 953 914 935 1,128 1,332 1,282 1,325 1,436 1,499Phosphate 226 265 260 294 350 410 393 390 404 392Potash 22 26 29 25 34 42 45 25 36 31

Closing Balance \a 358 557 597 549 261 295 397 310 314 329,...............

Nitrogen 285 431 452 395 198 190 242 189 137 174Phosphate 57 115 136 148 50 87 118 107 145 116Potash 16 11 9 7 13 18 37 14 32 40

\a Closing and opening balanees may not tally because of fertilizers in transit.

Source: Ministry of Finance and Economic Affairs.

112

Table 7.09: IRRIGATION WATER SUPPLY, 1960/61-1990/91 /a---... -t(million acre feet)

Rim Canal Head Net System Loss Surface Availab. Public Tubewell Total Farm GateStation Inflows Withdrawals or Gains (-)/(+) at Farm Gate Availability Private Tubewell Water Avallab.Khorif Rabi Kharif Rabi Kharif Rabi Kharif Rabi Kharif Rabi Kharif Rabi Khorif Rabi

1960/61 124.6 20.7 54.5 26.1 (9.7) 4.4 32.7 15.7 0.2 0.2 0.7 0.7 33.6 16.1960/61 119.1 21.0 55.8 27.2 (10.7) 2.4 33.4 16.3 0.3 0.3 1.1 1.0 34.7 17.1962/63 89.5 19.8 58.0 27.8 (9.5) 3.6 34.8 16.7 1.0 1.0 1.5 1.5 37.2 19.1963/64 119.2 21.5 62.2 27.2 (10.4) 4.8 37.3 16.3 1.1 1.1 2.0 2.0 40.3 19.1964/65 115.8 22.3 60.4 29.6 (15.5) 4.7 36.2 17.7 1.2 1.2 2.6 2.6 40.0 20.

1965/66 117.2 21.1 65.1 26.2 3.1 3.3 39.1 15.7 1.2 1.2 3.3 3.3 43.6 20.1966/67 116.5 23.8 66.4 29.6 (4.4) 4.8 39.8 17.8 0.9 0.9 4.1 4.1 44.8 22.1967/68 120.0 25.5 61.7 33.0 1.3 4.6 37.0 19.8 1.0 1.0 4.9 4.9 42.9 25.1968169 115.5 23.1 66.7 31.6 (3.2) 3.0 40.0 19.0 1.4 1.4 5.5 5.5 46.9 25.1969/70 114.2 19.7 69.2 30.7 (12.4) 4.6 41.5 18.4 1.8 1.8 6.0 6.0 49.3 26.

1970/71 89.6 15.9 60.8 26.5 (8.7) 3.1 36.5 15.9 2.2 2.2 6.6 6.6 45.3 24.1971/72 87.9 15.6 60.6 26.1 (11.0) 5.2 36.4 15., 2.2 2.2 7.3 7.3 45.9 25.1972/73 101.5 24.6 68.7 32.2 (10.3) 3.2 41.2 19.3 2.4 2.4 7.9 7.9 51.5 29.1973/74 143.9 19.2 63.4 32.7 (1.5) 9.3 38.1 19.6 2.7 2.7 8.5 8.5 49.3 30.1974/75 79.5 16.5 62.8 23.6 (10.3) 6.0 37.7 14.2 3.5 3.5 9.1 9.1 50.3 26.

1975/76 114.4 22.0 62.9 36.0 (16.3) 10.0 37.8 21.6 3.1 3.1 9.7 9.7 51.6 34.1976/77 111.1 19.1 58.5 38.9 n.a. n.a. 35.1 23.3 2.8 2.8 10.3 10.3 48.2 36.1977/78\a 100.4 23.9 64.5 33.2 (12.6) 0.9 38.7 22.9 3.1 3.1 10.8 10.8 52.6 36.i978/79 136.4 26.4 60.1 36.5 n.a. n.a. 36.1 21.9 0.3 3.3 11.4 11.4 50.8 36.1979/80 108.7 24.9 68.2 37.0 n.a. n.a. 40.9 22.2 0.5 3.5 12.0 12.0 56.4 37.

1980/81 109.8 26.6 69.4 38.0 (10.2) 3.7 41.7 22.8 5.5 5.2 12.6 12.6 59.8 40.1981/82 117.7 22.9 6Y.0 34.8 (12.0) 3.0 40.2 20.9 5.9 5.9 13.2 13.1 59.3 40.1982/83 97.1 25.3 '7.3 36.0 (9.0) 2.5 40.4 21.6 5.0 5.0 13.2 13.1 58.5 39.1983/84 128.3 21.7 62.4 38.2 (8.0) 4.8 37.4 22.9 5.1 5.1 13.5 13.5 56.0 41.1984/85 116.0 18.9 65.7 33.4 (11.2) 4.0 39.4 22.0 5.2 5.2 13.9 13.9 58.5 40.

1985/86 91.7 26.0 60.3 36.0 n.a. n.a. 36.2 21.6 5.3 5.3 14.2 14.2 55.8 41.1986/87 116.4 30.3 67.2 38.7 n.e. n.e. 40.3 23.2 5.4 5.4 14.6 14.6 60.3 43.1987/88 111.8 29.3 71.1 38.0 n.a. n.a. 42.7 22.8 5.5 5.5 15.0 15.0 63.1 43.1988/89 136.6 24.8 66.6 38.5 n.s. n.a. 46.2 23.1 5.7 5.7 15.3 15.3 60.9 44.1989/90 n.e. n.a. n.a. n.a. n.a. n.a. 47.2 27.0 5.8 5.8 15.7 15.7 68.7 48.1990/91 n.a. n.a. n.s. n.e. n.a. n.a. 48.3 27.4 6.0 6.0 16.0 16.0 70.3 49.

\a Losses have been assumed as 40X up to Nakka as against 30X assumed during the previous years.

Source: Ministry of Finance and Economic Affairs.

113

Table 7.10: SALE PRICES OF FERTILIZERS, 1981/82-1990/91--.... - (Rupees per Kett on)

10/27/81 3/15/82 10/6/82 6/11/83 5/20/86 9/18/87 10/10/888/31/89 10/29/90to to to to to to to to to

3/15/82 10/5/82 6/10/83 5/19/86 9/17/87 10/9/88 8/30/89 10/28/90 date

Nitrogen Fertilizers....................

AmJonim sulphate (domestic) AS 212N 840 940 1,080 1,180 1,280 * - * *Anonium nitrate (domestic) AN/CAN 26XN 1,000 1,100 1,160 1,200 1,614 * * * *Urea (domestic) 46XN 1,860 2,060 2,360 2,560 2,520 * * * *

Phosphate Fertilizers.....................

Super phosphate SSP 18XN 500 550 640 800 800 920 1,060 1,160 1,560(domestic Granular) (Gran.182

Super phosphate CIoported) SSP 162W 660 660/ 780 900 1.000Triple super phosphate(imported) TSP 46X 1,900 1900/ 2,220 2,560 2,940 3,720

Potash Fertilizers..................

Sulphate of potash(ifported) SOP 15XK 600 600 700 1,000 1,000 1,200 1,440 2,140 3,000

Conpound FertiLizers..............

Nitro photphate (inported) NP 23:23 1,560 1,680 1,940 2,200 2,200 2,380 26,740 2,980 3,460Di-emmonium phosphate DAP 18:46

Cimported) 2,000 2,100 2,420 2,920 2,920 3,220 3,700 4,340 4,980

* Price control removed./a With effect from February 6, 1986.,b With effect from December 8, 1983.

Sources: Food and Agriculture Division.

114

Table 7.11: PROCUREMENT AND MINIMUM PRICES FOR AGRICULTURAL COMM00ITIES, 1981/82-1990/91--------- (Rupees/40 Kgs)

Crops 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Wheat 58.0 64.0 64.0 70.0 80.0 80.0 82.5 85.0 96.0 112.0

Rice

Basmet 150.0 154.0 157.5 160.0 175.0 230.0 250.0 258.0 276.0 293.0IRRI-6 72.5 80.0 83.0 83.0 86.5 86.5 90.0 100.0 113.0 127.0Kangani 170.0 175.0 178.0 n.a. n.a. n.a. n.s. n.a. n.s. n.a.

Cotton (Seed Cotton)........ .............. . ..c

AC134, NT, BS-1 170.0 175.0 178.0 181.0 185.0 185.0 185.0 188.0 203.0 235.0Other U.S. varfeties\a 192.0 197.0 200.0 203.0 207.0 207.0 207.0 210.0 225.0 260.0Desl varieties 166.0 168.0 169.5 169.5 173.5 173.5 173.5 176.5 191.5 220.0

Sugarcane

(Factory gate) \b

NWFP 9.4 9.4 9.4 9.4 9.4 11.3 11.5 12.3 13.5 15.3Piuniab 9.7 9.7 9.7 9.7 9.7 11.8 11.8 12.6 13.8 15.3Sind 9.8 9.8 9.8 9.8 9.8 12.0 12.0 12.9 14.0 15.8

Maize 34.3 34.3 34.3 34.3 34.3 n.a. n.a. n.a. n.a. n.a.

Potato 27.0 40.5 40.5 40.5 40.5 42.0 44.5 50.0 55.0 60.0

Onion 19.0 25.0 25.0 27.5 30.0 32.0 37.5 36.5 40.0 54.5

\a Sarmast, Deltapine MS-39 and MS-40.\b 0.25 rupees/maurd lower at outstation.n.a. a not available.

Source: Ministry of Finance and Economic Affairs & Agricultural Prices Commission.

115

Table 8.01: PRODUCTION OF SELECTED INDUSTRIAL ITEMS, 1982/83-1990/91 a/

Item Unit of quantity 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Cotton yarn Mitlion kgs 448 432 432 482 586 685 758 911 1049Cotton cloth Million sq.met. 336 297 272 254 238 282 270 295 291Cigarettes Billions 38 40 39 40 40 42 32 32 32Refined sugar 1000 metric tons 1127 1149 1306 1116 1286 1779 1858 1857 1933Vogetable ghee 513 595 640 612 609 697 640 683 682Cement u 3938 4503 4732 57m 6508 7072 7125 7488 7835Fertilizers 2575 2676 2714 2734 2928 2858 2929 3019 3000Paper board &

chip board 59 62 69 63 69 70 66 97 96Safety matches Million boxes 1403 1690 1765 1899 2130 2491 3000 n.a n.eChemicals 1000 metric tons 215 236 254 272 270 282 299 320 323Mild steel

products 637 654 719 732 782 870 887 n.e n.*Jute goods 66 84 78 100 114 118 104 96 100Cycle rubber

tyres, tubes 1000 nos. 9210 9908 11114 10268 10528 10224 10244 9501 9084Coke Metric tons 369949 369500 451245 610059 636709 642052 672375 668172 712000Pig iron " 462625 490856 706016 848438 897242 932694 944518 912915 1013000ittlets 40323 179921 259121 253513 253848 271367 236033 279313 359000H.R sheetsand coils 0 16348 196794 397362 399613 475621 495422 339305 372000

C.R. sheetsand coils 0 0 18870 83465 122887 154550 143145 128347 111000

Formed sections 0 0 4491 3037 1802 4872 4203 n.a n.eCars Nos. 4120 9267 13146 15878 13690 19032 19996 25747 25166Trucks 3644 2883 2797 2285 1404 1104 651 1715 2080Buses 765 624 619 616 414 342 333 626 804Jeeps (4x4) 2138 2160 1715 2321 2156 2631 3340 1581 2805Light commerciflvehicles 10978 11718 12458 11566 10831 10089 118°9 11609 11882

Motor cycles/scooters/rickshaws 34452 54017 52905 60404 41870 49453 57599 71681 84240

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.

Source: Planning and Development Division.

116

Table 8.02: INDICES OF MANUFACTURING OUTPUT, 1982/83-1990/91..--..- (1980/81-100)

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91b/ b/ (Jul-Dec)

amnufacturing Total a/ 123.3 132.8 143.4 153.8 164.9 179.1 183.4 192.1 192.9

Selected ItemsVegetable products 102.0 121.0 130.5 125.4 128.6 134.9 123.8 132.1 128.7Cigarettes 104.5 110.1 108.6 109.4 110.5 109.7 89.2 89.9 86.9Cotton yarn 119.0 115.1 115.2 129.0 156.4 182.7 204.7 243.1 269.5Cotton cloth 109.0 94.6 88.3 83.0 77.3 91.5 87.7 95.8 92.0Paper and board 122.0 122.1 131.8 155.6 175.9 196.8 202.0 198.9 194.0Fertilizers 169.4 172.6 173.9 176.3 189.8 186.6 190.5 197.6 187.9Cement 111.3 127.2 134.9 166.4 183.2 199.6 202.1 211.8 214.0Mild steel produiats 128.7 132.2 145.2 147.9 158.2 n.a. n.a. n.a. n.a.Automobiles 178.0 216.6 264.9 263.4 226.7 268.9 296.1 332.2 340.1

a/ Based on 106 itemsb/ Manufacturing total based on 96 items due to non-avaiLability of data on ten items.

Table 8.03: GROSS FIXED CAPITAL FORMATION IN INDUSTRY, 1982/83-1990/91 a/

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

In Current Prices

Private large and medium-scale industries 5,478 7,073 8,346 10,322 11,445 13,936 20,032 24,637 29,186

Small-scale industry 1,328 1,493 1,665 1,945 2,127 2,602 3,260 3,735 4,548Public industry 5,144 5,700 3,871 4,622 3,i90 3,067 2,623 2,195 2,744(of which Steel Mill) (2,719) (2,228) (1,146) (2,563) (1,476) (739)

Total 11,950 14,266 13,882 16,889 16,762 19,605 25,915 30,567 36,478

In Constant 1981 Prices......... .............................. ..

Private large and medium-scale industries 4,767 5,722 7,062 7,713 6,226 5,980 7,618 8,634 8,971

Small-scale industry 1,256 1,316 1,475 1,600 1,733 1,879 2,037 2,173 2,355Public industry 4,478 4,614 3,260 3,459 1,743 1,327 1,013 791 872

Total 10,501 11,652 11,797 12,772 9,702 9,186 10,668 11,598 12,198

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.

Source: Planning and Development Division.

117

Table 8.04: GROSS FIXED CAPITAL FORMATION IN PRIVATE LARGE AND MEDIUM-SCALE INDUSTRY---------- 1982/83-1990/91 a/ (million rupees)

Industrial Groups 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

IN PRODUCTION

Food except bev. & tobac 193 370 463 507 367 506 735 903 1,112Beverages 10 10 26 28 18 56 81 99 123Tobacco 70 77 91 72 6 21 30 37 46Sub total 272 458 579 607 391 583 846 1,039 1,281

Textiles 538 446 638 1,394 1,687 1,671 2,426 2,981 3,673Footware, apparel & othe 30 44 108 69 37 48 69 85 105Sub total 568 491 746 1,463 1,724 1,718 2,495 3,066 3,778

Wood working 3 1 6 13 12 36 53 65 80Furniture and fixtures 1 1 3 5 5 23 33 41 50Sub total 4 2 9 18 16 59 86 106 130

Paper and paper products 238 13 83 158 186 356 516 635 782Printing and publication 7 27 43 28 16 51 75 92 113Sub total 245 40 126 185 202 407 591 727 895

Leather & leather produc 26 32 45 108 86 139 202 249 306Rubber products 31 350 43 50 37 101 197 180 222ChemicaL & chemical prod 129 241 321 448 458 378 550 675 832Products of petroleum & 19 16 22 147 145 96 140 172 212Non-metallic minerals 15 9 32 21 187 32 46 56 69Basic metal industries 11 9 14 67 56 75 110 135 166Metal products 13 13 19 44 28 45 66 81 99Sub Total 244 669 497 883 997 867 1,311 1,548 1,906

Machinery 34 40 58 58 57 96 139 171 211Elec. machinery & applia 43 64 69 167 223 201 292 359 443Sub total 77 103 127 225 280 297 431 530 654

Transport equipment 20 13 31 186 269 323 469 577 711

Miscellaneous 22 28 38 32 35 106 154 189 233

Total in production 1,451 1,803 2,153 3,597 3,914 4,361 6,383 7,782 9,588

UNDER CONSTRUCTION 4,430 5,797 6,811 7,429 8,861 10,665 15,086 18,646 21,840

Total 5,881 7,600 8,965 11,026 12,775 15,026 21,469 26,428 31,428

TOTAL EXCLUDING COST OFLAND AND RESIDENTIAL fHOLDINGS 5,478 7,073 8,346 10,322 11,445 13,936 20,032 24,637 29,186

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.Source: Federal Bureau of Statistics

118

Table 8.05: GROSS FIXED CAPITAL FORMATION IN SKALL SCALE INDUSTRY...--.... 1982/83-1990/91 a/ (million rupees)

Item 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Food, beverages, tobacco 207 233 260 303 332 406 509 582 708Ginming, texti1es 364 409 456 533 583 713 893 1,023 1,246Wearing apparel 5 6 7 8 9 10 13 15 18Footwear, leather, product 25 28 32 37 40 49 62 71 86Wood, cork products 97 109 122 142 155 190 238 273 332Furniture, fixtures 31 34 38 45 49 60 75 86 105Paper, products, publishin 33 37 42 49 53 65 81 93 113Chemicals, products 11 12 13 16 17 21 26 30 37Drugs, pharmaceuticals 3 3 3 4 4 5 7 8 10Rubber products 21 24 27 31 34 42 52 60 73PLastic products 47 52 59 68 74 91 114 131 160Pottery, china, gless 36 40 45 53 57 70 88 101 123Non-metallic mineral produ 77 87 97 113 123 151 189 217 264Iron, steel products 29 33 37 43 47 57 72 82 100Non-ferrous products 108 121 135 158 172 211 263 301 367Machinery, non-electrical 120 134 150 175 191 234 293 336 409Electrical machinery, appa 43 48 53 62 68 83 104 119 145Transport equipment 15 16 18 21 23 29 36 41 50Scientific instruments 3 3 3 4 4 5 7 8 10Sports goods 12 13 15 18 19 23 29 33 40Handicrafts 5 6 7 8 9 10 12 14 17Other 39 44 47 56 61 76 97 111 135

Total 1,328 1,493 1,665 1,945 2,127 2,602 3,260 3,735 4,548

a/ Figures for 1989/90 are revised and for 1990/91 are provisional.

Source: Federal Bureau of Statistics

i'

119

Table 9.00: COMMERCIAL ENERGY SUPPLIES, 1982/83-1990/91..........

Source 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 198o/89 1989/90 1990/91

oil (000 MT) at--- Domestic crude

Production 636 655 1,277 1,925 2,012 2,188 2,290 2.619 3,151Crude Imports 4,185 4,292 4,016 3,795 3,712 3,757 3,608 3,497 3,972Domestic Production ofPetroleum Products 4,264 4,352 4,668 4,838 4,956 5,671 4,970 5,163 5,991

Imports of PetroleumProducts 1,866 2,155 2,290 2,450 3,169 3,759 4,301 5,293 4,310

Opening Stock 170 159 153 277 101 96 215 215 522GROSS SUPPLY 6,300 6,666 7,111 T,565 8,226 9,526 9,486 10,671 10,823Closing Stock bl 230 232 214 216 268 271 215 522 630CONSUMPTION 6,070 6,434 6,897 7,349 7,958 9,255 9,271 10,149 10,193

GAS GROSS SUPPLY(MMCFT) c/ 347,111 346,678 361,850 380,162 402,561 437,311 455,488 497,653 464,713

COAL (000 M. Tons)<---Production 1,695 1,869 2,238 2,202 2,261 2,750 2,643 3,142 2,887

loports 520 491 716 852 919 853 896 765 918

ELECTRICITY...........

Total Capacity(MW) 4,799 5,010 5,615 6,298 6,651 6,821 7,111 7,775 8,937Hydel 2,547 2,548 2,898 2,898 2,898 2,898 2,898 2,898 2,898Thermal 2,114 2,325 2,580 3,263 3,615 3,785 4,075 4,739 5,902Nuclear 137 137 137 137 137 137 137 137 137

Gross Generation(GWH)d/ 19,697 21,873 23,003 25,589 28,703 33,091 34,562 37,659 40,900Hydel 11,365 12,826 12,241 13,804 15,250 16,690 16,970 16,925 18,000Thermal 8,104 8,723 10,416 11,355 12,951 16,147 17,562 20,442 22,500Nuclear 228 324 346 430 502 254 30 292 400

a/ Conversion factor is taken from Economic Survey of Pakistan 1989/90 as1 ton of oil * 7.454 barrels

b/ Including ex-portsc/ Million Cubic Feetd/ Gigawatt HoursSource: Economic Survey of Pakistan and Directorate GeneraL of New and Renewable Energy

Resources(DGNERER), Ministry of Petroleum and Natural Resources.

120

Table 9.01: ENERGY BALANCE SHEET, 1982/83-1989/90--------- (000 tons of oil equivalent)

Source 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90

Oil--- Production freo Domestic crude 396 361 629 960 985 1,081 1,090 1,224

Production from Importedcrude oil (PRL & NRL) a/ 3,926 4,048 4,107 3,984 4,079 4,242 3,987 4,047

Iported petroleum products 1,925 2,210 2,339 2,525 3,279 3,885 4,449 5,427Opening stock 170 159 153 277 101 96 215 211GROSS SUPPLY 6,418 6,778 7,228 7,747 8,444 9,304 9,741 10,909Exports 652 341 294 300 243 278 219 178NET SUPPLY b/ 5,765 6,436 6,933 7,446 8,201 9,026 9,522 10,731Closing stock/Losses 230 232 214 216 268 27' 215 520CONSUMPTION 5,535 6,204 6,719 7,231 7,933 8,755 9,307 10;211

GASGas processed 6,065 5,716 6,134 5,874 6,550 7,021 7,447 7,845Raw gas 565 628 594 894 775 972 870 1,087Associated gas 501 408 451 650 651 718 730 1,155GROSS SUPPLY 7,130 6,751 7,179 7,418 7,976 8,711 9,047 10,087Less feed stock 1,125 1,138 1,158 1,158 1,199 1,193 1,207 1,267NET SUPPLY 6,005 5,614 6,021 6,260 6,777 7,518 7,840 8,820Less losses 498 111 153 192 242 374 493 452CONSUMPTION 5,507 5,503 5,868 6,068 6,535 7,144 7,347 8,368

L.P.G.---- GROSS SUPPLY c/ 50 72 75 75 108 140 141 137

COAL d/---- GROSS SUPPLY c/ 758 836 1,001 985 1,011 1,230 1,182 1,406

ELECTRICITY b/

Hydel generation 2,705 3,053 2,913 3,285 3,630 3,972 4,039 4,028Thermal generation 1,929 2,076 2,479 2,702 3,082 3,843 4,180 4,865Nuclear gervration 54 77 82 102 119 60 7 69GROSS GENERATION 4,688 5,206 5,475 6,090 6,831 7,876 8,226 8,963Less units consumed in auxillary 144 164 179 174 180 201 212 224NET SUPPLY 4,543 5,042 5,296 5,916 6,651 7,675 8,013 8,739Less Losses e/ 1,176 1,298 1,111 1,235 1,487 1,707 1,654 1,895CONSUMPTION 3,368 3,744 4,185 4,680 5,164 5,968 6,360 6,844

TOTAL AVAILABILITY (GROSS) 19,043 19,643 20,957 22,315 24,371 27,262 28,338 31,502

Less feed stock (FertiLizer Ind.) 1,125 1,138 1,158 1,158 1,199 1,193 1,207 1,267Less exports 562 341 294 300 243 278 219 178Less auxiltiary of hydeL/nuclear 15 18 17 17 17 19 8 6

NET SUPPLY 17,341 18,146 19,488 20,840 22,911 25,772 26,904 30,051

Less losses 1,904 1,641 1,478 1,643 1,998 2,352 2,362 2,867GROSS CONSLMPTION 15,438 16,506 18,011 19,197 20,914 23,419 24,542 27,184Less Thermal generation 1,929 2,076 2,479 2,702 3,082 3,843 4,180 4,868

NET CONSUMPTION 13,509 14,429 15,532 16,495 17,831 19,576 20,363 22,316

8/ PRL & NRL are also processing domestic crude since 1984.b/ Conversion factors for HSD and LDO are used as 1.051 & 1.042 TOE/m.ton respectively as per Gross Calorific

1985/86 for homogenity. A single conversion factor of 1.0289 TOE/m.ton has been used for both HSD & LDO inyears. For electricity a conversion factor of 1 GWH a 238 TOE has been used.

c/ ALt supplies are assumed as consumption.d/ It does not include imported coal which is mostly used in Pakistan SteeL Mills as non-energy.ei It also incLudes closing stock of oil.Note:Gross Supply may not tally with production of natural & associated gas (Table 9.06 & 9.07)

due to gas failure and process losses.Source: Directorate General of New and Renewable Energy Resources (DGNRER).

121

Table 9.02: ENERGY CONSUMPTION BY SECTOR, 1982/83-1989/90---------- (000 tons of oil equivalent)

Sector 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90

Domestic a/ 2,216 2,598 2,91i' 3,274 3,662 3,991 4,398 4,790(14.5) (15.9) (16.3) (17.2) (17.6) (17.2) (18.1) (15.9)

Comwercial 470 538 585 614 666 720 745 762(3.1) (3.3) (3.3) (3.2) (3.2) (3.1) (3.1) (2.5)

Indcstrial 4,550 4,836 5,196 5,542 5,994 6,509 6,708 7,319(29.8) (29.6) (29.1) (29.1) (28.9) (28.0) (27.6) (24.2)

Agriculture 775 814 891 943 1,077 1,395 1.348 1,495(5.1) (5.0) (5.0) (5.0) (5.2) (6.0) (5.5) (4.9)

Transport b/ 2, 96 3,180 3,358 3,588 4,123 4.405 4,580 4,930(19.6) (19.4) (18.8) (18.8) (19.9) (19.0) (18.8) (16.3)

Power c/ 2,505 2,592 2,995 3,148 3,728 4,638 4,873 5,860(16.4) (15.8) (16.8) (16.5) (18.0) (20.0) (20.0) (19.4)

Fertilizer d/ 750 758 772 772 799 795 805 4,223(4.9) (4.6) (4.3) (4.1) (3.9) (3.4) (3.3) (14.0)

Other Govermnent e/ 1,006 1,043 1,134 1,158 703 783 881 840(6.6) (6.4) (6.4) (6.1) (3.4) (3.4) (3.6) (2.8)

Total 15,270 16,359 17,849 19,040 20,751 23,237 24,338 30,219------ (100) (100) (100) (100) (100) (100) (100) (100)

Figures in brackets are percentage shares.a/ Includes 75X of LPG in oilb/ Includes "Railtay Traction."ci Power represents fuels consumed for thermal generation. Electricity generated in turn is reflect

other sectors.d/ Excluding feed stock, which accounts for about 60X of total gas supply to fertilizer industry.e/ Excluding KESC sales to WAPDA from 1986/87.Note: HSD consuwption in "Agriculture Sector" is not avaiiabte and is included under "Transport Sect

"Agriculture Sector" represents LDO only.Source: DOGNRER.

122

Table 9.03: ENERGY CONSUMPTION BY RESIDENTIAL SECTOR, 1982/83-1990/91.....-... -(000 tons of oil equivalent)

Sector 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Oil a/ 650 754 828 882 969 992 1,108 1,152 974(29.3) (29.0) (28.4) (26.9) (26.5) (24.8) (25.2) (24.1) (39.5)

Gas 664 755 875 995 1,071 1,110 1,217 1,407 1,488(29.9) (29.0) (30.0) (30.4) (29.2) (27.8) (27.7) (29.4) (60.4)

Coal 10 10 7 6 3 9 7 3 2(0.4) (0.4) (0.2) (0.2) (0.1) (0.2) (0.2) (0.1) (0.1)

Etectricity 893 1,079 1,208 1,391 1,620 1,880 2,066 2,228 n.a.(40.3) (41.5) (41.4) (42.5) (44.2) (47.1) (47.0) (46.5)

Totat 2,216 2,598 2,918 3,274 3,662 3,991 4,398 4,790 2,464...... (100) (100) (100) (100) (100) (100) (100) (100) (1100)

Figures in brackets are percentage shares.a/ Including 75f of LPG consumption.Source: DGNRER.

Table 9.04: ENERGY CONSUMPTION IN THE INDUSTRIAL SECTOR, 1982/83-1990/91---------- (000 tons of oil equivalent)

Source 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

011 385 673 795 925 1,203 1,198 1,262 1,269 1,124(8.5) (13.9) (15.3) (16.7) (20.1) (18.4) (18.8) (17.3) (25.0)

Gas 2,147 1,953 1,941 1,922 1,891 1,966 2,038 2,208 2,092(47.2) (40.4) (37.3) (34.7) (31.5) (30.2) (30.4) (30.2) (46.5)

Coal 692 810 973 961 994 1,210 1,167 1,385 1,286(15.2) (16.8) (18.7) (17.3) (16.6) (18.6) (17.4) (18.9) (28.6)

Electricity 1,326 1,400 1,487 1,735 1,907 2,136 2,241 2,457 n.a.(29.1) (29.0) (28.6) (31.3) (31.8) (32.8) (33.4) (33.6)

Totals 4549.9 4836.3 5195.9 5542.2 5994.1 6509.0 6707.8 7319.0 4502.0....... (100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures in brackets are percentage shares.Source: DONRER.

123

Table 9.05: FIELD-WISE PRODUCTION OF CRUDE OIL, 1982/83-1990/91...OOO. - (000 barrels)

Fields 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Khaur 2.5 2.6 3.0 3.5 3.5 3.3 3.0 6.6 2.5(0.05) (0.05) (0.03) (0.02) (0.02) (0.02) (0.02) (0.03) (0.01)

Dhulian 38.1 9.5 8.6 14.6 11.0 9.6 9.0 8.5 9.1(0.8) (0.2) (0.1) (0.1) (0.1) (0.1) (0.1) (0.04) (0.04)

Joya Mir 110.2 85.1 86.6 97.3 111.6 163.2 115.9 199.6 211.4(2.3) (1.7) (0.9) (0.7) (0.7) (1.0) (0.7) (1.0) (0.9)

satkassar 202.4 191.9 184.0 162.6 143.6 160.4 187.2 216.5 202.7(4.3) (3.9) (1.9) (1.1) (1.0) (1.0) (1.1) (1.1) (0.9)

Meyal 2118.2 1849.2 1395.4 1264.0 1230.3 1245.0 1141.5 989.6 1015.8(44.7) (37.9) (14.7) (8.8) (8.2) (7.7) (6.7) (5.1) (4.3)

Toot 791.7 823.3 925.1 761.8 587.4 519.2 455.9 377.2 337.5(16.7) (16.9) (9.7) (5.3) (3.9) (3.2) (2.7) (1.9) (1.4)

Adhi 143.8 171.8 398.6 408.8 - - 163.3 769.3(3.0) (3.5) (4.2) (2.8) (0.8) (3.3)

Khaskheli 1331.1 1365.9 1161.4 1472.5 996.3 379.8 266.9 377.3 320.8(28.1) (28.0) (12.2) 100.3) (6.6) (2.4) (1.6) (1.9) (1.4)

Leghari - 350.4 2188.4 3224.2 2960.4 2392.6 1801.2 1961.3 1546.2(7.2) (23.0) (22.5) (19.7) (14.9) (10.6) (10.0) (6.6)

Dhurnal - 31.5 2165.7 4900.9 5668.5 6247.5 6442.2 5816.4 5251.6(0.6) (22.7) (34.2) (37.8) (38.9) (37.7) (29.8) (22.4)

Fim Kassar 2.4 9.8 9.0 8.3 3.5 1.5 671.4 1446.2(0.1) (0.1) (0.1) (0.1) (0.0) (0.0) (3.4) (6.2)

Ghotana - - - - 76.7 68.1 18.7 - -(0.5) (0.4) (0.1)

Tandoalam - 994.8 1603.1 1376.4 1113.6 866.2 795.4 731.9(10.4) (11.2) (9.2) (6.9) (5.1) (4.1) (3.1)

Mazari - - - 1080.9 2357.8 2422.4 2024.1 1829.1(7.2) (14.7) (14.2) (10.4) (7.8)

Dhabi - - - 425.8 744.5 427.2 404.0 353.3 329.8(3.0) (5.0) (2.7) (2.4) (1.8) (1.4)

Chaknaurang - - - - 203.8 118.7 334.5 655.4(1.3) (0.7) (1.7) (2.8)

Thora - 717.8 1060.1 1669.0 1722.3(4.5) (6.2) (8.6) (7.3)

Injra - - - 6.3 0.2 -(0.0) (0.001)

Sono - - - - 55.8 703.4 598.1 729.1(0.3) (4.1) (3.1) (3.1)

124

Fields 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Ohangatl - - - - - 589.1 526.1C3.0) (2.2)

Dakhnl - . . , , 91.6 474.9(0.5) (2.0)

Lashari centre - - - 346.2 629.0 9 .1(2.0) (3.2) (3.4)

Bobi - - - - - - 149.4 89.8 194.6(0.9) (0.5) (0.8)

Posaki - - - - - - 322.3 1630.1(1.7) (6.9)

Liari - - - - - - - 1121.90.0 0.0 (4.8)

S. Mazari - 486.0 920.8 1056.4(2.8) (4.7) (4.5)

Turk - - - - 57.7 206.8 230.0SO.3) (1.1) 0l.0)

Gotarchi . - - - - - 14.5 49.5 32.2(0.1) (0.3) (0.1)

Halipota - - - - - - - 3.9 31.5(0.0) (0.1)

Matli 55.7 128.2(0.3) (0.5)

Sonro - - - - - - - 154.3(0.7)

Total 4738.1 4883.5 9521.3 14348.0 14999.3 16074.5 17069.9 19520.7 23486.0(100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures in brackets are percentage shares.Source: DGNRER

125

Table 9.06: PRODUCTION OF NATURAL GAS BY FIELDS, 1982/83-1990/91....... .... (itBlion Cubic Feet)

Fields 1982/83 1983/84 1984/85 1985/86 1986/87 1987188 1988/89 1989/90 1990/91

Sui 262.2 263.1 263.5 255.7 248.5 253.5 258.9 255.2 227.4(80.0) t79.5) (76.5) (71.9) (65.8) (61.9) (61.0) (56.3) (49.7)

Mari 63.9 65.3 66.6 77.4 94.2 102.1 104.4 104.8 101.9(19.5) (19.7) (19.3) (21.8) (24.9) (24.9) (24.6) (23.1) (22.3)

Sari/Hundi 1.9 0.7(0.6) (0.2)

Pirkoh - 2.0 14.6 22.3 31.0 40.6 45.8 52.2 67.2(0.6) (4.2) (6.3) (8.2) (9.9) (10.0) (11.5) (14.7)

Kandrkot - - - - 4.0 13.6 12.5 20.4 25.0(1.1) (3.3) (2.9) (4.5) (5.5)

Gotarchi - - - - - 2.7 9.0 10.0(0.6) (2.0) (2.2)

Loti - - - - - 9.2 15.5(2.0) (3.4)

Malti - - 2.7 10.1(0.6) (2.2)

Total 328 331 345 355 378 410 424 454 457(100) (100) (100) (100) (100) (100) (100) (100) (100)

TFigures in brackets are percentage shares.

126

Table 9.07: PRODUCTION OF ASSOCIATED GAS BY FIELDS, 1982/83-1990/91.......... (Billion Cubic Feet)

F/elds 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Adhi - - - - - 1.1 5.0(2.4) (7.8)

Toot 2.5 2.8 3.6 3.0 2.3 2.2 2.2 2.1 1.7(12.9) (18.0) (21.0) (12.1) (9.4) (8.0) (7.0) (4.6) (2.6)

Dhullian 2.4 0.2 - - - -12.6) (1.6)

Meyal 14.3 12.5 9.5 9.0 9.4 10.4 10.7 9.4 8.0(74.6) (80.4) (55.2) (36.3) (37.8) (37.8) (34.3) (20.8) (12.4)

Dhurnal -t 4.1 12.8 13.1 15.0 15.0 13.9 12.7(23.8) (51.6) (52.8) (54.2) (48.1) (31.0) (19.8)

Turk - - - - 3.3 15.6 24.1(10.6) (34.7) (31.5)

Dakhni - - - 1.7 8.1(3.8) (12.6)

Bhangali - - - - - - - 0.6(0.9)

Nazari - - - 0.9 0.9(2.0) (1.4)

Hatipota - - - - - - 0.00.0

Dhabi 0.4(0.6)

S. Mazari - 0 - - - - - 0.3 0.2(0.7) (0.3)

Lier - - - - - 0.2(0.3)

Sonro 30(4.7)

Total 19 16 17 25 25 28 31 45 64....... (100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures in brackets are percentage shares.Source: OGNRER

127

Table 9.08: FIELD-UISE PRODUCTION OF COAL, 1982/83-1990/91---------- (000 tons)

Fieldb 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Sor-rangse 243 194 207 172 163 187 196 199 161(14.4) (10.4) (9.3) (7.8) (7.2) (6.8) (7.4) (6.3) (5.6)

Dcgorf 68 117 147 183 152 165 158 148 119(4.0) (6.2) (6.6) (8.3) (6.7) (6.0) (6.0) (4.7) (4.1)

Shorigh 33 44 59 42 60 69 82 117 120(1.9) (2.3) (2.6) (1.9) (2.6) (2.5) (3.1) (3.7) (4.2)

Sinjidi 139 180 204 202 185 216 216 201 150(8.2) (9.6) (9.1) (9.2) (8.2) (7.9) (8.2) (6.4) (5.2)

Mach 65 91 93 65 109 224 206 258 256(3.9) (4.9) (4.1) (3.0) (4.8) (8.2) (7.8) (8.2) (8.9)

Herna1 13 18 43 60 41 35 128 186 211(0.8) (1.0) (1.9) (2.7) (1.8) (1.3) (4.8) (5.9) (7.3)

Ouki 198 202 219 225 232 294 303 291 290(11.7) (10.8) (9.8) (10.2) (10.3) (10.7) (11.5) (9.3) (10.0)

Pitr lsmal 90 85 163 202 144 194 188 210 225c5.3) (4.5) (7.3) (9.2) (6.4) (7.1) (7.1) (6.7) (7.8)

Abesum 17 37 34 17 27 56 52 71 62(1.0) (2.0) (1.5) (0.8) (1.2) (2.0) (2.0) (2.3) (2.1)

Makerwal Salt 450 473 471 426 485 596 457 467 473(26.5) (25.3) (21.1) (19.3) (21.5) (21.7) (17.3) (14.9) (16.4)

Lakhra 310 366 533 544 565 652 609 940 780(18.3) (19.6) (23.8) (24.7) (25.0) (23.7) (23.0) (29.9) (27.0)

Jhampfr 25 31 30 27 60 17 15 19 14(1.5) (1.7) (1.4) (1.2) (2.6) (0.6) (0.6) (0.6) (0.5)

Nakerwal/Kohat 42 32 34 36 37 43 34 35 26(2.5) (1.7) (1.5) (1.6) (1.6) (1.6) (1.3) (1.1) (0.9)

Total 1,695 1,869 2,238 2,202 2,261 2,750 2,643 3,142 2,887...... (100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures in brackets are percentage shares.

Source: DONRER

128

Tabki 9.09: INSTALLED CAPACIIY OF ELECTRICITY GENERATION, 1982/83-1990/91..........-- (Megawatt)

Plants/Location 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Hydel (WAPDA)Warsak/Peshawar 240 240 240 240 240 240 240 240 240Dargai/Mardan 20 20 20 20 20 20 20 20 20Molakand/Dargai 20 20 20 20 20 20 20 20 20Rasul/Jheliu 22 22 22 22 22 22 22 22 22Shadlwal/Gujrat 14 14 14 14 14 14 14 14 14Chichokimalian/Laho 13 13 13 13 13 13 13 13 13Nandipur/Gujranwata 1; 14 14 14 14 14 14 14 14Kurram Garhi/Bannu 4 4 4 4 4 4 4 4 4Renala/Lahore 1 1 1 1 1 1 1 1 1Mangola/Jehlum 800 800 800 800 800 800 800 800 800Tarbela/LEowarancepu 1,400 1,400 1,750 1,750 1,750 1,750 1,750 1,750 1,750Chitral - 1 1 1 1 1 1 1 1

Sub-Total 2,547 2.548 2,898 2,898 2,898 2,898 2,898 2,898 2,898

Thermal (WAPDA)G.T.P./Shahdara a/ 85 85 85 85 85 85 85 85 85S.P.S./Faisaleabd 132 132 132 132 132 132 132 132 132G.T.P.S./Faisalabad 200 200 200 200 200 200 200 200 200O.T.P.S./Faisalabad 8 8 8 8 8 8 8 8 20N.G.P.S./Multan 266 266 266 266 266 266 266 266 266T.P.S./Guddu 439 440 440 1,089 1,040 1,240 1,240 1,234 1,234T.P.S. /Sukker 50 50 50 50 50 50 50 50 50N.G.P.S./Nyderabad 44 44 44 44 44 44 44 44 44G.T.P.S. /Kotri 130 130 130 130 130 130 130 130 130T.P.S./Quetta 59 59 59 95 94 94 94 94 94MESCO/Multan 20 20 20 20 20 20 20 20 20REPCO/Rawalp1ndi 9 9 9 7 9 9 9 9 9G.T.P.S/Kot Adu - 400 400 690 690 1,000T.P.S.(Jamshoro) - - - - 460 880

Sub-Total 1,441 1,442 1,442 2,125 2,477 2,677 2,967 3,421 4,164

KESCOWest Wharf steam st 96 96 96 96 96 66 66 66 66Thermal power stati 382 382 382 382 382 382 382 382 382Dual fuel station 15 15 15 15 15 15 15 15 15Gas turbine 80 80 80 100 100 100 100 100 100Gas turbine (Site) 100 100 100 125 125 125 125 125 125Thermal power gener - 210 420 420 420 420 420 630 1,050

Sub-Total 673 883 1,138 1,138 1,138 1,108 1,108 1,318 1,738

Thermal Total 2,114 2,325 2,580 3,263 3,615 3,785 4,075 4,739 5,902

Kanupp 137 137 137 137 137 137 137 137 137

Total Capacity 4,799 5,010 5,615 6,298 6,651 6,821 7,111 7,775 8,937

a/ Gas Thermal Power Stationb/ Steam Power Stationc/ Oil Thermal Power StationSource: DGNRER

*129

Toble 9.10: GENERATION OF ELECTRICITY BY SOURCE, 1982/83-1990/91 \a---- .- - -tOOO Gigawatt Hours)

Source 1982/83 1983/84 1984/65 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Hydel 11.4 12.8 12.2 13.8 15.3 16.7 17.0 16.9 18.0(57.7) (58.6) (53.2) (53.9) (53.1) (50.4) (49.1) (44.9) (44.0)

Thermal 8.1 8.7 10.4 11.4 13.0 16.1 17.6 20.4 22.5(41.1) (39.9) (45.3) (44.4) (45.1) (48.8) (50.8) (54.3) (55.0)

Nuclear 0.2 0.3 0.3 0.4 0.5 0.3 0.03 0.3 0.4(1.2) (1.5) (1.5) (1.7) (1.7) (0.8) (0.1) (0.8) (1.0)

Total 19.7 21.9 23.0 25.6 28.7 33.1 34.6 37.7 40.9------ (100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures In brackets are percentage shares.a/ Source of 1989/90 is the Statistical Supplement, Economic Survey 1989/90.

Source: DGNRER

Table 9.11: FUEL CONSUMPTION (MIX) FOR THERMAL POWER GENERATION, 1982/83-1990/91......... f(000 tons of oil equivatent)

Source 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91

Fuel oil 417.2 534.9 749.6 831.5 808.2 1,055.8 1,062.6 1,703.7 2,032.0(16.7) (20.6) (25.0) (26.4) (21.7) (22.8) (21.8) (29.1) (32.8)

Diesel oil 335.1 223.2 179.7 157.6 368.7 540.6 767.9 461.2 364.9(13.4) (8.6) (6.0) (5.0) (9.9) (11.7) (15.8) (7.9) (5.9)

Coal 14.6 10.5 14.4 11.4 8.5 9.5 8.1 17.8 11.0(0.6) (0.;) (0.5) (0.4) (0.2) (0.2) (0.2) (0.3) (0.2)

Gas 1,738.5 1,823.5 2,051.4 2,147.5 2,542.7 3,032.2 3,034.8 3,677.3 3,793.4(69.4) (70.3) (68.5) (68.2) (68.2) (65.4) (62.3) (62.8) (61.2)

Total 2,505.5 2,592.1 2,995.1 3,148.1 3,728.1 4,638.1 4,873.5 5,860.0 6,201.3...... (100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures in brackets are percentage shares.

Source: DGNRER

130

Table 10.01: WHOLESALE PRICE INDEX NUMBERS, 1982/83-1990/91------..... (1980/81 a 100)

X ChngeItem 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 over 1989/90

General 113.1 124.4 130.9 137.0 143.8 158.2 173.5 186.2 208.0 11.7

Food 116.9 125.2 135.4 140.2 146.7 ¶60.2 175.8 187.6 204.5 9.0

Raw materials 105.3 129.0 117.9 116.8 129.4 155.6 169.0 182.4 195.5 7.2

Fuel, lighting & lubricants 116.0 125.5 135.9 155.9 155.8 170.8 180.7 187.1 218.5 16.8

Manufactures 110.2 124.5 127.8 132.1 141.2 151.8 168.9 184.0 216.6 17.7

BuiLding materials 95.8 104.2 111.4 118.5 123.4 143.7 163.6 187.8 198.1 5.5

Source: Federal Bureau of Statistics.

Tab4e 10.02: INDEX NUMBERS OF WHOLESALE PRICES BY COMMODITIES, 1982/83-1989/90----------- (1980/81 a 100)

_ ChangeItem 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 ¶990/91 over 1989/90

Rice 117.6 122.7 126.9 137.2 142.8 155.1 166.6 177.6 201.0 13.2Wheat 122.6 128.7 141.0 149.6 148.0 148.5 162.8 180.2 205.2 13.9Gram 121.2 93.1 100.1 106.1 82.4 105.4 174.5 134.8 107.5 20.3Vegetable ghee 100.1 117.1 128.3 126.5 121.1 133.7 163.5 167.5 168.2 0.5Sugar (refined) 116.8 128.7 129.8 141.0 152.2 154.2 153.4 181.6 176.1 -3.1Spices 192.1 180.1 166.3 148.6 183.1 219.0 321.1 285.8 282.6 -1.1Salt 114.0 115.1 119.9 133.2 139.2 147.3 153.0 159.2 182.0 14.3Cotton '110.6 152.4 121.7 107.5 114.0 127.0 133.1 155.1 176.6 13.8Wool 85.5 89.9 98.8 90.8 117.0 146.9 164.8 166.5 125.6 -24.5Hides 106.3 181.9 255.0 260.8 360.1 543.9 638.0 743.9 858.8 15.5Skins 77.7 90.6 122.2 172.7 193.2 378.0 428.2 413.4 446.2 7.9Mustard & rapeseed ofl 89.7 122.9 133.3 127.3 125.8 151.1 166.4 167.4 175.6 4.9Tobacco 96.3 94.4 109.4 143.2 151.3 153.3 176.7 177.3 180.3 1.7Cotton yarn 109.9 143.2 120.4 118.8 142.2 165.0 164.0 186.9 216.6 15.9Cotton manufactures 107.6 119.7' 141.5 152.6 161.2 177.4 189.7 200.6 234.7 17.0Tobacco products 113.1 129.2 146.7 144.2 146.4 162.8 222.5 239.2 252.7 5.7

General 113.1 124.4 130.9 137.0 143.8 158.2 173.5 186.2 208.0 11.7

Source: Federal Bureau of Statistics.

Table 10.03: CONSUMER PRICE INDEX NUMBERS, 1982/83-1990/91 \a---- --- (1980/81 = 100)

X ChangeCommodity Group 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 over 1989/90

General 116.3 124.8 131.8 137.6 142.5 151.5 167.2 177.3 199.8 12.7

Food, beverages & tobacco 119.1 128.6 136.2 139.7 145.2 156.8 179.0 187.1 211.2 12.9Apperel, textiles & footwear 119.6 131.5 142.9 153.0 156.6 169.4 183.3 198.0 222.0 12.1House rent 110.9 116.0 120.6 125.2 129.3 133.4 137.9 147.8 163.6 10.7Fuel * lighting 111.2 116.0 121.4 128.4 127.3 132.8 148.4 165.0 189.6 15.0Household furniture, equipments

& etc. 116.9 122.4 129.5 134.6 138.2 145.0 158.9 176.3 188.4 6.9Transport & communfcatian 115.5 131.2 139.8 157.0 166.6 ¶72.7 178.4 185.9 229.6 23.5Recreation, entertainment &

education 113.2 119.2 124.9 133.3 141.2 151.9 160.7 169.8 181.3 6.8Cleaning, ltundry & personal

appearence 112.6 118.7 126.8 134.4 138.3 144.3 161.5 179.1 199.4 11.3Miscellarneous 116.2 123.1 124.9 131.6 136.4 141.3 150.6 163.1 171.8 5.3

\a Combined Indices of industrial, coamercial, and goverrnent enployees.Source: Federal Bureau of Statistics

IBRD 16248R264* 6s FORMER SOVIET UNION1

- S4..,AHINA

PAKISTAN '/,-36- NATIONAL CAPITAL \ K r*<

o CITIES AND TOWNS I?

NATIONAL ROADSPRIMARY AND SECONDARY ROADSRAILWAYS

+ AIRPORTS k Cho.soda \ \ pp . ol Co,0ro

- - PROVINCE BOUNDARIESINTERNATIONAL BOUNDARIES

. - -~- RIVERS \ *f owpsnd JAMMU and KASHMIR

, AF GHANISTAN <'5

-28. y\ ! aLob 280

ISLAMIC jREPLJBLIC OF i-.-..

IRAN Dhe/ 0 1o 0 200 300 400i_ 4 ,. / S} [/t N D Hk. KILOMETERS

0 . loo 15)0 200 250Bel iohMILES

BulbiT Pt t obd

h J °"° ~~Bod..lrStf24-~~~~~~~~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~ e/. ?.o o .s f ,d. 4-24A)

'-'I. dO.OIOOPIyOO0.POI.OIJL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~h'

'~~~~~~~~~~~~~~~~~~~~~~~0 Itl 'g0 Itlo ruc o, fn 0

64- 68- 72-IEBRUARY 1992