Pakistan Economy Hits Rough Patch

[Riaz Haq]

The recent political turmoil with Bhutto's return and her tragic assassination in Oct-Dec 2005 period is taking its toll on Pakistan's economy. Weaker textile exports, rising food prices, and ongoing energy crisis have caused the government to scale down its growth target for the fiscal year ending June 2008.



Immediately after Benazir Bhutto's death on Dec. 27, rioters from her native Sind province caused an estimated $1.3 billion in losses, according to Karachi's Chamber of Commerce. Power transmission, telecommunications and roads were affected. Among the recent issues exacerbating the larger energy crisis, the two main power transmission lines were blown up in January 2008 in Sind, creating a shortfall of 1,000 MW. The business community complained that lopsided and unplanned shutdowns resulted in closures in almost all industries. Many factories in Karachi, the heaving commercial hub -- including some owned by Colgate-Palmolive Co. and Philip Morris International Inc. -- sustained damage, according to Tasleemuddin A. Batlay, president of Karachi's American Business Council and a director of Colgate-Palmolive's Pakistan unit, as reported in Wall Street Journal. At Italian garment maker Maxco Pvt. Ltd., a fire engulfed several refurbished buildings, killing eight workers; damage was estimated at $25 million, according to a report in Wall Street Journal.

Pakistan's Finance Minister Salman Shah says economic fundamentals remain strong and growth should still exceed 6%, which would outstrip many of Pakistan's peers in Asia. Last year, the Karachi Stock Exchange's benchmark index advanced more than 40%.

Karachi share market on Monday started on a positive note on the back of foreign interest, coupled with increasing oil prices in the international market, and the KSE-100 index breached through 14,000 psychological level to hit 14,053.46 points intra-day high level, reports Business Recorder, Pakistan's Financial Daily.

The Pakistani economy has, so far, shown a lot of resilience in absorbing a number of shocks in the last few years. It is likely that there will be post-election violence in Pakistan regardless of the outcome. We'll have to wait and see if the economy can ride out this potential storm as well.