The Economic Fallout
By Fazal Hakeem

FORMER Prime Minister Mohtarma Benazir Bhutto’s assassination has created a political vacuum. Her death dumbstruck and stunned both her supporters and critics. She was a politician-cum-intellectual of par-excellence. Traders expressed solidarity with the late charismatic leader and kept their business closed for three days.

Her contribution to democracy will always be remembered. In addition to political effects, her demise caused economic repercussions on the overall estimates of Rs.1.874 trillion consolidated federal budget for Current Financial Year having a fiscal deficit of Rs.398 billion.

The Federal Board of Revenue is likely to revise its revenue collection targets to less than 1025 billion made in 2007-08 budget in view of expected Rs.60 billion shortfall by end June 2008. An adjustment of Rs. 44.425 billion through additional revenues were made. According to an estimate a single day strike deprives the national exchequer of around Rs.3 billion. The year 2007 bade bloody farewell making the 27th December a tragic day which one would be hardly be able to reconcile to.

Within two days of 27th December, 2007 assassination, 153 offices, 72 railways train apartments, 765 shops , 900 vehicles, 34 petrol pumps and 174 banks were burned One ATM machine costs between 30-40 million rupees, the exact figures of machines and looted money is yet to be worked out. 16 bridges were damaged and 25 railways stations were torched. 37 Police stations were attacked. Out of 800 vehicles set on fire 250 were on lease and the rest were with no insurance cover. Insurance companies will bear the major brunt of losses. About a dozen general insurance companies are operating despite a huge market of more than 160 million.

The huge losses could cause collapse of new comers in insurance sector. Business activities came to standstill. On 28 December Customs authorities have received only 74 entries for imports cargo against 2500 entries. Experts on the basis of last year’s imports of 24 billion dollars, the country suffered losses of an estimated 65 million dollars a day. The exports per day losses were around 50 million dollars a day on the basis of last year exports of 17 billion dollars. Assessment of about 80 billion rupees losses is under way.

Karachi Chamber of Commerce and Industry has started exercised to collect statistics for the payment purposes. Karachi Stock Exchange witnessed the biggest plunge of 696 points (4.7%) in one day that once proclaimed to be the world’s best performer in Asia.

The loot, plunder and arson shattered the people confidence and investors. Bloody demonstrations investors confidence has hit the rock bottom. Daily wage earners remained idle for more than a weak. The losses suffered by them should be reflected in the economic survey estimates on per capita income, unemployment and poverty alleviation.

Some analysts predict boost to perceived risk. News of assassination sent global gold and oil prices higher including unsettling of global foreign exchange markets. Credit rating agencies lowered country’s sovereign foreign currency . Moody rated Pakistan “B1” with a negative outlook. Normalization will change the picture. New elections will assigned the leadership with a set of serious economic and social challenges. Inflationary pressure have re-emerged. Food and energy prices are on the rise. Addressing the poverty issue, structural problems and maintaining the macro-economic stability would make the management task very difficult. Under globalization, improvement in production is important. Social development targets could be possible if education is improved and investments with new technologies is poured in the country.

The steep rise in international oil prices has raised petroleum products. Pakistan’s bill for oil imports during 2007 was up to 7.5 billion dollars against 3 billion dollars in 2004. The cost of oil per barrel would remain in the vicinity of 90 dollars which was 63 dollars per barrel in 2006-07.

Improved governance wherein the poor can have access to reasonably quality services. Fair tax and expenditure policies may have sobering effects on social sector. In view of imbalance of 7 billion dollars between imports and exports, the Trade Development Authority of Pakistan is sending a marketing mission.

According to a report the exports rose by just 7.13% while the imports swelled by 18.7%. This year trade deficit is expected 15 billion dollars. Pakistan economy volume is said to be closed of Rs. 10 trillion (160 billion dollars). The billion rupees losses suffered by the all strata of society could effect the economic targets due to law ad order.

The Finance Division has expressed confidence in narrowing down of trade and current account deficits during 2007-08. The trade deficit during first quarter of 2007-08 was brought down to 2.4 billion dollars against 2.70 billion dollars during the same period of 2006-07. Currently, Pakistan facing the fuel shortage which fluctuates between 1000-3000 megawatts and is likely to worsen due to transportation problem. The assassination of PPP Chairperson caused surged in world oil market. The geopolitical jitters compelled the brokers to shift funds from equities to metal being safer fearing regional turmoil.

The oil, gas and power projects could be risked due to long instability in the aftermath of Benazir’s death. Research analyst Chietigi Bajpace at Global Insight London view that “ we can expect immediate impact for energy projects such as the Trans-Afghanistan pipeline and the Iran-Pakistan-India natural gas pipeline, we could be shelved as the government struggle to maintain internal security” smacks biased approach. There is a pressure on Pakistan to shelve pipeline deal with Iran and meet power shortages by importing the electricity from Central Asian States. Despite the fact that security in Afghanistan is still a dream.

The political uncertainty has engulfed the entire business and economic activities. Business community are fearing about scrapping of existing contracts as well as no new contracts for supply and purchases. Food inflation is already in double digit. Wheat flour is sold for Rs.24 to Rs.25 per kg. Sugar, edible oil, pulses, rice, milk and eggs are sold costly. Cotton and rice did not give projected production. Sugarcane bumper crop is succumbed to the unending battle between the millers and growers. Same is the case of wheat crop despite its production as per target of 23-5 to 24 million tons.

Nevertheless, there is a need to look at the positive aspects and be optimistic than concentrate on pessimism. There is also a need for repositioning of all stakeholders to gain confidence and compete the challenging global business environment.

Readjustment is essential to achieve the critical mass in industry sector to perform well. No doubt, there is a huge demand for Pakistani cement, food, production, home textile etc provided the business community get ready to respond in time. Sales/exports of cement is increased upto 24% in 2007-08.

At the same time, appropriate projection by media is necessary to revive the national and international confidence to counter the rumour mongers and anti-state elements. In post 9/11 time law and order is an international problem and no country can absolve itself. Role of media is vital and tests the patriotism and professionalism of those involved.●