Foreign debt is 53% of GDP, revenues a mirage; then there's Kargil
Even as the latest UN report on the world economy predicts strong growth for India to continue in '99, international agencies don't hold out that hope for Pakistan. Moody's Investor Services, when it downgraded Pakistan recently, made it clear that 1999-2000 budget targets of 3 per cent budget deficit, 5 per cent real gdp growth and 21 per cent growth in direct taxes are about as reliable as promises by its militant groups.
A country with a foreign debt of 53.3 per cent of gdp and a foreign investment of $286 million in 1998-99, according to Moody's, hardly inspired confidence of creditors and investors. Especially since the beginning of the Kargil conflict, both its stockmarkets and currency have been under tremendous pressure. Following the downgrade, the rupee lost 97 paise in a single day on June 29. The rupee is now over 54 to a dollar, compared to around 50 at March-end, while recovery in the stockmarkets, according to a review by Jang newspaper, has been badly hampered by the Kargil conflict.
Pakistani economists openly admit that rescue efforts have so far been of little use in sorting out the economic mess. Tax collections this year fell short by about 15 per cent or Rs 4 billion. In a desperate move to bolster the revenue situation to meet imf conditions, the army has been sent out to read electricity meters and help collect overdue bills.
The government's privatisation programme and new public investments are at a standstill, probably because a lot of borrowed funds are going in for debt-servicing and war-spending. In such a situation, it's not difficult to predict where fresh imf funds would be spent. With the Kargil situation escalating, Prime Minister Nawaz Sharif has hardly had any time to get back to economic reforms so far.