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News Analysis: Pak Facing Horrendous Economic Pressures As War Continues
As the US-led military campaign against the Afghan Taliban regime continues, Pakistan, as a front line state, is facing massive pressures on its recession- hit economy.
The impact of the three-week-long military attacks in Afghanistan has started being felt in almost every aspect of Pakistan's economy, which has long been struggling hard for a revival.
Being Afghanistan's immediate neighbor and located in the most high war risk area, the domino effect of global airlines' crisis has been felt by Pakistan's airline and shipping industry as the insurance premiums for the shipping and airlines are increased.
As a result, the costs of exports and imports have risen significantly, affecting Pakistan's foreign trade severely.
Local economists are of the view that Pakistan is heading for a serious economic crisis as the US-led military operation in Afghanistan prolongs.
Even before the start of the on-going military campaign, the first in the 21st century, quite a number of multinational companies, airlines, shipping lines and big buying houses had cut down their operations in Pakistan amidst uncertainty created by an impending war.
The worst hit is the textile sector, the backbone of this south Asian nation. According to a report by the major English daily " The Nation", orders worth millions of dollars have so far been canceled.
Meanwhile, sources from the Central Board of Revenue (CBR) believe that the efforts by the Musharraf government to improve revenue collection during the current fiscal year (from July 1, 2001 to June 30, 2002) will be seriously affected if the military operations against the Afghan Taliban continue.
The CBR sources insisted that the on-going military crisis in neighboring Afghanistan will not only have a major effect on Pakistan's direct taxes collection but also have far-reaching repercussions on revenue collection as the import and export sector has been affected seriously.
During the last fiscal year, the CBR set an ambitious revenue target of 435 billion rupees (about 7.2 billion US dollars), but at the end of the fiscal year, it failed to achieve the third-time revised revenue target of 406 billion rupees (6.5 billion dollars) and total revenue collection remained at 394 billion rupees (6.35 billion dollars) after what a local press report said "utilization of all energies on the part of CBR high-ups".
Pakistan has set an export target of 10.2 billion dollars for the current fiscal year and the economic managers intend to narrow down the trade deficit which means that they will try their best to reduce imports to maximum level.
However, it is believed that under the present circumstances, the export target is anything but hard to achieve.
The existing economic situation is quite precarious and the events following the September 11 terror attack in the United Sates have added fuel to the fire.
According to the latest report by the International Monetary Fund (IMF) on Pakistan's economy, the growth target set for the current fiscal year may not be achieved and could be lower than expected in addition to the more current account deficit.
The IMF report also suggested that export growth is likely to be lower than projected, both because of expected further weakening of external environment and greater concerns about the domestic socio-political situation.
Pakistan's Finance Minister Shaukat Aziz has said that Pakistan is likely to suffer at least one billion dollar loss this year and the figure could rise if the current Afghan crisis is not resolved in the short term.
The military campaign in Afghanistan has lasted for three weeks. A short-term war now seems a lesser possibility as the US-led coalition is preparing for a prolonged war against terrorism.
The economic pressure on Pakistan, which is struggling under a burden of a 38 billion dollar debt, is daunting, and as the war in Afghanistan prolongs the situation is likely to deteriorate.
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