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Monday, 29 October, 2001, 15:42 GMT
Pakistan to miss growth forecasts
Farming in Pakistan
Farming accounts for one-quarter of the Pakistani economy
Pakistan's central bank has warned that economic growth will fall short of its original forecasts this year, citing the war in Afghanistan.

The State Bank of Pakistan said that the cancellation of investment plans by jittery foreign companies, coupled with lower expenditure by domestic consumers, will restrict growth for the current financial year to a 2.5-3.75% range.

That is down from the Bank's forecast of 4% growth earlier this year.

But the Bank added that final growth for the year could fall further still if the three-week old conflict in Afghanistan escalates.

Growth seen stagnant

"GDP [gross domestic product] will either be stagnant or negative depending on the intensity, duration and scope of the campaign," the bank said.

A sharp rise in insurance premiums on all ships travelling to Pakistan has hurt the country's export trade, further exacerbating its economic woes.

Last year, Pakistan's gross domestic product expanded by just 2.6% compared to the targeted 5% after drought devastated the country's agriculture sector.

Farming accounts for 26% of Pakistan's GDP.

Economists had predicted a stronger performance this year, citing a range of free-market reforms introduced by the Pakistani government in the spring, improved weather conditions, and an increase in export demand.

Debt relief

The central bank's decision to downgrade its growth forecast came as Pakistani finance minister Shaukat Aziz was due to meet his Japanese counterpart Masajuro Shiokawa in Tokyo to discuss Pakistan's debt to Japan, one of its main creditors.

Last month, Japan rescheduled half a billion dollars of Pakistan's debt in recognition of its support for the US-led coalition against terrorism.

Pakistan owes a total of $38bn, equivalent to around 13% of its GDP.

Germany has also promised more investment and overseas aid to Pakistan in return for backing the coalition.

On Sunday, the German government offered the country $39.2m to help deal with the growing numbers of Afghan refugees on its north-western border.

See also:

27 Sep 01 | Business
Japan eases Pakistan's debt burden
22 Oct 01 | Business
Pakistan counts cost of war
24 Oct 01 | Business
World Bank approves aid for Pakistan
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