HYDERABAD, Nov 25: The State Bank Governor Dr Shamshad Akhtar said on Tuesday that Pakistan was now out of the woods as the country had illustrated well its ability to achieve a high growth track record and offer promising prospects to investors, both domestic and international.

She said during her lecture at the University of Sindh that macro-finance programme was being launched at a massive scale. Only the poor and salaried people were paying tax (regularly) and the country needed to develop a culture of saving and investment, she said.

She said that after showing strengths and potential over the past few years or so, Pakistan faced a difficult year as its journey on path to high economic growth was disrupted.

The domestic resources mobilisation lagged behind investment requirements and delays in structural reforms in core infrastructure sectors resulted in acute shortages, which together affected overall economic performance, she said.

She said that despite a moderation in investment of GDP ratio during financial year 2008, saving-investment gap widened by 3.2 per cent points due to a sharper decline in savings to GDP ratio.

Specifically, investment to GDP ratio declined to 21.6 per cent in financial year 2008 from 22.9 per cent in 2007 and savings to GDP ratio dropped from 17.8 per cent in 2007 to 13.9 per cent during financial year 2008, she said.

The governor said that decline in savings and investment were both a source of concern. On the one hand, a fall in investment had a tendency to slow down economic growth and on the other a drop in savings might add increased pressure to external account to finance investment needs of the country, she said.

“The incipient economic stress magnified as the country faced unprecedented set of exogenous and endogenous shocks that eroded hard earned economic gains,” she said and added that fiscal year 2008 – an aberration and a deviation – had been adversely affected by multiple factors.

She pointed out that global commodity price shock hit Pakistan the most as the country was heavily dependent on oil imports. The lower than expected performance in real productive sectors was due to high international commodity prices, energy shortages, below target harvest of some key crops, which were hit by water shortages and uncertainty during political transition, she observed.

She said that fiscal management weaknesses surfaced more glaringly as the budget for 2007-08 was observed to be grossly underestimated and the spending was not aligned properly to the resource availability.

Widening fiscal deficit coupled with rising prices of oil in international market doubled the external current account deficit to 8.4 per cent of GDP, the governor said.

At the outset of fiscal year 2008-09, the government and central bank had together developed a macroeconomic stabilisation package, which had helped to have a buy-in from the international agencies, she said.

She said that the government had now widely acknowledged the inflationary impact of its sizeable borrowings from the central bank that reached undesirable levels close to Rs380 billion during July-November 17, 2008. During 2007-08 period, the central bank had to revise its monetary policy rate at least three times, she said.

Pakistan had well illustrated its ability to achieve a high growth track record and offer promising prospects to investors, both domestic and international, she said.

Dr Akhtar announced that the State Bank would establish a chair in the university.