Oct. 10 (Bloomberg) -- Pakistan's economy is capable of absorbing the devastation caused by Saturday's magnitude 7.6 earthquake, the strongest in a century, because remote areas were the worst-affected, a government official said.
``There will be some adverse impact on the budgetary targets, but the growing economy, resulting in higher revenue collection, will absorb this shock,'' Asfaque Hasan Khan, adviser to the finance ministry, said in an interview.
Pakistan expects growth of 7 percent this year as the government continues its effort to attract investment through privatization and liberalization, Prime Minister Shaukat Aziz said Oct. 1 in a speech to the World Economic Forum in Kuala Lumpur. The country's $110 billion economy grew 8.4 percent last year.
``If the earthquake had rocked industrial areas like the economic hub Karachi, Lahore or Faisalabad, then the economic activities would have received a jolt, resulting in adverse effects on the country's budgetary figures,'' Khan said.
The government forecast the fiscal deficit at 3.8 percent of gross domestic product for the year ending June 30, up from 3.3 percent the previous year. Revenue collection is forecast at 690 billion rupees ($12 billion), compared with 590 billion rupees collected a year earlier.
``It is difficult to assess the volume of losses, but it is expected that large funds from government resources will be used for these areas, impacting budgetary targets,'' said Arif Habib, chief executive of Arif Habib Investments, which manages the equivalent of $268 million of funds in Karachi.
``The tone at the stock market will be depressed because of loss of human lives, but will not see any decline in share prices, rather, an increase is expected in cement and banking shares,'' Habib said.
Pakistan's benchmark Karachi Stock Exchange has gained 32 percent since Jan. 1 compared with a 39 percent gain in 2004.
``Oil marketing companies will perform well, as consumption of fuel will increase as the government has started speedy relief work,'' said Muzamil Aslam, economist at KASB Equities in Karachi. ``Textile and companies making food products will see a jump in their sales.''
Insurance shares will remain unchanged because people have not yet developed a culture of insuring their lives and property, Aslam said. There will be some inflationary pressure on food- related items and the fiscal deficit will widen, resulting in a drop in economic growth by as much as 25 basis points to 6.75 percent, he said.
Pakistan's inflation rate, measured by the monthly consumer- price index, slowed to 8.41 percent in August from July, a decline economists attributed to stable food prices. The consumer price index rose an average 9.28 percent in the financial year ended June 30, compared with an average increase of 4.57 percent in the year ended June 30, 2004.
Pakistan Interior Minister Aftab Sherpao said international assistance was pledged by the United Arab Emirates, the U.K., France, Turkey, China, Japan, Russia, the U.S., Ireland and Indonesia. The countries were sending trained rescue teams, dogs and relief goods, including tents, blankets, food and medicine, and helicopters.
The World Bank said in an e-mailed statement yesterday it will give Pakistan $20 million in credit for reconstruction to help ``manage the damage to infrastructure and livelihoods of its people.''
The Manila-based Asian Development Bank pledged $10 million over the next two to three months for rehabilitation work in Pakistan.
posted by sultan in economy section.