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Public Sector Development Programme (PSDP) came under parliamentary scrutiny during the meeting of the Senate Standing Committee on Communication with the Secretary Planning and Development Commission contending that subsequent to the passage of the 18th Constitutional Amendment social sectors including education and health had been devolved to the provinces. In addition, the National Finance Commission (NFC) award envisages a lower federal government share in the divisible pool with the objective of granting greater financial autonomy to provinces which had been a long standing provincial demand. The principal argument in favour of these two measures was that devolution of social sectors together with greater finances would strengthen the hands of the provincial governments to deliver to the people and reduce federal government expenditure. Unfortunately none of the objectives has been achieved so far.

As Iraq unravels essentially because of the American forces' hasty departure from there, President Obama has of late come under increasing pressure to rethink his drawdown plan from Afghanistan that too remains unsettled, a dilemma further complicated by the controversial presidential election. The pressure has come not only from within the United States but also from its allies in the region. Under the Obama plan, the United States would pull out some 20,000 troops from Afghanistan by the end of the year leaving behind 9,800, a number to be cut to only 1000 by the end of 2016. About a dozen senior US Senators, both Republican and Democrats, and some at the Pentagon want their President to re-evaluate the timeline of withdrawal and the quantum of forces to be left behind in Afghanistan. Also of serious concern to observers in Washington is the fact that the US government is yet to have the Bilateral Security Agreement (BSA) and Status of Forces Agreement (SOFA), which President Karzai will not sign and the next man to do so is not yet in sight. Meanwhile, the insurgents are neither down nor out, in fact they have emerged stronger, too strong to be taken on by Afghan National Army on its own as indicated by some of recent encounters with them. Among the United States allies, Pakistan is one that has urged Washington to review its withdrawal plan and possibly devise some kind of mechanism for a continued support to help eliminate the curse of Taliban in the tribal areas. The concern was conveyed to the Obama administration as well as other critical stakeholders during a hush-hush visit by a high-powered Pakistani delegation. The visit undertaken last week was kept secret from the national media but the American media was fully briefed. What was the logic behind this strategy? Obama was under pressure of American public's war fatigue and decided to cut and run from Iraq and announced a set date for withdrawal from Afghanistan to earn credit for bringing home American boys and girls from two major conflicts. But the price in terms of peace and stability the two are paying is too high to win President Obama any kudos. The break up of Iraq seems to be imminent. The question whether Afghanistan will survive such an eventuality has no easy answer.
The latest external data released by the State Bank on 21st July, 2014 is quite disturbing as current account (C/A) balance of the country has posted a deficit of dollar 2.93 billion during FY14 (2013-14) as compared to dollar 2.50 billion in the past year, indicating a surge of dollar 429 million or 17 percent. Almost all the components of C/A balance except secondary income have recorded higher deficits during the year. As imports rose at a higher pace than exports, trade deficit widened from dollar 15.4 billion in 2012-13 to dollar 16.5 billion while services account also registered a higher deficit of dollar 2.6 billion as compared to dollar 1.6 billion in FY13. Deficit on primary income was also higher at dollar 3.9 billion compared to dollar 3.7 billion last year. Thanks to a substantial increase of almost dollar 2 billion in workers' remittances, surplus balance on secondary income, however, rose to dollar 20.2 billion during FY14 compared to dollar 18.1 billion in 2012-13, offsetting to a large extent the deficit in other components of the current account. As C/A deficit during the year was higher than last year, its ratio to GDP also rose from 1.06 to 1.18 during this period.
Ever since Islamabad has become the nation's capital there has been a steady rise in the number of holidays on account of religious festivals. The reason for such increase is not difficult to understand. Islamabad is essentially inhabited by outsiders, whose residence there is required either by their jobs or they being rich enough have their second homes away from the humdrum of their fiefdoms or they cannot afford accommodation for their families that are constrained to leave behind in their village. So the babus that essentially run Islamabad; brazenly act in their own self-interest while determining Eid and other holidays. But this time we are going to have the longest spell of Eid holidays - from July 25 to August 2. For good nine days, the government will be away on furlough for far longer. And when the federal government offices in Islamabad close down there is not much the banks, business and industry throughout the country can do to maintain their tempo and thus pile up huge losses in production. Not that for rest of the time when government offices are open there is great regard for work ethics - none of it for there is this 'tea time' all the time. If anybody thought that by declaring Saturday also a close day the government has grossly erred he is mistaken. Given the chance the present rulers, like many of their predecessors, would like to have longer weekends for rest and recreation; after all governance is such a laborious duty. Add to this the rulers' sense of piety and their advisors' canny move to keep anti-loadshedding demonstrators off the street by diverting electric supply from closed government offices to their homes and we are condemned to live what the Chinese call the 'interesting times'.
Prime Minister Nawaz Sharif is learning the ropes the hard way. His vision and aspirations cannot be met with the present system of governance, where the executive authority, in constitutional terms, rests with him but in reality its implementation is greatly dependent on country's cumbersome bureaucracy. The present system does not have the required depth or the resilience to undertake any strategic thinking to develop a strategy aimed at tackling the ongoing electricity crisis. The nation was first informed that there is a shortfall in generation capability to meet the present demand - now it is being told that the transmission and distribution system is also woefully inadequate to endure any addition in power supply. It is no rocket science to determine the electric power demand if the growth in GDP is estimated at 4.1 percent. This means the demand for electric power will go up by one and half times and if population growth is also included the demand for electric power, on yearly basis, will rise by at least twice the growth figures.
Israel has begun a ground offensive, intensifying its assault on the besieged Gaza Palestinians. As of Monday 13 days of Israeli attacks had claimed 558 Palestinian lives, wounded nearly 2,283 people, and destroyed hundreds of homes while Israeli casualty count stood at 27, including 25 troops. The asymmetrical nature of the fights between the occupying power and the occupied is too obvious. Yet sadly but unsurprising Western governments have continued to back Israeli aggression. Following the latest escalation President Obama reaffirmed his support for Israel saying "we are hopeful that Israel will continue to approach this process in a way that minimises casualties." Such a large-scale military 'process' is meant to destroy, not protect lives. Similarly, in her comments on the latest round of bloody violence German Chancellor Angela Merkel tried to portray the aggressor as the aggressed saying "both sides must accept painful compromises, but we stand by the side of Israel when it comes to self-defence." Such validations of blatant aggression only encourage Tel Aviv to behave recklessly, generating anger against Western countries in the Arab street as well as in the wider Muslim world.
The Board of Directors of SBP, in its meeting held on 19th July, 2014, decided once again to leave the policy rate unchanged at 10 percent for the next two months. A status quo was widely anticipated as the economy was still not out of woods despite improvement in some of the key macroeconomic indicators. According to central bank's Monetary Policy Statement (MPS), economic indicators are certainly better at the beginning of FY15 than a year ago: foreign exchange reserves were considerably higher, forex market had stabilised, growth in broad money (M2) was contained due to a deceleration in government's budgetary borrowings, private sector credit was picking up along with a moderate economic recovery and inflation remained in single digit. More specifically, year-on-year growth in M2 had decelerated to 12.5 percent by end-June, 2014 - the lowest rate of monetary expansion during the last three years. This was mainly due to a significant reduction in government borrowings for budgetary support from the banking system that provided necessary space to the private sector to borrow from banks; it also led to lowering inflationary expectations. The growth in domestic debt during FY14 had decelerated due to a lower fiscal deficit and increase in external financing. Foreign inflows had resulted in a capital and financial surplus of dollar 6.1 billion during July-May, 2014 which was a marked improvement compared to the surplus of only dollar 465 million in the corresponding period last year. From a low level of dollar 2.8 billion on 7th February, 2014, SBP's foreign exchange reserves had increased to dollar 9.6 billion by 4th July, 2014 and exchange rate had stabilised slightly below Rs 99 to a dollar. The average CPI inflation at 8.6 percent in FY14 was in single digit for the second consecutive year. Thanks to a better LSM performance, real GDP had grown by 4.1 percent in 2013-14 despite challenging security conditions and energy shortages.


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Foreign Debt $60.9bn
Per Cap Income $1,368
GDP Growth 3.6%
Average CPI 7.5%
Trade Balance $-1.558 bln
Exports $2.117 bln
Imports $3.675 bln
WeeklyJuly 10, 2014
Reserves $14.638 bln