Pakistan 2010 webinar

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This is a presentation made by Jenny Nordgren, country analyst at SEB, in a webinar geld on the Benche. Link to a recording of the webinar:

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Pakistan 2010 webinar

  1. 1. The Benche WEBinar September 7, 2010 Jenny Nordgren Pakistan – Adding insult to injury 1
  2. 2. Human catastrophe   Worst floods since 1920s   About a fifth of Pakistan is under water   Affected around 17 million people   Damaged around 30 % of the agricultural land and 23 % of this year’s harvest   Severe damages to the infrastructure 2
  3. 3. Massive Economic Challenge   Agriculture sector 20 % of GDP   Spillover impacts on textile and manufacturing sectors   Damage to the infrastrucure   Economic recovery jeopardized –  GDP expected to grow by only 2 % instead of projected of 4-5 % in 2010/11   Severe pressure on the budget –  Budget deficit widen to 6-7 % of GDP, well above its 4 % target in 2010/11 3
  4. 4. Banking system under strain   Moodys’s changed its rating outlook on 5 banks to negative on August 30   Negative macroeconomic effects from the floods –  Impede corporate sector’s recovery –  Challenge borrower’s repayment capacity –  Textile sector accounts for 14 % the rated banks loan book   Deterioating asset quality   Declined profitability   Liquidity constraints 4
  5. 5. External position better than expected   FX reserves of USD 12.5bn   External financing need of around USD 8bn in 2010/11 –  Debt repayments of around USD 2bn –  Current account deficit projected at USD 5-6bn   Strong inflow of remittances   IMF loan worth of USD 11.3bn of which USD 7.3bn has been disbursed since 2008 5
  6. 6. IMF vital role to play   IMF to provide emergency assistance USD 450mn   Additional USD 1.7bn to be disbursed under the IMF-program end-2010   UN appeal of USD 460mn   World Bank and Asian Development Bank jointly committed USD 3bn   Varying amounts from bilateral donors 6
  7. 7. Fragile security and political situation   President Zardari unpopular and much-criticised   Risk of ethnic and social tensions   Risk of Islamic radicalization   Cautious Western donor support 7

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