Finance minister sees 4.6 percent GDP growth this fiscal year

ISLAMABAD (November 01 2002) : Finance Minister Shaukat Aziz has said that Pakistan would achieve 4.6 percent GDP growth during ongoing fiscal year, which is marginally higher (0.10 percent) than envisaged 4.5 percent for the same year and 1 percent higher than last year's 3.6 percent GDP growth.

The 4.6 percent GDP growth seems achievable as the government expects the manufacturing sector to grow at 5-6percent and agriculture sector most likely to cross the last year growth trend (1.4 percent). The service sector would remain modest.

He was speaking here at the signing ceremony of International Finance Corporation (IFC) financing of $ 35 million to the Dewan Salman Fiber Limited (DSFL).

IFC is the financing arm of the World Bank group devoted to private sector would provide $ 30 million senior loan, a convertible loan of $ 4 million, and a $ 1 million participation in a convertible preferred stock issue.

IFC's financing would assist DSFL to expand its polyester staple fiber capacity by adding a special fiber line of 20,000 tons per annum, refinance its existing debt, and fund its need for permanent working capital. In addition to IFC funding, the $ 70 million project will receive a $ 21 million loan from a syndicate of local banks and $ 14 million through a convertible preferred issue and internal cash generation.

Dewan Salman Fibre is the first Pakistani synthetic and petrochemical company with world-scale operations and has become an exporter of synthetic fibber in the international market. As a result of continued de-bottlenecking, technical expertise, and the acquisition of Dhan Fibres Limited in year 2000, Dewan Salman now has an annual PSF production capacity of about 250,000 tons. Dewan Salman is the only company in Pakistan with an annual Acrylic production capacity of 25,000 tons.

Now it is working to develop specially fiber products in the country to meet growing needs of the textile sector, which is the largest export earner for the country. This will also address the issue of temporary over-capacity of PSF in the country.

DSFL has put in place various measures to ensure cost competitiveness in the rising fuel cost scenario. In this regard, efforts are being made to convert the PSF Units to gas-fire. This, coupled with substantial savings in interest cost, should strengthen the cash flows and profitability of Dewan Salman Fiber. The export orders have improved overall capacity utilisation of the company and have led to greater production efficiency.

Dewan Group is one of the largest industrial groups in the country and is well regarded by the industrial and banking communities its strengths has been reinforced due to the backing of strong partners like Mitsubishi and Samyang.

Dewan Salman Fiber, the flagship company of the group has been known for its pioneering efforts and was the first Pakistani Company to float Euro Convertible Bonds (US$ 45 million) to finance its polyester fibre expansion in 1994. The bonds were listed on the Luxembourg Stock Exchange. Despite the foreign exchange crisis in 1998, the Company made regular payments to its bond-holders and the bonds were fully redeemed in FY 2001.

Through this investment, IFC will participate in the Company's pioneering effort to issue convertible preferred stock, which will be the first such publicly listed instrument in the country.

At present, Pakistan is IFC's ninth largest client in the world. Our portfolio stands at US$458 million to which we should add US$ 200 million, directly mobilised by IFC through its syndicated loan programme. IFC is presently considering new direct IFC investments of US$ 100-200 million, i.e. an increase of around 35 percent to our existing portfolio. These new investments cover a variety of sectors ranging from SME and housing finance to manufacturing, port terminals and telecom.

The ceremony was attended by Sami Haddad, Regional Director IFC, Farid Dossani Chief of Pakistan Mission, IFC, Commerce Minister Abdul Razak Dawood, Chairman BOI Wasim Haqqie, Faiza Bhatta and other officials form IFC and DSFL.

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