macroeconomic imbalances of pakistan 3rd

7/28/2019 Macroeconomic Imbalances of Pakistan 3rd

1/16

1

MACROECONOMIC IMBALANCES

OF PAKISTANPRESENTED BY:

1.SIKANDER ALI E-03

2.WAZIR MOHAMMAD E-16

3.MOHAMMAD ABDULLAH E-37


2/16

2

WHAT IS MACROECONOMIC IMBALANCE

MACROECONOMIC IMBALANCES OF PAKISTAN

SAVING AND INVESTMENT GAP

PAKISTANS FOREIGN TRADE IMBALANCE

FISCAL IMBALANCES

OUTLINE


3/16

3

National saving is composed of private and

Government savings. A high saving nation has arapidly growing capital stock and enjoys a rapidgrowth and its potential output.

Investment plays dual role, affecting short-run output

through its impact on aggregate demand andinfluencing long-run output growth through theimpact of formation on potential output andaggregate supply.



4/16

4

Savings and investment rates in Pakistan are low in relationto historical growth of the economy and relative to many

low income countries. At low rates of savings andinvestment, it would not be possible to support futureeconomic growth of 8 per cent per annum which is sociallynecessary. Efforts to maintain a high rate of growth without

mobilizing more national savings would result in a rapidaccumulation of non-concessional external debt with seriousconsequences for the balance payments position of thecountry in the not too distant future.



5/16

5

Various reasons have been put forward to explain Pakistansunimpressive savings performance. These include the large

unorganized, or black economy whose savings are notcaptured in official statistics, a feudal outlook characterizedby wasteful expenditure and ostentatious living, and thelow level of per capita income.

The most frequently cited reason, is however, a culturally

induced bias in favor of consumption. But while such a biaswould affect the propensity to save, it cannot by itselfexplain all aspects of Pakistans savings performance and byconstantly citing this factor, the importance of otherdeterminants tends to be either disregarded or discounted.



6/16

6


The main imbalance between savings and investment in

Pakistan arises in the public sector. A sound fiscal positionhas a crucial role to play in ensuring macro-economicstability, promoting sound economic growth and alleviatingpoverty. Mismanagement of fiscal policy often results indestabilizing inflation, devaluation of currency, high interest

rates, inefficient investments and frustration of poverty.


7/16

7

Pakistans foreign trade imbalance

Pakistans foreign trade imbalance is disturbingly large. Theweaknesses of Pakistans balance of payments stem from anarrow export base, large external debt service paymentsand unsatisfactory demand management which bystimulating domestic absorption curtailed the availablesurplus for exports.


8/16

8


By enthusiastically pursuing a policy aimed at

efficient import substitution and enhancingcompetitiveness of our exports, it should be possiblefor Pakistan to strengthen its external accounts.


9/16

9


The rate of growth of our exports should be at least thesame as the rate of growth of imports. For this purposethere is a need to establish a neutral regime vis--vis exportpromotion and import substitution. There is also a need forrationalization of exports. Furthermore, there has to bemore emphasis on quality control of important exportproducts as well as on strengthening the institutional infra-

structure for exports such as credit insurance, trade fairsand export promotion council. These export promotionmeasures, of course, have to be buttressed by a supportivedemand management policy.


10/16

10


Pakistan is a member of the World Trade Organization, and

has bilateral and multilateral trade agreements with manynations and international organizations.

Fluctuating world demand for its exports, domestic politicaluncertainty, and the impact of occasional droughts on its

agricultural production have all contributed to variability inPakistan's trade deficit.
http://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organization


11/16

11

FISCAL IMBALANCES

A situation where all of the future debt obligations of agovernment are different from the future income streams.

The Situation in Pakistan is that of increasing economic andpolitical instability and the destabilized government is losingcontrol. In growth and in Investment we lose investorbecause of political situations and collapse of external

demand for its exports and decline in accessibility of externalcapital to finance or invest in growth process of the country.


12/16

12

FISCAL IMBALANCES

Poverty, the insufficiency of income to meet basic needs, lowquality of life.

The budget deficit in the first quarter of FY12 was 1.2 percentof GDP, While expenditures also showed higher growth thanthe last year, the upside is that some of this growth was tiltedtowards development expenditures.


13/16

13

FISCAL IMBALANCES.

Policies to rectify the current economic imbalances will yield

positive result only in a situation characterized by macro-economic stabilization. It is obvious that without prudent fiscalmanagement and enforcement of austerity, the economycannot be put on the path of sustained robust growth within

the framework of a situation characterized by financial andexternal sector viability.


14/16

14

FISCAL IMBALANCES.

Target of 4.7 percent of GDP mainly because; The strong growth in tax revenue was largely due to import

related sales tax, which was supported by higher unit valueof crude oil and fertilizers during the quarter; however, this

gain in taxes could be offset by subsidies both on fertilizerand POL in the months ahead;


15/16

15

FISCAL IMBALANCES.

Heavy dependence (Rs 150 billion) on the realization of CSFand 3G licenses; and issuances of 3G licenses are scheduledfor Mar 2012, the CSF (Competitiveness Support Fund ) andprovincial surpluses are already lagging.


16/16

16

THANK YOU.

macroeconomic imbalances of pakistan 3rd

Documents