pakistan economy general review

8/6/2019 Pakistan Economy general review

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Current Economic Situation of Pakistan

Introduction

Pakistan economic environment is affected by intensification of war on terror and deepening

of the global financial crisis which penetrated into domestic economy through the route of

substantial decline in Pakistans exports and a visible slowdown in foreign direct inflows.

Pakistan economy continues to remain exposed to the vagaries of international developments

as well as internal security environment. The intensity of the global financial crisis has

further added to Pakistan predicament. Despite support from the IMF and other bilateral and

multilateral donors, Pakistan external account remains exposed to a host of uncertainties.

Growth and investment

In growth and investment we lost investor because of global economic situation, through

financial markets which collapse the external demand for its exports and decline in

availability of external capital to finance or invest in growth process of the country.

According to global financial crisis was felt on market and investor confidence in many

developing countries, including Pakistan, as banking systems and asset markets came under

stress.

Growth and investment

In growth and investment we lost investor because of global economic situation, through

financial markets which collapse the external demand for its exports and decline inavailability of external capital to finance or invest in growth process of the country.

According to global financial crisis was felt on market and investor confidence in many

developing countries, including Pakistan, as banking systems and asset markets came under

stress.


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Manufacturing

The manufacturing being the second largest sector of the economy bears significant

importance 18.4 percent contribution to GDP. Overall manufacturing sector posted a negative

growth rate of 3.3 percent during the current fiscal year against the target of 6.1 percent and

4.8 percent of last year. However, production in large scale manufacturing during July-Mar2008-09 witnessed a broad-based decline of 7.7 percent against the revised growth target of

negative 5.0 percent.

Fiscal Development

The main objective of Pakistan fiscal policy is sustained economic growth in unison with

decline debt services, poverty alleviation, the creation of job opportunities and investment in

physical and human infrastructure. It is unfortunate that fiscal space available during the past

seven years (2000-2007) was not used to provide support to structural reform; instead, painful

structural reforms were delayed. The current government decrease the 20 percent

governmental expenses.


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Money And Credit

Functioning of the financial markets, monetary stability and economic growth are closely

related, due to the fact that monetary policy transmission signals work through the channels

of financial markets and bank-based intermediation. Therefore an efficient financial system is

a pre-requisite for stronger economic growth. For a successful financial system, financialintermediaries play a significant role, since they are critical lenders and borrowers.

Capital Markets

Financial markets perform a key function in the form of intermediation by mobilizing savings

from a large pool of small savers and channelizing these funds into productive investments by

a generally much smaller number of borrowers. Trading in securities enables a match

between the differing maturity preferences of lenders and borrowers. Stock markets also

potentially endorse broad-basing of ownership of financial assets and the reallocation of

funds among corporations and sectors. Moreover, a developed bond market helps inproviding liquidity to domestic growth and credit expansion. (In 30 Jun 2008 the index rate of

KSE was 12,289.03 and on 15 May 2009 it was 7,177.64 similarly on 29 April 2011 it was

12057.54).


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Inflation

The rate of inflation is an important macroeconomic indicator and one of the key variables

most central banks around the world scrutinize when setting their main policy rate. Pakistan

is one of only a handful of countries that is still experiencing double-digit inflation. The surge

in food and commodity prices witnessed during the start of fiscal year 2008-09 pushed theConsumer Prices Index (CPI) in Pakistan to a record level of 25.3% in August 2008,

remaining above the 20% level up until February 2009. Now a days its roundabout it is

about 12.9%percent.


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Trade And Payments

The global economic downturn is affecting the Pakistan economy through three indirect

channels: the sharp drops in oil prices, has led to sharp easing of import demand pressures;

the contraction in global demand, trade, and related activity, is impacting adversely demand

for exports and remittances from EU and US in particular; and constricted access to the

international credit markets and lower investor appetite for risk is affecting capital inflows,

depressing local asset prices, and reducing already low investment level. Pakistan economy

needs an integrated policy to deal with external sector vulnerabilities like removing structural

rigidities in the exports and imports sectors.

External And Domestic Debt

The government embarked upon a plan of Economic Stabilization to regain macroeconomic

stability. The measures taken under this program by the government have placed the

economy on the path to recovery. The support from the international Monetary Fund is a key

impetus to this stabilization process. The effect of stabilization started accruing as the current

account has recovered substantially and hemorrhage to foreign exchange reserves notonly

arrested but around $3.4 billion have been added to the reserves.


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Education

Education is extensively regarded as a route to economic prosperity being the key to

scientific and technological advancement. Hence, it plays a pivotal role in human capital

formation and a necessary tool for sustainable socio-economic growth. Education also

combats unemployment, confirms sound foundation of social equity, awareness, tolerance,

self esteem, and spread of political socialization and culture vitality. It raises the productivity

and efficiency of individuals and thus produces skilled manpower capable for leading theeconomy towards the path of economic development. Education also originates confidence

which empowers people to defend their rights, improve health status and good governance in

implementation of socio-economic policies.


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Health And Nutrition

Pakistan requires progress in economic and policy sector to reduce the burden of diseases not

simply in health care but much have to be done in agriculture, education, transportation,

environment, public health sector and other relevant areas in order improve the nations

overall health. The most immediate health problem of the country are: inadequate sanitation

facilities, unsafe water, poor living conditions, poverty and low literacy rate with women

being the worse affected whose lack of knowledge often render them and their children

vulnerable to various diseases.


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Population, Labour Force And Employment

Pakistan is facing a formidable challenge of tackling the issues of economic development and

poverty reduction. In the wake of growing population, the need for food security and the

provision of employment opportunities and housing are becoming a burden on the economy.

Without population stabilization, addressing the critical issues, such a global warming,

biodiversity, the environment, energy, food/water supplies, migration and security is

extremely difficult. Total population in Pakistan is 163.76 million in 2008-09.

Poverty

The inadequacy of income to meet basic needs, low quality of life, denial of opportunities

and choices basic to human development are different facets of poverty. The main objectives

of government policies are to raise the standard of living and improve the socio-economic

conditions of the people and thus reduce the incidence of poverty in the country.


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Transport And Communication

Transportation network of any country is of vital importance to its development and affects

all sectors through economic linkages. It ensures safe and timely travel encourages business

activities and cuts down transportation costs while granting produces access to markets for

their goods. A reliable transportation network also provides swift access to labor force and

hence generates employment opportunities. It has been widely recognized that economies

with better road and communication networks are positioned more advantageously in terms

of overall competitiveness as compared to economies having poor networks. Enhancements

in transportation and telecommunication benefit industry, agriculture, and other servicessectors as well as improving the standard of living of the general public, it is therefore,

crucial that investments be made to develop and maintain an efficient network of

transportation and telecommunication to ensure cost efficient integration of markets both

domestically and internationally.


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Energy

The world energy scenario during 2008-09 has been very eventful, same as Pakistan.

International oil prices fluctuated widely, leaving all vulnerable oil import countries likePakistan under great stress. The volatile energy picture not only made major dents in the

macroeconomic variables such as budget deficit, current account balance, inflation, exchange

rates and foreign exchange reserves, but also eroded the purchasing power of poor on the

back of rising prices of petroleum products. So the major impact has been experienced in the

industrial and agriculture sector, because of energy shortfall. Energy consumption being an

integral part of all the economic activities has also declined as a result of the economic

slowdown.


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THE END

pakistan economy general review

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