You are on page 1of 4

Economic Review of Pakistan 2009

Economy of Pakistan in general
The economy of Pakistan is the 27th largest economy in the world in terms of purchasing power, and the 48th largest in absolute dollar terms. Pakistan has a semiindustriali ed economy, which mainly encompasses te!tiles, chemicals, food processing, agriculture and other industries. "rowth poles of Pakistan#s economy are situated along the $ndus %i&er with di&ersified economies of 'arachi and Pun(ab#s urban centers. The economy has suffered in the past from decades of internal political disputes, a fast growing population, mi!ed le&els of foreign in&estment, and a costly, ongoing confrontation with neighboring $ndia.

The economy today
)ue to inflation and economic crisis worldwide, Pakistan#s economy reached a state of *alance of Payment crisis. +ince the beginning of 2,,8, Pakistan#s economic outlook has taken stagnation. +ecurity concerns stemming from the nation#s role in the -ar on Terror ha&e created great instability. .ombined with high global commodity prices, the dual impact has shocked Pakistan#s economy, with gaping trade deficits, high inflation and a crash in the &alue of the %upee, which has fallen from /,-0 1+) to o&er 8,-0 1+) in a few months. 2conomic re&iew of Pakistan has been focusing in recent times on how to deal with economic recession. The report by ministry of finance stated that the fiscal deficit target, 4.3 per cent of ")P and the current account deficit target of 4.5 per cent of ")P were achie&able. The report also shows some signs of impro&ement in the economic &ariables such as the stabili ation in inflation rate, a significant increase in the buildup of foreign e!change reser&es which reco&ered from a low of 63.4 billion on 7ctober 30, 2,,8 to 67.8 billion on 8pril 07, 2,,5. There were also some indication that the amount could be increased further, if the country continues to proceed on the track. 7ther &ariables showing economic re&iew of the country are as follows9

7 percent against an e!pansion of 4 percent the pre&ious year. $nflation has started to decline slowly and :ul-:an inflation was at 23. Inflation The ongoing global inflationary pressures continue to affect the economies of $ndia and Pakistan. which account for up to 34 percent of agricultural &alue. The economic recession and cost of production has deficiently affected the A+@ growth. poor e!ecution of laws and the withdrawal of subsidies were the main causes of high inflation ratios in the country./= in the corresponding period last year.4 = during first si! months of the current fiscal year. The banking and financial sectors of the country showed substantial growth which would contribute a positi&e impact on the economy in the near future. The go&ernment had set a target of 4... the real cost has been that ")P growth has suffered.4 percent ")P growth for the fiscal year ending on :une 3. Aarge-scale manufacturing was estimated to ha&e contracted by 7. Sectors  Agriculture: The agriculture sector is likely to achie&e its growth target of 3. The manipulators. although it was 8.5< as measured by the . >ood inflation in first se&en months of current fiscal year came down to 25. 8griculture ratio to ")P will be positi&e which is based upon anticipated high wheat crop and abo&e target growth of minor crops including a reasonably good outturn by the li&estock sub-sector.A+@< ratios will be negati&e due to many local and international reasons.GDP (grand domestic product) 8s stated in the report the ")P will be in range of 2.P$ will be close to 2.  Ser!ice: The ser&ice sector showed some resilience in the current fiscal year. )espite the di&ersified but integrated efforts of the go&ernment the country still faces a high double-digit inflation rate.8-.4 per cent. per cent.7 percent compared with a negati&e growth of /.3 per cent for the current year. 8s the go&ernment has tried to consolidate the economy. $t is e!pected that the a&erage inflation for the year .2 per cent would be achie&ed as the demand for li&estock products was growing at a phenomenal pace. after ha&ing achie&ed a re&ised 4. 8ccording to the report. weak regulatory bodies.2.0 growth the pre&ious year. . posted growth of 7.4 percent last year.4 per cent to 3. @a(or crops.5= against 24. all li&estock products witnessed an increase in prices and thus the target of 3.8= while it was 02.  anufacturing industry: $t is pro(ected that large-scale manufacturing .4= last year but $nflation is still abo&e go&ernment?s target of 02=.

//0 billion. and more than a third of its 0/.5. as in the past si! weeks Pakistani capital market?s &alue has impro&ed by 2. #urrency e$change Pakistani %upee has fallen has fallen from /. in order to boost economic growth. Stock market $t seems that the stock e!changes of the country are on the road to reco&ery but their sustainability factor is still Buestionable. There is still much to be done and will depend on the go&ernment?s ability .530 billion by end :une 3.77=. @oreo&er..0 billion in 2..5 can be a wakeup call for the policy makers.277 and it has been one of the biggest sources after e!ports.. The significance of this depreciation effect is highlighted by the fact that e&en though the stock of foreign currency debt has gone down in dollar terms by 64. The reco&ery phase of the premier stock e!change after floor remo&al has been hopeful and an outstanding performance has made it one of the best performing markets of the world in 2. @onthly e!ports for :anuary reached to 60. "oreign trade Total 2!ports reached to 60.3/ billion while imports reached 62. #onclusion The re&iew of economic situation for the fiscal year 2.8-. an increase of 4.-0 1+) to o&er 8.534 billion showing an increase of 8.. The depreciation of the rupee against the dollar has been responsible for appro!imately // per cent of the total increase in public debt..7-. an impro&ement from last year?s deficit of 62. million. per cent. chemicals and cement.Po!erty and unemployment 8nalysts say Pakistan#s low growth is tantamount to recession with annual population growth of more than 2 percent./4 billion.. The rupee depreciation in the first Buarter has an impact of %s447 billion on the stock of public debt.. as stated in a debt policy report submitted to the Dational 8ssembly.5 ha&e totaled to 64.2= mainly constituted of rice. basis points to 04 percent in 8pril.8.-0 1+) in a few months. million people li&ing in po&erty.22 billion. to earn foreign e!change for bridging gap between foreign currency inflows and outflows.5. Public debt is estimated to cross %s7... The aggregate remittances in first se&en months of fiscal year 2.428 billion making monthly deficit of 60. which was the highest le&el in last fi&e years. up by 34 per cent from %s4. the interest rate is cut by 0.. Come remittances for :anuary were 6/37 million showing a decline from )ecember?s massi&e 6/74 million. there has been an increase in rupee terms of %s404 billion in the first Buarter. $mports for se&en months reached to 620.

ountry?s foreign e!change position would mainly depend on $@> as Pakistan has already approached $@> for 64. "uture outlook The economy has finally started to show signs of relati&e stability by achie&ing the first set of targets set by $nternational @onetary >und. >or a sustainable growth. 8ll signs are that domestic inflation would be difficult to tame gi&en relati&ely high non food and food items prices.. . The interest rates might go down in near future owing to tremendous pressure from business community pro&ided that in addition to high interest rates. 2!change rate would remain &olatile in absence of any ma(or in&estments from abroad . billion finance in addition to 67. slowing e!ports orders ha&e already made things worse for corporate. . the go&ernment needs to pursue the permanent reform processes and resist in slowing them for short-term political gains.4 billion stand by implement concrete measures in significant areas that directly tackle these faults in the economy.