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OVER VIEW OF PAKISTANS ECONOMY Challenges and Problems with Economy: The fiscal year 2013 is facing continuously

power and gas shortages along with internal and external challenges etc. Circular debt is continuously increasing despite the injection of government, which increase pressure on fiscal side. The important factor to increase the circular is fragile performance of public sector. The another factor is worst law and situation particularly in hub of economic activity like Karachi and other provinces as well, Punjab, KPK and Balochistan. Terrorism affected investment growth severely, which 14.2% in 2013 as compare to 19.21% in 2008. The financial global meltdown in 2008 affected the developed as well developing countries and Pakistan economy was one of them. The GDP growth rate which was 5% in 2007-08 dropped to 0.4% in 2008-09 on the base year of 2005-06. Further the change in natural climate during 2010 to 2011 affected agriculture crops adversely. Other sectors of economy, i.e. agriculture, services and manufacturing performed below their capacity.

Macroeconomic Indicators:
The GDP growth rate of 2012-013 is 3.6% (2005-06) Primary Surpluses: Primary surplus increased in 2013 due to Coalition Support Funds (CSF), inflow of remittances and reduction in trade deficit But the schedule payment of IMF is still challenges in ongoing year. The foreign reserves have declined to $11.5 billion.

Fiscal Development: The FBR revenue collection is remained sluggish, while expenditures on power subsidies and debt servicing increased sharply. To finance fiscal deficit government had to borrow from SBP, but fiscal deficit is still 4.6% as compare to 6.4% last year. Low tax to GDP ratio is around 9.6% as compare to 10.2% in last year On the other hand provincial resource mobilization performed remarkably well during the first nine months of fiscal year 2012-13 with the growth rate of 20.8 percent. After the announcement of 7th NFC award, provinces received a significant amount of the federal government taxes as their share from the divisible pool along with additional grants. Inflation: The inflation reached at 25% during 2008 due to increase in oil and gas commodities prices etc. Rate inflation decreased significantly till single digit as compare to double digit in last year. The annualized inflation rate measured in terms of Consumer Price Index (CPI) for (July-May) 2012-13 averaged at 7.5 percent as against 10.9 percent recorded in the same period of 2011-12. Government increased the wheat support price to support farmer. Foreign Direct Investment: Foreign direct investment increased during July-April 29.7% stood at US$ 853.5 million, it was $658.2 million in last year. The major share of inflow comes from US, UAE and United Kingdom having shares 14.0, 12.6 10.2%. In capital market the major shares come from US, UK and Hong Kong etc. Trade and Payments: The trade deficit has decreased by 2.5% to US$ 12.5 from $12.9 billion. This is due to increase 0.15% growth of exports and 0.9% decrease in imports prices. Total exports are around $20.5 billion and imports are around 33.0 against 33.3 billion dollar in last year. Remittance is around 11.6 billion dollar against 10.9 billion dollar showing a growth of 6.4%.

The EU and the US represent the most important destinations of Pakistan exports and their markets absorb 31 percent and 23 percent of exports. While China represents the third most important destination with an 11.5 percent share. Public Debt: Pakistans public debt reached to Rs.13,626 billion by end-March 2013 that is 59.5 percent of GDP as compared with 59.8 percent during the same period last year. Per Capita Income: Per capita income is regarded as one of the key indicators of economic well-being over a period of time. Per Capita Income in dollar terms grew at a nominal rate of 3.4 percent in 2012-13 and increased to $ 1,368 in 2012-13. Global Outlook The IMF has reflected in the forecast that entire world economy growth is forecasted to reach 3.3. per cent in 2013 and 4.0 percent in 2014. The growth projected for Euro areas is -0.3 percent for 2013 and for 2014, 1.1 percent. In contrast USA growth is forecasted to be 1.9 percent in 2013 and 3.0 percent in 2014, while for Japan 1.6 percent in 2013 and 1.4 for 2014. Growth in developing Asian economies is projected at 7.1 percent in 2013 and 7.3 percent for the year 2014. The IMF expects growth in oil exporting countries in the Middle East is also not encouraging. Unfortunately, Europe is now caught in a vicious cycle of high debt and low growth. Problems in this area can impact Pakistans trade, however, emerging markets and developing economies, the expansion of output is expected to be broad based. In Asia, growth has already returned to a healthy pace. In China, external demand, high consumption will keep in its growth. The other economies of the world are expected to benefit from upturn in advance economies.

Growth and Investment: Commodity Producing Sector: Commodity Producing Sector (CPS) consists of agriculture and industry. CPS accounted for 42.3 percent of GDP after rebasing of national accounts during the outgoing fiscal year. The commodity producing sector has performed better in outgoing fiscal year as compared to last year, its growth rate this year was 3.4 percent against the growth of 3.1 percent last year. However, the growth of the commodity producing sector remained far below its potential due to heavy rains, energy crises, law and order situation etc. Agriculture Sector: Agriculture provides food items and raw materials for industrial units and accounts for 21.4 percent of GDP, 45 percent of employment. The performance of the agriculture sector remained weak due to unfavorable weather conditions which resulted in lower production of cotton and rice. However, this sector posted a growth of 3.3 percent against the growth of 3.5 percent last year. Manufacturing Sector: In spite of sever energy crisis, LSM performed well 9.3% as GDP while it was 4.3%. It will more supportive for industrial growth. The manufacturing sector is another important sector of the economy having much contribution in the progress of our economy. The manufacturing sector captured 63 percent share of the overall industrial sector. The growth was recorded at 3.5 percent compared to the growth of 2.1 percent last year. Manufacturing sector accounts 13.2 percent of GDP and employ 13.8 percent of the labor force. The Manufacturing sector is further divided into three sectors namely Large Scale Manufacturing, Small Scale Manufacturing and Slaughtering.

Services Sector: Services sector growth rate was stagnant due to slow performance of transport and communication sectors etc. It is 3.6% of GDP as 4.4% in 2012. The services sector has emerged as the main driver of economic growth and playing a vital role in sustaining economic activities in Pakistan. The share of the services sector has increased from 56 percent of GDP in 2005-06 to 57.7 percent in 2012-13. The services sector consists of the sub-sectors: Transport, Storage and Communication; Wholesale and Retail Trade; Finance and Insurance; Housing Services (Ownership of Dwellings); General Government Services (Public Administration and Defense); and Other Private Services (Social Services). The services sector has recorded a growth rate of 3.7 percent in 2012-13. Finance and Insurance at 6.6 percent, General Government Services at 5.6 percent, Housing Services at 4.0 percent, Other Private Services at 4.0 percent, Transport, Storage and Communication at 3.4 percent and Wholesale and Retail Trade at 2.5 percent. COMPONENTS OF GDP: Consumption-Led Growth: Pakistans economic growth is historically characterized as consumption-led growth like other developing countries. The expansion of output is the sum of consumption (both private and public), investment (public and private) and net exports of goods and services. The growth driven by the private consumption expenditure reached to 76.98 percent of GDP, whereas public consumption expenditures were 10.68 percent of GDP. Total consumption expenditure has reached to 87.66 percent of GDP in 2012-13 compared to 88.86 percent last fiscal year. Total consumption has declined 1.2 percent of GDP

Investment: Total investment has decreased from 19.21 percent of GDP in 2007-08 to 14.22 percent of GDP in 2012-13. Fixed investment has declined to 12.6 percent of GDP in 2012-13 from 17.61 percent of GDP in 2007-08. Private investment recorded a contraction of 8.7 percent in 2012-13 compared to 12.8 percent of GDP in 2007-08. Public investment as a percent of GDP also decreased to 3.9 percent in 2012-13 against the 4.8 percent in 2007-08. Domestic savings have also decreased from 9.1 percent of GDP in 2007-08 to 8.7 percent of GDP in 2012-13. Former Finance Minister Shaukat Tareen Said:

As I have said it many a times, all incomes will have to pay taxes and there cannot be any sacred cows. Agriculturists will have to pay their taxes and so should the retailers, real-estate developers stock-market and all professionals. Our tax to GDP is woefully inadequate at 9pc, where Sri Lanka is 17pc, India 19pc, China 21pc and Turkey 33pc. Before I left the government, there was a tax plan in place, which needs to be implemented. It will require a strong political will.
In terms of power shortages, our major issue is that over the years we have been moving away from our optimum energy mix of Hydel, Coal, Wind and Solar. We have through PPs and RPPs shifted our reliance on furnace oil and to a lesser extent on gas, both of these are imported and their prices have escalated over the years. Hence, to try to balance the books, the Government has had to increase electricity prices. This has not only increased the expenses of the honest citizen but, in an inefficient and corrupt environment, has increased the line losses as well as receivables from both the public and private sectors.