increased up to 20% that is a kind of Bombing of
GL 65
Sir Nofil Safwan’s Compilation and
Presentation
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How is Economic Growth Measured?
Economic growth in a country is measured by the
country’s Gross Domestic Product (GDP) in one year•
GDP = the total amount of final goods and services
produced in one year within a country
Gross Domestic Product
• GDP is the total value of all the goods and services
produced in that country in one year – Tells how rich or
poor a country is – Shows if the country’s economy is
getting better or worse
• Raising the GDP of a country can improve the
country’s standard of living.
4 FACTORS OF ECONOMIC GROWTH ON GDP
OF A YEAR
1, Natural Resources – 2, Human Capital – 3, Capital
Goods – 4, Entrepreneurship
1, The Role of Natural Resources: “Gifts of Nature”•
Important to countries. Without them, countries must
import the resources –
2, Human Capital: Value that humans bring to the
marketplace – Nations that invest in the health, education,
and training of their people will have a more valuable
workforce. Human capital includes education, training,
skills, and healthcare.
3, Capital Goods: All of the factories, machines,
technologies, buildings, and property needed by
businesses to operate are capital good – Examples: tools,
equipment, factories, technology, computers,
lumber, machinery, etc. The more capital goods a country
has = the more goods & services they are able to produce
. economist who can draw his own lines, and work
4, Entrepreneurship: People who take the risk to start
and operate a business are called entrepreneurs –– They
bring together natural, human, and capital resources to
produce foods or services to be provided by their
businesses.
INFLATION: CAUSES AND REMEDIES.
1. Money supply (total amount of money exist in
economy)has been used to control inflation.
(Usually done by State Bank)
2. Pakistan agreement with IMF (Paragraph 18,
Page 73) reveals that State bank of Pakistan is
responsible to control inflation through (1)
Exchange rate Policy (2) Broad money
(M2)Expansion. (M2 is reserves and currency in
circulation).
3. Money supply accomplish through giving money
to Banks.
4. In IMF Agreement with government it is clearly
mentioned that in current situation Broad money
inflation.
5. Monitory policy report comes quarterly.
6. 600bn Rupees Taxes, government has to collect
from the country.
7. There are two big reasons of inflation (1)
Shortage of supply (2) Excess of money.
8. If we ask to the economist that what is the reason
of inflation they all put different reasons but one
reason will be same that is the act of printing
currency notes by government.
9. State bank monitory policy reveals that
government printed 590bn Rupees during last 45
days (13bn per day or 90lac per minute)
10. State bank board comprises upon businessmen
they have their own interests, there is not a single
economist in the Central board of directors of
SBP.
11. In other countries there is no cartelization
(economic monopoly) like Sugar mafia, Cement
mafia etc.
12. Fiscal responsibilities of debt limitation Act
2005 which say that government debt
(government borrowing from smaller banks)
servicing as compare to GDP cannot exceed
60%, but in Pakistan, government working on
higher percentages, which is illegal but nobody is
taking any notice, neither opposition nor
government.
13. Section 9 of Fiscal responsibilities of debt
limitation Act 2005 says that if government
crosses the limit of 60%, government will has to
give stability program for 3 years how to rescue
it.
14. To reduce that ratio whatever money government
borrowed from banks, should repaid. Tax efforts
should be stabilized, fiscal deficit should be
reduced.
15. Stat bank governor should be an expert
independently.
16. Prize stability is the number one priority work of
State Bank of any country.
17. When finance minister says that our budget
deficit is 2000billion Rupees, means, money will
be printed equal to the same amount, resulted
into the devaluation of money.
18. Budget should be made on the basis of our
expenditures in contrast of resources, instead of
calculating sum of expenditure of our yearly
expenses, to estimate the budget deficit.
19. Energy sector 100bn rupees deficit that should
be overcome.
20. Borrowed Money should be returned to the
related banks by the government, to make sure
that the money will be invested in necessary field
like Agriculture.
IMPORTANCE OF DOMESTIC SAVINGS
Dr Muhammad Yaqub (ex-governor State Bank of Pak)
Saturday, September 06, 2014 thenews.com
1. Pakistan almost need 20 % investment rate to
GDP in order to attain annual rate of
economic growth of 7%.
2. Right now rate of investment is 14% to GDP
in Pakistan.
3. Because a rate of growth of 6-8 percent per annum
is needed to create enough new jobs to absorb the
additional labour force each year (due to population
growth) and also to reduce the high rate of existing
unemployment.
4. Lack in foreign investment/foreign borrowing can
be covered by increased domestic investment. For
which promotion of domestic saving is required.
5 The current domestic saving rate at 7.5 percent of
GDP is not only one of the lowest in developing
countries but also the lowest in the history of Pakistan.
6 Domestic savings can broadly be divided between1.
public sector savings and 2. private sector savings.
7 Unfortunately, the public sector is currently a net dis-
saver to the extent of about 2-3 percent of GDP.
8 The government will have to work hard on the dual
track of mobilising real resources through tax
reforms and curtailing wasteful current expenditure.
9 At present, direct taxation is confined to the
corporate sector and salaried groups and indirect taxes
are collected mainly from the poor. Unfortunately, it is
politically not easy for governments to tax – and it
is even more difficult to tax the rich and powerful than
the poor.
10 Private savings can broadly be divided between 1
household savings and 2 business savings. Both are
currently being discouraged by the policy framework
and need to be promoted through suitable amendments
in it.
11 For the promotion of household savings, the
government has to bring down inflation, give a
positive real rate of return on financial savings and
strengthen institutional framework for saving
mobilisation.
12 On the import side, the structure of import duties
needs to be changed to discourage conspicuous (over)
consumption. This system should be replaced by a
new one to consciously (awareness) tax consumption
and reward savings. Various social security schemes
based on savings must also be formulated and
launched.
13 Business savings can be promoted by encouraging
retained earnings for its ploughing back in further
investment and lowering of the corporate income
tax rates (Tax imposed by public authorities on the
incomes of corporations.). There is a need to
encourage the incorporation of businesses, and take
legislative and other measures to document the
economy, dismantle the large underground economy
and contain conspicuous consumption both in the
public and private sectors.
EXTERNAL DEBT WILL RISE TO $120 BILLION IN
NEXT TWO YEARS: HAFEEZ PASHA
Naya Daur April 6, 2019
Pakistan’s external debt would increase to $120 billion in the
next two years, economist and former finance minister
Dr Hafeez A Pasha said writes in his book.
The reason for the increase is Pakistan Tehreek-e-Insaf (PTI)’s
continuous borrowing of money from the International
Monetary Fund (IMF) and friendly nations e.g. China, Saudi
Arabia and the United Arab Emirates (UAE).
In his book titled ‘Growth and Equality – Agenda For
Reforms’, Pasha projects that external financing requirement
over the three year period would add up to $66 billion. The ex-
FM also predicts that poverty and unemployment would
increase in the coming years.
The unemployment rate might jump from 6.3 percent in 2017-
18 to 7.2 percent in 2018-19 and to 8.3 percent by 2020-21,
writes Pasha. Also, the number of people living below the
poverty line would also increase to 6 million by 2012, which is
a 6 percent increase.
Pasha wrote that Pakistan’s GDP growth is expected to fall
sharply from 5.8 percent in 2017-18 to 3.8 percent in ongoing
fiscal year 2018-19 due to large devaluation. Inflation would
come down to 6.3 percent by 2019-20 and fiscal deficit would
continue to decline at a modest rate to 5 percent of the GDP by
2020-21.
He opined that for Pakistan to come out of the country’s
economic woes, it has to revive its agriculture sector. He said
by increasing credit availability to the agriculture sector,
especially small farmers and keeping a check on prices of the
fertilizers, Pakistan can achieve agricultural goals.
Pasha recommended that the PTI government must focus on
manufacturing sector, enhancing private investment, public
development spending, privatization programme and
employment generation strategy in next few years.
Inflation hit 9.41 percent on Monday, a five-year high. Last
week on Friday, petrol prices were increased by Rs6 per litre
amid severe backlash for the ruling PTI. The prices of light
diesel and kerosene oil increased by Rs3 per litre each, while
high-speed diesel soared to Rs117.43.
Dr. Hafeez Ahmed Pasha (Urdu: ‫ )ﺣﻔﯾظ اﺣﻣد ﭘﺎﺷﺎ‬is a
distinguished economist of Pakistan who has been the
Chairman of the Planning Commission's Panel of
Economists, an independent advisory committee for
the government.
He has served as the dean of the School of Social
Sciences at the Beaconhouse National University,
Lahore and is currently the Professor Emeritus. He
has also been the Vice Chairman of the university's
think-tank, the Institute of Public Policy. During the
tenure of the PPP government from 2008 to 2013 he
acted as the Convenor of the Prime Minister's
Economic Advisory Council.
Dr. Pasha has an M.A. from Cambridge
University, England, and a Ph.D. from Stanford
University, USA.