ECONOMICAL DEVELOPMENT

Era 2008-2018

Pakistan Economy
Haziq Hussain Satti (160691).
“Economic changes in Pakistan from
2008-2019”

INTRODUCTION:
This assignment is about changes and events that took place during 2008-
2019. Underlying time period can be divided into 3 eras.
First one started when Pakistan moved out of dictatorship after almost 9 years
and general elections took place in 2008 and as a result Pakistan people party
came in to power lead by Asif Ali Zardari, Pakistan faced many problems
during their tenure due to miss use of power by several ministers along with
a lot of corruption.
In 2013 PMLN was elected by Pakistani nation for the next 5 years, their
policy was expansionary, which helped many businesses to flourish but on the
other hand new businesses were really difficult to start. PMLN government
mostly focused on building infrastructure due to which industries such as
cement and steel showed great growth, huge amount of load was taken by this
government resulting in leaving Pakistan under large debts and its periodic
interest payments.
In general elections of 2018, Pakistan Tehreek E Insaf ruled Pakistani federal
offices for the first time in the history of Pakistan. Their intentions were
towards tourist development and investing on human capital rather than
building infrastructure. Due to their aggressive leadership they faced many
problems, they were unable to maintain Pakistani economy as compared to
where previous government left. Most of business persons were not in favor
of this government so they intentionally slowed down economic activities
causing problem for government.
Now economic conditions of Pakistan during these 3 regimes would be
discussed year wise.
 “2008-13”
In general elections of 2008, Pakistan again started its journey of democracy after being under
dictatorship for almost 9 years. Pakistan People Party lead by Benazir Bhutto, again started its
political activities from 2007 but unfortunately Benazir Bhutto was killed on December 27, 2007.
Death of BENAZIR provided a way to ASIF ALI ZARDARI to get sympathy of PAKISTANI
voters and somehow the won general elections, an as a result, Asif Ali Zardari became president
of Pakistan along with Yousaf Raza Gillani being prime minister.
Economy of Pakistan was not well managed during that era as we witnessed that finance minister
was changed 5 times during the 5 year time period. Here we will look for the economic activities
during the 5 years of PPP, some of the economic moves and changes that they made and their
impact on economy of Pakistan.
Fiscal year 2007-8 was very difficult for Pakistan economy due to several political events and
instability and load shedding problems. Growth in economy was only 4.99% as compared to 5.54%
in last year and a projected 7.2% for this year. Unemployment rate was 5.2%. Inflation in April
2008 was highest as compared to previous 3 decades. Government borrowings from SBP were
highest as compared to past which resulted in monetary expansion leading to the high inflation in
the country. Current account deficit in first 10 months was almost $11.6bn which was
comparatively 75% higher than same period in previous year.
Year 2008-9 was difficult for whole world due to major economic crisis, this not only effected
developed countries but also developing and under developed countries. GDP growth was only
0.36%, this drastic decrease in GDP was because of new government and a general trend in
economy of Pakistan that whenever a new government takes place economic activities always slow
down due to less confidence on new government policies.
Now in fiscal year 2009-10 there was a little bit stability after the crisis in previous year, but this
stability was not up to the mark. Despite several challenges GDP was 2.58%. Unemployment rate
increased to 5.5% from 5.2%. Inflation rate was 13.3%, a bit lower than previous year. Current
account deficit narrowed down to one third as compared to earlier year.
During the fiscal year 2010-11 there was inflation rate of 14.1%. Per capita income raised to $1254.
Unemployment rate remained at 5.6%. GDP growth in was 3.62% and it grew to 3.84% in year
2011-12.
Pakistan’s economy continued to face challenges like energy shortages, floods and rains, poor law
and order situations because it was not well managed. Economy of Pakistan in 5 years of PPP
government grew at only 2.9%. During these 5 years Pakistan economy faced its worst time and it
was a big challenge for coming government to move Pakistan’s economy towards stability.
 “2003-2018”
PMLN government completed its 5 years’ time period for the first time in the history of Pakistan.
If we consider economic side of this era we can see CPEC and other major developments made by
the government. Business mind of PMLN leaders also played a major role for economy of
Pakistan.
GDP of Pakistan in in 5 years jumped from 3.6% to 5.53% leading to 41 position in the ranking of
196 countries. Pakistan witnessed impressive growth in GDP due to CPEC, real estate, retail
business and other industries such as cement. Inflation measure also dropped from 7.98% to
3.68%. Foreign exchange reserves rose from $11.8bn to $16.9bn which is a very good indication
for the country.
The FOREIGN DIRECT INVESTMENT WERE $ 2.24 billion, although it was a high number as
compared to that of 2013, but it was still miserably low for a nation which is full of opportunities,
but foreign investors invest very less due to security issues and nonstable Pakistani economy.
During the fiscal year 2013-14 economic performance of Pakistan improved as growth touched all
sectors of economy. China and Pakistan entered into a great and long lasting contract of CPEC,
although it will benefit Pakistan economically in a very long run but still it was a good economic
move. Pakistan experienced growth in GDP as 4.05% comparatively higher than previous year.
Inflation was somehow managed under single digit. Government also invested in infrastructure
such as roads and bridges and Metro bus which helped cement, steel and other construction
industries to flourish. Small scale manufacturing also grew from 8.28% to 8.35%. Per capita
income growth was 3.83%.
Economic growth in the year 2014-15 witnessed some improvement. Pakistan started taking some
of the advantage of CPEC. GDP grew to 4.06% which was almost equal to GDP growth of previous
year. Inflation rate in 2015 was 4.53% almost half of 2014 inflation rate. Per capita income showed
a growth of 9.25%.
Year 2015-16 was a slow year for economic growth as the world economy had a slow pace during
that time period. Some of the achievements of Pakistan in this fiscal year were price stability,
improvement in tax revenue, reduction in fiscal deficit and high foreign exchange reserves. GDP
growth accelerated to 4.56% during this period. Inflation in 2016 was at lowest level of 2.86%.
Year 2016-17 was a good year for Pakistan economy as it reached a growth of 5.22% in GDP very
much higher that previous data. Pakistan Stock exchange was ranked 5th best performing stock
market in the world. FBR tax collections also increased during this time providing a handsome
revenue to government. Fiscal deficit narrowed down and per capita income increased as compared
to previous year. FDI also increased a lot during this time.
World Bank in its report stated that Pakistan’s economic growth increased to 5.8% in 2018.
Revenues from telecom sector also increased a lot during that time period. Industrial sector grew
by 5.8% that was highest in 10 years.
If we conclude whole era of PMLN government from 2013-2018 we can say that exports failed to
pick up so government attempted to solve this issue by providing financial incentives and duty
concessions. Another reality is that Pakistan is no longer in a position to compete in global markets.
According to World Bank's yearly rankings, Pakistan's cost and ease of doing business ranking has
slid down to 147 from its ranking of 116 in 2013. The government made no significant steps to
work on improving Pakistan ranking. PMLN government left most of the public sectors such as
airways and railways in a loss making situation.
 “2018 ONWARDS”
After general elections of 2018 PAKISTAN TEHREEK E INSAF came into power, looking at the
economic perspective they changed most of the policies, such as they shifted from expansionary
policy to contractionary, this government showed interest in sectors such as tourism and human
development rather than focusing on infrastructure. Now we will see the performance of PTI
government in their first ruling year.
External sector has showed some improvement. Imports decreased by 5 percent. Trade deficit
reduced by 7.4 percent. Remittances increased by 8.45 percent to $ 17.8 billion. GDP growth was
3.3%. Government and private services helped in achieving the targeted growth in service sector.
The FBR collections remained lower as compared to previous year. Government declared a
separate tax policy function of FBR from other tax administration. Created Specialized Tax Unit
for foreign assets. Tax broadening measures. Government introduced amnesty scheme and many
other measure were taken to make people filer. These efforts helped in increasing number of tax
filers to more than1.87 million.
During July-May, 2019 inflation increased to 7.2 percent due to increase in fuel prices, which
impacted on increase of prices of everything all over the country. The SBP has adopted
contractionary monetary policy by raising discount rate to 12.25 percent to stabilize the
macroeconomic situation.
Currently situation of Pakistan’s economy is really worse but economic indicators are showing
that in near future our condition will stabilize, and Pakistan will witness a real growth in its
economy.
CHANGES IN MACROECONOMIC INDICATORS:
Here economic changes in Pakistan would be discussed under some of the major macroeconomic
indicators.
GDP:
It is basically the monetary value of all the finished goods produced within boundaries of a country
during a specific time period.
Looking at the trend it shows a positive trend from 2008 till now, but only once during the fiscal
year 2012-13 it decreased a little bit and this the time period of end of PPP government and start
of PMLN government, so economic activities slowed down a little bit. In the year 2018-19 it again
decreased as it was first year of an unexperienced government.
PER CAPITA INCOME:
It is the average income earned per person, in a specific economy in a specific time period.
Per capita income is also showing an increasing trend as growth, and it only decreased in fiscal
year 2018-19 because of low growth in economy.
INDIRECT TAXES:
These are the taxes that are imposed on consumers while buying any goods or services. Pakistani
economic policies mostly emphasize on indirect taxes rather than direct taxes on income.
Indirect taxes are also showing a steady positive trend but it increased with a high ratio in the year
2018-19 due to tight tax related policies of PTI government.
EXPORTS AND IMPORTS:
These 2 factors are really important to be aligned to get balance of payment, both exports and
imports of Pakistan increased in past but the problem is that the ratio by which imports increased
is much higher than that of exports, resulting in trade deficit.