Financial Position of Pakistan (2009-10)

Financial position of Pakistan is currently a victim of so many variables it is very difficult to

control them all , Pakistan is a very dynamic country rich in human and natural resources but on
the other hand its been a target of Global politics, playing a central role in fighting terrorism
which has played a major role in putting strings in the growing economy of Pakistan, energy
crisis , which is further supported by inadequate and inefficient government performance and
policies in coping with these problems. As a developing state these factors are a major set back.

In recent years Pakistan economy was going through a phase of artificial growth , with increase
in external borrowings , high consumption, subsidized products and growing level of non
developmental expenses neglecting industry and agriculture.Economys GDP risen to about
7%,and due to manipulation of stocks and due to ill legal activities our stock market faced a
crash in 2009.

Inflation is on the rise reached up to 20%, due to low production the aggregate supply has
declined leading to increase in imports, investments have declined due to energy crisis and
worst law order situation which has in turned reduced capital per worker .The govt. borrowing
has caused NDA to increase highly dependent upon Debt which is supported by very low tax
collections and increasing government expenditures.

All these problems have trapped our economy our economy is not growing investors and private
sector are crowding out due to disbelief about there returns and safety and the tightened
monetary policy is responsible for it to. On one hand it has safeguarded the economy on the
other hand due to uncertain variables and political scenes foreign investors and private sectors
are not willing to operate which is a set back and economy collapsed about 2%.

External account improvement is due to tranche from IMF (4.6 billion) , Increase in balance of
payment( 2.2 billion) , bridge financing (1.1 Billion) , Coalition support fund and remittances’.
Which has caused the NFA to increase and rising bank deposits have caused increase liquidity
in the economy.

Challenges to economy

 Maintain a stable interest rate , stabilizing and progressively declining inflation is

changing scenarios
 To Increasing tax collections
 How to facilitate private sectors , foreign investors and SMEs
 Deceasing non developmental expenses
 How to cope with the corrupt and in efficient management
 Lower down the impact of political instability and better law and order situation

Impact of overcoming these challenges

 Best resource optimization
 Increase tax collection means less fiscal deficit
 Increased government revenues and low waste expenditures would provide room for
having more developmental projects
 Private sector would feed from this and investments would be increased with higher
confidence
 Consumers buying power will increase