Nasir Abbas

04151713084
BBA 4th (A)
Pakistan Economy

Assignment#1
Role of Agricultural and Industrial Sector in Amelioration of Pakistani People

Agriculture and industrial sectors are very important and major sectors which play a
very crucial part in economic development of Pakistan as well as in the prosperity and well-
being of its people. Agriculture sector alone is a living source of almost 65% of Pakistani people
because this large proportion of the country’s population lives in the agricultural rural lands.
Agriculture sector contributes about 19% in country’s GDP which is a very significant
proportion. Also this agriculture sector holds about 43% of labor force. It also contributes to
foreign exchange and enhances growth in other sectors. Major part of the agriculture outputs like
fruits, vegetables, pulses, wheat, rice, sugarcane and cotton are exported worldwide and earn
great amount of dollars which supports our economy. Additionally, this sector is also responsible
and a source for the country’s local industries and eatables. On the other hand, industrial sector is
the largest sector which is the source of livelihood of Pakistani people. This sector contributes to
about 25% to the GDP of the country. This sector has many industries including small scale,
medium and large scale industries which consist of main industries like textile, cement, sports,
sugar and fertilizer industries. Now we look into how these two sectors are contributing to the
betterment and improvement of Pakistani people.

Agricultural Sector
According to the 6 th population and housing census of Pakistan 2017, the country’s
population is growing at the rate of 2.4% per annum. Due to this rapid increase in population, the
demand for agricultural products is increasing day by day. For this, the government is taking
some fruitful steps and measures like crop diversification, reducing markup rates, efficient use of
water and promotion of high value crops including biotechnology.

Performance during 2017-2018

The target growth for the year 2017-2018 was 3.5% but the agriculture sector
surpassed this target and recorded at 3.81% which was higher than the previous year’s growth of
2.07%. Whereas the livestock has a share of 58.92% in the agriculture sector and contributes to
11.11% in country’s GD. Its growth increased to 3.76% from 2.99% as of last corresponding
period. Likewise, the fisheries sector has a share of 2.10% in agriculture sector and corresponds .
40% in the GDP and the growth increased to 1.63% from 1.23% as of last year period.
Moreover, the forestry sector also has a share of 2.09% in agriculture and .39% in GDP which
has an increased growth of 7.7% against the growth of 2.37% of last year period.
These facts and figure show that people of Pakistan are greatly dependent on the
agriculture sector and this sector is increasing its contribution in country’s economy as well as
being a greater source of livelihood for the masses. This sector contributes to the improvement in
lives of Pakistani people in following ways.

 Source of Livelihood and Food Supply

As mentioned earlier, this sector is a major source of earning for a great part of
population of the country. People living in rural areas grow crops, keep livestock, work in
forestry and fisheries for the purpose of earning profits. Eatable crops and fruits are more
important because the people are largely dependent on them. Wheat is the main crop
which was cultivated on an area of 8,734 thousand hectares, and was 1.7% of the GDP.
Rice was cultivated on an area of 2,899 thousand hectares and was 0.6% of GDP and
sugarcane was cultivated on an area of 1,313 thousand hectares and was 0.7% of GDP.
These numbers reveal that these crops are very important for the living of people.
Overall, this sector has 42.3% of labor force.

 Pre-requisite for Raw Material

Agriculture sector also provides raw material for many industrial units in the country.
These industries include textile industry, sugar industry, leather industry, dairy industry,
spices industry and many more. Hence this sector becomes a source of livelihood for the
people working in industrial units. Moreover, this sector also provides products for the
export business which is a very significant segment of the country’s economy.

Industrial Sector
Millions of people in Pakistan are connected to this sector. Industrial sector is the 2 nd
largest sector of the country contributing to 25% of GDP and providing livelihood to a large
proportion of population of the country. Urban population is mainly involved in industries.
Production and manufacturing of goods in industrial sector attract people for work. Textile
industry, for example, contributes significantly in producing jobs for the citizens. Moreover, the
small industry also plays a vital role in GDP. There are many improvements in living standards
of people of Pakistan which are directly related to the industrial sector and its performance in the
country. Following are the benefits and positive improvements which industrial sectors brings
with itself to the people of Pakistan across the country.

 Source of Livelihood
A large proportion of Pakistan population is directly or indirectly involved in
industrial sector working at small, medium and large scales. This sector has about 40% of
labor force which is truly a significant number. For example, cottage industry is
 providing employment and livelihood to a large number of people especially women who
manage to work within their houses.

 Higher standard of Living

With increased income, people become able to make their living standard better. When
people get opportunity to earn to meet their needs and wants, they set their working hours
according to the need of money they use to have. The more opportunities they have to
work with appropriate wages, the more comfortable and better life they live. Higher
productivity of the nation’s economy leads to higher individual’s income. This rise in
income raises the living standard of common man.

 Increased Literacy Rate

Industrial development is making earners of households to get their children better
education. This thing is increasing literacy rate of the country.

 More Progress in other Sectors

The development in one industry leads to progress in other industry. For example,
development in leather industry increases progress in shoe and football industry. Every
industry influences other industry in either way. This influence of development creates
employment opportunities for more people.

 Rise in Agriculture Production

Better industrial development provides advance mechanical technology and
methodology to the industrial sector. For example, industry provides tractors, thrashers,
harvesters and transport to the farmers which increases their ability to produce more and
better crops. The increase in income of farmers boosts economic development.

 Increase in National Income

With industrialization, a country makes use of its resources and increases quantity and
quality of goods manufactured which leads to increased productivity. This more
productivity leads to more gross national income.

Assignment#2
Role of State Bank of Pakistan in Controlling
Foreign Exchange

The foreign exchange reserves of Pakistan are managed and controlled by the State Bank
of Pakistan. The function is mandated by the SBP Act, 1956 section 20. The State Bank of
Pakistan holds the very important and sensitive responsibility of managing foreign exchange to
run the country’s economy in right direction. Foreign exchange is a crucial element to be
considered and to be kept in great supervision because the country’s imports, exports and the
investments are affected by this factor. State Bank of Pakistan controls the foreign exchange by
taking following measures.

Reserve Management Investment Parameters

Reserve management is based on these three parameters.

1. Safety
Safety of the reserves is the primary objective because foreign reserves are the assets of
the public and they have strategic role in promoting economic policies and objectives. Capital
reservation is important when investments are made.

2. Liquidity
Management should make sure that sufficient reserves are available to fulfill the
obligations when they become due. Investments should be made primarily in securities with
active secondary markets if sufficient liquidity is to be maintained.

3. Optimal Returns
The reserves should be invested with the objective of maximizing risk adjusted returns if
capital preservation and liquidity constraints are under influence.
Reserve Management function has acquired a important role within the Financial
Markets & Reserve Management (FMRM) Group of the Bank in November 2006. State Bank of
Pakistan held liquid exchange reserves on 30th June 2017 worth USD 16,144.8M

Governance Structure and Management

It designates and specifies the responsibilities for executing investment policy,
determining investment parameters and monitoring results to various participants in the reserve
management process. The governance structure for reserve management at SBP consists of:

 SBP Board
This Board is the highest decision making authority for management of reserves and
takes the primary responsibility of management and performance of reserves. Its responsibilities
are approving Strategic Asset Allocation and policy guidelines.

 Investment Committee of SBP Board

This committee provides oversight in the areas like portfolio compliance review & Risk
compliance, review & recommend changes in investment policy, strategic asset allocation and
tactical investment strategy, operational guidelines for the investment of the reserves and
appointment of asset managers, custodians and investment consultants. Investment
Committee of the Management
 This Committee is basically responsible for supervision and operational & tactical
guidance for the reserves management. Its responsibilities are to evaluate and recommend to the
Investment Committee of SBP Board, the appointment of asset managers, custodians, investment
consultants, the investment policies in relation to the management of the Foreign Exchange
Reserves, approve the operational & tactical guidelines for the investment of the reserves,
monitor compliance with the Investment Policy and guidelines set out by the Central Board,
review: investment guidelines for internal and external investments, new products and asset
classes, the performance of the in-house and external managers with respect to the benchmark.

 Management Team
Team management of following departments is responsible to carryout reserve
management activities.
 International Markets and Investment Department
This department manages the daily operations of reserve management and collaborates
with TOD and RMD for the settlement function, compliance decisions and risk management. Its
responsibilities include managing: cross currencies cash flows & debt obligations, relationship
with external fund managers, custodians and consultants, the short-term portfolio to ensure
liquidity & optimal, in-house fixed income portfolio and international currency exposures and to
analyze active portfolio managers’ performance & approach in generating alpha.
 Risk Management Department
This Department monitors risk exposures in overall reserve, the management revolves
around setting and monitoring counterparty exposures, measuring concentration, contagion and
concentration risks, oversees compliance of externally managed funds with the Board’s approved
parameters and guides external managers on how to reduce any unwanted exposures created in
the portfolio which may be in excess to the approved benchmarks. The department is responsible
to report any mismanagement or breach to the Investment Committee. The Department reports
through the FMRM Group making sure the differentiation of functions between the back, frond
and middle offices.
 Treasury Operations Department
This department serves as the back office of reserve management and is to set to
perform accounting and settlement operations and other activities such as data management and
dissemination. for the reserves. This department also has to reports to Financial Resource
Management Group.

 Risk Management Policies and Procedures

State Bank of Pakistan manages foreign reserve portfolios according to its policies and
procedures. The Bank takes following strategic risk management objectives to ensure the
stability and ease.
 Liquidity Risk
 This step is taken to make sure that foreign reserves are always available. These
reserves consist of assets which normally are diversified across United States and other
important currencies. Also these assets include assets which are readily convertible to cash
whenever required.
 Credit Risk
Under this risk, reserves are always invested under careful and strict guidelines. The
investment parameters include stringent approval process for counter-party selection, prudent
obligor limit metrics, carefully monitoring contagion risks and at the end managing
concentration risks.
 Market Risk
Under this risk, SBP tries to decrease the risk of severe changes to reserves due to fast
changes in market rates by executing performance objectives, tracking the error limits and
traditionally designed customized benchmarks.
 Operational Risk
Under operational risk, the Bank takes care of any material damage to the Bank’s
reputation, material risk of loss and material loss of legal disputes.

All these measures are taken under supervision of SBP to control Foreign Exchange.