AAIRAH(190177) ASSIGNMENT#1 PAKISTAN ECONOMY

QUESTION#1

Around the world, nations are attempting to move through the Covid; financial and monetary
arrangements are widely being utilized to guarantee the monetary effect of the pandemic can be
sufficiently managed. Pakistan is the same. The Pakistan Economic Survey 2019-2020 has
uncovered that without precedent for more than 63 years, Pakistan's economy enrolled a record
withdrawal of 0.4% during the previous a half year. The story just gets grimmer as we go ahead.

The monstrous degrading of the Rupee to its genuine worth, instead of a fake one, has had its
upsides and downsides. The administration attempted to make the best of this degrading by
expanding the loan costs to 13.25% to support inflow of unfamiliar stores. Also, this improved
craving to execute an import-replacement strategy as products, which were openly imported
previously, got far from individuals short-term. As the new monetary year started, the economy
began to observe a momentous turnaround which affirmed the legislature had taken suitable
strategy plan of action to address the macroeconomic irregular characteristics. The adjustment
exertion paid off with a supported change in current record shortfall and proceeded with
monetary judiciousness. As Pakistan was a route to make a moderate recuperation to 2016
levels, the pandemic struck. This worldwide monetary lockdown has been a curse all finished.
The World Economic Outlook (April 2020) ventures worldwide development to contract strongly
by - 3 percent in 2020, and the misfortune to worldwide GDP more than 2020 and 2021 could
associate with 9 trillion dollars because of the worldwide wellbeing emergency. The effect of the
pandemic has been far reaching in Pakistan also. Private utilization because of discouraged
customer request has diminished to 78.5% contrasted with 82.9%. On paper this may appear to
be a little 4.5% decline however if one somehow happened to do straightforward science that is
a generous $11 billion misfortune. Likewise, private speculation has dropped alongside an
expansion in Foreign Asset possessions. Every one of these issues compound to a 'one-two
punch' circumstance; individuals are not contributing rather are taking out cash from incomes to
stock elsewhere; this is suggestive of the Wall Street crash of the 1920s.

REVIVAL OF PAKISTAN ECONOMY:

There are two issues being faced by the country’s political and economic managers. These are
the economy of health and the health of economy. The current Covid-19 shock can eat up 0.5-
1% of gross domestic product (GDP) growth in the current fiscal year, in fact, it can inflict more
damage. The repeated cut in policy rate by the central bank since March and its incentive

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packages can help boost the industry, but will not fully revive the economy. Moody’s Investors
Service has lowered its forecast for Pakistan’s growth and projected a modest contraction of
0.1-0.5% for FY20 because of the growing impact of Covid-19 crisis. Pakistan has continued to
face macroeconomic challenges despite the steps taken earlier to tighten fiscal and monetary
policies to rein in high and unsustainable twin deficits – fiscal and current account. In the current
year, the government, however, has managed to control the current account deficit. The entire
world has been badly hit by the Covid-19 pandemic. The focus of every nation, including
Pakistan, has shifted to emergency health needs and saving lives and economy. The
government’s threat of strict action against hoarders of essential commodities has fallen on deaf
ears. Lockdown or curfew, both have wider consequences. In response to the Covid-19
pandemic, the Sindh government quickly jammed the wheels of economy by quick enforcement
of the lockdown. Punjab and K-P came later to apply the brakes, but it was direly needed to stop
the spread of Covid-19.
Many vulnerable sections of society are still waiting for relief, which is largely absent, when
compared with the previous response after a major earthquake or floods. The poor and needy
want funds to be quickly disbursed to them. The fear of contracting the virus and social
distancing are big constraints.
The government has announced an Rs1.2-trillion relief package but it will take time to reach the
masses. The prime minister is striving to distribute resources at a swift pace which may have
some impact. However, the larger economy has come to a standstill. From small to big
businesses, poor to middle-class consumers, sports events including the Pakistan Super
League (PSL) and other games, the sports industry and all others have been hit badly.

QUESTION#2

Contribution of agriculture sector in Pakistan economy

Pakistan's agriculture sector plays a central role in the economy as it contributes 18.9
percent to GDP and absorbs 42.3 percent of labor force. According to the 6th Population and
Housing Census of Pakistan 2017, the country's population is growing at the rate of 2.4 percent
per annum.

INFLATION:

Food inflation hurts poor more than rich as poor spend higher proportion of their income on food
items as compared to rich. Higher global food and crude oil prices in 2008 resulted in higher
(than historical average) food inflation in Pakistan. Global food inflation caused food inflation in

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Pakistan. However, food inflation diffusion has been lower as compared to non-food inflation in
Pakistan. Food inflation volatility in Pakistan was found to be half of that observed in the world.
Compared to global food inflation persistence, there is no evidence of food inflation persistence
in Pakistan. However, within the food group, most of the goods, which were manufactured,
exhibited inflation persistence. With the help of comparison of food inflation with wage increases
for labor (after 2008 global commodity prices shock), the poor (labor class) was found to be at
disadvantage.

SUGGESTION:

1. Develop high-yield crops

increased research into plant breeding, which takes into account the unique soil types of Africa,
is a major requirement. A dollar invested in such research by the CGIAR consortium of
agricultural research centers is estimated to yield six dollars in benefits.

2. Boost irrigation
with the growing effects of climate change on weather patterns, more irrigation will be needed.
Average yields in irrigated farms are 90% higher than those of nearby rain-fed farms.

3. Increase the use of fertilizers

as soil fertility deteriorates, fertilizer use must increase. Governments need to ensure the right
type of fertilizers are available at the right price, and at the right times. Fertilizer education
lessens the environmental impact and an analysis of such training programs in East Africa
found they boosted average incomes by 61%.

4. Improve market access, regulations, and governance

Improving rural infrastructure such as roads is crucial to raising productivity through reductions
in shipping costs and the loss of perishable produce. Meanwhile, providing better incentives to
farmers, including reductions in food subsidies, could raise agricultural output by nearly 5%.

5. Make better use of information technology

Information technology can support better crop, fertilizer and pesticide selection. It also
improves land and water management, provides access to weather information, and connects
farmers to sources of credit. Simply giving farmer’s information about crop prices in different
markets has increased their bargaining power. Seiko, a provider of a mobile crop information
services, estimates they can boost incomes by 10-30%.

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6. Adopt genetically modified (GM) crops
the adoption of GM crops in Africa remains limited. Resistance from overseas customers,
particularly in Europe, has been a hindrance. But with Africa’s rapid population growth, high-
yield GM crops that are resistant to weather shocks provide an opportunity for Africa to address
food insecurity. An analysis of more than one hundred studies found that GM crops reduced
pesticide use by 37%, increased yields by 22%, and farmer profits by 68%.

7. Reform land ownership with productivity and inclusiveness in mind

Africa has the highest area of arable uncultivated land in the world (202 million hectares) yet
most farms occupy less than 2 hectares. This results from poor land governance and
ownership. Land reform has had mixed results on the African continent but changes that clearly
define property rights, ensure the security of land tenure, and enable land to be used as
collateral will be necessary if many African nations are to realize potential productivity gains.

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