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Current Economic Situation of Pakistan

Introduction

Pakistan economic environment is affected by intensification of war on terror and deepening


of the global financial crisis which penetrated into domestic economy through the route of
substantial decline in Pakistan’s exports and a visible slowdown in foreign direct inflows.
Pakistan economy continues to remain exposed to the vagaries of international developments
as well as internal security environment. The intensity of the global financial crisis has
further added to Pakistan predicament. Despite support from the IMF and other bilateral and
multilateral donors, Pakistan external account remains exposed to a host of uncertainties.

Growth and investment

In growth and investment we lost investor because of global economic situation, through
financial markets which collapse the external demand for its exports and decline in
availability of external capital to finance or invest in growth process of the country.
According to global financial crisis was felt on market and investor confidence in many
developing countries, including Pakistan, as banking systems and asset markets came under
stress.

Growth and investment

In growth and investment we lost investor because of global economic situation, through
financial markets which collapse the external demand for its exports and decline in
availability of external capital to finance or invest in growth process of the country.
According to global financial crisis was felt on market and investor confidence in many
developing countries, including Pakistan, as banking systems and asset markets came under
stress.
Manufacturing

The manufacturing being the second largest sector of the economy bears significant
importance 18.4 percent contribution to GDP. Overall manufacturing sector posted a negative
growth rate of 3.3 percent during the current fiscal year against the target of 6.1 percent and
4.8 percent of last year. However, production in large scale manufacturing during July-Mar
2008-09 witnessed a broad-based decline of 7.7 percent against the revised growth target of
negative 5.0 percent.

Fiscal Development

The main objective of Pakistan fiscal policy is sustained economic growth in unison with
decline debt services, poverty alleviation, the creation of job opportunities and investment in
physical and human infrastructure. It is unfortunate that fiscal space available during the past
seven years (2000-2007) was not used to provide support to structural reform; instead, painful
structural reforms were delayed. The current government decrease the 20 percent
governmental expenses.
Money And Credit

Functioning of the financial markets, monetary stability and economic growth are closely
related, due to the fact that monetary policy transmission signals work through the channels
of financial markets and bank-based intermediation. Therefore an efficient financial system is
a pre-requisite for stronger economic growth. For a successful financial system, financial
intermediaries play a significant role, since they are critical lenders and borrowers.

Capital Markets

Financial markets perform a key function in the form of intermediation by mobilizing savings
from a large pool of small savers and channelizing these funds into productive investments by
a generally much smaller number of borrowers. Trading in securities enables a match
between the differing maturity preferences of lenders and borrowers. Stock markets also
potentially endorse broad-basing of ownership of financial assets and the reallocation of
funds among corporations and sectors. Moreover, a developed bond market helps in
providing liquidity to domestic growth and credit expansion. (In 30 Jun 2008 the index rate of
KSE was 12,289.03 and on 15 May 2009 it was 7,177.64 similarly on 29 April 2011 it was
12057.54).
Inflation

The rate of inflation is an important macroeconomic indicator and one of the key variables
most central banks around the world scrutinize when setting their main policy rate. Pakistan
is one of only a handful of countries that is still experiencing double-digit inflation. The surge
in food and commodity prices witnessed during the start of fiscal year 2008-09 pushed the
Consumer Prices Index (CPI) in Pakistan to a record level of 25.3% in August 2008,
remaining above the 20% level up until February 2009. Now a day’s its roundabout it is
about 12.9%percent.
Trade And Payments

The global economic downturn is affecting the Pakistan economy through three indirect
channels: the sharp drops in oil prices, has led to sharp easing of import demand pressures;
the contraction in global demand, trade, and related activity, is impacting adversely demand
for exports and remittances from EU and US in particular; and constricted access to the
international credit markets and lower investor appetite for risk is affecting capital inflows,
depressing local asset prices, and reducing already low investment level. Pakistan economy
needs an integrated policy to deal with external sector vulnerabilities like removing structural
rigidities in the exports and imports sectors.

External And Domestic Debt

The government embarked upon a plan of Economic Stabilization to regain macroeconomic


stability. The measures taken under this program by the government have placed the
economy on the path to recovery. The support from the international Monetary Fund is a key
impetus to this stabilization process. The effect of stabilization started accruing as the current
account has recovered substantially and hemorrhage to foreign exchange reserves notonly
arrested but around $3.4 billion have been added to the reserves.
Education

Education is extensively regarded as a route to economic prosperity being the key to


scientific and technological advancement. Hence, it plays a pivotal role in human capital
formation and a necessary tool for sustainable socio-economic growth. Education also
combats unemployment, confirms sound foundation of social equity, awareness, tolerance,
self esteem, and spread of political socialization and culture vitality. It raises the productivity
and efficiency of individuals and thus produces skilled manpower capable for leading the
economy towards the path of economic development. Education also originates confidence
which empowers people to defend their rights, improve health status and good governance in
implementation of socio-economic policies.
Health And Nutrition

Pakistan requires progress in economic and policy sector to reduce the burden of diseases not
simply in health care but much have to be done in agriculture, education, transportation,
environment, public health sector and other relevant areas in order improve the nation’s
overall health. The most immediate health problem of the country are: inadequate sanitation
facilities, unsafe water, poor living conditions, poverty and low literacy rate with women
being the worse affected whose lack of knowledge often render them and their children
vulnerable to various diseases.
Population, Labour Force And Employment

Pakistan is facing a formidable challenge of tackling the issues of economic development and
poverty reduction. In the wake of growing population, the need for food security and the
provision of employment opportunities and housing are becoming a burden on the economy.
Without population stabilization, addressing the critical issues, such a global warming,
biodiversity, the environment, energy, food/water supplies, migration and security is
extremely difficult. Total population in Pakistan is 163.76 million in 2008-09.

Poverty

The inadequacy of income to meet basic needs, low quality of life, denial of opportunities
and choices basic to human development are different facets of poverty. The main objectives
of government policies are to raise the standard of living and improve the socio-economic
conditions of the people and thus reduce the incidence of poverty in the country.
Transport And Communication

Transportation network of any country is of vital importance to its development and affects
all sectors through economic linkages. It ensures safe and timely travel encourages business
activities and cuts down transportation costs while granting produces access to markets for
their goods. A reliable transportation network also provides swift access to labor force and
hence generates employment opportunities. It has been widely recognized that economies
with better road and communication networks are positioned more advantageously in terms
of overall competitiveness as compared to economies having poor networks. Enhancements
in transportation and telecommunication benefit industry, agriculture, and other services
sectors as well as improving the standard of living of the general public, it is therefore,
crucial that investments be made to develop and maintain an efficient network of
transportation and telecommunication to ensure cost efficient integration of markets both
domestically and internationally.
Energy

The world energy scenario during 2008-09 has been very eventful, same as Pakistan.
International oil prices fluctuated widely, leaving all vulnerable oil import countries like
Pakistan under great stress. The volatile energy picture not only made major dents in the
macroeconomic variables such as budget deficit, current account balance, inflation, exchange
rates and foreign exchange reserves, but also eroded the purchasing power of poor on the
back of rising prices of petroleum products. So the major impact has been experienced in the
industrial and agriculture sector, because of energy shortfall. Energy consumption being an
integral part of all the economic activities has also declined as a result of the economic
slowdown.
THE END