Current Issues of Pakistan

8/6/2019 Current Issues of Pakistan

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Presentation by!

Name: NAUROZ KHAN

Class: B.B.A 4th

Subject: BUSINESS FINANCE

Topic: CURRENT ECONOMIC

SITUATION OF PAKISTAN

DATE: 17, AUGUST, 2009


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Current Economic

Situation OfPakistan


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Introduction

Pakistan economic environment is affected byintensification of war on terror and deepening of theglobal financial crisis which penetrated intodomestic economy through the route of substantial

decline in Pakistans exports and a visible slowdownin foreign direct inflows. Pakistan economycontinues to remain exposed to the vagaries ofinternational developments as well as internalsecurity environment. The intensity of the global

financial crisis has further added to Pakistanpredicament. Despite support from the IMF and otherbilateral and multilateral donors, Pakistan externalaccount remains exposed to a host of uncertainties.


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Growth and investment

In growth and in investment we lost investorbecause of global economic situation,through financial markets which collapse the

external demand for its exports and declinein availability of external capital to finance orinvest in growth process of the country.According to global financial crisis was felton market and investor confidence in manydeveloping countries, including Pakistan, asbanking systems and asset markets cameunder stress.


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Agriculture

In spite of structural shift towardsindustrialization, agriculture sector is still thelargest sector of the economy with deep impact

on socio-economic set up. It is the source of thelivelihood of almost 44.7 percent of the totalemployed labor force in the country. With thepresent contribution to GDP at 21.8 percent,

agriculture sector is the mainstay of the ruraleconomy around which socio-economicprivileges and deprivations resolve.


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Manufacturing

The manufacturing being the second largestsector of the economy bears significantimportance 18.4 percent contribution to GDP.

Overall manufacturing sector posted a negativegrowth rate of 3.3 percent during the currentfiscal year against the target of 6.1 percent and4.8 percent of last year. However, production inlarge scale manufacturing during July-Mar2008-09 witnessed a broad-based decline of7.7 percent against the revised growth target ofnegative 5.0 percent.


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Fiscal Development

The main objective of Pakistan fiscal policy issustained economic growth in unison withdecline debt services, poverty alleviation, the

creation of job opportunities and investment inphysical and human infrastructure. It isunfortunate that fiscal space available during thelast seven years (2000-2007) was not used toprovide support to structural reform; instead,painful structural reforms were delayed. Thecurrent government decrease the 20 percentgovernmental expenses.


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Money And Credit

Functioning of the financial markets,monetary stability and economic growth areclosely related, due to the fact that monetary

policy transmission signals work through thechannels of financial markets and bank-based intermediation. Therefore an efficientfinancial system is a pre-requisite forstronger economic growth. For a successfulfinancial system, financial intermediariesplay a significant role, since they are criticallenders and borrowers.


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Capital Markets

Financial markets perform a key function in the formof intermediation by mobilizing savings from a largepool of small savers and channelizing these fundsinto productive investments by a generally muchsmaller number of borrowers. Trading in securitiesenables a match between the differing maturitypreferences of lenders and borrowers. Stockmarkets also potentially endorse broad-basing ofownership of financial assets and the reallocation offunds among corporations and sectors. Moreover, a

developed bond market helps in providing liquidityto domestic growth and credit expansion. (In 30 Jun2008 the index rate of KSE was 12,289.03 and on15 May 2009 it was 7,177.64).


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Inflation

The rate of inflation is an important macroeconomicindicator and one of the key variables most centralbanks around the world scrutinize when setting theirmain policy rate. Pakistan is one of only a handful of

countries that is still experiencing double-digitinflation. The surge in food and commodity priceswitnessed during the start of fiscal year 2008-09pushed the Consumer Prices Index (CPI) in Pakistanto a record level of 25.3 percent in August 2008,

remaining above the 20 percent level up untilFebruary 2009. Now a days its roundabout 18percent.


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Trade And Payments

The global economic downturn is affecting thePakistan economy through three indirect channels:the sharp drops in oil prices, has led to sharp easingof import demand pressures; the contraction inglobal demand, trade, and related activity, isimpacting adversely demand for exports andremittances from EU and US in particular; andconstricted access to the international creditmarkets and lower investor appetite for risk isaffecting capital inflows, depressing local asset

prices, and reducing already low investment level.Pakistan economy needs an integrated policy to dealwith external sector vulnerabilities like removingstructural rigidities in the exports and importssectors.


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External And Domestic Debt

The government embarked upon a plan ofEconomic Stabilization to regain macroeconomicstability. The measures taken under thisprogram by the government have placed the

economy on the path to recovery. The supportfrom the international Monetary Fund is a keyimpetus to this stabilization process. The effectof stabilization started accruing as the currentaccount has recovered substantially and

hemorrhage to foreign exchange reserves notonly arrested but around $3.4 billion have beenadded to the reserves.


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Education

Education is extensively regarded as a route toeconomic prosperity being the key to scientific andtechnological advancement. Hence, it plays a pivotalrole in human capital formation and a necessary toolfor sustainable socio-economic growth. Educationalso combats unemployment, confirms soundfoundation of social equity, awareness, tolerance,self esteem, and spread of political socialization andculture vitality. It raises the productivity andefficiency of individuals and thus produces skilled

manpower capable for leading the economy towardsthe path of economic development. Education alsooriginates confidence which empowers people todefend their rights, improve health status and goodgovernance in implementation of socio-economicpolicies.


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Health And Nutrition

Pakistan requires progress in economic and policysector to reduce the burden of diseases not simplyin health care but much have to be done inagriculture, education, transportation, environment,

public health sector and other relevant areas in orderimprove the nations overall health. The mostimmediate health problem of the country are:inadequate sanitation facilities, unsafe water, poorliving conditions, poverty and low literacy rate with

women being the worse affected whose lack ofknowledge often render them and their childrenvulnerable to various diseases.


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Population, Labour Force And

Employment Pakistan is facing a formidable challenge of tackling

the issues of economic development and povertyreduction. In the wake of growing population, theneed for food security and the provision of

employment opportunities and housing arebecoming a burden on the economy. Withoutpopulation stabilization, addressing the criticalissues, such a global warming, biodiversity, theenvironment, energy, food/water supplies, migration

and security is extremely difficult. Total populationin Pakistan is 163.76 million in 2008-09.


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Poverty

The inadequacy of income to meetbasic needs, low quality of life, denialof opportunities and choices basic to

human development are different facetsof poverty. The main objectives ofgovernment policies are to raise thestandard of living and improve the

socio-economic conditions of thepeople and thus reduce the incidenceof poverty in the country.


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Transport And Communication

Transportation network of any country is of vital importance toits development and affects all sectors through economiclinkages. It ensures safe and timely travel encourages businessactivities and cuts down transportation costs while grantingproduces access to markets for their goods. A reliabletransportation network also provides swift access to laborforce and hence generates employment opportunities. It hasbeen widely recognized that economies with better road andcommunication networks are positioned more advantageouslyin terms of overall competitiveness as compared to economieshaving poor networks. Enhancements in transportation andtelecommunication benefit industry, agriculture, and otherservices sectors as well as improving the standard of living ofthe general public, it is therefore, crucial that investments bemade to develop and maintain an efficient network oftransportation and telecommunication to ensure cost efficientintegration of markets both domestically and internationally.


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Energy

The world energy scenario during 2008-09 has beenvery eventful, same as Pakistan. International oilprices fluctuated widely, leaving all vulnerable oilimport countries like Pakistan under great stress.The volatile energy picture not only made majordents in the macroeconomic variables such asbudget deficit, current account balance, inflation,exchange rates and foreign exchange reserves, butalso eroded the purchasing power of poor on theback of rising prices of petroleum products. So the

major impact has been experienced in the industrialand agriculture sector, because of energy shortfall.Energy consumption being an integral part of all theeconomic activities has also declined as a result ofthe economic slow down.


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Current Issues of Pakistan