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8/13/2019 Lec 01 Economy of Pakistan 2012 13
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ECONOMY OF PAKISTAN: 2012-13
Presentation by
Sehrish Abro
Main Focus
1. Structure of Economy of Pakistan
2. Federal Budget: 2012-2013
3. Economic Challenges: 2013
4. Fiscal Policy
5. Monetary Policy
1
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Economy of PakistanPRESENTATION FRAME
1. Basic concepts of Economics
2. Economy of Pakistan
3. Federal Budget: 2012-13
4. Pakistan: Economic Challenges: 2013
5. Fiscal Policy
6. Monetary Policy
7. Sector wise performance during 2012-2013
2
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DEFINITIONSOFECONOMICS
Economicsis a science of Wealth Adam Smith 1776
Economics is the science which studies
human behavior as a relationship between
unlimited wants and scarce resources which
have alternative uses Robbins 1931
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1: ECONOMY OF PAKISTAN
4
S. No. Components
1. Agriculture
2. Manufacturing
3. Services
Components
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TERMS: 'GROSSDOMESTICPRODUCT- GDP'
The monetary value of all the finished goods
and services produced within a country's
borders in a specific time period, though GDP
is usually calculated on an annual basis. It
includes all of private and public consumption,
government outlays, investments and exports
less imports that occur within a definedterritory
5
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INFLATIONANDDEFLATION
Inflationis an increase in the overall price level.
Hyperinflationis a period of very rapid increases in
the overall price level. Hyperinflations are rare, but
have been used to study the costs and consequencesof even moderate inflation.
Deflationis a decrease in the overall price level.
Prolonged periods of deflation can be just as
damaging for the economy as sustained inflation
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The unemployment rateis the percentage of
the labor force that is unemployed.
The unemployment rate is a key indicator of
the economys health.
UNEMPLOYMENT
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DEFINITIONOF'INCOMEPERCAPITA'
A measure of the amount of money that is
being earned per person in a certain area.
Income per capita can apply to the averageper-person income for a city, region or country
and is used as a means of evaluating the living
conditions and quality of life in different areas. It can be calculated for a country by dividing
the country's national income by its
population. 8
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DEFINITIONOF'BALANCEOFPAYMENTS- BOP'
A record of all transactions made between
one particular country and all other countries
during a specified period of time. BOP
compares the dollar difference of the amount
of exports and imports, including all financial
exports and imports. A negative balance of
payments means that more money is flowingout of the country than coming in, and vice
versa.
9
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OTHERS:
FDI Public Debt-Domestic and foreign debt
Remittances
Fiscal deficit
Trade deficit
Capital Market
Foreign Reserves
Foreign Exchange
Poverty, poverty line 10
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1-1: AGRICULTURE
11
S. No. Components
1. Livestock
2. Crops:
1. Major2. Minor
3. Fishing
4. Forestry
Components
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1-2: MANUFACTURING
12
S. No. Components
1. Industry:
High Tech
LSM
SME
Cottage
2. Minerals
3. Electricity
4. Construction
Components
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1-3: SERVICES
13
S. No. Components
1. Physical (wholesale, retail,
transport, storage)
2. Social (telecom, housing, health,defense)
3. Financial (finance and insurance_
Components
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3-1: FEDERAL REVENUE BUDGET: 2012-13
15
FEDERALREVENUEBUDGET2012-13Particulars Rs. b %
CURRENTREVENUE1. Indirect Taxes 1,572* 49
Composition Rs.b %
Sales Tax 1,077 69Custom Duties 248 15
Federal Excise 125 08
Others (Plus Petroleum Levy) 122 08
1,572* 100
2. Direct Taxes 932 292,504 78
3. Non-Tax Revenue 730 22
3,234 100
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3-1: FEDERAL REVENUE BUDGET: 2012-13
16
Rs. B %4. Less: Transfer to Provinces 1,459
Net Federal Revenue 1,775
CURRENTEXPENDITURE
1. Debt Servicing 1,142 442. Defence Affairs & Services 545 21
3. Cost of Running Govt 404 15
4. Grants & Transfer to Provinces 312 12
5. Subsidies 209 08
2,612 100
Less: Deficit in Revenue Budget 837
1,775
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3-2: FEDERALANNUALDEVELOPMENTPLAN2012-2013
17
ANNUALDEVELOPMENTPLAN2012-2013
Particulars Rs. b %DEVELOPMENTEXPENDITURE
1. Federal Govt: 2012-13
Departments (rs. 207b),
Corporations (Rs. 80b)
Special Programs (Rs. 27b)Special Areas (Rs. 36b) and
ERRA* Rs. (10b)
360 61
2. Other Developments
Expenditure
154 26
3. Provincial Governments 77 13
591 100
*Earthquake Rehabilitation & Reconstruction Authority
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3-2: FEDERALANNUALDEVELOPMENTPLAN2012-2013
18
FINANCINGPATTERN Rs.b %
1. Bank Borrowings 484 82
2. External Receipts 386 65
3. Estimated Provincialsurplus 80 14
4. Net Internal Resources (359)* (61)
591 100
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3-2: FEDERALANNUALDEVELOPMENTPLAN2012-2013
19
BREAKUPOFINTERNAL
RESOURCES
Rs. b
1. Deficit in Revenue Budget
for 2012-2013
837
2. Less: Net Capital Receipts (478)
(359)*
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3-3: PROVINCIALALLOCATION: 7THNATIONAL
FINANCIALAWARD
20
Province Allocated
%
Population*
%
Punjab 48 57.36
Sindh 27 23.71
KPK 16 13.82
Balochistan 09 5.11
100 100
*Based on Population Census of 1997.
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4: PAKISTAN: ECONOMIC CHALLENGES: 2013
21
A: Economy Challenges 2012
1. Business Environment: Deteriorating
2. Security Threats: Increasing
3. Foreign Investment: Declining
4. Exchange Rate: Depreciating
5. Inflationary Pressure: Building Up6. Foreign Exchange Reserves: Depleting
7. Industrialists relocating their Industries Abroad
8. Electricity and Gas Shortages: Aggravating
9. Exports Growth: Turning Negative10. Mysterious Growth in Remittances: Continuing
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4: PAKISTAN: ECONOMIC CHALLENGES 2013
22
C: 2013 Outlook
Outlook for 2013 is Likely to Further Deteriorate.
1. Political uncertainty with adverse consequences on the
economy.
2. Fiscal indiscipline hallmark of the Government during
election year.
3. Mobilization through taxation will take the back seat.4. Reliance on Non-Tax Revenues would increase further.
5. Expenditure is expected to rise further with budget deficit
likely to be in the range of 6% 6.5% of GDP.
6. Economy will remain out of focus of the politicalleadership.
7. Energy shortage (electricity and gas) to aggravate further.
8. Politics is likely to dominate economics.
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4: PAKISTAN: ECONOMIC CHALLENGES: 2013
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D: Expected Trends 2013
1. GDP Trend : 3-4%
2. Domestic Investment : Not expected to Pick up
3. Unemployment and Poverty are likely to rise further
4. Inflationary pressure to rise on account of senseless increase
in government administered prices
5. External balance of payments to come under pressure dueto following:
a. Flat, even negative export growth
b. Search in payment to the IMF
c. FDI to witness a sharp declined Sharp depreciation of exchange rate
e. Public debt is likely to worsen on account of large fiscal
deficit.
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4: PAKISTAN: ECONOMIC CHALLENGES: 2013
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E: Consequences
1. National Security at Stake
2. Miss-Governance to Continue
3. In Search of a Direction
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6: FISCAL POLICY
25
1. Objectives
a. Full Employment
b. Resource Mobilization
c. Resource Allocation
d. Maintenance of Economic Stability
e. Income Re-Distribution
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MONETARYPOLICY
Tools:
Discount rate
Reserve Ratio OMO
26
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6: FISCAL POLICY
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4. Income Tax Rates 20131. Individuals
- Non-Salaried - 5 brackets (10% -----25%)- Salaried5 brackets (5.0% -----20%)
- Exempt upto Rs. 4 Lac
2. Companies
- Public, Private& Banking Companies 35%
- Small companies 25%
3. Dividend received by all tax payers 10% and 20% on banking
company from its assets management company
4. Property income
- Rs. 150,000 exempt
- Rates 5% -----10%
5. Capital gains
- With holding period less than six months 10%
- More than six month but less than 12 months 8%