PAKISTANS ECONOMY IN THE

DOMESTIC, REGIONAL AND GLOBAL

ECONOMIC CONTEXT

Dr. S.M.Khair
Associate professor
Department of Economics
BUITEMS, Quetta.

Overview of the economy

Pakistans estimated population in 2015 = 191.7 million,
growth rate = 1.92%
Pakistan GDP = Rs. 27384 billion
Per capita income in 2014-15 = 1512 $
Savings only 14.50 % of GDP
Labor force = 60.09 million
Unemployment = 6 %
Literacy = 74% urban, 49% rural, Balochistan = 43 %, only
2.1% of GDP being spend on education
Agriculture, industry and service sectors contribution to
GDP = 20.9 %, 20.30 %, and 58.80 %

Overview of the economycontd.

Within industrial sector, manufacturing 65.4%, Small
scale manufacturing 13%, large scale manufacturing
80%, slaughtering 7%
Remittances inflow $ 14969.66 million, 16% higher
than previous year
Fiscal deficit = 3.8 % of GDP
Total expenditure = Rs. 5642.4 billion, current expdt. =
4462.3 bn, dev expdt. = 1180.1 bn
Total revenue = Rs. 2682 bn (direct taxes 39.3%,
indirect taxes 61.7% of FBR revenue)
Inflation rate = 4.8 %

Overview of the economy..contd.

Pakistans policy trends consistent with
liberalization, deregulation and privatization.
Major successes of the fiscal year 2014-15
Picking up economic growth
Economic growth = 4.24 % better than previous year
supported by agriculture, industry and services
Inflation contained at lowest since 2003
Improvement in tax collection
Decrease in fiscal deficit
Increase in workers remittances
Increase in foreign exchange reserves
Successful launch of Sukuk bond
Stock market touched new history

Current economic issues..contd.

Government expenditures are more than its Revenues
Pakistan economy is running a fiscal deficit for decades.
Low tax to GDP ratio (10%) , narrow tax base
Two main reasons behind the low tax-to-GDP ratio- One is evasion
and widespread corruption. The second equally important reason is
the tax expenditures, exemptions and concessions provided by the
tax system,
Greater dependence on indirect taxes (GST 18%) for revenue
collection which are regressive in nature- stifling economic growth
and widening the gap between the rich and the poor/lacks fairness
and equity
The inability of governments to collect taxes is forcing the state to
withdraw, bit by bit, from its functions, duties and responsibilities
that its citizens expect.
Dr Pasha believes that these exemptions provided to the rich and
the powerful, corps commanders, members of the supreme court
as well as ministers, have made the tax system more regressive.

Current economic issuescontd.

Poverty measured in terms of access to basic social and
economic services (we lag behind most developing
countries) has become more severe than a poverty
estimate based on nutritional intake.
We often consider income/eco poverty/consumption
poverty, but the underlying scheme of justice, equality,
and power have to be understood and recognized.
Multi-dimentional poverty (edn. Health, sanitation,
water supply) 60% of pop. (58.7%) Live below poverty (2
US $/day) (World Bank in a report WDI).
Every third Pakistani caught in poverty bracket.
Pak. HDI 0.572 lower than India 0.612

Current economic issuescontd.

Contracting export markets
Future economic growth will face a slowing down of
demand in our traditional export markets of Europe
and the US. To overcome this demand insufficiency for
our products we will have to look east, especially
towards our neighbours, with young consumers and
growing markets, as opposed to aging populations and
contracting markets in the West.
Growth in exports has become critical for financing our
import bill, especially with doubts about the continuing
robustness of remittances from slowly growing Europe
and US, and now the Middle East following the collapse
in oil prices.

Current economic issuescontd.

Low productivity of agriculture sector
It is possible to double yields per acre employing modern
agronomic practices using technology, without aimless
subsidization of crops (eg wheat) and inputs such as fertilizer
and irrigation services.
Furthermore, there is a need to shift from food crops to
horticulture, dairy farming and crop varieties less dependent
on water.
Increases in productivity will require a package of initiatives,
the most important being better management of a key input
i.e., water.
For the efficient use of water, greater focus is needed on land
levelling, zero-till cultivation, drip irrigation, greenhouse and
tunnel technology (for horticulture, fruit and vegetables),
policies to facilitate development of private cold-storage
chains, logistics and infrastructure connecting farms to
markets to check wastage, etc.

Current economic issuescontd.

A self-serving rentier elite that has spawned and
accepted, if not actively supported, poor quality
governance. This is reflected in an inept, venal political
leadership, nurturing dysfunctional systems and
institutions debilitated by political and interest group
interference, patronage and non-merit appointments
(Kardar, 2015).
Consequently, society has assimilated the political,
social and cultural values of a structure rooted in
paternalistic and personal relations, nepotism and
patronage and violation of laws.
The state has become a hostage to these interest
groups and their perceptions on how Pakistans
political, bureaucratic and economic formations should
be organised (Kardar, 2015).

Current economic issuescontd.

Energy shortage: The entire sector suffers from
unreliability of supply, proliferation of theft and poor
recovery of dues owing to collusion between
consumers and the personnel of these utilities.
Inequity in public services for education, health, safe
drinking water and sanitation have continued to
deteriorate as the richer segments have been able to
fend for themselves by arranging private provision for
such services.
Large and widening regional disparities in the levels
and rates of economic growth and the quality of
physical infrastructure and social and economic
services, have politically alienated growing segments of
youth along nationalistic/ethnic lines.

Pakistan public debt trends

99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

a) Debt Payable
(Rs)

09-10

201011

201112

201213

201314

201415

1576 1728

1715

1852

1979

2152 2322

2601 3266

3852

4651

6014

7638

9521

11932
.2

27.5

27.8

29.9

30.6

31.2

32.1

33.9

36.4

40.7

46.4

50.0

54.6

53.2

47.9

62.6

Exc. Rate
(E.O.P)

52.5

63.4

60.1

57.7

57.9

59.7

60.2

60.4

68.3

81.4

85.5

86.0

94.5

99.1

101.9

b) Foreign Debt
(Rs)

1442 1761

1795

1766

1810

1913 2041

2201 2778

3776

4270

4694

5030

4747

5004.
3

c) Total Debt (a +
b)

3018 3489

3510

3618

3789

4065 4363

4802 6044

7629

8921

10709 12668 14268

16936
.5

3826 4163

4402

4823

5641

6500 7623

8673 1024 12724 14837 18063 20091 22909

3

27384

1298 1499

1851

2078

2261

2566

2969

2682

Debt payable ($)

GDP (mp)

Total Revenue

513

553

624

721

806

900 1095

78.9

83.8

79.8

75.0

67.2

62.5

57.2

55.4 59.0

60.0

68.1

59.3

63.0

62.3

61.8

588

631

563

502

470

452

398

370

412

429

474

494

481

631

Total Debt as %
of:
- GDP
- Revenue

403

Pakistan external debt over time

Added $1.6 billion in external debt in 8 years (2000-07) but added

$19.6 billion in just 4 years (2008-11)

Possible consequences of high debt

burden
Serious threat to economic development
Causes macroeconomic instability
Depresses economic growth-rise in
unemployment & poverty
Raises the risks of fiscal crises
Increases pressure on exchange rate
Major constraints for the government to
undertake counter cyclical policies to revive
economic growth
Loss of sovereignty, increase dependency on
external borrowing

Future prospects
The growth rate above 5pc per annum for most
of Pak history is now finding that this rate has
dropped to below 4 %- gives the impression that
this is the new equilibrium rate that we may have
to live with for some time.
Explains the poor performance of the economy,
even though there are some positive
fundamentals that should be able to accelerate
economic growth?
The natural resources base of the country can be
used to accelerate economic growth and
development
Renewable energy sources must be promoted

Future prospects.contd.
A massively sized young population of more than 100
million, which should provide a huge market for
consumer goods as well as a large labour force that
could be productively employed, representing what
is generally referred to as the demographic
dividend.
A large irrigation system, the recent upgrading of
telecommunication and internet facilities (mobile
technology) and an expanded network of roads could
become strategic drivers of growth and employment.
They could improve the mobility and productivity of
this workforce, thereby pushing up the economy to a
higher and sustainable development path.

Future prospects.contd.
Export diversification and exploring new export outlets
Imports substitution
Increase the agricultural production by investing more
in this sector to enhance economic growth and create
employment opportunities
Improve water use efficiency
Improve the governance, which is very poor in many
areas
Promote tourism
Resource mobilization through broadening tax base
Our some indicators not good among the other
countries

Thanks