Executive Summary
The Government remained focused on maintaining
macroeconomic stability, growth, mobilizing
domestic resources and increasing exports,
balanced regional development and providing
safety nets for the vulnerable groups. Despite
numerous challenges, the economy performed
better in 2011-12 than many developed and
developing economies. These included sharp
increase in fuel and commodity prices,
recessionary trend globally and weak inflows.
Domestically, economy was struck by heavy rains
in Sindh and parts of Balochistan costing $ 3.7
billion. Notwithstanding these challenges, the
Gross Domestic Product growth this year is
estimated at 3.7 percent as compared to 3.0 percent
last year.
In comparison, the global recovery is threatened by
intensifying strains in the euro area and fragilities
elsewhere. International Monetary Fund has
maintained its growth forecast of 2.1 percent for
United States in the year 2012, negative 0.3
percent for Euro area, 0.8 percent for United
Kingdom, 5.7 percent for Emerging and
Developing Economies after factoring China (8.2
percent) and India (6.9 percent) and 2.0 percent for
Japan.
Despite global slowdown, Pakistan has managed to
maintain its exports during July-April 2012 to last
year’s level which saw a phenomenal growth.
Remittances remained buoyant and estimated at
close to $ 13 billion, an increase of 16 percent.
Recessionary trend globally have, however,
impacted capital flows to Pakistan. Current
account balance was affected due to sharp increase
in oil prices and import of 1.2 million metric tons
of fertilizer.
Tax measures enforced by the Government in
April 2011 has yielded dividend. July-April 2012
growth in FBR tax revenues demonstrated a
growth of 24 percent with Rs. 1445 billion as
compared to 1250 billion last year. Efforts are
underway to reach the ambitious target of 1952
billion. Non-tax receipts have been less due to non
disbursement of anticipated coalition support funds
and delaying the expected auction of 3 G license to
a later part of summer.
Growth and Stabilization
The economy is now showing signs of modest
recovery. GDP growth for 2011-12 has been
estimated 3.7 percent as compared to 3.0 percent in
the previous fiscal year 2011. The Agriculture
sector recorded a growth of 3.1 percent against 2.4
percent last year. The Large Scale Manufacturing
(LSM) growth is 1.1 percent during July-March
2011-12 against 1.0 percent last year. Overall, the
commodity producing sectors and especially the
Agriculture sector have performed better. The
Services sector recorded growth of 4.0 percent in
2011-12.
Flood Impact Assessment
This performance has been achieved despite severe
monsoon rains triggered floods of an
unprecedented scale in Southern Pakistan,
engulfing 23 districts of Sindh Province and
adjoining areas of northern Balochistan causing
damages to crops, infrastructure and human
settlements, thus adversely affecting national
economy.
According to the World Bank and the Asian
Development Bank (ADB) Damage and Needs
i
Pakistan Economic Survey 2011-12
Assessment (DNA) Report, approximately, 9.6
million people were affected in Sindh and
Balochistan as a result of these rains. The total
damages estimated to Agriculture, Energy,
Transport and Communication, Health,
Environment as well as the Forestry, Water Supply
and Sanitation amount to Rs. 324.5 billion (US$
3.7 billion).The rehabilitation and Cost of recovery
is estimated at Rs. 239 billion (US$ 2.8 billion).
This is in addition to damages of $ 10 billion to the
economy during 2010 floods.
Commodity Producing Sector: The commodity
producing sector has performed better in the
outgoing fiscal year as compared to last year. Its
growth rate this year was 3.3 percent against 1.5
percent during last year.
Agriculture Sector is a key sector of the economy
and accounts for 21 percent of GDP. The
supportive policies of the government resulted in a
growth of 3.1 percent against 2.4 percent last year.
Major Crops registered an accelerating growth of
3.2 percent compared to a negative growth of 0.2
percent last year. The major crops including
Cotton, Sugarcane and Rice witnessed growth in
production of 18.6 percent, 4.9 percent and 27.7
percent respectively. However, preliminary
estimates of wheat production showed a negative
growth due to late receding of flood waters in
lower Sindh which hampered the timely cultivation
of the wheat crop. Livestock has witnessed a
marginally higher growth of 4.0 percent against the
growth of 3.97 percent last year. Fisheries sector
showed a growth of 1.8 percent. Forestry recorded
a growth of 0.95 percent as compared to the
contraction of 0.40 percent last year.
Manufacturing Sector: The growth of the
manufacturing sector is estimated at 3.6 percent
compared to 3.1 percent last year. Small scale
manufacturing maintained its growth of last year at
7.5 percent and slaughtering growth is estimated at
4.5 percent against 4.4 percent last year. Large
Scale Manufacturing (LSM) has shown a growth
of 1.1 percent during July-March 2011-12 against
1.0 percent last year. The Construction Sector has
shown 6.5 percent growth as compared to negative
growth of 7.1 percent last year. Mining and
Quarrying sector recorded a positive growth of 4.4
percent during July-March of the fiscal year 2011-
ii
12 against negative growth of 1.3 percent last year.
Electricity and gas distribution witnessed a
negative growth of 1.6 percent against - 7.3 percent
last year.
Services Sector: The Services sector has
registered a growth rate of 4.0 percent during July-
March of the fiscal year 2011-12 against 4.4
percent last year. It is dominated by Finance and
Insurance at 6.5 percent, Social and Community
Services 6.8 percent and Wholesale and Retail
Trade 3.6 percent.
Consumption: Real private consumption grew at
11.6 percent in fiscal year 2011-12 as compared to
3.7 percent growth last year and real government
consumption grew at 8.2 percent as compared to
5.2 percent last year. Private consumption
expenditure has reached 75 percent of GDP;
whereas public consumption expenditures are 13
percent of GDP. Private consumption has
increased on the back of sustained growth in
remittances. Total consumption has reached 88.4
percent of GDP in fiscal year 2011-12 as compared
to 83 percent last fiscal year. Furthermore, increase
in rural income due to higher production of crops
and sharp increase in commodity prices also
supported the consumption demand.
Per capita real income grew at 2.3 percent in
2011-12 as compared to 1.3 percent growth last
year. In dollar terms, it increased from $ 1258 in
2010-11 to $ 1372 in 2011-12.
Real Investment has declined from 13.1 percent
of GDP last year to 12.5 percent of GDP in 2011-
12; fixed investment has declined to 10.9 percent
of GDP in 2011-12 from 11.5 percent of GDP last
year. Similarly Private investment also contracted
to 7.9 percent of GDP in 2011-12 as compared to
8.6 percent of GDP last year. Public investment as
a percent of GDP is 3.0 percent in 2011-12 against
the 2.9 percent last year. National savings are 10.7
percent of GDP in 2011-12 as compared to 13.2
percent in 2010-11.
Foreign Direct Investment stood at $ 668 million
during July-April 2011-12 as against $ 1293
million last year. The capital flows were affected
because of global financial crunch and euro zone
crisis. Oil and Gas Exploration remained the major

sector for foreign investors. The share of Oil and
Gas Exploration in total FDI during July-April
2011-12 stood at 70 percent.
Workers’s Remittances witnessed a strong
growth of 25.8 percent in 2011 over the previous
year 2010. During July-April 2011-12, worker’s
remittances grew by 20.2 percent at $ 10.9 billion.
The buoyancy in remittances is largely attributed
to the government’s efforts to divert remittances
from informal to formal channel. Data on
remittances suggests that the monthly average for
the period of July-April 2011-12 stood at $ 1.09
billion compared to $ 0.90 billion during the
corresponding period last year. The upsurge in the
remittances is attributed to the government’s
efforts of redirecting these flows from informal to
formal channels.
Fiscal Development: The Medium Term
Budgetary Framework has improved the budget
preparation process. Medium-term fiscal
framework and budget policies have been
incorporated into a medium-term Budget Strategy
Paper on rolling basis, which include medium-term
indicative budget ceilings for the recurrent and
development budgets, and provides an opportunity
to discuss the budget between technical and
political levels prior to the presentation of the
annual budget. The political level involvement
includes Cabinet, Standing Committees on Finance
& Revenue, and political parties. The Output
Based Budget (OBB) has also been
institutionalized in the federal government which
presents policies of the ministries in the shape of
goals, outcomes, outputs and medium-term
budgets. The OBB also presents key performance
indicators for the outputs to introduce government
wide monitoring system.
18th amendment in the Constitution of the Islamic
Republic of Pakistan was an historic step forward
abolishing the concurrent list transferring
additional functions to the Provinces. It was
combined with a path breaking 7th National
Finance Commission Award in 2010. In addition,
the Government resolved long standing demands
of the Khyber Pakhtunkhwa relating to Net Hydel
Profit and Royalty and Gas Development
Surcharge of Sindh and Balochistan. The award
also acknowledged multiple criteria for transfer of
Executive Summary
resources. Share of Balochistan has increased from
5.1 to 9.0 percent. Likewise, Khyber Pakhtunkhwa
has been assigned 1 percent of the total divisible
pool to mitigate the impact of campaign against
extremism. This has allowed transfer of 70 percent
of the divisible pool to the provinces and FATA
and Gilgit-Baltistan. During the last two years,
Federal Government has transferred over Rs. 800
billion additional over 2009-10 resource transfer of
Rs. 633 billion. This should help the provinces to
earmark more resources to social sectors and
development of infrastructure.
Government continued its efforts to broaden the
tax base and simplifying the tax structure. Efforts
are underway to move towards two main taxes, i.e.
income tax and sales tax. As a result, Special
Excise Duties and Regulatory Duties have been
abolished. A three years plan to phase out Federal
Excise Duties is under implementation. Capital
Gain Tax has been levied on sales of securities in
the stock exchange. Sales tax exemptions and zero
ratings have been withdrawn on all items including
textile, leather, fertilizer, pesticides, sports goods
and tractors except food items, health, education
and agriculture produce. The Government has
strengthened automated e-filing and electronic
payment and refund system to ensure expeditious
settlement of refund claims expeditiously. For this,
a centralized sales tax refund cheque issuance
system is now operational in the Federal Board of
Revenue. Broadening the tax base identifying
potential taxpayers has remained a key focus for
which a dedicated unit has been established in the
FBR. These efforts are now paying dividend.
Federal Board of Revenue target for 2011-12 was
set at Rs. 1952 billion. During first ten months, tax
collection stood at Rs. 1,426.0 billion against Rs.
1,149.8 billion in the comparable period of last
year, showing an increase of 24 percent. It does not
include Rs. 19 billion collected by Sindh province
on GST on services.
Efforts are being made to manage the fiscal deficit
within acceptable level through an expenditure
management strategy, austerity measures and
reforms in public sector enterprises. The
government is committed to simplification of tax
regime, broadening the tax and mobilizing
domestic resources. The operational expenditure of
the federal ministries was reduced by 20 percent. A
iii
Pakistan Economic Survey 2011-12
general ban was placed on recruitment and
purchase of durable goods. Official transport
assigned to entitled officers of BPS-20 to 22 was
monetized to reduce expenditure on POL and
repair and maintenance as well as drivers. Subsidy
expenditure was rationalized. As a result of these
efforts, overall fiscal deficit was at 5.0 percent of
GDP in July-April 2012 against 5.5 percent of
GDP of the comparable period of last year. It is
noteworthy that containing the deficit during the
period under review was quite challenging as the
burden of financing fell directly on domestic
sources due to the non materialization of external
inflows.
Unlike the past, it was for the first time in many
years that Public Sector Development Program did
not face any cut. Despite huge financial
constraints, the Government made a special effort
to fully fund the PSDP. Accordingly, Rs. 304
billion were released that facilitated in completion
of 200 projects. The Government efforts can be
gauged from the fact that Rs. 2.2 trillion were
provided during the last four years for PSDP.
Money and Credit: The SBP lowered the discount
rate by cumulative 200 bps points to 12 percent
during the first half of fiscal year 2011-12 in line
with inflationary trend in the country. During the
first eleven months of the current fiscal year (June
2011-11th May 2012) broad money (M2) witnessed
an expansion of 9.1 percent as compared to 11.47
percent as compared to last year. The deceleration
in money supply is primarily driven by the
significant fall in the Net Foreign Assets of the
banking system along with increased government
borrowing and a one-off settlement of circular
debt. Net Domestic Assets (NDA) during July
2011 - 11th May 2012 stood at Rs. 880.9 billion
against Rs. 481.6 billion during the same period
last year. The expansion in NDA is mainly
contributed by a rise in demand for private sector
credit and government borrowings. Conversely,
Net Foreign Assets (NFA) witnessed a contraction.
During July2011-11th May, 2012, credit to the
private sector witnessed a net increase of Rs. 234.8
billion compared to Rs. 107.8 billion in the same
period last year. Year-on-year growth in private
sector credit was up 7.5 percent by 11th May, 2012.
iv
The weighted average lending rate (including zero
mark-up) on outstanding loans stood at 12.8
percent while the weighted average deposit rate
(including zero mark-up) stood at 6.98 percent in
March 2012. This resulted in a spread of 5.8
percent. The decline in the weighted average
lending rate is due to the lag involved in
contracting fresh loans in the new declining
interest rate environment and the decline in banks
return on government securities. It is pertinent to
mention that since the SBP was following a tight
monetary policy till August 2011 and the interest
rates were moving up, the banking spread
remained high.
Capital Markets: The KSE 100 index stood at
12,496 on June 20, 2011. It crossed the barrier of
14,000 and closed at 14,618 on 7th May, 2012, the
highest level seen in last four years showing a
growth of 17 percent over the closing index of last
financial year. The Government has now levied
Capital Gain Tax on securities. The net investment
by the foreign investors in Pakistan’s Stock
Markets during July-March, 2011-12 reflected a
net outflow of US$176 million. This indicates that
bullish trend observed in Pakistani equity market is
due to the restoration of the confidence of local
investors and institutions. During fiscal year 2011-
12, the leading stock markets indices of the world
observed mixed trends with negative growth of
18.1 percent in China to 19.03 percent positive
growth in case of Philippines. Pakistani Stock
market performed well as compared to markets of
the world during the current fiscal year. This was
mainly due to the steps taken by the government to
boost the confidence of the equity market investors
which included reforms in the Capital gains tax,
etc.
The Government has enacted Stock Exchanges
(Corporatization, Demutualization and Integration)
Act, 2012 which will further strengthen the
country’s stock markets. The law requires stock
exchanges to be demutualized within 119 days of
its promulgation in accordance with timelines
specified for completion of various milestones
involved in demutualization exercise.
Corporatization, demutualization of stock
exchanges would entail converting their structure
from non- profit, mutually owned organization to
for-profit entities owned by shareholders.

Demutualization would result in increased
transparency at stock exchanges and greater
balance between interests of various stakeholders
by clear segregation of commercial, regulatory
functions and separation of trading rights and
ownership rights. Demutualization is well-
established global trend and almost all stock
exchanges worldwide operate in demutualized set
up. The enactment of this law has brought Pakistan
capital market at par with other international
jurisdictions like India, Malaysia, Singapore, USA,
UK, Germany, Australia, Hong Kong, Turkey
among others. It will help expand market outreach,
attract new investors, improve liquidity and enable
stock exchange to attract international strategic
partners.
Inflation: Price stability remained the priority of
the government. The Government has constituted a
National Price Monitoring Committee headed by
the Finance Secretary with representatives of
Federal Ministries and Provincial departments. The
Committee meets every month. In addition, the
Cabinet and the Economic Committee of the
Cabinet monitors the prices of essential items and
take corrective measures to ensure that prices
remain under check. These efforts have yielded
results. Inflation has declined for the third
consecutive year. CPI was 10.8 percent during
July-April, 2012 from a high of 25 percent in
October 2008. It was in single digit in December
2012. This has been achieved despite sharp
increase in international oil prices, effect of
upward adjustment in the administered prices of
electricity and gas, supply disruptions due to
devastating floods of 2010 and heavy rains of 2011
and bank borrowings. Food and non-food inflation
averaged 11.1 percent and 10.7 percent
respectively against 18.8 percent and 10.8 percent
in the same period of last year.
Trade and Payments: The Government pursued
vigorously to secure concessional duties package
on 75 items from the European Union. The World
Trade Organization approved the package this
year. It is expected that this will boost Pakistan’s
exports to EU, one of the major trading partner of
Pakistan. Exports witnessed a strong performance
last year attaining the highest level ever of $ 25
billion showing a growth of 30 percent. It reflected
both the price and quantity effect. Despite euro
Executive Summary
zone crisis, impacting the demand for Pakistan
goods, Pakistan has successfully maintained its
exports at last year’s until April this year. Exports
during July-April 2012 were $ 20.5 million
compared to $ 20.46 billion last year. The Afghan
Transit Trade Agreement (APTTA) has
encouraged formal trade between Pakistan and
Afghanistan and the volume has risen to around $
2.5 billion annually. Efforts are underway to
formalize Free Trade Agreements and Preferential
Trade Agreements with many countries. It will
help boosting Pakistan’s exports. Efforts are also in
hand to normalize trade relations with India.
Imports grew by 14.5 percent and stood at $ 33.1
billion during July-April 2012. The current account
deficit stood at $ 3.4 billion in the same period. It
was largely as a result of high oil prices and import
of fertilizers. Continued support from current
transfers in the form of workers’ remittances
helped in containing current account balance.
Pakistan has witnessed some geographical
diversification in exports. During 2005-06, 47.2
percent of the country’s exports were concentrated
in five markets (USA, UK, Germany, Hong Kong
and U.A.E.) of the world and remaining share of
all other countries was 52.8 percent. This
concentration is on continuous decline since 2005-
06 and recently the share of these five markets
stood at 35.7 percent whereas the share of all other
countries increased to 64.3 percent during July-
December 2011-12. This improvement in
geographical diversification was mainly the result
of Strategic Trade Policy Framework (STPF-2009-
12) introduced by the government and the resulting
increase in exports to China, Afghanistan and
Bangladesh.
Pakistan’s foreign exchange reserves reached to $
16.5 billion at the end-April 2012 compared to $
17.0 billion at end-April 2011. The exchange rate
averaged at Rs. 85.50/US$ during July-April 2010-
11, whereas it averaged at Rs. 88.55/US$ during
July-April 2011-12. The Pak Rupee depreciated by
3.4 percent during July-April 2011-12 over the
depreciation of 2.2 percent in July-April 2010-11
period.
Public Debt: Pakistan’s public debt stood at
Rs. 12,024 billion as of March 31, 2012. During
v
Pakistan Economic Survey 2011-12
first nine months of the ongoing fiscal year, total
public debt registered an increase of Rs. 1,315
billion which includes Rs. 391 billion consolidated
by the Government into public debt against
outstanding previous year’s subsidies related to
food and energy sectors. Public debt as a percent of
GDP stood at 58.2 percent by end-March 2012.
During July-March 2012, $179 million was added
to the EDL stock. At the end of March 2012,
servicing of the public debt stood at Rs.720.3
billion against the budget amount of Rs. 1034.2
billion.
Population, Labour Force and Employment:
Pakistan is endowed with demographic dividend
with a bulging young population. They can be a
productive asset of the country if put to proper
training and skill development. Pakistan is also
facing rapid urbanization. The population in urban
areas has increased from 65.3 million in 2010-11
to 67.5 million in 2011-12. Accordingly, cities
development is one of the key pillars of Pakistan’s
growth framework.
According to the Labour Force Survey 2010-11,
Pakistan has a labour force of 57.2 million people
which is 0.9 million more than the last year. Out of
this potential labour force, the total number of
people were employed during 2010-11were 53.8
million, which is 0.6 million more than the last
year. The total labour force working in the
agricultural sector remained unchanged during the
period 2008-2011. In manufacturing sector, the
participation rate has increased from 13.2 percent
in 2009-10 to 13.7 percent in 2010-11. Efforts are
being made to develop an efficient, equitable and
rights based labour market that provides the
mechanisms for productivity growth in the
economy which results in real wage increases.
The government is making sincere efforts to boost
overseas employment which will not only reduce
the unemployment burden in the country but will
also enhance remittances. In this regard, MoUs
have been signed with number of labour importing
countries such as Malaysia, Kuwait, and Qatar etc.
Emigrants sent abroad in 2010 were 0.4 million
and 0.5 million in 2011. Saudi Arabia, Gulf State
including United Arab Emirate (UAE), Oman and
Kuwait are the largest market of Pakistani workers.
vi
Transport and Communication: The transport
and communication sector is a major contributor to
government revenues. Sustainable economic
development is dependent on a robust and low cost
transport system. Enhanced export competitiveness
is also contingent upon the efficient performance
of this sector. The government is committed to
implementing a comprehensive and modernizing
transport and logistics sector through continuous
reforms in all of its sub sectors. The Ministry of
Communications has prepared a draft National
Transport Policy which covers all modes of
transport sectors i.e. (i) Roads, (ii) Railways, (iii)
Ports and Shipping and (iv) Aviation. This policy
also includes the National Transport Corridor
Improvement Program (NTCIP) to make it more
productive and environment friendly.
The National Highway Authority completed 12
projects of flyovers, bridges, interchanges and the
upgrading of roads during the last one year at a
cost of Rs. 19.6 billion. At present, 46
development projects of roads covering 2,985 kms
are ongoing costing Rs. 245 billion in different
sections/packages. These projects include
construction of roads, river bridges, tunnels,
flyovers and interchanges. NHA has also launched
and awarded 16 new development projects
covering over 500 kms, including construction of a
number of bridges, flyovers and interchanges
costing Rs. 71 billion. NHA is simultaneously
constructing 12 bridges across the rivers. These
are: on river Chenab 4, on river Sutlej 2, on river
Swan 1 and on river Indus 5.
The Cabinet Committee of Restructuring (CCOR)
approved a restructuring framework for Pakistan
Railways (PR). New Board of Directors of PR has
been instituted, involving academia, management
professionals, rail experts and executive
functionaries. The Government arranged Rs. 6
billion loan for repair of locomotives and freight
operations are also being prioritized for revenue
generation. PR is being provided Rs. 2.3 billion per
month from the budget to finance pay and pensions
of Railway employees. An Asset Management
Company is being established for optimum
utilization of PR’s assets. Private sector
involvement is the focus moving forward, the
Chamber of Commerce and Industries Lahore has
been engaged for their freight transportation from

Karachi to Lahore. Commercial management of
rail operations and outsourcing of non-core
functions is being initiated with an aim to improve
efficiency of rail operations. Private Sector is also
running a passenger train.
During the financial year, 16 kms of track was
rehabilitated on the Pakistan Railways network
besides doubling the previous 15 kms of track.
Construction of a D Class railway station at new
Multan City, renovation of Khudian Khas,
Usmanwala, Raiwind and Kanganpur railway
stations was carried out. Signaling system of four
railway stations damaged during the riots of 2007
was rehabilitated during the period. During
February 2012, 52 new design passenger coaches
were imported from China. Remaining 150
passenger coaches will be manufactured at
Pakistan Railway Carriage Factory Islamabad by
June 30, 2013. In addition, 22 passenger coaches
have been rehabilitated at the Pakistan Railway
Carriage Factory Islamabad during the last year. A
new dry port was set up at Prem Nagar near
Raiwind industrial area, Lahore through public-
private partnership.
Teledensity in the country has increased by 68.3
percent in April 2012, showing 6.7 percent growth
as compared to the previous year. Mobile
penetration rose to 64.9 percent in 2011-12 against
60.4 percent in 2010-11. Fixed Local Loop
teledensity now stands at 1.93 percent. Total
mobile subscribers has reached 118.3 million by
the end of March 2012. Subscribers of Local Loop
(FLL + WLL) are 5.9 million, out of which 3.10
million belong to FLL and 2.8 million belong to
WLL. Broadband subscribers reached 1.9 million
at the end of February 2012.
There has been a cumulative investment of
approximately US$ 2.5 billion in the electronic
media industry in Pakistan. More than 200,000
new jobs with diversified skills and qualifications
have been provided. Additionally, over 7 million
people have been accommodated through indirect
employment. With the current growth rate of more
than seven percent per annum in this sector, it is
estimated that the cumulative investment in the
electronic media industry will reach above $ 3.0
billion by the end of the current financial year.
Executive Summary
Energy: Energy is considered to be the lifeline of
economic development. Pakistan’s economy has
been growing at an average growth rate of almost 3
percent for the last four years and demand of
energy both at the production and consumer end is
increasing rapidly. The Energy Committee headed
by the Finance Minister presented a well
articulated Energy Recovery Plan to the Cabinet in
November 2011 which was approved after due
deliberations.
The Plan focused on: (i) improving governance
structure: it included dissolution of PEPCO and
replaced by Central Power Purchase Authority,
constituting new Boards of Directors (BODs) of 8
DISCOs and NTDC comprising professionals,
issuance of explicit guidelines of professionalizing
the BOD, hiring professional CEOs for DISCOs,
GENCOs and CPPA, and business plans for each
DISCO and GENCO to be developed by the newly
hired CEO and approved by the new Board; (ii)
Supportive legislative framework: NEPRA law
was amended authorizing NEPRA to notify fuel
adjustment, Cabinet has approved amendment
making electricity theft a serious crime; (iii)
Financial Sustainability of the System: the
Government has increased electricity tariff by 90
percent and Rs. 1.25 per kwh very recently to
recover the full cost of electricity supply which is
still Rs. 3 per kwh below the determined tariff; (iv)
Resolution of Circular Debt: the Government has
provided Rs. 1122 billion from the budget during
the last four years to resolve circular debt issue.
However, extremely low collection than required
(90 percent of the billed amount) by DISCOs
always leaves a high balance as receivables; (v)
Supply Side Management: reduction in
transmission and distribution losses as well as
running the most efficient plants; (vi) Demand
Side Management: Standard Operating Procedure
(SOP) issued for recovery of private receivables, a
limit of 45 days for payment overdue has been set
for disconnection, Loss mapping in each DISCO
initiated to identify losses and their sources,
Government facilitating recovery of dues of
Provincial and Federal Government departments,
and Media campaign for prudent use of electricity;
(vii) Promoting Private Sector Participation (viii)
changing fuel mix and (ix) changing energy mix
moving towards hydel and coal based generation.
In addition, the Government has launched a major
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Pakistan Economic Survey 2011-12
energy conservancy program that includes two
holiday a week, closing the markets at 8:00 pm,
lighting alternate pole of the Municipalities and
using air conditioners in offices after 11:00 p.m.
The contribution of Hydel in electricity generation
increased to 33.6 percent in 2011. Karachi
Electricity Supply Corporation (KESC) contributed
8.3 percent, Pakistan Atomic Energy Commission
(PAEC) 3.6 percent, Kot Addu Power Company
(KAPCO) 6.2 and the Hub Power Company
(HUBCO) 9.1 percent to total electricity
generation. Independent Power Producers (IPPs)
have contributed almost 25 percent. The
Government is implementing a number of priority
hydel projects such as 969 MW-Neelum Jhelum,
1410 MW-Tarbela 4th Extension, and Patrind in the
private sector. Almost 96 percent of the work on
the main dam at Mangla, spillway and allied
facilities are completed and resettlement work is in
progress. Likewise 99.7 percent work on Satpara
and 72.1 percent on Gomal Zam dam have been
completed. 7100 MW-Bunji, 4320 MW-Dasu, 80
MW Kurram Tungi Dam, 740-MW Munda Dam
and 4500 MW-Diamer Bhasha Dam are in the
pipeline. Pakistan is one of the beneficiaries of
Tetra-partner power import project under the head
of Central Asia-South Asia (CASA-1000)
electricity trade. In addition, a number of thermal
projects are under implementation including 747
Guddu refurbishment.
Pakistan has huge coal reserves estimated at over
185 billion tones. Thus the long term trend shows
that there was an increase of production of coal; an
average 7.7 percent change occurred during the last
ten years. Federal as well as Sindh Governments
are actively pursuing to provide necessary
infrastructure at Thar for exploiting these coal
reserves for power generation. Two blocs have
been leased out on pilot basis. Efforts are
underway to provide the missing transmission link
between Matiari and Thar.
The Government is also working on different gas
pipelines as well as import of LNG and LPG to
address the gas shortages. In this regard, Liquified
Natural Gas (LNG) Policy 2011 has been notified
which encourages private parties to develop LNG
projects and sets them free to participate in any
segment of the LNG value chain. The gas sector
viii
supply increased by 4.9 percent in July-March
2011-12 as compared with the corresponding
period of last year. The average production of
natural gas during July-March 2011-12 was 4236.1
million cubic feet per day (mmcfd) as against
4050.6 (mmcfd) during the corresponding period
of last year showing an increase of 4.6 percent.
Social Safety Nets: The government is committed
to a sustained poverty reduction strategy and to
allocate a minimum of 4.5 percent of GDP to
social and poverty related expenditures. The
government prioritized 17 pro-poor sectors through
the Medium Term Expenditure Framework
(MTEF) which provides a link between the policy
priorities and the budget realties. Expenditure on
pro-poor sectors in 2007-08 stood at 5.6 percent of
GDP, 7.5 percent in 2008-09, 7.6 percent in 2009-
10. Total expenditures in 2010-11 were 6.9 percent
of GDP. This was first year of the 7th National
Finance Commission Award when 70 percent of
the divisible pool was transferred to the provinces
as well as transition was taking place as a result of
18th amendment.
The floods of 2010 and heavy rains of 2011
significantly hurt the efforts to improve standard of
living of the people. The floods and rains affected
approximately 20 million people directly and a
much larger proportion indirectly; the loss to
infrastructure and livelihood sources further
impacted the people of these areas.
The Benazir Income Support Programme, a
flagship program of the Government, has made a
remarkable progress by providing much needed
relief to over 4 million recipients all over Pakistan.
Over the last 4 years, BISP was provided over Rs.
178 billion out which Rs. 153 billion were
contributed from domestic resources. A total
amount of Rs. 122 billion has been disbursed to its
recipients up to March 2012. The number of
recipients is expected to be increased to 7 million
once the on-going processing of data collected
during the “nation-wide poverty scorecard
targeting survey” is completed. BISP has launched
a number of programmes including (i) Payment to
Recipients, (ii) Graduation Initiatives, (iii)
Waseela-e-Haq, (iv) Waseela-e-Rozgar, (v)
Waseela-e-Sehat and (vi) Waseela-e-Taleem to

mitigate the impact of stabilization program as
well as inflation.
The Pakistan Poverty Alleviation Fund (PPAF) is
yet another element of the country’s poverty
reduction strategy. The PPAF is dedicated for
micro credit, enterprise development, community
based infrastructure and energy projects, livelihood
enhancement and protection, social mobilization,
and capacity building. The overall disbursements
for core operations during the period of July-
December 2012 were Rs. 8.5 billion.
Pakistan Bait-ul-Mal is making a significant
contribution towards poverty reduction through its
various services by providing assistance to
destitute, widows, orphans, invalid, infirm and
other needy persons irrespective of their gender,
caste, creed and religion through its ongoing core
projects/schemes. A total of Rs. 1.8 billion has
been utilised upto February 2012 on schemes such
as individual Financial Assistance, child support
program, vocational schools, sweet homes etc.
After devolution of the subject of Zakat, the
Provinces/Federal Areas are directly managing the
distribution of Zakat to the beneficiaries. Zakat
funds have been utilized for assistance to the
needy, indigent, poor, orphans, widows,
handicapped and disabled for their subsistence and
rehabilitation. Up to March 2012, a total amount of
Rs.7.8 billion was distributed amongst the
provinces and other administrative areas.
Peoples Works Programme (PWP) I & II are
welfare programmes comprising small
development schemes providing village
electrification, gas, farm to market roads,
education, health and other services to create jobs
at the local level. PWP-I & II have been provided
over Rs. 38 billion during 2011-12.
Employees Old Age Benefits Institution provides
monetary benefits to the old age workers through
various programmes such as the Old Age Pension,
Invalidity Pension, Survivors Pension and Old Age
Grants. During the period of July-March 2012, Rs.
8 billion has been disbursed to 350,485
beneficiaries.
Executive Summary
Workers Welfare Fund is also facilitating the poor
labourers in industrial sector by providing funds
for housing facilities and marriage grant, death
grant and scholarships etc. During (July-March)
2011-12, Rs. 2.5 billion has been incurred for these
schemes. Government has also taken various
micro-finance initiatives in collaboration with all
stakeholders to generate employment opportunities
and to eliminate poverty.
The Government has provided huge subsidies
during the last four years to the vulnerable and
poor to mitigate the impact of stabilization, floods
and international prices. These include: Rs. 1122
billion for the power sector, Rs. 104 billion for the
petroleum sector in addition to foregone income of
Rs. 136 billion from Petroleum Levy by adjusting
it downward to keep the petroleum prices lower
than the international market, Rs. 110 billion on
fertilizer and Rs. 137 billion for food items such as
sugar, wheat and subsidized items through Utilities
Stores. In addition, Federal Government provided
Rs. 42 billion to the flood affectees through Watan
Card as well as Citizens Compensation Damages
Program.
Environment: Pakistan continued to face
challenges to achieve environmentally sound
development. This has become increasingly
difficult to achieve in the backdrop of back to back
flooding and rains across the country as well as
other exogenous and endogenous factors. The
quality of the natural environment is not only an
extremely important issue from the point of view
of individual survival but it will also emerge as one
of the principal human security issues in Pakistan.
The environmental challenges include climate
change impacts, loss of biological diversity,
deforestation and degradation of Air and Water
quality.
A number of projects have been funded by the
government to improve the capacity of relevant
institutions to deal with increasing environmental
degradation. In addition, there are a number of
projects funded by the donors in which the
government is a partner. These are being currently
implemented to improve overall environment of
the country. Government efforts alone, because of
the limited resources at its disposal, are not enough
and demand a much larger participation and
ix
Pakistan Economic Survey 2011-12
support from other stakeholders including industry,
civil society, and the public at large as well as the
donors. National Climate Change Policy 2011
provides a framework for addressing the issues that
Pakistan faces or will face in future due to the
changing climate.
The level of access to drinking water is quite
impressive in Pakistan. According to Pakistan
Bureau of Statistics report (PBS) Pakistan Social
and Living Standards Measurement Survey 2010-
11, access to drinking water to urban and rural
population of Pakistan is 94 and 84 percent, with
an average of 87 percent in 2011. Sanitation
facilities are also improving. According to a report
released by the WHO/UNICEF Joint Monitoring
Program (JMP) 2012, 92 percent people had access
to drinking water by 2010 in Pakistan while this
ratio was 85 percent and 89 percent in 1990 and
2000 respectively. The MDG target is to achieve
the ratio of 93 percent by 2015.
Going forward, the government will continue to
pursue policy of macroeconomic stability, growth
and creating jobs, mobilizing domestic resources,
incentivizing the private sector, and strengthening
the social safety nets.
x
State of Economy in 2008
It is important to appreciate the state of economy
inherited by the democratically elected
Government and the challenges it faced as the
Government presents 5th budget for the first time in
the history of Pakistan.
By the time this Government assumed
responsibilities in March 2008, a combination of
large exogenous price shocks (oil and food), global
financial turmoil, huge expenditure on security and
policy lapses during the political transition had set
a stage for full blown crisis. More specifically:
` Real GDP growth slowed down in 2007-08
reflecting weaker performance of the
agricultural and manufacturing sectors.
` Headline CPI 12-month inflation rose to 25
percent in October 2008, with core inflation
(excluding energy and food) increasing to 18
percent.
` External current account deficit widened to
about $14 billion or 8½ percent of GDP in
2007/08.
` Fiscal deficit rose to 7.6 percent of GDP in
2007/08 mainly because of a substantial
increase in energy and food subsidies and
import prices
` Gross reserves declined from $ 16 billion to $
11 billion
` Domestic pressures and the global financial
crisis led to rising dollarization and an outflow
of deposits from the system in 2008 which
contributed to a deterioration of liquidity
conditions
` Karachi KSE-100 index dropped by one third,
prompting the Karachi Stock Exchange Board
to impose a floor on the decline of all stock
prices on August 27, 2008.
The Government had no choice but to go to IMF
to strengthen international reserves and ensure
fiscal stabilization. Just when the economy was
transitioning from stabilization to growth, Pakistan
was struck by the great floods of 2010. It caused
severe damages to infrastructure, roads, bridges,
power stations, refineries, schools, hospitals, crops
and livestock. A large number of human lives were

lost. The total loss was estimated to be around $ 10
billion. It was followed by yet another spell of
severe rains in Sindh and parts of Balochistan in
2011 causing a loss of additional $ 3 billion.
The security development in the country during
2008-09, particularly in the North-West, required
beefing up of security forces and mobilization of
additional resources to deal with the situation. In
addition, humanitarian crisis spawned by the
security situation displacing over 3 million people
resulted in huge budgetary costs.
Achievements since FY2008
Inspite of huge challenges during the last four
years including global economic contraction
especially in the advanced economies, financial
turmoil, great floods of 2010, extraordinary
rains in 2011, persistently rising energy prices,
continuing security situation, the Government
succeeded in:
` Maintaining macroeconomic stability by
pursuing tight monetary policy and fiscal
discipline
` Revival of Growth: Economy is
recovering from the floods and exogenous
shocks and real GDP growth is estimated
at around 3.7 percent on the back of pick
up in agriculture and large scale
manufacturing growth as compared to 3
percent last year
` Inflation: Average inflation seems remain
close to the targeted 11 percent, declining
from the peak of 25 percent
` External Sector: Pakistan’s external
account registered an unexpected
improvement during FY11 providing much
needed breathing space to the economy.
The exports surged to $ 25.4 billion
showing a growth of 28.4 percent whereas
the imports registered an increase of 14.7
percent. As a result, the trade deficit,
which had been a major factor in the
deterioration of the external account in the
past, remained in check, and contracted by
8.7 percent as compared to the preceding
year. FY11 current account balance posted
a small surplus of $ 0.3 billion as
Executive Summary
compared to 8.5 percent deficit in 2008.
This year, exports have maintained last
year trend during July-April 2012 despite
adverse global environment
` Strong flow of remittances: The rising
trend in remittances continued for the
fourth consecutive year in FY12 as
remittances are estimated close to US$ 13
billion as compared to $ 6.2 billion in
FY08
` Build up of Foreign Exchange Reserves:
The improvement in the overall external
balance despite the contraction in financial
account surplus helped build up foreign
exchange reserves during FY11. Thus, by
the end of June 2011, Pakistan’s overall
foreign exchange reserves stood at a record
level of US$ 18.2 billion. Currently, these
are at $ 16.4 billion despite repayment to
the IMF as well as discharging all our
obligations
Several New Initiatives of the Government
This Government has undertaken several new
initiatives during the last four years. The most
significant initiatives include:
` 7th National Finance Commission Award:
The Award was path-breaking as (i) it moved
away from population as the sole basis for
horizontal distribution of resource and gave
due weightage to population, poverty/
backwardness, revenue collection, revenue
generation and inverse population density; (ii)
it increased share of Balochistan to 9.09
percent (iii) 70 percent share of the divisible
pool is now being transferred to the
Provinces and Special Areas (iv) transfer to
the provinces increased from Rs. 633 billion in
FY10 under 6th NFC Award to Rs. 999 billion
in FY11 and Estimated Rs. 1,204 billion in
FY12
` 18th Amendment in the Constitution
abolishing the concurrent list and transfer of 17
federal ministries to the provinces
` Autonomy to Gilgit-Baltistan
` Aghaz-e-Haqooq-e-Balochistan
xi
Pakistan Economic Survey 2011-12
` Additional Resources to less developed areas
in 4 years: It included (i) Rs 32 billion to
Gilgit-Baltistan in 2 years (ii) Rs 71 billion to
AJK and (iii) Rs 110 billion to FATA
` Public Sector Development Program: PSDP
over a period of 4 years was Rs 2.2 trillion.
Current year’s PSDP outlay is Rs 730 billion
as compared to Rs 480 billion last year. It was
spent to complete 657 projects in 4 years
` Peoples’ Works Program: Rs 130 billion were
earmarked under Peoples Works Program-II
(Rs 110 billion) and Rs 20 billion under PWP-I
in 4 years for implementation of hundreds of
schemes for electrification, gas supply, road,
water supply and sanitation
` Citizens’ Damages Compensation Program:
Federal Government provided Rs 42 billion to
the flood affectees
` Subsidies: Over the 4 years, Government has
provided so far (i) over Rs 1122 billion
towards tariff differential subsidy to maintain
the notified tariff lower than the determined
tariff (ii) Rs 104 billion in petroleum subsidy
(iii) Rs 110 billion for fertilizer subsidy and
(iv) Rs 137 billion in food subsidy. In addition,
the Government lost Rs 136 billion in revenue
by adjusting the petroleum levy downward
` Benazir Income Support Program: Additional
resources of Rs 178 billion allocated for
disbursement through BISP to vulnerable
groups including Rs 153 billion from the
budget
xii
` Benazir Employees Stock Option
Programme: Under this scheme, 12 percent
shares of 80 State Owned Enterprises were
transferred to 500,000 employees of those
SOEs making them shareholder
` Internship Program: The Government also
provided 100,000 internship to Master degree
holders paying them Rs 10,000 per month
` Railways: Railway was provided Rs 119
billion over the last 4 years; Rs 85 billion
under current budget and Rs 34 billion for
development budget
` Energy Sector: Government injected
professionalism in power sector by
restructuring Board of Directors of some PSEs,
initiated alternate energy program, put hard
budget constraint and resolved circular debt
issue partially
` Tax Simplification: The government took
many steps to (i) simplify the taxation system
(ii) minimum tax slab increased from Rs
100,000 to Rs 350,000 (iii) expanding the tax
base by bringing new tax payers in the net (iv)
improve the tax administration (v) Special
Excise duties were eliminated (vi) gradual
elimination of federal excise duty (vi)
abolishing regulatory duties on 392 items (vii)
elimination of zero ratings on key sectors
` Doubling the FBR Tax Revenues: As a result
of these efforts, FBR revenue has moved from
Rs 1 trillion in 2007-08 to around Rs 2 trillion
in 2011-12.
 Chapter 1
Growth and Stabilization
Introduction
The resilience of the economy of Pakistan has been
tested several times by one crisis after another. The
economy has witnessed numerous domestic and
external shocks from 2007 onwards. The sharp rise
in international oil and food prices, the internal
security hazards brought on by the campaign
against extremism and the repeated natural
disasters in the form of successive floods have
buffeted the macroeconomic strategy with shock
after shock. Domestically, two floods, the difficult
security situation and the energy crisis have
combined to drastically impact economic growth.
The campaign against extremism with its
associated destruction of physical infrastructure,
the displacement of thousands of people from the
affected areas and the associated rise in
expenditure to support the moved people has all
taken their toll. The growth in our export markets
has slowed down compared to last year. Gross
Domestic Product (GDP) growth has been stuck at
a level, which is half of the level of Pakistan’s
long-term trend potential of about 6.5 percent per
annum and is lower than what would be required
for sustained increases in employment and income
and a reduction in poverty.
Amidst the critical challenges of the floods and
heavy rains of 2010 and 2011, skyrocketing oil
prices and global contraction, the government’s
strategy continued to focus on regaining
macroeconomic stability. There have been some
successes. Pakistan has been able to withstand the
pressures and improve its performance in some key
areas such as the check on inflation, the increase in
exports and revenue generation and maintenance of
comfortable foreign exchange reserve levels. The
focus on reforms and austerity through the control
of public expenditures despite the difficulties has
continued.
The economy is now showing signs of modest
recovery. The commodity producing sectors and
especially the agriculture sector are doing better.
Some improvement is also witnessed in the Large
Scale Manufacturing (LSM) sector. The Service
sector also gained from healthy trade activities and
the improvements in the commodity producing
sectors. The smooth functioning of the supply
chains is playing a key role in improving the
economic situation and ensuring the availability of
essential items. Pakistan has the potential to grow
at 6 to 7 percent in the next couple of years.
The GDP growth for 2011-12 was projected at 4.2
percent on the back of 3.4 percent growth in
Agriculture, 2 percent growth in LSM and 5
percent in Services sectors. However, the torrential
rains in Sindh province during August 2011
compelled the government to revise its GDP
growth target to 3.6 percent from 4.2 percent on
the basis of 2.5 percent growth in Agriculture, 1.5
percent in LSM, and 4.4 percent growth in services
sector.
The revised growth targets have been met and
marginally exceeded. The economy has shown
resilience. GDP growth for 2011-12 has been
estimated 3.7 percent based on nine month data as
compared to 3.0 percent (revised) in the previous
fiscal year 2011. The Agriculture sector recorded a
growth of 3.13 percent against a target of 3.4
percent and previous year’s growth rate of 2.38
percent. The Large Scale Manufacturing sector
grew by 1.78 percent as compared to the target of
2.0 percent and against the growth of 1.15 percent
1
Pakistan Economic Survey 2011-12
in the last year. Although the Services sector
recorded steady growth of 4.02 percent as
compared to 4.45 percent in 2010-11, this was
Fig-1.1 GDP Growth (%)
10.0
9.0
8.0
7.5
7.0
6.0 4.7
5.0
4.0 3.1
3.0 2.0
2.0
1.0
0.0
2000-01
2001-02
2002-03
2003-04
The 3.7 percent growth based on the nine months
data 2011-12, up from 1.7 percent in 2008-09 and
3.0 percent last year, indicates the potential growth
trajectory. The country has enormous potential to
grow at much higher rates which is demonstrated
by the achievement of the 3.7 percent growth this
year despite the numerous internal and external
shocks that the economy has been forced to
withstand.
Some of Pakistan’s economic problems are
structural in nature. The objectives of sustaining
high growth, low inflation, and external payment
viability can not be achieved without removing
certain structural barriers. To this end the major
structural reforms of the government have included
tax legislation, trade reforms, further privatization
of State Owned Enterprises (SOEs), financial
sector reforms, human resource development and
social protection. The EU approval of duty waiver
on textile items is being pursued aggressively,
which would help in improving the exports and
providing support to the business environment. In
recent times, Pakistan has also undergone political
and constitutional changes. Civil societies and
other organizations are now playing a more active
and independent role and this coupled with
government reforms are helping economic growth.
Global Developments
The International Monetary Fund (IMF) has
warned that the euro zone debt crisis is escalating
2
lower than the target of 5.0 percent set for the
outgoing year. Figure-1.1 presents an overview of
GDP growth over the previous years.
9.0
6.8
5.8
3.7 3.7
3.1 3.0
1.7
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
and dragging down the entire world economy. In
this scenario China has remained a bright spot. Its
growth rate, although down to a forecast of 8.2
percent for this year compared to 9.2 percent last
year, has remained relatively high. If China can
maintain its growth, it’s good for the world,
providing support for commodities markets and
growth in other countries.
The IMF maintained its forecast of 2.1 percent
growth for the US in the year 2012 and 2.4 percent
for the year 2013. For Japan the growth rate
projected for 2012 is 2.0 percent and for 2013 it is
1.7 percent. Overall, economic activity in
advanced economies is likely to expand by 1.7
percent on average in 2012 and 2013. Growth in
emerging economies is projected at 5.7 percent in
2012. The IMF expects growth in oil exporting
countries in the Middle East and North Africa to
slow to 3.9 percent in 2012, from 4.9 percent in
2011. Net oil importers in the Middle East and
North Africa region are expected to record 2.6
percent growth in 2012, after sluggish growth of
1.4 percent in 2011. GDP growth across the Gulf
Cooperation Council (GCC) countries is expected
to be moderate at a rate of 4 percent in 2012.
Unfortunately, Europe is now caught in a vicious
cycle of high debt and low growth. Highly
burdened by debt, most of the economies in the
region may not attain respectable levels of growth
to improve their fiscal position. This will imply
 Growth and Stabilization

potential debt servicing difficulties and limit their
abilities to unshackle their growth potential.
Almost 17 percent of total exports of Pakistan are
to the Euro zone as are a reasonable portion of its
total import from this region. Problems in this area
can impact on Pakistan’s trade and hence its
overall growth.
Asia on the other hand, continues to move ahead,
with China and India leading the growth. There is
some hope that perhaps Asia has created some
distance from the OECD, and has therefore, not
been dragged down so far. However, if the OECD
continues its downward slide, the export-led Asian
giants could see their growth prospects diminish.

Table-1.1: Comparative Real GDP Growth Rates (%)

Region/Country 2009 2010 2011 2012 2013 (P)
World GDP -0.5 5.3 3.9 3.5 4.1
Euro Area -4.1 1.9 1.4 -0.3 0.9
United States -2.6 3.0 1.7 2.1 2.4
Japan -6.3 4.4 -0.7 2.0 1.7
Germany -4.7 3.6 3.1 0.6 1.5
Canada -2.5 3.2 2.5 2.1 2.2
Developing Countries 2.7 7.5 6.2 5.7 6.0
China 9.2 10.4 9.2 8.2 8.8
Hong Kong SAR -2.7 6.8 5.4 2.6 4.2
Korea 0.2 6.1 4.5 3.5 4.0
Singapore 0.6 2.8 3.3 2.7 3.9
Vietnam 5.3 6.8 5.9 5.6 6.3
ASEAN
Indonesia 4.6 6.2 6.5 6.1 6.6
Malaysia -1.6 7.2 5.1 4.4 4.7
Thailand -2.3 7.8 0.1 5.5 7.5
Philippines 1.1 7.6 3.7 4.2 4.7
South Asia
India 6.6 10.6 7.2 6.9 7.3
Bangladesh 5.9 6.4 6.1 5.9 6.4
Sri Lanka 3.5 8.0 8.2 7.5 7.0
Pakistan 1.7 3.1 3.0 3.7 4.3
Middle East
Saudi Arabia 0.1 4.6 6.8 6.0 4.1
Kuwait -5.2 3.4 8.2 6.6 1.8
Iran 3.9 5.9 2.0 0.4 1.3
Egypt 4.7 5.1 1.8 1.5 3.3
Africa
Algeria 2.4 3.3 2.5 3.1 3.4
Morocco 4.9 3.7 4.3 3.7 4.3
Tunisia 3.1 3.1 -0.8 2.2 3.5
Nigeria 7.0 8.0 7.2 7.1 6.6
Kenya 2.6 5.6 5.0 5.2 5.7
South Africa -1.5 2.9 3.1 2.7 3.4
Source: World Economic Outlook (IMF), April 2012.
P: Projected.

have a substantial negative impact on the economy

Pakistan’s economy is very closely linked to the
of Pakistan. A contraction or stagnation in
rest of the world due to its high external sector
economic activity in the global economy, can
exposure. Several countries of the euro zone are
potentially affect the level of our exports, Foreign
important trading partners of Pakistan. As such,
Direct Investment (FDI) and home remittances
any untoward development in these countries could
adversely. Similarly further increase in oil prices

3
Pakistan Economic
E Surrvey 2011-122

can creatte hurdles in the ongooing econom mic is alreaady seriously hampering economic
e actiivities
activities of the countrry. The increaase in oil pricces (Box-1).
Box-1
Rise in Oil Prices and Economic
E Actiivities
Rising oil prices affect an economy through
t directt and Figg 1.2: Impact of Oil Prices on
o LSM
indirect chhannels. The direct
d channel works throughh the S
Sector
supply sidde whereas thee indirect channnel works thrrough 120.0
0 LSM Growth rate YOY
Y
20.0
00
the demand side. The vaariables ultimattely affected byb oil Oil Prices
100.0
0 15.0
00
price hikes include con nsumption, invvestment, exchhange
rate, balannce of paymen nts, and unempployment. The first 80.0
0 10.0
00

Rs. Per Liter

Growth (%)
nine monthhs of the fiscall year 2011-122 depict that oiil bill
has reacheed $11.14 billioon indicating a rise of 38 percent 60.0
0 5.00
0
over $8.01 billion for the same peeriod of last year.
40.0
0 0.00
0
Soaring oiil prices are caausing massivee trade imbalannces;
the trade deficit
d hed to $16.1 biillion which is $4.8
has reach 20.0
0 -5.00
billion higgher than the corresponding
c period of prevvious
period. 0.0
0 -10.00

Jan-08

Jan-10

Jan-11

Jan-12
July-07

July-08
Jan 09
Jan-09
July-09

July-10

July-11

Mar-12
In the firstt stage, rising oil prices makke input expennsive
which effeect producers’ price
p and loweer the real profi
fits of
firms and investment
i for future projectss. Decomposinng the investmeent in differentt sectors revealls further that the
t fall
in investm
ment was more in the manufaacturing sectorr compared to construction, transportation and communiication
sectors. Thhus Large Scalee Manufacturinng (LSM) grow wth was more adversely
a impaacted as shownn in the Fig-1.2.

The increaasing oil pricces also cripppled our econnomic

growth duue to the backw ward and forwward linkages with Fiig-1.3: Electriccity Generatioon
agriculturee and the serviices sector. Thhus oil price shhocks
hampered capacity utilizaation and loweered the availabbility
Others 3%
of inputs thhus adding to the capacity utilization
u issuees. In Gas 24% Oil 40%
4
response, firms attemp pt to minim mize the cost of
productionn through the minimization
m o the variablee cost
of
resulting inn large layoffs..

Another immportant aspecct is the energyy mix for electrricity

generation-in Pakistan which
w is creatting huge finaancial
pressures and
a massive electricity
e shuttdowns. Pakisttan is
generating almost 40 perrcent of electriicity (Fig-1.3) from
thermal reesources (impo orted input), which
w is the least Hydel
H
cost-effective option due to the ever inccreasing furnacce oil 3 %
33
prices.

Heavy reliiance on imporrted oil has ressulted in circuular debt and electricity shorttages, which iss eroding our export
mbalances. So just the oil pricce hike by itseelf has been a major challennge for
competitivveness and creaating fiscal im
Pakistan’s economic grow wth.

Sectoral Analysis
A of Growth
G presentted in Table--1.2. These data d highlightts the
relativee importancee of various sectors andd sub-
It is esseential to loo
ok into the performance
p of
sectorss and the interr- relationshipp between theem.
various components
c of Gross Naational Produuct
(GNP) to understand what
w is happeening to overrall
growth. The growth h performance of varioous
componennts of GDP over the lasst five years is

4
 Growth and Stabilization

Table 1.2: Growth Performance of Components of Gross National Product

(% Growth at Constant Factor Costs of 1999-2000)
Sectors/Sub-Sectors 2007-08 2008-09 2009-10 2010-11 R 2011-12 P
Commodity Producing Sector 1.3 1.8 3.56 1.47 3.28
1. Agriculture 1.0 4.0 0.62 2.38 3.13
-Major Crops -6.4 7.8 -2.28 -0.23 3.18
-Minor Crops 10.9 -1.2 -7.72 2.68 -1.26
-Livestock 4.2 3.1 4.28 3.97 4.04
-Forestry 9.2 2.3 2.20 -0.40 0.95
-Fishing -13.0 -3.0 1.47 1.94 1.78
2. Mining & Quarrying 4.4 -0.5 2.23 -1.28 4.38
3. Manufacturing 4.8 -3.6 5.46 3.06 3.56
-Large Scale 4.0 -8.1 4.79 1.15 1.78
-Small Scale 7.5 7.5 7.51 7.51 7.51
-Slaughtering - - 4.33 4.38 4.46
4. Construction -5.5 -11.2 16.34 -7.09 6.46
5. Electricity & Gas Distribution -23.6 59.0 6.16 -7.25 -1.62
Services Sector 6.0 1.7 2.63 4.45 4.02
6.Transport,Storage and Communication 3.8 3.6 1.89 0.87 1.25
7. Wholesale & Retail Trade 5.3 -1.4 4.49 3.53 3.58
8. Finance & Insurance 11.1 -7.6 -12.16 -1.41 6.53
9. Ownership of Dwellings 3.5 3.5 3.51 1.79 3.51
10. Public Administration & Defence 1.2 3.6 2.52 14.17 2.61
11. Social, Community & Public Services 9.8 8.9 7.83 6.90 6.77
12. GDP (Constant Factor Cost) 3.7 1.7 3.07 3.04 3.67
Source: Pakistan Bureau of Statistics
P : Provisional, R : Revised, - : Included in Small Scale

Commodity Producing Sector Agriculture Sector

The commodity producing sector (CPS) comprises
of agriculture and industry. It is the most important
sector of the economy, with relatively stronger
forward and backward linkages for economic
development and prosperity of the country. It
accounted for 46.5 percent of GDP during the
outgoing fiscal year. This is a decline from 49.1
percent of GDP in 2001-02, indicating that the
share of the non-commodity producing sector has
increased. The commodity producing sector has
performed much better in outgoing fiscal year
compared to last year; its growth rate this year was
3.28 percent against only 1.47 percent in last year.
The recovery in both agriculture and industrial
sector, though moderate, has helped to achieve this
level. However, the growth of the commodity
producing sector remained far below its potential
due to largely unforeseen climatic factors.
Agriculture is a key sector of the economy. It
provides food items and raw materials for
industrial units and accounts for 21 percent of
GDP, 45 percent of employment and 60 percent of
exports. In the inevitable process of structural
transformation its share shrank to 21.1 percent in
fiscal year 2011-12 compared to 24.1 percent ten
years earlier in 2001-02. Despite its declining
share, it is the single largest sector of Pakistan’s
economy. Moreover, an overwhelming majority of
the population depends directly or indirectly on
income generated by this sector. The agriculture
sector has strong backward and forward linkages.
As a result its growth has a larger impact on the
overall economic performance. The performance
of the agriculture sector remained weak due to
recent catastrophic floods.
However, the government’s supportive polices in
this sector resulted in a growth of 3.13 percent

5
Pakistan Economic Survey 2011-12
against the growth of 2.38 percent last year and
0.62 percent in fiscal year 2009-10. The improved
performance is mainly attributed to a sharp pick-up
in the production of rice; cotton, and sugarcane.
Livestock also registered a significant growth. The
agriculture sector consists of various sub-sectors
which include crops, livestock, fisheries and
forestry. The crop sub-sector is further divided into
major crops, namely, wheat, cotton, rice,
sugarcane, maize and gram and minor crops
namely, pulses, potatoes, onions, chilies and garlic
etc.
Major Crops: Major crops account for 31.87 of
agricultural value added and registered an
accelerating growth of 3.18 percent compared to a
negative growth of 0.23 percent last year and -2.28
percent in fiscal year 2009-10. The major crops
including cotton, sugarcane and rice witnessed
growth in production of 18.6 percent, 4.9 percent
and 27.7 percent respectively. However, wheat
registered a negative growth of -6.7 percent. The
main reason for the negative growth of wheat is the
2.6 percent decline in area under cultivation. In
lower Sindh, in particular, sowing was delayed
mainly because of late receding rain water which
resulted in a decline in both the acreage as well as
the yields. Moreover, in Punjab also the extended
fog season delayed the planting of seed beyond the
optimal period. The other major crops bajra, jowar,
maize, sesamim, gram, barley, rapeseed and
mustard and tobacco showed mixed trends but
their share in the overall sector is small.
Minor Crops: Minor crops contributed 10.11
percent to value addition in overall agriculture.
Production in this sub-sector declined by -1.26
percent. This negative growth is far below the 2.68
percent positive growth last year. The main reason
for this negative growth of minor crops is the
heavy flood in Sindh and Balochistan provinces.
The growth of pulses is estimated at -3.50 percent,
vegetables -10.0 percent, chilies -78.4 percent,
onion -15.4 percent and oil seeds -26.9 percent.
Livestock: Global integration, rising income and
living standards as well as changing dietary
patterns across regions have brought a paradigm
structural shift. This shift is visible in Pakistan
also. The share of livestock in agriculture has
increased to 55 percent. Livestock includes cattle,
6
buffalos, sheep, goat, camel, horses, asses, mules
and poultry and their products. The demand for
livestock has grown at a phenomenal pace. The
increase in prices has provided incentive for
greater production and spurred growth. The
importance of this sector may be recognized by the
fact that the majority of people living in rural areas
depend directly or indirectly on the livestock and
dairy sector. This sub-sector is highly labour
intensive. It has also emerged as a major source of
income for the small farmers as well as the
landless rural poor.
Livestock has witnessed a marginally higher
growth of 4.04 percent against the growth of 3.97
percent last year. The production of milk, poultry
products and other livestock items has increased at
the rate of 3.3 percent, 7.1 percent and 2.24 percent
respectively.
Fisheries: The fisheries sector witnessed a growth
of 1.78 percent against the growth of 1.94 percent
last year. Components of fisheries such as marine
fishing and in-land fishing, contributed to an
overall increase in value addition in the fisheries
sub-sector. The gross value addition of marine fish
increased by 1.35 percent and that of inland fish by
1.96 percent.
Forestry: The growth of the forestry sub-sector is
recorded at 0.95 percent as compared to the
contraction of -0.40 percent last year. Forests are a
key component of our environment and
degradation of forests can pose severe socio-
economic challenges for the coming generations.
The main components of forestry, timber and fire
wood, grew at 0.90 percent and 0.46 percent
respectively.
Manufacturing Sector: The manufacturing sector
contributes much to the progress of our economy.
The manufacturing sector has remained under
stress for the last several years, due to energy
shortages, poor law and order situation. The heavy
floods also depressed the supply chain and affected
market demand. The share of the manufacturing
sector in GDP was 17.7 percent in 2001-02. This
has increased in 2011-12 to 18.6 percent of GDP.
The manufacturing sector has been hard hit by
international and domestic factors, which caused
the slowing down of its output. The growth of the
 Growth and Stabilization

manufacturing sector was 3.56 percent compared Much of the country’s mining reserves exist in
to the growth of 3.06 percent last year. remote areas. Infrastructure improvements are
necessary to sustain and achieve higher growth
Manufacturing has three main sub-components; rates in future. Improvement in the security
namely the Large-Scale Manufacturing (LSM), situation in the country would also lead to greater
Small Scale Manufacturing and Slaughtering. production.
Small scale manufacturing maintained its growth
of last year at 7.51 percent and slaughtering growth Services Sector:
is estimated at 4.46 percent against 4.38 percent
The importance of the services sector has been
last year. Large Scale Manufacturing (LSM) has
recognized all over the world. This sector has
also witnessed a slight improvement. It has shown
emerged as the main driver of economic growth.
a growth of 1.78 percent against the growth of 1.15
The services sector also plays a vital role in
percent last year. The major LSM industries which
sustaining economic activities in Pakistan. The
registered notable growth include; refrigerators
economy has gone through a major transformation
7.56 percent, sugar 27.09 percent, beverages 10.60
in its economic structure. The share of the services
percent, liquid/syrup 15.93 percent, injection 6.53
sector has increased to 53.5 percent in 2011-12. In
percent, soaps and detergents 8.15 percent, buses
developed countries the share of services sector in
25.0 percent, electric bulbs 15.02 percent, electric
GDP is around 75 percent. This share is 65 percent
transformers 27.72 percent etc. On the whole 38
in Singapore, 52 percent in India and 42 percent in
major industries group recorded positive growth.
Indonesia.
The industries which reported negative growth
include; cooking oil -1.61 percent, motor tyres - The services sector consists of the following sub-
25.73 percent, T.V. sets -22.19 percent and sectors: Transport, Storage and Communication;
deepfreezers -49.47 percent etc. Wholesale and Retail Trade; Finance and
Insurance; Ownership of Dwellings; Public
Construction Sector: The construction sector has
Administration and Defense; and Social Services.
shown 6.46 percent growth as compared to
The Services sector has registered a growth rate of
negative growth of -7.09 percent in last year. The
4.02 percent in 2011-12. This performance is
increase in growth is due to rapid execution of
dominated by Finance and Insurance at 6.53
work on the rehabilitation of the flood affected
percent, Social and Community Services 6.77
areas, increased investment in small scale
percent and Wholesale and Retail Trade 3.58
construction and rapid implementation of PSDP
percent. The contribution of transport, storage and
schemes which are near completion.
communication is estimated at 1.25 percent. The
recovery in agriculture and industry have resulted a
Mining and Quarrying: Extraction of minerals
positive impact on the performance of the whole
and ores through efficient mining and quarrying
sale and retail trade. Our services sector has a great
provides convenient and economical access to raw
potential to grow at a rapid pace. In order to
materials and a competitive edge to the country.
develop the services sector, Pakistan has
The mining and quarrying sector recorded positive
recognized the needs to liberalize operating rights
growth of 4.38 percent during the year 2011-12
and has separated regulators from operators.
against the negative growth of -1.28 percent last
year. The contribution of this sector in GDP has
Finance and Insurance Sector: The finance and
expanded remarkably and now accounts for 9.45
insurance sector comprises the State Bank of
percent of the industrial value addition. The output
Pakistan; all scheduled banks (domestic and
of chromite, bauxite, gypsum, chalk and fluoride
foreign), Development Financial Institutions
increased by 591.54 percent, 82.15 percent, 24.43
(DFIs), all insurance (life and general) companies,
percent, 82.18 percent and 111.28 percent
Modaraba/Leasing companies, Money Changers
respectively. This growth was also made possible
and stock exchange brokers. The financial sub-
in some part due to the increase in natural gas
sector consists of all resident corporations
production. The extraction of bentonite, however,
principally engaged in financial intermediations or
registered substantial decline of -47.82 percent.

7
Pakistan Economic Survey 2011-12
in auxiliary financial activities related to financial
intermediation. Pakistan’s financial sector is
integrated with the world economy and this is
reflected in its performance. Finance and Insurance
sector recorded positive growth of 6.53 percent in
2011-12 as against contraction of -1.41 percent last
year.
Transport, Storage and Communication: The
role of Transport, Storage and Communication
(TS&C) sector is very important in boosting the
economic activities of the country. The current
global economic crisis and the level of integration
of these sub-sectors in the globalized economy
including the presence of multi national enterprises
(MNEs) in the markets of all countries of the world
puts a greater need for major investments in
physical and qualitative terms to meet expected
demand. Information and Communication
Technologies (ICTs) are perhaps the most critical
tool for a dynamic and flexible services sector. The
TS&C sub-sector grew at 1.25 percent as
compared to 0.87 percent last year. Water
Transport has declined by -3.14 percent during
2011-12, and Air Transport by a massive -27.93
percent. Sub-sectors that showed a positive growth
are; pipeline transport 34.64 percent, road transport
2.88 percent, storage 2.10 percent and
communication 0.93 percent.
Wholesale and Retail Trade Sector: The
wholesale and retail trade sector is based on the
margins taken by traders on the transaction of
commodities traded. In 2011-12, this sector grew
at 3.58 percent as compared to 3.53 percent in the
last year.
Public Administration and Defense: Public
Administration and Defense posted a growth of
2.61 percent as compared to 14.17 percent last
Table 1.3: Sectoral Contribution to the GDP growth (% Points)
Sector 2007-08
Agriculture 0.23
Industry 0.38
- Manufacturing 0.92
Services 3.08
Real GDP (Fc) 3.68
Source: Pakistan Bureau of Statistics
8
year. The positive change in the wage component
of public sector employees, and an increase in
defense and security related expenditures were
largely responsible for this growth.
Ownership of Dwellings: Ownership of
Dwellings has recorded a growth of 3.51 percent
during the year 2011-12 compared to 1.79 percent
last year. Social Services grew by 6.77 percent
against the last year’s growth of 6.90 percent. The
rise in the growth of Ownership of Dwelling and
social services is mainly due to the fast track work
on reconstruction and rehabilitation of flood
affected areas by government, NGOs and private
sectors.
Contribution to Real GDP Growth
(Production Approach)
As in previous years the improvements in
economic growth in the fiscal year 2011-12 came
mainly from the services sector. The services
sector contributed 58.58 percent to overall
economic growth; while the commodity producing
sector (CPS) contributed only 41.4 percent. The
agriculture sector contributed 17.98 percent to
economic growth compared to 23.43 percent
contribution by the industrial sector.
The overall growth of 3.67 percent is shared
between the Commodity producing sector and
Services sector. Within the commodity producing
sector, agriculture contributed 0.66 percentage
points to overall GDP growth, while industry
contributed 0.86 percentage points. The services
sector contributed the remaining 2.15 percentage
points. The percentage share of agriculture,
manufacturing and services in overall growth was
17.98 percent, 23.43 percent and 58.58 percent
respectively. The sectoral contribution to the GDP
growth is shown below in Table-1.3.
2008-09 2009-10 2010-11 2011-12
0.86 0.13 0.50 0.66
-0.03 1.57 0.18 0.86
-0.69 0.10 0.57 0.66
0.89 1.37 2.36 2.15
1.72 3.07 3.04 3.67
 Growth and Stabilization

Furthermore, increase in rural income due to

Contribution to Real GDP Growth
higher production of crops and the sharp increase
(Aggregate Demand Side Analysis)
in commodity prices also supported the
Consumption is the largest and relatively smooth consumption demand.
component of aggregate demand; the other two
components are investment and net exports. In The share of investment in GDP growth remained
every economy of the world consumption may be negative. A number of factors may be responsible
disaggregated into the public and private sector for this decline. These include: slow down in
consumption. Similarly investment may be global business activities affecting foreign direct
classified into public and private investment. investment, the decline in the external demand of
Aggregate demand is the sum of consumption, the domestic production, serious energy shortages,
investment and net exports (exports minus imports) unstable law and order situation and higher interest
of the goods and services. Pakistani society like rates in the recent years. The contribution of net
other developing countries is a consumption exports has also been negative. The balance
oriented society, having a high marginal propensity between investment and consumption has been
to consume. As a result private consumption is the disturbed from 2008-09 onwards due to domestic
major sub-component of aggregate demand. and external shocks. The composition of aggregate
demand highlights an alarming factor. The
Private consumption expenditure has increased to contribution of fixed investment to economic
75 percent of GDP, whereas public consumption growth has become negative since 2008-09.
expenditures are 13 percent of GDP. Total Domestic demand continued to be the most
consumption has reached 88.35 percent of GDP in significant driving force for economic growth, with
fiscal year 2011-12 compared to 83 percent in the private consumption being the major driver for
last fiscal year. Private consumption has increased sustaining aggregate demand.
on the back of sustained growth in remittances.
Table-1.4: Composition of GDP Growth
Point Contribution
Flows 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Private Consumption 0.8 3.4 -1.9 8.3 -1.5 2.3 8.5
Public Consumption 3.9 -1.1 3.8 -4.2 5.1 0.4 0.9
Total Consumption [C] 4.7 2.3 1.9 4.1 3.6 2.7 9.4
Gross Fixed Investment 2.9 2.2 1.3 -2.7 -1.5 -1.3 -1.5
Change in Stocks 0.1 0.1 0.0 0.1 0.1 0.1 0.1
Total Investment [I] 2.9 2.3 1.3 -2.7 -1.4 -1.2 -1.4
Exports (Goods & Serv.) [X] 1.8 0.4 -1.0 -0.6 2.2 2.4 -2.1
Imports (Goods & Serv.) [M] 3.2 -0.7 0.6 -2.7 0.9 0.9 1.7
Net Exports [X-M] -1.5 1.1 -1.6 2.2 1.3 1.5 -3.8
Aggregate Demand (C+I+X) 9.4 5.0 2.2 0.9 3.5 3.0 5.9
Domestic Demand (C+I) 7.6 4.6 3.2 1.4 2.2 1.5 8.0
GDP MP 6.2 5.7 1.6 3.6 3.5 3.0 4.2
Source: Pakistan Bureau of Statistics

Composition of Gross Domestic Product almost 62 percent of the GDP in 1969-70 to 46.46
percent in 2011-12, a decline of 15.54 percent. The
The economy of Pakistan, like all developing
decline in the share of CPS is offset by the increase
economies, is in the process of structural
in the share of the services sector. A further
transformation during the last few decades. There
breakdown of the CPS shows that the share of the
has been a clear shift away from the Commodity
agriculture sector has been falling over time. In
Producing Sector (CPS) which accounted for
1969-70, agriculture accounted for 38.9 percent of

9
Pakistan Economic Survey 2011-12

GDP. This has gradually declined to 21.1 percent
in 2011-12. The decline in the share of agriculture
in GDP indicates that the non-agriculture sectors
grew more quickly as compared to the agriculture
sector.
Scientific development and revolutionary
innovations in the business climate have
encouraged the manufacturing and services sectors
more than the agriculture sector. Structural, social
and cultural problems of the agriculture sector, the
higher risk and vulnerability to natural calamities
have encouraged investors to switch to the non-
agriculture sectors. The contribution of agriculture
to overall GDP will continue to decline as
development takes place. This is an inevitable
consequence of the process of growth and
development.
It has been observed during the last two decades
that the major momentum to economic growth has
come from the services sector which has emerged
as the main driver of the economic growth. Within
the services sector, almost all the sub-sectors have
increasing contributions. The share of
manufacturing in GDP has remained stagnant, at
around 14.7 percent, for 30 years until 1999-2000.
Its contribution to GDP has increased after 1999-
2000 from 14.7 percent to 18.65 percent in
2011-12.

Table 1.5: Sectoral Share in Gross Domestic Product (GDP)

(At Constant Factor Cost-in percentage)
1999-00 2004-05 2008-09 2009-10 2010-11 2011-12 P
Commodity Producing Sector 49.3 48.7 47.1 47.6 46.7 46.46
1. Agriculture 25.9 22.4 21.8 21.2 20.9 21.1
- Major Crops 9.6 8.4 7.3 6.9 6.5 6.71
- Minor Crops 3.5 2.7 2.5 2.2 2.3 2.13
- Livestock 11.7 10.6 11.3 11.4 11.5 11.61
- Fishing 0.4 0.3 0.4 0.4 0.4 0.37
- Forestry 0.7 0.4 0.3 0.3 0.2 0.24
Industrial Sector 23.3 26.3 25.3 26.4 25.8 25.40
2. Mining & Quarrying 2.3 2.7 2.5 2.5 2.4 2.40
3. Manufacturing 14.7 18.3 18.2 18.6 18.7 18.65
- Large Scale 9.5 12.9 12.1 12.3 12.1 11.90
- Small Scale 5.2 4.1 4.7 4.9 5.1 6.74
4. Construction 2.5 2.1 2.1 2.6 2.5 2.15
5. Electricity & Gas Distribution 3.9 3.2 2.5 2.8 2.2 2.19
Services Sector 50.7 51.3 52.9 52.4 53.3 53.54
6. Transport, Storage & Communication 11.3 10.4 10.2 10.1 10.0 14.12
7. Wholesale and Retail Trade 17.5 18.7 16.8 17.0 17.2 17.12
8. Finance and Insurance 3.7 4.0 5.7 4.9 4.5 4.79
9. Ownership of Dwellings 3.1 2.9 2.8 2.7 2.7 2.72
10. Public Admn. & Defence 6.2 5.9 6.1 6.0 6.6 6.62
11. Other Services 9.0 9.5 11.3 11.8 12.3 12.65
12.GDP (Constant Factor Cost) 100.0 100.0 100.0 100.0 100.0 100.0
Source: Economic Adviser’s Wing, Finance Division
P: Provisional

Fig-1.4 presents the structural shift in the
economy. During the last 10 years the sectoral
share of the agriculture sector has decreased from
23 percent to 21.1 percent. The sectoral share of
the manufacturing sector has increased from 18
percent to 18.6 percent and the share of other
industries has remained more or less stagnant
around 7 percent of the GDP over the last 10 years.
The share of the services sector has increased from
50.9 percent to 53.5 percent in the same period. It
may be concluded that on the whole structural
transformation has been slow during the decade
under discussion. The share of the commodity

10
 Growth and Stabilization

producing sector and the services sector has increased marginally.

Fig-1.4: Contribution to GDP
Other
Other 2001-02 Industries 2011-12
Industries 6.8%
7.3% Agriculture
24.1%
Agriculture
21.1%

Services Services Manufactur

Manufactu ing 18.6%
50.9% 53.5%
ring,17.7%

The government has approved the Framework of is making efforts to accelerate the
Economic Growth which lays out a wide-ranging operationalization of the growth strategy by
strategy for long term competitiveness and growth. initiating specific policies and programs in key
The strategy focuses on governance, institutions, strategic areas. The salient features of the new
markets, connectivity and cities. The government growth strategy are summarized in Box-2.

Box-2
New Growth Strategy
` New growth strategy is an approach to accelerate economic growth and sustain it. It identified a coherent
approach to growth that goes well beyond projects and targets public service delivery, productivity,
competitive markets, innovation and entrepreneurship
` The strategy is based on sustained reform that builds efficient and knowledgeable governance structure, and
markets in attractive and well-connected locations. It focuses on the ‘software’ of economic growth (issues
of economic governance, institutions, incentives, human resources, etc.), and provides an environment in
which the ‘hardware’ of growth (physical infrastructure) could be expanded and made more productive at
every level.
Targeting Growth
` Around 68 percent of Pakistan’s population is in the youth category (under 30 years) with the size of the
workforce increasing by over 3 percent annually. To absorb this youth bulge productively, Pakistan's real
GDP needs to grow at an annual average rate in excess of 7 per cent
` Efforts will be undertaken to revive the economy to its short term potential GDP growth rate of about 5–6
percent annually. Resolving issues regarding energy and governance and ensuring credible macro stability,
this could be achieved in a short time
` Deep and sustained reforms for a number of years in areas such as public sector management, developing
competitive markets, urban management and connecting people and places are the way forward for
accelerating growth to above 7 percent. This is precisely what fast growing economies have done. This is
also the direction towards which Pakistan is now aimed to move.
Thrust of Growth Strategy
Pakistan is facing several external and internal challenges. In order to achieve economic growth in this scenario the
new growth framework has the following characteristics. It does the following:

` Puts emphasis on productivity and efficiency beyond brick and mortar perspective
` Seeks to build a better government and markets, taking the view that good government complements

11
Pakistan Economic Survey 2011-12

efficient, competitive and connected markets

` Recognizes that economic well-being is a result of the variety and frequency of economic transactions.
Policy, law and regulation must seek to minimize transaction costs and allow speedy and frequent
transactions.
` Focuses on urban development as a crucible for the nurturing of innovation entrepreneurship and
productivity
` Includes youth through community development and the provision of market opportunities while
continuing to impart skills and education.
Source: Planning and Development Division

Per Capita Income: The per capita income in dollar terms has increased
from $ 582 in 2002-03 to $ 1,372 in 2011-12. The
Per capita income is defined here as Gross
major factors, which contributed in the rise of per
National Product at market price in dollar term
capita income, include acceleration in real GDP
divided by the country’s population. Per capita
growth, inflows of workers remittances and the
income is widely used and recognized as one of the
stable exchange rate. Fig 1.5 shows the
important indicators of economic growth and
improvement in per capita income during the last
general well-being of a society. Per Capita Income
ten years.
in dollar terms grew at a modest rate of 9.1percent
in 2011-12 compared to 17.8 percent growth last
year.

Fig-1.5: Per Capita Income ($)

1600
1372
1400 1258
1200 1015 1068
990
1000 904
823
663 724
800
582
600
400
200
0
2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

Investment and Savings 12. Fixed investment has decreased to 10.9 percent
of GDP in 2011-12 from 20.5 percent of GDP in
Investment plays an important role in the economic
2007-08. Private investment witnessed a
growth of a country. It raises the productive
contraction of 7.9 percent in 2011-12 compared to
capacity of the economy, affects the employment
15.0 percent of GDP in 2007-08. Public investment
levels, and promotes technological progress
as a percent of GDP also declined to 3.0 percent in
through embodiment of new techniques.
2011-12 against the 5.4 percent in 2007-08. The
Investment spending is usually volatile, because it
composition of investment between the private and
depends on multiple factors. That is why it is
public sector has also changed during the period
responsible for much of the fluctuations of the
under review.
GDP. Investment has been hard hit by international
and domestic factors during the last few years.
The contribution of national savings to domestic
Total investment has declined from 22.1 percent of
investment is indirectly the mirror image of foreign
GDP in 2007-08 to 12.5 percent of GDP in 2011-

12
 Growth and Stabilization

savings required to meet investment demand. The
requirement of foreign savings needed to finance
the saving investment gap, reflects the current
account deficit in the balance of payments.
National savings are 10.7 percent of GDP in 2011-
12 compared to 13.6 percent in 2007-08. Domestic
savings have also declined from 11.5 percent of
GDP in 2007-08 to 8.9 percent of GDP in 2011-12.
Net foreign resource inflows are financing the
saving investment gap. Theoretically, there are two
ways of improving the savings investment gap.
One is through increasing savings and the other is
through decreasing investment. Pakistan needs to
gear up both savings and investment to enhance the
employment generating ability of the economy as
well as increase resource availability for
investment.
Public sector investment is crucial for catalyzing
economic development. It creates spillover effects
for private sector investment because private sector
development is facilitated through public sector
development spending particularly on
infrastructure. However, curtailment of
development expenditures limits private sector
development. Public sector investment decreased
from 5.4 percent of GDP in 2007-08 to just 3.0
percent in 2011-12. Saving and Investment as
percentage of GDP are presented in Table 1.6.

Table 1.6: Structure of Savings and Investment (As Percent of GDP)

Description 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 P
Total Investment 16.6 19.1 22.1 22.5 22.1 18.2 15.4 13.1 12.5
Changes in Stock 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.6
Gross Fixed 15.0 17.5 20.5 20.9 20.5 16.6 13.8 11.5 10.9
Investment
-Public Investment 4.0 4.3 4.8 5.6 5.4 4.3 3.6 2.9 3.0
-Private Investment 10.9 13.1 15.7 15.4 15.0 12.3 10.2 8.6 7.9
Foreign Savings -1.3 1.6 3.9 5.1 8.5 5.7 2.2 -0.1 1.8
National Savings 17.9 17.5 18.2 17.4 13.6 12.5 13.2 13.2 10.7
Domestic Savings 15.7 15.4 16.3 15.6 11.5 9.8 9.3 13.3 8.9
Source: EA Wing Calculations
P: Provisional

Foreign Direct Investment responding positively. China, India, Turkey, Brazil

and Indonesia also appear to be moving in a
Pakistan has a very fertile market for foreign
positive direction.
investors given its very large consumer base of 180
million people. People need food, energy and other
Foreign Direct Investment (FDI) in Pakistan stood
amenities to live and thrive. There is a great
at $ 666.7 million during July-April 2011-12 as
potential in the power and infrastructure sector and
against $ 1292.9 million last year. This is a decline
in natural resources. There seems to be huge scope
of 48.4 percent. Oil & Gas Exploration remained
for investment in hydel and coal based power
the major sector for foreign investors. The share of
projects, alternative energy like wind power, and
Oil and Gas Exploration in total FDI during July-
natural gas transmission from foreign lands. The
April 2012 stood at 69.8 percent.
country also needs infrastructure, world class
education systems, exploration of its natural Pakistan will certainly attract foreign direct
resources and mechanization of industries. Foreign investment with the resolution of the energy
investors can exploit all such opportunities. shortages and improvement in the law and order
situation. The Board of Investment (BOI) under the
Global foreign direct investment will be close to $
Prime Minister’s Secretariat is making efforts to
800 billion during 2012; less than the $ 1 trillion
provide an increasingly investment friendly
achieved in 2007. The Euro crisis has dampened
environment to investors. Efforts are being made to
enthusiasm. However, prospects from East Asia
facilitate foreign investors in Pakistan with
are looking good. The United States is focusing on
improved infrastructure and a better working
economic revival and its stock markets are

13
Pakistan Economic Survey 2011-12

environment so that the favorable business climate the standard of living of recipient households.
may induce investors to initiate new investment
projects. In particular, efforts are also going on to The upsurge in the remittances may be attributed to
encourage the setting up of fruit processing the government’s efforts for redirecting these flows
industries and more export processing zones in the from informal to formal channels. Bilateral
country, so that sustained high economic growth arrangements of commercial banks with foreign
through exports may be achieved. entities under Pakistan Remittance Initiatives (PRI)
have helped facilitate movement in this direction.
Workers Remittances Furthermore, initiatives under the PRI such as
introduced Xpress money, Inter bank Fund
Remittances from overseas Pakistanis have been an
Transfer (IBFT) facility have also helped to
important source of foreign exchange during the
improve the remittance flow to Pakistan. Increase
last four years. These have not only provided
in remittances is also the result of the higher
critical support to the balance of payments but
demand of Pakistani workers. An overview of
have helped in stimulating the domestic economy
country wise remittances is presented in Table 1.7.
and helped to alleviate poverty. Significant flows
of remittances also helped Pakistan to partially
counter the adverse effects of the oil price shocks,
reduce the unemployment problem, and improve
Table-1.7: Country Wise Workers’ Remittances US$ Million
July-April*
Country 06-07 07-08 08-09 09-10 10-11
11-12
USA 1459.64 1762.03 1735.87 1771.19 2068.87 1922.35
U.K. 430.04 458.87 605.59 876.38 1199.67 1263.67
Saudi Arabia 1023.56 1251.32 1559.56 1917.66 2670.07 2987.86
U.A.E. 866.49 1090.30 1688.59 2038.52 2597.74 2386.26
Other GCC Countries 757.33 983.39 1202.65 1237.86 1306.18 1226.61
EU Countries 149.00 176.64 247.66 252.21 354.76 304.59
Total 5493.65 6451.24 7811.43 8905.90 11200.97 10,876.99
Source: SBP
* : Provisional

inflation and reduction in fiscal deficit, Pakistan’s

Workers’ Remittances totaled $ 10,876.99 million
economy remains in an unsteady state with slow
in July-April of 2011-12, as against $ 9,046.61
growth, fragile macroeconomic fundamentals, and
million in the comparable period of last year. This
heightened vulnerability to balance of payments
is an increase of 20.23 percent. Remittances from
shock. Key problems affecting the economy
Saudi Arabia recorded massive growth of 43.25
include energy shortages and a host of structural
percent, followed by U.K. (27.52 percent), USA
impediments that have held back investment and
(14.57 percent), Other GCC countries (15.34
growth. Necessary reforms are under process to
percent) and UAE (14.10 percent) during the
remove the structural impediments.
period under review. Monthly data on remittances
suggests that the monthly average for the period of
Reinitiating the privatization process will attract
July-April 2011-12 stood at $ 1,087.70 million
foreign investment for Pakistan. Foreign
compared to $ 904.66 million during the
investment may also be attracted from the Middle
corresponding period last year.
East in agriculture and livestock sectors. Many of
these countries need an assured supply of items
Prospects of Economic Growth
like wheat, rice, milk, poultry meat, edible oil,
Pakistan’s economy is resilient. This resilience flowers, fruit and vegetables and are ready to
comes from the potential as well as the growth in invest on the basis of long-term supply contracts.
remittances and in the informal economy. Despite
positive developments including the easing of

14

Savings are the mover of growth. Policies are
being implemented which give savings incentives
such as, tax breaks and compulsory savings in
employee provident funds. The government is
aware that several long term savings instruments
may need to be developed to increase household
savings. There is also need to expand the network
of National Savings Schemes, microfinance
institutions, banks and postal savings to far flung
areas of the country. These have been and are the
focus of the government’s attention.
Measures to stimulate growth will not yield full
potential unless the structural weaknesses
responsible for the decline in the investment are
addressed. This decline is due largely to the
unstable security situation. The shortage and high
cost of energy, and the rising cost of doing
business in Pakistan are also contributing to the
decline. The government is making efforts to
address these negative factors in order to improve
investment climate in the country.
Pakistan’s middle class has expanded and is
currently estimated at 35 percent of the population.
Having substantial size and composition primarily
urban and associated with professional white-collar
Growth and Stabilization
occupations the middle class may play a major role
in boosting economic growth. A vibrant middle
class not only generates demand of goods and
services but also the savings required to fund
productive investments. Moreover, the middle
class households provide a breeding ground for the
professional and skilled labour force. Such human
capital is essential for growth in the long run. With
the existence of such a vibrant middle class the
consumer goods industry can provide a strong
impetus to economic growth. Despite an overall
slump in the economy, the consumer goods
industry in Pakistan has registered a steady growth
and has a great potential for further expansion.
There is rising trend of youth entrepreneurship in
Pakistan. Many young entrepreneurs have
succeeded in establishing various businesses that
are booming. This has produced a strong
demonstration effect for others to follow. These
young entrepreneurs have the potential to cause a
paradigm shift in the economic fortunes of
Pakistan. The opening up of trade with India is
another major initiative that can boost economic
growth by providing greater market access as well
as easy and cheaper availability of raw materials
for domestic producers.
15
 Chapter 2
Agriculture
The agriculture sector continues to be an essential
component of Pakistan’s economy. It currently
contributes 21 percent to GDP. Agriculture
generates productive employment opportunities for
45 percent of the country’s labour force and 60
percent of the rural population depends upon this
sector for its livelihood. It has a vital role in
ensuring food security, generating overall
economic growth, reducing poverty and the
transforming towards industrialization. The present
government is determined to improve the quality
of life of the people and to banish hunger and
malnutrition from the country by making
agriculture an efficient, productive and profitable
sector of the economy.
In order to improve governance in the public sector
the government took bold steps and brought in the
18th Amendment to the Constitution of 1973.
Accordingly, Ministries performing tasks which
were provincial subjects were devolved from the
Federal level, including the Ministry of Food and
Agriculture. However, realizing the food security
concerns across the country the government took
timely steps to establish the Ministry of National
Food Security and Research to tackle the Food
Security issues.
The newly created Ministry, under the aegis of
the present government, has planned to take
two major steps in order to solve the food
security issues on a permanent basis. The first
step is the establishment of the National Food
Security Council representing Federal,
Provincial and local level Governments.
Secondly, through a Letter of Intent the Ministry,
in collaboration with World Food Programme, is
launching the Zero Hunger Programme worth US $
1.6 billion to address the food security objective.
Under this Programme the Ministry shall donate up
to 500,000 metric tons of wheat per year and the
World Food Programme intends to negotiate with
local producers to exchange part of the donated
wheat for High Energy Biscuits (HEB) and similar
products manufactured in Pakistan factories for
distributions through WFP operations to primary
school children, siblings of malnourished children
and the vulnerable populations especially children
at risk of malnutrition. The fund will also be
converted to fortified wheat flour for distributions
aimed at combating food insecurity in Pakistan.
The WFP will also cooperate in the capacity
building of the Ministry’s officials in areas
addressing food security and monitoring progress.
Flooding in 2011, affected crops like rice, cotton
and sugarcane, although in the current year, 2011-
12, they performed well and provided support and
continued to support food security objectives this
year. The agriculture sector recorded a growth of
3.1 percent in 2011-12. The profitability of
agriculture sector during 2011-12, remained high
because the farmers received good prices for rice,
cotton and sugarcane, which allowed for greater
financial resources passed on to the rural economy.
Recent performance
During 2011-12, the overall performance of
agriculture sector exhibited a growth of 3.1 percent
mainly due to positive growth in agriculture related
subsectors, except minor crops. Major crops
accounted for 31.9 percent of agricultural value
added and experienced a growth of 3.2 percent in
fiscal year 2011-12 with negative growth of 0.2
percent in 2011. The significant growth in major
crops is contributed by rice, cotton and sugarcane
17
Pakistan Economic Survey 2011-12

by 27.7 percent, 18.6 percent and 4.9 percent, respectively.

Table 2.1: Agriculture growth percentages from 2005-2012
Year Agriculture Major Crops Minor Crops Livestock Fishery Forestry
2005-06 6.3 -3.9 0.4 15.8 20.8 -1.1
2006-07 4.1 7.7 -1.0 2.8 15.4 -5.1
2007-08 1.0 -6.4 10.9 4.2 9.2 -13.0
2008-09 4.0 7.8 -1.2 3.1 2.3 -3.0
2009-10 0.6 -2.3 -7.7 4.3 1.5 2.2
2010-11 2.4 -0.2 2.7 4.0 1.9 -0.4
2011-12(P) 3.1 3.2 -1.3 4.0 1.8 1.0
Source: Pakistan Bureau of Statistics
P:Provisional

sowing season, begins October-December and is

Minor crops contributed 10.1 percent value
addition in agriculture and exhibited a negative
growth of 1.3 percent in 2011-12 against 2.7
percent growth of 2011. The Livestock sector,
which has a 55.1 percent share in the agriculture,
grew by 4.0 percent in 2011-12. The Fishery sector
grew by 1.8 percent as against last year’s growth of
1.9 percent. Forestry sector posted a positive
growth of 1.0 percent this year as compared to
negative growth of 0.4 percent last year.
Pakistan has two crop seasons, "Kharif" being the
first sowing season from April-June and it is
harvested during October-December. Rice,
sugarcane, cotton, maize, mung, mash, bajra and
jowar are “Kharif" crops. "Rabi", the second
harvested in April-May. Wheat, gram, lentil
(masoor), tobacco, rapeseed, barley and mustard
are "Rabi" crops. These crops make Pakistan an
agricultural country and its performance is
dependent upon timely availability of irrigation
water. During 2011-12, the availability of water as
a basic input for Kharif 2011 (for the crops such as
rice, sugarcane and cotton) has been 10 percent
less than the normal supplies but 13 percent higher
than last year’s Kharif 2010 season. The water
availability during Rabi season (for major crop
such as wheat), is estimated at 29.4 MAF, which is
19.2 percent less than the normal availability, but
15 percent less than last year’s Rabi crop (Table
2.2).

Table 2.2: Actual Surface Water Availability (Million Acre Feet)

%age incr/decr.
Period Kharif Rabi Total
Over the Avg.
Average system usage 67.1 36.4 103.5 -
2003-04 65.9 31.5 97.4 - 5.9
2004-05 59.1 23.1 82.2 - 20.6
2005-06 70.8 30.1 100.9 - 2.5
2006-07 63.1 31.2 94.3 - 8.9
2007-08 70.8 27.9 98.7 - 4.6
2008-09 66.9 24.9 91.8 -11.3
2009-10 67.3 25.0 92.3 -10.8
2010-11 53.4 34.6 88.0 -15.0
2011-12 60.4 29.4 89.8 -13.4
Source: Indus River System Authority

I. Crop Situation the agriculture. Thus, four major crops (wheat,

rice, cotton, and sugarcane) on average, contribute
Major crops, such as wheat, rice, cotton and
29 percent to the value added in overall agriculture
sugarcane account for 91 percent of the value
and 6.0 percent to GDP. The minor crops account
added in the major crops. The value added in major
for 10.1 percent of the value added in overall
crops accounts for 32 percent of the value added in

18
 Agricuulture

agriculturre. Livestock contributes 55.1 percent to (41.9 percent). Thhe productionn performancce of
agriculturral value addded–much morem than the
t major crops
c is docum
mented in Taable 2.3.
combinedd contribution n of major annd minor croops
Table 2.3: Production of
o Major Crop
ps (iin thousands off tons)
Cotton
Year Sugarcanee R
Rice Maize Wheatt
(0
000 bales)
13,019 444,666 5,547 3,1100 21,277
2005-06
(-8.7) (-5.5) (10.4) (11.22) (-1.6)
12,856 544,742 5,438 3,0888 23,295
2006-07
(-1.2) (222.6) (-2.0) (-0.77) (9.5)
11,655 633,920 5,563 3,6055 20,959
2007-08
(-9.3) (116.8) (2.3) (16.77) (-10.0)
11,819 500,045 6,952 3,5933 24,033
2008-09
(1.4) (-221.7) (25.0) (-0.3) (14.7)
12,914 499,373 6,883 3,261 23,311
2009-10
(9.4) (-1.3) (-1.0) (-9.22) (-3.0)
11,460 555,309 4,823 3,7077 25,214
2010-11
(-11.3) (112.0) (-30.0) (13.77) (8.2)
13,595 588,038 6,160 4,271 23,517
2011-12(P)
(18.6) (4.9) (27.7) (15.22) (-6.7)
Source: Paakistan Bureau of Statistics
P: Provisioonal (July-Marcch), Figures inn parentheses arre growth/decline rates

increasse in yield peer hectare ass compared to last

a) Major Crops:
year. The
T area, prodduction and yield y of cottoon for
i) Cotton:
the lastt five years iss given in Taable 2.4 and Figure
F
Cotton is i an important cashh crop whiich 2.1.
significanntly contributtes to the nattional econommy
by providding raw material
m to thhe local texttile Figu
ure 2.1: Cotton Production
P (000 bales)
industry, surh as cotto on lint as an export item.. It
140
000
accounts for 7.8 peercent of vaalue added in
agriculturre and 1.6 perrcent of GDP P. During 20111- 135
500
12, the crop
c was culttivated on ann area of 28835
130
000
thousand hectares, 5.4 percent morre than last yeear
(2689 thhousand hecttares). The production is 125
500
reported at 13.6 milliion bales durring the periiod
120
000
(July-Marrch) 2011-12,, higher by 188.6 percent ovver
the last year’s producttion which was
w 11.5 milliion 115
500
bales. The increase in cultivaated area and a 110
000
productionn is attributeed to the usee of BT cottoon,
07-08 08-09 09-10 10-11 11-12(P)
control ovver widespreaad attack of cotton leaf curl
c
virus (CL LCV) and su ucking pestss which helpped Source: PBS
P

Table 2.4: Area, Produuction and Yieeld of Cotton

Area Production Yield
Year
(000
0 Hectare) % Change (000 Bales) % Changge (Kgs/Heec) % Chaange
2007-08 3054 - 0.7 116555 - 9.3 649 -8.7
2008-09 2820 -7.7 118119 1.4 713 9.9
2009-10 3106 10.1 129114 9.3 707 -0.8
2010-11 2689 -13.4 114660 -111.3 724 2.4
2011-12(P) 2835 5.4 135995 1
18.6 815 12.6
Source: Pakkistan Bureau of
o Statistics
P: Provisional (July-March)

19
Pakistan Economic
E Surrvey 2011-122

World Cootton Outloo

ok
The produuction and con
nsumption off major cottonn growing couuntries are givven in Table 2.5.
2

Table 2.5: Production anda Consumpttion of Major Cotton Grow wing Countriess (inn Millions of Toons)
20009-10 20010-11 E 2011-12 P
Productionn
China 6.992 6
6.40 7.40
India 5.118 5
5.76 5.69
USA 2.665 3
3.94 3.39
Pakistan 2.007 1
1.91 2.35
Brazil 1.119 1
1.96 2.00
Uzbekistann 0.885 0
0.91 0.88
Others 3.229 4
4.22 5.28
World Total 22.117 255.10 2
26.96
Consumptiion
China 10.110 9
9.59 9.38
India 4.330 4
4.48 4.56
Pakistan 2.339 2
2.20 2.33
East Asia/AAustralia 1.886 1
1.75 1.63
Europe & Turkey
T 1.555 1
1.49 1.46
Brazil 1.002 0
0.96 0.90
USA 0.777 0
0.85 0.70
Others 3.336 3
3.17 3.01
World Total 25.336 244.49 2
23.96
Source: Paakistan Central Cotton Comm
mittee, M/O Texxtile Industry
E: Estimateed, P: Provisio
onal

respecttively. Sugarccane was culltivated on ann area

Fig-2.2
2: Sugarcane Production
P (0000 of 1,0446 thousand hectares,
h 5.9 percent
p higherr than
Tonss) last year’s
y level of 988 thhousand hecctares.
65000
Sugarccane production for the year 2011-12 is
estimatted at 58.0 million
m tons, in contrast to
t last
60000
year’s production of 55.3 millionn tons. This shows
s
an incrrease of 4.9 percent
p over the productiion of
55000 last yeear. The maiin factors coontributing to t the
producction are luccrative markket prices off last
50000 year’s produce andd timely avaailability of inputsi
encourraged the farm mers to grow w more sugaarcane
45000 crop. However,
H the yield per heectare, if commpared
07-08 08-0
09 09-10 10-11 11-12(P)) with laast year, possted a negative growth. The
Source: PBS floods of 2010 enhanced thee soil fertilitty of
Sugarccane crop, and as a result,, yield per heectare
posted a growth of 6.9 percennt as comparred to
ii) Sugarccane: negativve 0.9 perrcent this year. How wever,
The sugarrcane crop is the second major
m cash crrop producctivity gain could
c not be sustained beecause
and is useed as a raw material
m in thhe production of water receded veryy slowly in sugarcane arrea of
refined suugar and gur.. Its share in value addedd in lower Sindh. The area, producction and yieeld of
agriculturre and GDP P is 3.7 and 0.8 perceent, sugarcaane for the laast five years are given in Table
2.6 andd Figure 2.2.

20
 Agricuulture

Table 2.6: Area, Producction and Yielld of Sugarcanne

Area Produuction Yield
Year
(000 Hectare)
H % Change (000 Tons) % Change (Kgs/Hecc.) % Chaange
2007-08 1241 20.6 63920 16.8 511507 -3.2
2008-09 1029 -17.1 50045 -21.7 488635 -5.6
2009-10 943 -8.4 49373 -1.3 522357 7.7
2010-11 988 4.8 55309 12.0 555981 6.9
2011-12(P) 1046 5.9 58038 4.9 555486 -0.9
Source: Paakistan Bureau u of Statistics
P: Provisioonal (July-Marcch)

producction and yielld of rice for the last five years

iii) Rice:
are shoown in Table 2.7
2 and Figurre 2.3.
Rice rankks as second amongst
a the staple food graain
crops in Pakistan
P and it
i has been a major sourcee of Figu
ure 2.3: Rice P
Production (000 Tons)
foreign exxchange earniings in recentt years. Pakisttan
75
500
grows a high
h quality of
o rice to fulffill the domesstic
demand anda also for exports. Ricce accounts 4.9 4 70
000
percent of the value added
a in agriiculture and 1.0
percent of GDP. The sown area for f rice is 25571 65
500
thousand hectares, 8.7 percent more m than last
l
60
000
year’s 2365 thousand hectares. The production of
the crop is
i an estimateed 6160 thouusand tons, 277.7 55
500
percent more
m than the44823 thousandd tons producced
last year. This increasee in area is duue to 8.7 perceent 50
000
increase in
i area sown n. The yield per p hectare hash 07-08 08-09 09-10 10-11 11-12(P)
45
500
shown im mproved gro owth of 177.5 percent as Sourcee: PBS
comparedd to -14.6 percent last year. y The arrea,

Table 2.7: Area, Producction and Yielld of Rice

Area Production Yield
Year
(000 Heectare) % Change (
(000 Tons) % Change (Kgs/Hecc.) % Chaange
2007-08 2515 -2.6 5563 2.33 2212 5.0
2008-09 2963 17.8 6952 25.00 2346 6.1
2009-10 2883 -2.7 6883 -1.00 2387 1.7
2010-11 2365 -18.0 4823 -30.00 2039 -14.6
2011-12(P) 2571 8.7 6160 27.77 2396 17.5
Source: Paakistan Bureau u of Statistics
P: Provisioonal (July-Marcch)

iv) Wheat: 8901 thousand

t hecctares. The production
p off 23.5
millionn tons is estim
mated during July-March 2011-2
Wheat is the basic staple food for fo most of the t
12. Thhe yield per hectare in 2011-12 possted a
populationn and largest grain sourcee of the counttry.
negativve growth of 4.2 percent as a compared to 11
Its impoortance is always recognized whhen
percentt growth last year. This is due to the facct that
formulatinng agriculturral policies. It contribuutes
the sowwing of wheaat was delayeed due to staanding
12.5 percent to the value added in agriculture anda
water and other climatic
c factoors. Recentlyy the
2.6 percennt to GDP. Wheat
W is cultivvated in an arrea
governnment has incrreased the proocurement prrice to
of 8666 thousand
t hecttares in 20111-12, showingg a
Rs. 10050. This steep would heelp the farmeers to
decrease of 2.6 perceent over last year’s area of

21
Pakistan Economic
E Surrvey 2011-122

increase its productio on and its impact

i will be
Fig 2.4:
2 Wheat Prooduction (0000 Tons)
realized inn the later parrt of 2011-12..
2700
00
The overaall decrease in area is duue to problems 2500
00
farmers faced in th he disposal of the wheat
2300
00
produced during last year.y Farmerss then began to
increase predisposition
p n of growing early sown BTB 2100
00
cotton andd reducing th he area of BT
T cotton sownn in 1900
00
rain affectted districts of
o Sindh This phenomenonn is
demonstraated in Table 2.8 and Figurre 2.4. 1700
00
07-08 08-09 09-10 10-11 11-1
12 (P)

Source: PBS

Table 2.8: Area, Producction and Yielld of Wheat

Area Produuction Yield
Year
(000 heectares) % Change (000 tons) % Change (Kgs /Hecc.) % Chaanges
2007-08 8550 -0.3 20959 -10.0 2
2451 -9.8
2008-09 9046 5.8 24033 14..7 2
2657 8.4
2009-10 9132 1.0 23311 -3..0 2
2553 -3.9
2010-11 8901 -2.5 25214 8.2 2
2833 11.0
2011-12(P) 8666 -2.6 23517 -6..7 2
2714 -4.2
Source: Pakkistan Bureau of
o Statistics
P:Provisionnal(July-Marchh)

v) Other Major Crops reductiion of about 41.3 percennt during 2011-12

mainlyy because of unfavorable
u w
weather condiitions.
During 20011-12, the prroduction of maize
m increassed
The otther crops liike bajra, toobacco, jawarr and
by 15.2 percent,
p whilee rapeseed annd mustard roose
barley also, witnesssed a declinee in productiion of
by 5.7 peercent. This is in contrasst to crops liike
12.1 percent,
p 8.7 percent, 2.8 percent andd 1.4
gram, thee largest Rab bi pulses croop in Pakistan,
percentt, respectivelly, in 2011-12 as comparred to
where prroduction sto ood at 291 thousand tons,
the corrresponding period
p last year.
y The area and
against 4996 thousand tons of last year,
y showingg a
producction of majorr crops are givven in Table 2.9.
2
Table 2.9: Area and Pro oduction of Otther Major Kharif
K and Rabbi Crops
20110-11 2011-12 (P
P) % Change In
Crops Area Production Areea P
Production production
n over
(0
000 hectares) (000 tons)) (000 hecctares) (
(000 tons) Last yeaar
Kharif
Maize 974 37007 1083 4271 15.2
Bajra 548 3446 458 3044 -12.1
Jawar 229 1441 214 1377 -2.8
Rabi
Gram 1054 4996 1055 291 -41.3
Barley 77 7
71 75 700 -1.4
Rapeseed & Mustard 203 1776 213 1866 5.7
Tobacco 51 1003 47 944 -8.7
Source: Paakistan Bureau u of Statistics
P: Provisioonal (July-Marcch)

22
 Agriculture

b) Minor Crops It is estimated that 10 percent of the total

i) Oilseeds availability of edible oil is consumed in industries
like cosmetics, paints and other allied products.
The major oilseed crops grown in the country
Around 200,000 tons of edible oil is exported,
include sunflower, canola, cottonseed, rapeseed
mainly to Afghanistan. This does not include
and mustard. Although the cotton crop is grown for
smuggling through porous borders which is not
its lint, cottonseed contributes 50 to 60 percent of
accounted for.
local edible oil production. At present, total
requirement of edible oil in the country is 2.045
During the year 2011-12 (July-February) 1.467
million tons. During the year 2010-11, the total
million tons of edible oil worth Rs. 145 billion
availability of edible oil was 3.079 million tons; of
(US$ 1.654 billion) was imported. Local
which local production contributed 0.696 million
production during 2011-12 was 0.636 million tons.
tons (34 percent of the requirement); while imports
The area and production of oilseed crops during
of edible oil or oilseeds was 2.383 million ton. The
2010-11 and 2011-12 is shown in Table 2.10.
import bill reached Rs. 224 billion (US$ 2.611
billion) in 2010-11.
Table 2.10: Area and Production of Major Oilseed Crops
Crops 2010-11 2011-12 (P)
Area Production Area Production
(000 Acres) Seed Oil (000 Acres) Seed Oil
(000 Tons) (000 Tons) (000 Tons) (000 Tons)
Cottonseed 6,450 2,934 352 6,958 3,212 385
Rapeseed/ Mustard 439 157 50 575 203 61
Sunflower 1,108 643 244 877 473 179
Canola 223 131 50 27 30 11
Total 8,230 3,865 696 8,437 3,918 636
Source: Pakistan Oilseed Development Board
P: Provisional (July-Feb)

percent, respectively. The area sown for masoor,

ii) Other Minor Crops:
onion and chillies decreased by 13.8 percent, 14.9
The production of mung and potato has increased percent and 65.7 percent, respectively. There was
by 22.0 percent and 17.5 percent, respectively an increase of area sown for mung and potatoes by
during, 2011-12. However, the production of 2.5 percent and 16.2 percent, respectively. The
chillies, onion, masoor (lentil) and mash decreased area and production of minor crops are given in
by 78.3 percent, 15.4 percent 12.8 percent and 3.5 Table 2.11.
Table: 2.11 Area and Production of Minor Crops
2010-11 2011-12(P)
%Change In
Crops Area Production Area Production
Production
(000 hectares) (000 tons) (000 hectares) (000 tons)
Masoor 26.1 13.3 22.5 11.6 -12.8
Mung 137.4 76.2 140.8 93.0 22.0
Mash 24.5 11.3 24.5 10.9 -3.5
Potato 159.3 3491.8 185.1 4104.4 17.5
Onion 147.6 1939.6 125.6 1640.0 -15.4
Chillies 63.6 171.7 21.8 37.2 -78.3
Source: Pakistan Bureau of Statistics
P: Provisional (July-March)

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Pakistan Economic Survey 2011-12

II. Farm Inputs natural gas (the raw material for urea) and some
i) Fertilizer: urea plants produced less than their production
capacity. However, a timely import of urea
Fertilizer is Pakistan’s most important and
addressed the absence in supply and total
expensive input in agricultural production. The
availability of fertilizer increased by 16.3 percent.
contribution of balanced fertilizer use towards
Despite the increased supply of urea, total
increased yield varies from 30 to 60 percent in
consumption of fertilizer reduced by 4.9 percent.
different crop production areas of the country. One
Nitrogen consumption increased by 0.3 percent
kg of fertilizer nutrient produces about 8 kg of
while that of phosphate decreased by 22.3 percent
cereals (wheat, maize and rice), 2.5 kg of cotton
and potash by 36 percent. Details of fertilizer
and 114 kg of stripped sugarcane. All of Pakistan’s
production are presented in Table 2.12.
soils are deficient in nitrogen (N), 80 to 90 percent
are deficient in phosphorus (P), and 30 percent are
The major reason for reduced fertilizer
lacking in potassium (K). The wide spread
consumption was the effect of heavy and
deficiency of micronutrients is also appearing in
destructive rains in the Sindh province during the
different areas. Lands used for single crops are
monsoon season in 2011, which adversely affected
depleting soil fertility because lands are using only
crop lands. Another reason for the reduction in
certain essential plant nutrients and are intensely
consumption of fertilizer was the increase in price
cultivated. When these soils go without being
of all fertilizers. The prices of urea went up by 81.4
replenished, future crops are threatened from loss
percent in July-March, 2011-12 as compared to the
of micronutrients and other essential plant
same period of the last fiscal year. The prices of
nutrients.
DAP, CAN and NP also increased by 38.8 percent,
75.5 percent and 45.7 percent, respectively, over
The domestic production of fertilizers from July-
the same period last year.
March, 2011-12 declined by 1.4 percent when
compared to the last year’s production. The
fertilizer industry experienced a curtailment of

Table: 2.12 Production and Off-take of Fertilizers (‘000’ Nutrient Tons)

Domestic % % % %
Year Import Total Off-take
Production Change Change Change Change
2007-08 2822 - 876 - 3698 - 3581 -
2008-09 2907 3.0 568 -35.1 3475 -6.0 3711 3.6
2009-10 3082 6.0 1444 154.2 4526 30.2 4360 17.5
2010-11 3076 -0.2 645 -55.4 3721 0.6 3933 -9.8
2010-11 P 2287 - 532 - 2819 - 3064 -
2011-12 P 2255 -1.4 1024 92.6 3279 16.3 2913 -4.9
Source: National Fertilizer Development Centre
P : Provisional (Jul-March)

ii) Improved Seed: requirement for sustainable agricultural growth and

food security. Effective use of improved and
Quality seed is also an essential input for
certified seed can result in higher agricultural
improving yield in Pakistan. Seed has a unique
production, which leads to increased net incomes
position among the other various agricultural
of farming families. This is the desired positive
inputs because the effectiveness of all other inputs
impact of improved seed for greater rural
depend primarily on the potential of the seeds.
development. Hence the availability of quality seed
Seed is a high technology product and is an
of improved varieties is essential to achieve
innovation readily adapted for Pakistan’s climate.
production targets.
Improving access to good quality seed is a critical

24
 Agriculture

During July-March, 2011-12 about 361.0 thousand
tons of improved seed of various Kharif/Rabi
season crops were procured. The procurement of
seeds for various Kharif crops (cotton, paddy,
maize, mung bean, etc) is currently underway. The
details of this procurement are demonstrated in
Table 2.13.
The Federal Seed Certification and Registration
Department (FSC&RD) is engaged in providing
seed certification coverage to public and private
sector seed companies of the country. It provides
seed quality control services through its 28 seed
testing laboratories as well as monitoring of seed
quality in the market. The activities and
achievements of the department during 2011-12
are described below:
` During the year 2011-12, forty-five (45) new
seed companies were registered, making the
total number of registered seed companies in
the country 774, which includes four public
sector and five multinational companies.
` Twenty-two (22) new crop varieties were
approved {(5) wheat, (11) cotton, (3) oilseeds,
(2) pulses and (1) fodder}.
` During 2011-12, different crops offered by the
various seed agencies, totaling 502.6 thousand
acres, were inspected for certification
purposes.
` A total quantity of 361.0 thousand MT seeds of
various corps were sampled and tested for
purity, germination and seed health purposes.
` Pre and post control trials of all pre-basic,
basic seed lots and 20 percent of certified seed
lots were carried out in the fields to determine
the quality of seed distributed by various seed
agencies.
` Under the provision of the Seed Act, five cases
were filed in different courts of law against the
seed dealers found selling substandard seeds.
` During 2011-12, a total of 13.7 MT of
imported seed of various crops and hybrids,
with a total value of Rs. 3287.6 million, was
tested under the Seed (Truth in Labelling)
Rules. 1991 at the port of entries i.e. Lahore
and Karachi.
` Almost 718 samples of seed and propagating
material of various vegetable and fruit crops
were tested at the Central Seed Testing
Laboratory, Islamabad for detection of fungal
and viral disease using latest diagnosis
techniques and protocols.

Table 2.13: Seed Availability* (Metric Tons)

Crop Local Imported Total
Wheat 319890.0 0.0 319890.0
Cotton 1649.8 0.0 1649.8
Paddy 22749.6 2657.1 25406.7
Maize 1372.9 3739.3 5112.2
Pulses 1189.0 0.0 1189.0
Oilseeds 23.5 328.7 352.2
Fodders 11.4 1473.6 1485.0
Vegetables 256.0 564.6 820.6
Potato 145.0 4963.6 5108.6
Total 347287.2 13726.9 361014.1
Source: Federal Seed Certification & Registration Department
* : July-March 2011-12

helps in increasing crop intensity, an aim Pakistan

iii) Irrigation
hopes to achieve throughout the country. Despite
Universally an efficient irrigation system is a pre- the existence of a good irrigation canal network in
requisite for higher agricultural production as it Pakistan, large amounts of water are wasted in the

25
Pakistan Economic Survey 2011-12

irrigation process because of improper lining of and winter season is presented in Table 2.14.
waterways. Rainfall recorded during the monsoon

Table 2.14: Rainfall* Recorded During 2011-12 (in Millimetres)

Monsoon Rainfall* Winter Rainfall*
(Jul-Sep) 2011 (Jan-Mar) 2012
Normal 137.5mm 70.5mm
Actual 236.5mm 34.2mm
Shortage (-)/excess (+) + 99.0mm -36.3mm
% Shortage (-)/excess (+) +72.0 % -51.4%
Source: Pakistan Meteorological Department
* : Area weighted

The canal head withdrawals in April-September

During the monsoon season, (July-September), 2011 increased by 13 percent and stood at 60.4
the normal average rainfall 137.5 mm, while million acre feet (MAF) as compared to 53.4 MAF
the actual rainfall received in 2011 was 236.5 during the same period last year. During the
mm, indicating an increase of 99.0 percent. second planting season, October-March, 2011-12,
During the winter, (January-March), normal the canal head withdrawals declined to 29.4 MAF,
average rainfall during this period is 70.5 mm compared to 34.6 MAF during the same period last
and the actual rainfall received in 2012 was year. The Province-wise details are given in Table
34.2 mm,, indicating a decrease of 51.4 2.15.
percent under the normal rainfall average.
Table 2.15: Canal Head Withdrawals (Below Rim Station) Million Acre Feet (MAF)
Kharif Kharif % Change in Rabi Rabi % Change in
Provinces (Apr-Sep) (Apr -Sep) Kharif 2011 (Oct-Mar) (Oct –Mar) Rabi 2011-12
2010 2011 over 2010 2010-11 2011-12 Over 2010-11
Punjab 29.00 34.29 18 18.73 17.61 -6
Sindh 22.61 23.29 3 14.51 10.13 -30
Balochistan 1.21 1.86 54 0.88 1.12 27
KPK 0.60 0.96 60 0.48 0.56 17
Total 53.41 60.40 13 34.59 29.42 -15
Source: Indus River System Authority

resources. The focus areas of investment in the

To address the water sector issues, strategies
and future water sector policy, an integrated
water resource management approach, guiding
principles of equity, efficiency, participatory
decision making, sustainability and
accountability have been adopted. The strategy
is focused on priority investments in the water
sector to achieve additional water storages and
reorganization for effective and responsive
institutional reforms. Water availability is
continuously diminishing. The challenge is to
formulate an effective implementation of a
comprehensive set of measures for the
development an efficient management of water
water sector are:
a. Augmentation of surface water resources by
construction of storage small/medium dams.
b. Conservation measures, or the lining of
irrigation channels, included modernizing and
rehabilitating irrigation systems, lining of
waterways and enhancing efficiency by
rehabilitating and improving the operation of
the existing system.
c. Protection of infrastructure from onslaught of
floods and water logging and Salinity.
d. Introduction of high efficiency irrigation
systems i.e. sprinkler and drip.

26
 Agriculture

It is expected about Rs. 30.00 billion would be following major water sector projects are
utilized on the water sector’s programmes under demonstrated in Table 2.16.
the Ministry of Water and Power for 2011-12. The
Table: 2.16: Major Water Sector Projects under Implementation
Projects Location Total Live Irrigated Latest Status
App.cost Storage Area (Expected up to June 2012)
(Rs. In (MAF) (Acres)
million)
Gomal Zam Dam Khyber 12,829 0.892 1, 91,139 75 % Physically completed
Pakhtunkhwa
Greater Thal Canal * Punjab 30,467 - 1,739,000 Phase-I, completed
(3 Phases)
Rainee Canal * Sindh 18,862 - 412,400 94 % Physically completed
(3 Phases) Phase-I
Kachhi Canal * Balochistan 31,204 - 713,000 62 % Physically completed
(3 Phases) Phase-I
Raising of AJ&K 62,553(O) 2.90 All over Physically completed
Mangla Dam 97,000 (B R) Pakistan
Satpara Dam Skardu 4,397 0.05 15,536 Physically completed
Multi- purpose
Right Bank Outfall
Drain (RBOD)
RBOD-I Sindh 14,707 88% Physically Completed
RBOD-II Sindh 29,014 65% Physically Completed
RBOD-III Balochistan 6,535 75% Physically Completed
Source: Planning & Development Division, Planning Commission
* Progress of all three canals is for Phase-I, whereas app. cost is reflected for total project, Revised cost of all three
canals is un-approved, submitted for approval to P&D Division

` Rs. 1,800 million is expected to be utilized on

Water Sector Programmes during (2011-12)
These programmes are:
` Completion of phase-I of the Greater Thal
Canal, substantial completion (60 percent) of
Kachhi Canal in Balochistan and Rainee Canal
(92 percent) in Sindh for irrigating 2.9 million
acres.
lining various irrigation channels in Punjab,
Sindh and Khyber Pukhtunkhwa during the
year 2011-12.
` An amount of Rs. 1,600 million is expected to
be utilized during the year 2011-12 on
improvement of existing irrigating system in
Punjab, Sindh, KPK and Balochistan.

` Completion of Mangla Dam Raising Project
for additional storage of 2.9 MAF and
additional power generation of 644 GWh.
` Completion of Satpara Dam in Gilgit Baltistan
for irrigation of 15,536 acres of agriculture
land and 17.3 MW power generations.
` Substantial completion of Gomal Zam Dam
Project in Tribal/ Khyber Pakhtunkhwa (KPK)
area for irrigation of 1, 91,139 acres of
agriculture land and generation of 17.4 MW
power
` More than Rs. 2.00 billion is expected to be
utilized on construction of new small to
medium sized dams across Pakistan; (Winder,
Darwat, Nai Gaj and Naulong dam).
` In Balochistan, about Rs. 3.00 billion are
expected to be spent on the construction of
new small, delay action dams and
improvement of existing irrigation system and
flood schemes.
` In the drainage sector, continued fast track
implementation of the RBOD-1, II & III
projects hope to protect and reclaim 4.90
million acres of irrigated land.

27
Pakistan Economic Survey 2011-12

iv) Agricultural Credit: The increasing demand for credit is due to an array
of factors, such as the rising pressure from the
The role of credit is instrumental in the agriculture
quickly expanding population. Credit on food
sector where Pakistani farmers often lack finances
resources and high prices of agriculture inputs, and
necessary for carrying out vital farming activities.
the reasonable prices of agricultural commodities
This issue, if not addressed, can cause a multitude
are attracting investment into Pakistan’s
of problems, ranging from the exploitation of poor
agriculture sector. The Agricultural Credit
farmers at the hands of informal sources of credit,
Advisory Committee (ACAC) has allocated an
to a slowdown in the adoption of modern farming
indicative agriculture credit disbursement target of
techniques and inputs, resulting in slow
Rs. 285 billion for 2011-12 as compared to the
development of this chief sector of our economy.
target of Rs. 270 billion; (fixed for last year and
The Government of Pakistan and the SBP is the actual credit disbursement of Rs. 263 billion
cognizant of the centrality of access to agriculture during 2010-11). Out of the total amount of
credit in the growth of the agriculture sector, and agricultural credit disbursed, Rs. 195.1 billion was
they have been making all efforts for the allocated to Commercial Banks, Rs. 70.1 billion to
promotion and development of agricultural finance ZTBL, Rs. 12.2 billion went to the Microfinance
in the country at affordable prices. As a result, the Banks, (five MFBs included since July 2011), and
flow of credit to agriculture sector from banks is Rs. 7.6 billion was allocated to the Punjab
showing improvement. A well-established network Provincial Cooperative Bank Limited (PPCBL).
of lending institutions operates to meet the During July-March, 2011-12 five major banks, as a
financial requirements of farmers in the rural areas. group, disbursed Rs 107.7 billion or 76.3 percent
Currently 26 commercial and microfinance banks, of their whole year’s targets. ZTBL disbursed Rs
with around 3,900 agriculture designated branches, 37.9 billion or 54 percent of its targets and
are facilitating farmers by extending agriculture Domestic Private Banks (DPBs) disbursed Rs 37.3
credit throughout the country. These include; ABL, billion or 69 percent of their targets. MFBs
Habib Bank Limited (HBL), Muslim Commercial disbursed Rs 8.5 billion or 69.9 percent of their
Bank (MCB), United Bank Limited (UBL), two target and the PPCBL disbursed Rs 6.0 billion or
specialized banks, viz, Zarai Tarqiti Bank Limited 79.1 percent of its allocated target.
(ZTBL), Punjab Provincial Corporative Bank
During the period July-March, 2011-12, bank
Limited (PCBL), and 14 private domestic banks.
disbursement to the agriculture sector surged by 17
Furthermore, five microfinance banks (MFBs) are
percent on a year-to-year basis to Rs 197.4 billion,
also providing financing to farmers. These banks
or 69.2 percent of the target, of Rs. 285 billion.
provide credit to the farming community for all
This goes in contrast to the disbursement of Rs
types of farming activities such as growing crops,
168.7 billion during corresponding period last year.
livestock, poultry, fisheries, orchards, forestry,
The details are presented in Table 2.17.
nurseries, apiculture and sericulture.
Table 2.17: Supply of Agricultural Credit by Institutions (Rs. in Billion)
Domestic Total
Commercial
Year ZTBL PPCBL Private MFBs
Banks Rs. Billion %Change
Banks
2006-07 56. 5 80.4 8.0 24.0 0.0 168.8 22.8
2007-08 66.9 94.7 5.9 43.9 0.0 211.6 25.3
2008-09 75.1 110.7 5.6 41.6 0.0 233.0 10.1
2009-10 79.0 119.6 5.7 43.8 0.0 248.1 6.5
2010-11 65.4 140.3 7.2 50.2 0.0 263.0 6.0
2010-11 P 37.4 93.3 4.4 33.7 0.0 168.7 -
2011-12 P 37.8 107.6 6.0 37.3 8.5 197.4 17.0
Source: State Bank of Pakistan.
P: Provisional (July – Mar)

28
 Agriculture

Box-1
Credit Disbursement to Farm and Non-Farm Sector
The sector-wise classification reveals that the share of the non-farm sector showed healthy growth and its share in
overall agriculture credit disbursement rose to 36.3 percent in March, 2012. During the period under review Rs
125.64 billion was disbursed to the farm sector while credit disbursement to non-farm sector stood at Rs 71.73
billion. Last year, an amount of Rs 110.46 billion or 65.5 percent was extended to farm sector and Rs 58.23 billion
or 34.5 percent was disbursed to non-farm sector.

2011-12 2010-11
Sector
July-March 2011 July-March 2010
A Farm Credit 125.64 110.46
1 Subsistence Holding 70.83 65.97
i Production 68.60 63.97
ii Development 2.23 2.82
2 Economic Holding 33.82 28.68
i Production 33.04 27.94
ii Development 0.78 0.74
3 Above Economic Holding 20.98 15.81
i Production 19.07 15.09
ii Development 1.91 0.72
B Non-Farm Credit 71.73 58.23
1 Small Farms 19.02 12.67
2 Large Farms 52.71 45.56
Total (A+B) 197.36 168.69
Source: SBP

employment generation at the rural level. It also

III. Forestry
During the year 2011-12, forests have contributed
92 thousand cubic meters of timber and 262
thousand cubic meters of firewood as compared to
91 thousand cubic meters timber and 261 thousand
cubic meters firewood in 2010-11.
IV. Livestock and Poultry
A. Livestock
The livestock sector occupies a unique position in
the National Agenda of economic development of
the present government. The sector provides a net
source of foreign earnings. Historically livestock
has been the subsistence sector dominated by small
holders to meet their needs of milk, food security
and daily cash income. Therefore, livestock is
considered a more secure source of income for the
small farmers and landless poor; and, is a source of
helps to reduce income variability, especially in
cases of crop failure due to a variety of causes.
Livestock is central to the livelihood of the rural
poor in the country and can play an important role
in poverty alleviation. It can uplift the
socioeconomic condition of Pakistan’s rural
masses. The livestock population for the last three
years is given in Table 2.18.
Livestock contributed approximately 55.1 percent
to the agricultural value added and 11.6 percent to
national GDP during 2010-12, against 54.6 percent
and 11.6 percent during the same period last year.
Gross value added of the livestock sector at
constant factor cost has increased from Rs. 672
billion (2010-11) to Rs. 700 billion (2011-12);
showing an increase of 4.0 percent as compared to
previous year.

29
Pakistan Economic Survey 2011-12

Table 2.18: Livestock Population (Million Nos.)

Species 2009-101 2010-111 2011-121
Cattle 34.3 35.6 36.9
Buffalo 30.8 31.7 32.7
Sheep 27.8 28.1 28.4
Goat 59.9 61.5 63.1
Camels 1.0 1.0 1.0
Horses 0.4 0.4 0.4
Asses 4.6 4.7 4.8
Mules 0.2 0.2 0.2
Source: Ministry of National Food Security & Research
1
: Estimated Figure based on inter census growth rate of Livestock Census 1996 & 2006

The major products of livestock are milk and meat. The production of these products for the last three
years is given in Table 2.19.

Table 2.19: Milk and Meat Production

Species Units 2009-101 2010-111 2011-121
Milk (Gross Production) 000 Tons 44,978 46,440 47,951
Cow " 15,546 16,133 16,741
Buffalo " 27,848 28,694 29,565
Sheep2 " 36 36 37
Goat " 739 759 779
Camel2 " 808 818 829
Milk (Human Consumption)3 000 Tons 36,299 37,475 38,690
Cow " 12,437 12,906 13,393
Buffalo " 22,279 22,955 23,652
Sheep " 36 36 37
Goat " 739 759 779
Camel " 808 818 829
Meat4 000 Tons 2,965 3,095 3,232
Beef " 1,655 1,711 1,769
Mutton " 603 616 629
Poultry meat " 707 767 834
Source: Ministry of National Food Security & Research
1: The figures for milk and meat production for the indicated years are calculated by applying milk production
parameters to the projected population of respective years based on the inter census growth rate of livestock census
1996 & 2006
2 : The figures for the Milk production for the indicated years are calculated after adding the production of milk
from camel and sheep to the figures reported in the livestock census 2006.
3 : Milk for human consumption is derived by subtracting 20% (15% wastage in transportation and 5% in calving)
of the gross milk production of cows and Buffalo.
4 : The figures for meat production are of red meat and do not include the edible offal’s.

The production of other livestock products over the last three years is demonstrated in Table 2.20.

Table:2.20 Estimated Livestock Products Production

Species Units 2009-101 2010-111 2011-121
Eggs Million Nos 11,839 12,457 13,144
Hides 000 No's 13,040 13,481 13,938
Cattle " 6,496 6,741 6,995
Buffalo " 6,445 6,640 6,842

30
 Agriculture

Table:2.20 Estimated Livestock Products Production

Species Units 2009-101 2010-111 2011-121
Camels " 99 100 101
Skins 000 No's 47,402 48,478 49,582
Sheep Skin " 10,495 10,620 10,745
Goat Skin " 23,061 23,685 24,237
Fancy Skin " 13,846 14,173 14,509
Lamb skin " 3,117 3,154 3,192
Kid skin " 10,728 11,019 11,318
Wool 000 Tons 42.0 42.5 43.0
Hair " 22.6 23.2 23.8
Edible Offal’s " 334 344 353
Blood " 56.8 58.3 59.8
Guts 000 No's 47,886 48,974 50,089
Casings " 13,879 14,347 14,832
Horns & Hooves 000 Tons 48.1 49.5 50.9
Bones " 713.4 735.1 757.5
Fats " 228.1 234.8 241.7
Dung " 1,008 1,039 1,071
Urine " 311 320 329
Head & Trotters " 208.2 214.0 220.1
Ducks, Drakes & Ducklings Million No’s 0.6 0.6 0.5
Source: Ministry of National Food Security & Research
1 ; The figures for livestock product for the indicated years were calculated by applying production parameters to
the projected population of respective years

Consequent of 18th Constitutional Amendment, the
subjects of animal health and production have been
delegated to the provinces. The Ministry of
National Food Security and Research created a
“Livestock Wing”, delegating the following roles:
1. Co-ordination of foreign aid and technical
assistance in the livestock sector and related
fields.
2. Animal Quarantine Departments/ stations/
facilities located anywhere in Pakistan.
3. Veterinary drugs, vaccines and animal feed
additives.
a. Import and export.
b. Procurement from abroad for federal
requirement and for interprovincial
supplies.
4. Livestock, poultry and livestock products;
a. Import and export.
b. Laying down national grades.
The population growth, increase in per capita
income and the potential for export is fueling the
demand of livestock and livestock products. The
rise in production cost has increased the retailer’s
and consumer’s price index for milk, yogurt, meat,
eggs, and other items. The overall livestock
development strategy resolves to foster “private
sector-led development”, with the public sector
providing an enabling environment through policy
interventions and playing a capacity building role
for improved livestock husbandry practices. The
emphasis will be on improving per unit animal
productivity and moving from subsistence to
market oriented and then to commercial livestock
farming in the country to meet the domestic
demand and surplus for export.
The Livestock Wing with its redefined mandate
continued regulatory measures that included
allowing import of high yielding animals, semen
and embryos for crossbreeding. It also included
duty free import of veterinary dairy and livestock
machinery/equipment, allowing import of feed
inputs, and vaccines at zero rates. In order to
reduce input costs in livestock/poultry feed
production, certain feed ingredients, growth
promoters and vitamin premixes have been zero
rated. Sales tax exemption has been allowed to

31
Pakistan Economic Survey 2011-12

uncooked poultry meat; processed milk, yogurt,
cheese and flavoured milk, butter and cream in
order to encourage establishment of a value added
industry in the country. More than 9500 exotic
animals, 318,768 semen doses and 4300 embryos
of high yielding animals have been imported in the
country from July 2010 to December 2012. New
slaughterhouses, milk processing and meat
processing units have been established in the
private sector. The export of the meat (beef,
mutton and camel meat) has increased from US
$108.54 million (2010-11) to US $123.61 million
in 2011-12, showing an increase of 13.9 percent.
The future plan for the livestock sector is to
persuade the policies to achieve 5 percent or more
growth in meat and 8 percent or more in milk
production through shifting from subsistence
livestock farming to market-oriented and
commercial farming. The focus will be to
encourage and promote high yielding animal’s
production and their crossbreeding through
Artificial insemination services. The future road
map has clear mile stones in the shape of entering
into global Halal Food Trade Market, controlling
trans-boundary animal diseases of trade and
economic importance, as well as a socio-economic
uplifting mechanism of poor, small-scale livestock
farmers.
Poultry
The poultry sector is one of the most organized and
vibrant segments of the agriculture industry of
Pakistan. This sector generates direct and indirect
employment and income for about 1.5 million
people. Its contribution in agriculture and livestock
is 6.4 percent and 11.5 percent, respectively.
Poultry meat contributes 25.8 percent of the total
meat production in the country. The current
investment in the poultry industry is about Rs
200.00 billion. The poultry sector has shown a
robust growth of 8 to 10 percent annually, which
reflects its inherent potential. The production of
commercial and rural poultry and poultry products
for the last three years is given in Table 2.21.

Table 2.21: Domestic/Rural & Commercial Poultry

Type Units 2009-101 2010-111 2011-121
Domestic Poultry Million No’s 77.35 78.51 79.68
Cocks " 9.58 9.84 10.10
Hens " 36.76 37.42 38.09
Chicken " 31.02 31.25 31.48
Eggs2 " 3676.00 3742.00 3809.00
Meat 000 Tons 102.40 104.43 106.51
Duck, Drake & Duckling Million No's 0.59 0.56 0.54
Eggs2 " 26.28 25.18 24.13
Meat 000 Tons 0.80 0.77 0.73
Commercial Poultry
Layers Million No's 30.41 32.54 44.10
Broilers " 493.40 542.74 34.82
Breeding Stock " 8.39 8.81 597.02
Day Old Chicks " 515.36 566.89 9.25
Eggs2 Million No’s 8137.00 8690.00 623.58
Meat 000 Tons 603.47 662.18 9281.00
Total Poultry
Day Old Chicks Million No’s 546.00 598.00 655.00
Poultry Birds " 610.00 663.00 721.00
Eggs " 11839.00 12857.00 13114.00
Poultry Meat 000 Tons 707.00 767.00 834.00
Source: Ministry of National Food Security & Research
1 ; The figures for the indicated year are statistically calculated using the figures of 2005-06.
2 : The figures for Eggs (Farming) and Eggs (Desi) are calculated using the poultry parameters for egg production.

32

Poultry Development policy envisions sustainable
supply of wholesome poultry meat, eggs and other
value added products to the local and international
markets at competitive prices. It is aimed at
facilitating and supporting private sector-led
development for sustainable poultry production.
The strategy revolves around improving the
regulatory framework; disease control and genetic
improvement in rural poultry; high tech poultry
production under environmentally controlled
housing; processing and value addition; improving
bio-security; need based research and development
and farmers training and education. It envisages
poultry sectors growth of 15-20 percent annually.
MEGA DEVELOPMENT PROJECTS
The Ministry of Livestock and Dairy
Development, before devolution concluded the
following (7) projects in the Livestock sector at an
estimated cost of Rs. 8.8 billion. The achievements
of these projects are summarized below:
Strengthening of Livestock Services Project
(SLSP)
` Field studies on (5) models of service delivery
were conducted (CAHEW, WLEW, DFCM,
Wool Producers Association, PRSM);
` Introduced PPR vaccine production in the
country;
` Distribution of 2200 Motor-Cycles to field
staff of provincial livestock departments on
hire purchase basis to strengthen and improve
the veterinary health coverage; and
` Established the National Epidemiology
Network for Livestock Disease Surveillance
and Reporting.
Livestock Production and Development for
Meat Production
` Completed more than 13,000 feed-lot fattening
operations (beef and mutton) in which more
than 163,000 beef animals and 200,000 mutton
animals have been produced.
Milk Collection Processing and Dairy
Production and Development Programme
Agriculture
` Formed 207 Milk Producer Groups (MPG) in
all the four provinces, Azad Jammu &
Kashmir and Gilgit Baltistan
` Installed 150 milk cooling tanks
` Provided 63.3 tons of fodder seeds and 663
tons of animal ration/feed on cost basis to the
members of MPGs
` Registered 1,004 Red Sindhi, Sahiwal and
NiliRavi livestock breeders for production of
quality breeding animals.
Prime Minister’s Special Initiative for Livestock
(PMSIL)
` A total of 290 veterinary clinics have been
established providing veterinary services at 70
percent reduced cost to rural farmers at their
door steps i.e. 100 percent achievement
` Quality medicines/vaccines are available to
rural farmer at 30 percent reduced cost as
compared to market prices
` A total of 3,150 community organizations
(COs) have been formed and 3000 rural
community persons have been trained by
imparting one month training in basic
veterinary services through the government
livestock institutes
` A total of 4,265 rural livestock female farmers
have been trained in better animal husbandry
practices to enhance their income through
enhanced milk productivity
National Programme for the Control and
prevention of Avian Influenza
` Established 40 surveillance and 66 rapid
response units (RRUs)
` Processed 0.4 million samples of blood, tissues
and swabs for screening against Avian
Influenza
` Establishment of the Bio security Laboratory-3
is under process
` Disbursed Rs. 23.5 million as compensation to
Avian Influenza affected farmers
` Pakistan is maintaining Avian Influenza (bird
flu) free status since June 2008
33
Pakistan Economic Survey 2011-12
Improving Reproductive Efficiency of Cattle
and Buffaloes in smallholder production
systems
` Civil work of Embryo Transfer Technology
Centre at Okara has been completed
` For strengthening and improvement of
Provincial Semen Production Units (SPU) 6
Semen Quality Analyzer (SQA-VB with Test
Kit) were given to SPU’s in Korangi, Quetta,
Khairimurat, Qadirabad, Harichand, and
Karaniwala
` Embryo Transfer Technology Centre has
produced 502,996 semen doses and 2,031
embryos from elite exotic animals for cross
breeding purposes and carried out 178,318
artificial inseminations, embryo transfer has
been carried out in 168 animals
` Provided training to artificial insemination
technicians
Up gradation and Establishment of Animal
Quarantine Stations in Pakistan
` A total of (5) Animal Quarantine Stations
(AQS) have been up-graded in order to
facilitate import/export of livestock and its
products
` A total of 2 new AQS are being established at
Khunjrab and Khokhrapar.
V. Fisheries
i) Fishery plays an important role in Pakistan’s
economy and is considered to be a source of
livelihood for coastal inhabitants. Apart from
marine fisheries, inland fisheries (based in
rivers, lakes, ponds, dams) are also a very
important activity throughout the country.
Fisheries share in GDP is 0.3 percent.
Although the contribution is very small it adds
substantially to the national income via export
earnings. A total of 84,498 million tons of fish
and fish preparation were exported during the
July-March, 2011-12. Pakistan’s major buyers
are China, Thailand, Malaysia, Middle East,
Sri Lanka and Japan. Pakistan earned US
$222.8 million from these exports.
ii) During July-March, 2011-12 the total marine
and inland fish production was estimated at
951,324 million tons, out of which 681,700
34
million tons was from marine production and
the remaining came from inland waters. In
July-March, 2010-11 the production was
estimated to be 937,082 million tons, where
672,652 m. tons was marine and the remaining
was produced by inland fishery sector.
iii) The government is taking a number of steps to
improve the fisheries sector. A number of
initiatives have been taken by the federal and
provincial fisheries departments which also
include strengthening of extension services,
introduction of new fishing methodologies,
development of value added products,
enhancement of per capita consumption of
fish, and the upgrading of socio-economic
conditions of the fishermen’s community.
iv) Modernized Fishing Fleets: A project for the
improvement of fish holds of local fishing
boats was approved and four local fishing
boats have been modified by the federal
government (Marine Fisheries Department) as
demonstration boats at a total cost of Rs. 5.0
million with the aim of assisting boat owners
to modify their boats on similar lines. As a
result of introducing modular boats by the
MFD, boat owners have started modifying boat
using their own expenses. So far, 502 boats
have been modified. This shows success in the
fishermen community because they have
accepted and are using the technology of lining
of fish holds with fiberglass coatings.
(v) Resumption of Export to the EU Countries
The European Union (EU) has expressed
satisfaction with most of the steps taken by the
government of Pakistan. However, with regard
to the Hazard Analysis Critical Control Point
(HACCP) of processing plants, the EU has
now asked for an inspection report. MFD, in
consultation with a UNIDO consultant,
submitted this report on December 31, 2011.
Based on this report it is hoped that fisheries’
exports will be resumed.
The export of fish and fishery products to the
European Union was suspended in April 2007.
The Government has made adequate and
effective efforts to resume of export to the EU.

In this connection, two laboratories of the
Marine Fisheries Department achieved
accreditation under ISO/IEC-17025
international standards and now the test report
of these laboratories are recognized all over the
world. Thus, the requirement of EU and SPS
has been fulfilled. As mentioned above, during
the tenure of the present government, more
than 500 fishing boats have been upgraded; the
government of Sindh contributed 75 percent,
while 25 percent contribution was made by the
owner to upgrade present standards.
Landing sites and auction halls at Karachi Fish
Harbour have also been upgraded; processing
plants have rectified the deficiencies. The
knowledge and skills of MFD inspectors under
official watch have been enhanced. Training
has also been provided to the fishermen on
hygienic preservation and handling of a catch
once it is onboard the fishing vessels.
v) Conservation and management of marine
resources
MFD in collaboration with fisheries
department of the government of Sindh,
Fisherman’s Cooperative Society Ltd, Karachi
Fisheries Harbour Authority and other
stakeholders undertook research/experimental
Agriculture
surveys to test different sizes of the cod-end of
trawl-net being used by local fishermen. The
optimal mesh size, on the basis of results of the
surveys, will be selected and notified for
implementation by the fishermen to ensure
juveniles and/or undersized fish cannot escape
from the trawl-net.
Conclusions
The agriculture sector continues to play a crucial
role in Pakistan’s economy. Currently it
contributes 21 percent to GDP, and provides
employment to 45 percent of the country’s labour
force, while 60 percent of the rural population
derives its livelihoods from this sector. Despite the
floods of 2011, the sector recorded a growth of 3.1
percent in 2011-12. The profitability of agriculture
sector during 2011-12, remained high because the
farmers received good prices for rice, cotton and
sugarcane, which allowed for greater financial
resources passed on to the rural economy.
Recognizing the vital role the sector plays in
ensuring food security, generating overall
economic growth, reducing poverty and the
transforming towards industrialization, the present
government is determined to support the sector by
promulgating policy that will continue to make
agriculture an efficient, productive and profitable
sector of the economy.
35
 Chapter 3

Manufacturing and Mining

3.1 Introduction Manufacturing (QIM) increased by 1.05 percent

against the target of 2.0 percent compared to
The manufacturing sector posted a growth rate of
growth of 0.98 percent during the same period last
3.56 percent during the current fiscal year July-
year. Due to revision of the base year as well as
March 2011-12 compared to 2.96 percent of the
new industries being added, it is not prudent to
same period last year. A modest improvement was
compare the performance of the LSM sector on the
seen in Large Scale Manufacturing (LSM) in July-
revised base against the official growth target of
March 2011-12 as the Quantum Index of
2.0 percent (Box-1).
Box-1
The methodology to compute Quantum Index of Manufacturing (QIM) has been revised during the current fiscal
year. This includes rebasing, addition of new industries and revision of weights. Important Changes can be gauged
from the table below.

Previous QIM Rebased QIM

• Base Year 1999-00 • Base Year 2005-06

• Weight derived from the Census of
Manufacturing Industries (CMI) 2000-01
• Cumulative weight of 75.075 percent for 100
items is being used for computation of QIM
• Weight derived from the Census of
Manufacturing Industries (CMI) 2005-06
using UN International Standard Industries
Classification (ISIC) Rev 3.1
• Cumulative weight of 70.332 percent for 112
items is being used for computation of QIM

Comparison of Weights
CMI 2000-01 CMI 2005-06
Sources No of Items Weights (%) Sources No of Items Weights (%)
MOIP/1 35 44.446 MOIP/1 36 49.556
/2 /2
OCAC 11 5.232 OCAC 11 5.410
BOS/3 54 25.397 BOS/3 65 15.366
All 100 75.075 All 112 70.332
/1
: Ministry of Industries and Production
/2
: Oil Companies Advisory Committee
/3
: Bureau of Statistics (Provincial)

37
Pakistan Economic Survey 2011-12

Statistics 65 items respectively have contributed in

The production data received from the Oil
LSM growth as -0.26 percent, 0.75 percent and
Companies Advisory Committee (OCAC)
0.55 percent.
comprising of 11 items, Ministry of Industries and
Production 36 items and the Provincial Bureau of

Fig 3.1: LSM Growth rates (Y-o-Y)

15.0

10.0
Growth rate

5.0

0.0

-5.0

-10.0

June-11
Oct-10
Jul-10

Aug-10

Jan-11

Feb-11

Oct-11
Sept-10

Nov-10

Aug-11

Nov-11

Jan-12

Feb-12
Mar-11

Apr-11

May-11

Sept-11
July-11

Mar-12
Dec-10

Dec-11
Source: Pakistan Bureau of Statistics

key industries (textile, fertilizer, steel, glass etc)

The growth rate in Large Scale Manufacturing
not operating at expected levels.
(LSM) has recovered, largely due to good
performance among the sub categories such as
LSM production began to revive in December
food, beverages and tobacco, paper and board,
2011 as the impact of flood began to subside. A
textile, non-metallic mineral products,
remarkable growth of 6.0 percent was witnessed in
pharmaceutical and leather products compared to
Feb-2012. This could also be attributed to the
negative growth seen during the second quarter of
beneficial effect of specific policies on large scale
the current fiscal year. The Year to Year positive
industry. Effective fiscal policy helped in
growth during the start of current fiscal year (July-
revitalizing the growth to some extent due to
Sep) can be partially attributed to export demand
reduction in duties on beverages, automobiles,
which has increased the production in the short
cement and air conditioners. This step was
run. Dismal performance was seen in the winter
necessitated in view of the costly input prices and
season (Oct-Dec) which was due to persistent gas
the need to absorb the volatility in the production
shortages. Moreover, agro-based industries which
of these industries. In addition, the growth in agro-
were recovering from the impact of the floods of
based industries was based on increase in cotton
2010, was again hit by another natural calamity in
(Punjab) and sugarcane production during the
the form of heavy rains in Sindh during August
current fiscal year. In March 2012, the year to year
2011. The cotton crop is most vulnerable to floods
performance of the sector turned negative by
and almost all major sugarcane producing districts
registering a decline of 3.7 percent owing to
were affected but losses to sugarcane were lower
prolonged power and gas shortages.
as the crop is relatively resilient to flooding. The
floods also damaged industrial supply networks Group-wise Performance
and rural demand and this coupled with severe
power and natural gas shortages led to a number of The group-wise analysis (Table 3.1) indicates
some of the groups in the Large Scale

38
 Manufacturing and Mining

Manufacturing (LSM) experienced a positive
growth during the first nine months (July-March)
of the current fiscal year. The groups showing
substantial increase include pharmaceutical (10.89
percent), paper and board (8.38 percent), wood
product (7.39 percent), food beverages and tobacco
(6.53 percent), non-metallic mineral products (2.87
percent), leather product (1.76 percent) and textile
(0.77 percent).

Fig 3.2: LSM growth rate (Annual Basis)

12.00 9.49
10.00
8.00 6.02
6.00
4.00 1.51
0.33 1.05
2.00
0.00
-2.00
-4.00 -5.98
-6.00
-8.00
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
(July-Mar)
Source: Pakistan Bureau of Statistics

The sectors showing a decline in production during improvement in some other external factors such
July-March, 2011-12 were iron and steel products as higher textile export, better marketing strategies
(28.47 percent), rubber products (24.63 percent), in smaller food processing industries and the
engineering products (10.19 percent), electronics government’s supportive policies for tractors,
(7.88 percent), coke and petroleum products (5.68 wheat milling and pharmaceutical industry.
percent), chemicals (4.70 percent), automobiles
(0.84 percent) and fertilizers (0.42 percent). The group wise growth and the contribution of
each of the LSM for the period July-March 2010-
The performance of LSM production for the 11 versus July-March 2011-12 is presented in
remaining period of 2011-12 augurs well due to the Table-3.1.
Table 3.1: Group-wise Growth and Points Contribution rate of LSM for the month of July-March 2011-12 vs.
July- March 2010-11
% Change % Point Contribution
S.No Groups Weights July-March July-March
2010-11 2011-12 2010-11 2011-12
1 Textile 20.91 0.7 0.8 0.15 0.16
2 Food, Beverages & Tobacco 12.37 14.0 6.5 1.73 0.81
3 Coke & Petroleum Products 5.51 -4.6 -5.7 -0.25 -0.31
4 Pharmaceuticals 3.62 1.3 10.9 0.05 0.39
5 Chemicals 1.72 -2.5 -4.7 -0.04 -0.08
6 Automobiles 4.61 11.9 -0.8 0.55 -0.04
7 Iron & Steel Products 5.39 -10.3 -28.5 -0.56 -1.53
8 Fertilizers 4.44 -9.2 -0.4 -0.41 -0.02
9 Electronics 1.96 -14.4 -7.9 -0.28 -0.15
10 Leather Products 0.86 17.4 1.8 0.15 0.02
11 Paper & Board 2.31 -2.3 8.4 -0.05 0.19
12 Engineering Products 0.40 -9.5 -10.2 -0.04 -0.04
13 Rubber Products 0.26 9.2 -24.6 0.02 -0.06
14 Non-Metallic Mineral Products 5.36 -9.6 2.9 -0.51 0.15
15 Wood Products 0.59 6.9 7.4 0.04 0.04
Source: Pakistan Bureau of Statistics

39
Pakistan Economic Survey 2011-12

juices, syrups and squashes (26.68 percent), heavy

Growth was mainly derived from consumer goods.
machinery & equipment (20.99 percent), sugarcane
Food and pharmaceuticals showed the strongest
machine (19.24 percent), electric tubes (17.86
contribution. In addition, intermediate goods such
percent), kerosene oil (14.56 percent),
as building materials, fertilizers and petroleum
liquids/syrups (14.09 percent), footwear (6.15
products posted a modest contribution in overall
percent) and LPG (3.44 percent).
LSM performance.
An Item wise review of production of selected
Some important items wise contribution in Large
items in Large Scale Manufacturing during July-
Scale Manufacturing growth witnessed in
March 2011-12 is presented in Table 3.2.
generating sets (143.88 percent), blankets (109.87
percent), electric transformer (31.15 percent),

Table-3.2 : Production of selected industrial items of Large Scale Manufacturing

July-March % Change % Point
S.No. Items Unit Weight
(Jul-Mar) Contribution
2011-12 (Jul-Mar) 2011-12
2010-11 2011-12
1 Deep Freezers (Nos.) 0.16 67380 35316 -47.59 -0.08
2 Jeep & Cars (Nos.) 2.80 101532 110430 8.76 0.25
3 Refrigerators (Nos.) 0.24 690236 737146 6.80 0.02
4 Upper Leather (000 sq.m.) 0.39 19324 18350 -5.04 -0.02
5 Cement (000 tones) 5.30 20814 21410 2.86 0.15
6 Liquids/Syrups (Milion Liters) 1.10 62.456 71.259 14.09 0.16
7 Phosphatic fertilizer (000 N tones) 0.40 385.313 359.344 -6.74 -0.03
8 Tablets (Milion Nos) 1.90 15848.369 17550.617 10.74 0.20
9 Cooking oil (000 tones) 2.20 228.649 228.834 0.08 0.00
11 Nitrogenous fertilizer (000 N tones) 4.04 1667.918 1674.972 0.42 0.02
12 Cotton Cloth (Million sq.m.) 7.20 764.480 769.600 0.67 0.05
13 Vegetable Ghee (000 tones) 1.10 816.924 829.434 1.53 0.02
14 Cotton Yarn (000 tones) 13.00 2200.41 2225.31 1.13 0.15
15 Sugar (000 tones) 3.50 3892.141 4485.592 15.25 0.53
16 Tea Blended (000 tones) 0.40 50.783 57.511 13.25 0.05
17 Petroleum products (Milion Liters) 5.50 8427.809 8046.298 -4.53 -0.25
18 Cigarettes (Billion Nos.) 2.10 47.458 45.674 -3.76 -0.08
19 Coke (000 tones) 0.10 218.824 138.616 -36.65 -0.04
20 Pig iron (000 tones) 1.58 326.675 195.81 -40.06 -0.63
Source: Pakistan Bureau of Statistics

The country has been faced with energy shortages high consumption trends remained the driving
due to which the utilization capacity remained low force in helping to stimulate revival. However,
(Box-2). Nevertheless capacity in the local alternate energy sources in the long run could help
industry and expected domestic demand based on to further foster growth in the industrial sector.

40
 Manufacturing and Mining

Box-2
LSM Data Annual Installed & Utilized Capacity of 37 Items
S.No Items Unit of Annual 2010-11 (July-June) 2010-11 (July-Jan)
Measure Installed Capacity % Age Capacity % Age
Capacity Utilization Utilization
1 Sugar Th. Tones 6,800 4,169 61.31 2,266 74.98
2 Cigarettes Min Nos 96,187 65,403 68.00 34,521 61.52
3 Cotton Yarn Th. Kgs 3,240,400 3,939,480 90.71 1,734,630 91.77
4 Cotton Cloth Th. M2 12,644,000 9,008,980 71.25 5,320,100 72.13
5 Jute Hessian Tones 24,000 18,218 75.91 10,986 78.47
6 Jute Sacking Tones 120,000 62,630 52.19 34,261 48.94
7 Jute Others Tones 36,000 12,326 34.24 7,041 33.53
8-11 Paper & Paper Tones
900,000 434,740 48.30 288,309 54.92
Board
12 Chip Board Tones 95,000 27,464 28.91 16,844 30.40
13 Sodah Ash Tones 500,000 378,048 75.61 214,135 73.42
14 Caustic Soda Tones 230,650 172,031 74.59 99,665 74.08
15-21 Fertilizer Tones 7,264,700 6,026,611 82.96 3,532,812 83.37
22 Glass Sheet Th.M2 71,000 13,342 18.79 8,107 19.57
23 Cement Th. Tons 41,484 28,716 69.22 16,421 67.86
24 Bicycles Nos 700,000 343,205 49.03 135,307 33.14
25 Coke Tones 970,000 301,701 31.10 106,647 18.85
26 Pig Iron/H. Metal Tones 1,230,000 433,104 35.21 158,230 22.05
27 Cast / Rolled Billet Tones 660,000 3,913 0.59 1,403 0.36
28 Hr. Coils/ Plates Tones 792,000 358,597 45.28 117,235 25.38
29 Cr. Coils Tones 210,000 87,946 41.88 16,628 13.57
30 Glav. Products Tones 100,000 2,720 2.72 - 0.00
31-33 Cars/LCVs/Jeeps Nos 280,000 153,997 55.00 94,076 57.60
34-35 Trucks/Buses Nos 25,000 3,300 13.20 1,715 11.76
36 Tractors Nos 75,000 70,855 94.47 14,896 34.05
37 Motor Cycles Nos 2,935,525 1,638,457 55.81 962,665 56.22
Source: Ministry of Industries and Production

3.2 Textile Industry
The textile industry plays a pivotal role in
Pakistan's economy. The contribution of the textile
industry in total exports is around 54 percent of the
total export earnings of the country. It is a labour-
intensive industry and offers entry-level jobs for
unskilled labour. Job creation, especially in the
clothing sector, has been particularly strong for
women, who previously had limited income
opportunities outside the household or the informal
sector. The textile and clothing industry accounts
for 46 percent of the total manufacturing and
provides employment to 38 percent of the
manufacturing labour force. The availability of
basic raw material for the textile industry i.e.
cotton, has played a significant role in the growth
of the industry because of which Pakistan has been
able to prove its strength in the world by sustaining
its position and growth.
Global Overview
The international statistics report on export of
textile and clothing trade indicates some signs of
recovery in this sector after the global financial
meltdown in 2008-09. The exports of textile and
clothing trade has increased from US$ 524.0
billion in 2009 to US$ 602.2 billion in 2010; an
increase of 14.7 percent. The export of Pakistan
textile and clothing trade has also shown positive
signs, increasing from US$ 9.9 billion in 2009 to
US$ 11.8 billion in 2010, an increase of about 20
percent.
In 2010 China became the major exporter of
textiles, pushing the European Union into second

41
Pakistan Economic Survey 2011-12

place. India recorded a 40 percent increase in its
exports of textiles in 2010 to become the third
largest exporting nation, just ahead of the United
States. China’s share in world exports of clothing
increased to 37 percent in 2010, rising from 18.3
percent in 2000, while its share in the country’s
total exports declined to 8.2 percent, from 14.5
percent in 2000. Among the major exporters of
clothing, India registered a decline of 3.1 percent.

Table 3.3: Export of Textile and Clothing (US $ Billions)

2000 2004 2005 2006 2007 2008 2009 2010
World Textile 157.3 195.5 202.7 220.4 240.4 250.2 209.9 250.7
World Clothing 197.7 260.6 276.8 309.1 345.8 361.9 315.1 351.5
Total:- 355.0 456.1 479.5 529.5 586.2 612.1 524.0 602.2

Pakistan Textile 4.5 6.1 7.1 7.5 7.4 7.2 6.5 7.8
Pakistan Clothing 2.1 3.0 3.6 3.9 3.9 3.9 3.4 3.9
Total 6.7 9.1 10.7 11.4 11.2 11.1 9.9 11.8
% Age of World Trade 1.88 2.01 2.23 2.15 1.91 1.81 1.88 2.00
Source: Ministry of Textile

Performance of Textile Industry

Domestic Overview
The textile industry of Pakistan has the potential to
Domestically Pakistan is facing problems of
perform better both in production as well as in
shortage of electricity, gas and law and order
export by virtue of its inherent competitiveness on
situation. The unscheduled/scheduled load
account of its conventional products. However, to
shedding along with increasing rates of gas and
sustain its position and increase its share and to
electricity have obstructed the viability of the
move into high value added products, large
textile industry as exporters are unable to meet
investments in machinery equipment and new
their commitments. Besides this, high interest rates
technology are essential. The training of workers,
of bank financing have also hindered new
improvement in labour productivity, research and
investments in the textile industry and layoffs and
development, product diversification and branding
closures have become common in the industry.
are the immediate areas to focus on. The export
performance of this industry is reported in Table
3.4.

Table 3.4: Export of Pakistan Textiles (US$ Millions)

2011-12
2006-07 2007-08 2008-09 2009-10 2010-11
(Jul-Mar)
Cotton & Cotton Textiles 10390 10071 9308 9754 13104 8513
Synthetic textiles 430 490 319 446 670 395
Wool & Woolen Textiles 233 216 145 137 132 95
Total Textiles 11053 10777 9772 10337 13906 9063
Total Exports 17011 19224 17782 19290 24827 16913
Textile as %age 65% 56% 55% 54% 56% 54%
Source: Ministry of Textile

3.2.1 Ancillary Textile Industry components are being produced both in the large-
scale organized sector as well as in the
The ancillary textile industry includes cotton
unorganized cottage/small and medium units. The
spinning, cotton cloth, cotton yarn, cotton fabric,
performance of these various ancillary textile
fabric processing, home textiles, towels, hosiery
industries is discussed below.
and knitwear and readymade garments. These

42
 Manufacturing and Mining

(i) Cotton Spinning Sector Clothing Sector

The spinning sector is the most important segment The pattern of cloth production is different from
in the hierarchy of textile production. At present, that of the spinning sector. Usually production of
as per the record of Textile Commissioner cloth in the mill sector is reported and the non-
Organization (TCO), it is comprised of 521 textile mills sector is not reported. For the non-mills
units (50 composite units and 471 spinning units) sector, therefore, estimated numbers are taken as
with 9.99 million spindles and 116 thousand rotors proxy. The production of cotton cloth has
in operation with capacity utilization of 89 percent increased substantially. This sector served as the
and 60 percent respectively, during July –March, main strength for the down stream sectors such as
2011-12. bed wear and made-ups and garments. The
following table presents the production and export
performance of the cloth sector.
Table 3.5: Production and Exports of Clothing sector
Production July-Mar July-Mar % age
(M. Sq. Mtrs.) 2010-2011 2011-2012 Change
Mill Sector 764.480 769.600 0.67
Non Mill Sector 5971.650 5975.850 0.07
Total 6736.130 6745.450 0.14
Cloth Exports
Quantity (M.Sq Mtr.) 1294.863 1412.963 9.12
Value (M.US$) 1716.300 1709.961 -0.369
Source: Ministry of Textile

(ii) Textile Made-up Sector tents and canvas, cotton bags, bed-wear, hosiery
and knitwear, and readymade garments including
This is the most dynamic segment of the textile fashion apparels. Export performance of the made-
industry. The major product groups are towels, up sector is presented in Table 3.6.

Table 3.6: Exports of Made-Ups

2011-2012 2010-2011 %
(July – Mar) (July-Mar) Change
Hosiery Knitwear
Quantity (M.Doz) 75.383 100.451 -24.96
Value (M.US$) 1216.120 1276.722 -4.75
Readymade Garments
Quantity (M.Doz) 19.741 25.455 -22.45
Value (M.US$) 1216.120 1276.722 -4.75
Towels
Quantity (M.Doz) 101.508 149.224 -31.98
Value (M.US$) 488.273 580.448 -15.88
Tents/Canvas
Quantity (M.Doz) 18.139 9.221 96.71
Value (M.US$) 67.406 29.260 130.37
Bed Wears
Quantity (M.Doz) 188.385 243.051 -22.49
Value (M.US$) 1356.656 1556.984 -12.87
Other Made up
Value (M.US$) 418.802 508.768 -17.68
Source: Ministry of Textile

43
Pakistan Economic Survey 2011-12

a) Hosiery Industry Table 3.8: Exports of Tent & Canvas Industry

(July– Mar) (July – Mar) %
There are about 12,000 knitting machines all over 2011-2012 2010-2011 Change
the country. There is greater reliance on this Quantity
18.139 9.221 96.71
industry due to the substantial value addition in (000 Doz)
knitwear. This sector has tremendous export Value
67.406 29.460 130.37
potential also. However the sector remained under (M.US$)
pressure from its competitors. Source: Ministry of Textile

Table 3.7: Export of Knitwear
(July – Mar) (July – Mar) %
2011-2012 2010-2011 Change
Quantity
75.383 100.451 -24.96
(000 Doz)
Value
1534.662 1726.139 -11.09
(M.US$)
Source: Ministry of Textile
b) Readymade Garment Industry
The garment industry provides highest value
addition in the textile sector. The industry
consisted of small, medium and large scale units
most of them having 50 machines and below.
Large units are now coming up in the organized
sector of the industry.
During July-March 2011-12, readymade garments
worth $ 1.2 billion were exported compared to $
1.3 billion in the comparable period of last year,
thus showing a decline of 4.8 percent. In quantity
terms the decline in the exports of readymade
garments was 22.5 percent.
c) Towel Industry
During July-March 2011-12, exports in this sector
stood at $ 488 million as against $ 580 million in
the comparable period of last year; showing a
decrease of 15.9 percent. Quantity exported
declined by 31.9 percent.
d) Canvas
This is the highest raw cotton consuming sector.
The production capacity is more than 100 million
sq. meters. This value-added sector also has great
potential for export. Nearly 60 percent of its
production is exported while 40 percent is
consumed locally mostly by the armed forces.
Pakistan is the cheapest source of tents and canvas.
iv) Art Silk and Synthetic weaving industry
The art silk and synthetic weaving industry has
developed as a cottage industry over the time based
on power looms. Units comprising of 0-10 looms
are spread all over the country. The major
concentration is in Karachi, Faisalabad,
Gujranwala and Jalalpur Jattan as well as in the un-
settled areas (Bara, Swat, Khyber Agency and
Waziristan). During 2011-12 (July-March),
production of synthetic fabric recorded at
1,311,550 million square meters as compared to
1,478,571 million square meters during the same
period last year, showing a decrease of 11.3
percent.
v) Woolen Industry
The main products manufactured by the woolen
industry are woolen yarn 6.864 M.kgs, acrylic yarn
6.960 M.kgs, fabrics 3,445 (M.sq.meter), shawls
13.353 million, blanket 657,235, and carpets 3.5
(M.Sq.meter). The exports of carpets during the
period July to Mar 2011-12 is as below Table 3.9.
Table 3.9: Exports of Carpets and Rugs (Woollen)
(July – Mar) (July – Mar) %
2010-2011 2011-2012 Change
Quantity
2.123 2.512 13.61
(M.Sq.Mtr)
Value (M.US$) 96.078 95.305 0.80
Source: Ministry of Textile
vi) Jute Industry
The main products manufactured by the jute
industry are jute sacks and Hessian cloth, which
are used for packing and handling of wheat, rice
and food grains. During 2011-12 (July-March), no
change has been recorded in spindles installed
capacity whereas single addition has been recorded
in the looms installed capacity compared to last

44
 Manufacturing and Mining

year. However, negative growth was observed in planning to prepare a growth strategy with active
the working capacity of both spindles and looms participation of all stakeholders in order to touch
during the current fiscal year. Table 3.10 shows the the export target of US$ 500 million by 2015.
installed and working capacity of the industry
during the period under review. The electric fan industry is mainly clustered in
Gujrat and comprises of more than 2,000 small and
Table 3.10: The installed and working capacity of medium enterprises. The industry is not only
jute industry fulfilling local demand for domestic fans of
(July – Mar) (July – Mar) % various categories but is also earning handsome
2010-11 2011-12 Change
Spindles
foreign exchange besides providing ample
36076 36076 0% employment opportunities. A number of measures
Installed
Spindles have been taken during 2011-12 and are currently
27697 24279 -12% underway to facilitate the industry to produce
Worked
Looms domestic fans at par with internationally accepted
1851 1852 0.1%
Installed standards. The Fan Development Institute (FDI) is
Looms also being updated with the cooperation of the
1129 1047 -7%
Worked Pakistan Council for Science and Industrial
Source: Ministry of Textile Research (PCSIR).

The production of jute goods for the period of July
– Mar. 2010-11 and 2011-12 was 92,666 M. ton
and 98,753 M. ton respectively, showing an
increase of 6.6 percent.
3.3 Other Industries
Although Pakistan’s exports are mostly
confined to cotton and textile products in the
international market, there are other industries
as well which progressed rapidly and also
contributed to the manufacturing sector.
3.3-1 Engineering Sector
The engineering industry in Pakistan has enjoyed
some success as a result of some really hard work.
The increasing competition that the international
market presents has been challenging. Engineering
Development Board (EDB) is the apex government
body entrusted with strengthening the engineering
base of Pakistan. Its main objective is to maintain
international standard in the field of engineering
goods and services. The EDB has taken initiatives
to boost the production of the surgical industry and
electric fan Industry.
The current capacity in the surgical sector is under
utilized. During 2011-12 (July-March), exports of
surgical goods and medical instruments reached
US$ 221 million compared to US$ 186.7 million
during the same period last year. The EDB is
In addition to projecting the engineering image of
Pakistan, the EDB has initiated the compilation of
the Engineering Goods and Services exporters
Directory of Pakistan 2012. The directory shall
have the complete profile of the Exporters and
shall be circulated to Pakistan’s Foreign Missions,
Foreign Chambers of Commerce and the EDB’s
International support partners in the potential
markets.
3.3-2 Automobile Industry
The four sectors of the automobile industry have
shown mixed trends of growth during the year
July-March 2011-12. The industry seems to be less
buoyant in comparison with the corresponding
period of last year 2010-11. Buses, cars, LCVs and
two/three wheelers managed to grow by 23
percent, 9.1 percent, 5.7 percent and 3.1 percent
respectively compared to 24.7 percent, 16.4
percent, 20.5 percent and 12.6 percent respectively
during the same period last year. A larger decline
was witnessed in tractor production which was
recorded at 48 percent compared to negative
growth of 2.2 percent.
During the start of the current fiscal year,
production of tractors declined substantially by
almost 70 percent after the imposition of the 16
percent general sale tax (GST) in April 2011.
Following the government’s announcement to cut
GST from 16 percent to 5 percent production

45
Pakistan Economic Survey 2011-12
figures have started to recover. The two other
components of the automotive industry such as
jeeps and trucks also showed dismal performance
Table 3.11: Production of Automotive Industry
Installed 2010-11
Products
Capacity (July-March)
Cars 240,000 100,870
LCVs 43,900
Jeeps 5,000
Buses 5,000
Trucks 28,500
Tractors 65,000
Two/Three Wheelers 1,800,000 602,268
Source: Pakistan Automotive Manufacturing Association (PAMA)
The potential demand for vehicles in the economy
is helping to grow the industry but it is highly
dependent on the long term policy commitments.
The term of the current Auto-industry
Development Program is expiring on June 30th
2012. The government’s commitment with the
industry would reflect in a new program which
may bring new hope and opportunities for growth.
It may be added that the forthcoming opening up
of trade with India would bring new opportunities
as well as challenges for the auto-industry and thus
a transformation is inevitable.
3.3-3 Fertilizer Industry
The fertilizer industry, being provider of one of the
key inputs for crop production, has significant
importance in the country’s economy. At the
beginning of 2011-12, it was assumed that the
country will attain self-sufficiency at least in urea
availability because of the operationalizing of two
new plants. This has added annual production
capacity of 1.8 million tonnes to the national
installed capacity taking it to 6.3 million tonnes per
annum. However, due to the curtailment of natural
gas (the raw material for urea manufacturing),
some urea plants produced substantially less than
their production capacity. As a result 1.6 million
tonnes of urea had to be imported by the
government during 2011-12 to meet the deficit.
Hence, in addition to spending foreign exchange
for imports, the government had to pickup the
price difference to equalize the prices of domestic
and imported urea; and for this purpose, it is
46
by registering negative growth of 44 percent and
6.8 percent respectively. The table given below
presents the comparative analysis of the sector.
2011-12 % Change
(July-March)
110,059 9.1
14,159 14,971 5.7
662 371 -44.0
357 439 23.0
2,031 1,893 -6.8
51,664 26,840 -48.0
620,741 3.1
estimated that the government spent around Rs. 45
billion as fertilizer subsidy in 2011-12.
The fertilizer sector is the second largest consumer
of gas after the power sector. Natural gas is used as
feedstock as well as fuel in the manufacturing of
nitrogenous fertilizers. Three companies namely
Sui Northern Gas Pipeline Limited, Sui Southern
Gas Company Limited and Mari Gas Company
Limited are providing gas to the fertilizer sector.
The intensity of the prevailing energy crisis
specifically in relation to the supply of natural gas
to supply curtailment (20 percent on Sui Network
plants and 12 percent on Mari Network) to the
fertilizer industry since May, 2010, has meant that
the winter load shedding has increased from
normal 45 days to 60 days. And on the SNGPL
system the rotational load management (shedding)
of 15 days for fertilizer plants has also been
observed. This policy of gas supply is adversely
affecting domestic production of fertilizer and
resulting in a price hike and increase in the import
bill. Smooth supplies of natural gas to urea plants
are essential to run the plants at 100 percent of
their installed capacity for making urea available
(as per requirement) at stable/affordable prices and
for avoiding its import.
3.3-4 Cement Industry
The cement production capacity in Pakistan has
increased to 44 million tonnes in 2011-12 from 30
million tonnes in 2006-07 due to the establishment
of new cement plants. Pakistan’s cement is being
exported to Afghanistan, India, Africa, and Middle

East. Export of cement is exempted from the Sales
Tax and Federal Excise Duty (FED). However, a
16 percent sales tax and the Rs. 500 per ton
Federal Excise Duty are being charged on the
domestic consumption. The import of coal used as
fuel for the cement plants is allowed at 0 percent
customs duty and 16 percent sales tax. As per the
investment policy of the government, the import of
Table 3.12: Supply (Million tonnes)
Years Production Capacity
Capacity Utilization(% age)
2006-07 30 80 %
2007-08 37 82 %
2008-09 42 75 %
2009-10 45 77 %
2010-11 41 76 %
2011-12
44 70%
(July-Dec)
Source: Ministry of Industries
3.5: Privatization Programme
Pakistan’s privatization program was initiated in
the early 1990s to demonstrate the government’s
high priority to private sector development.
Pakistan’s privatization program was the most
successful program in the whole of South Asia,
Central Asia and the Middle East as it successfully
managed to complete approximately 167
privatization transactions, generating revenue of
over US$ 9 billion.
The last privatization transaction completed by the
Privatization Commission was Hazara Phosphate
and Fertilizers Limited (HPFL) in November 2008.
Thereafter, the privatization program entered into
an extended lean period due to domestic and global
challenges. Domestically, unstable law and order
situation and negative economic outlook adversely
affected the investment climate in the country.
Internationally, the global financial crisis of 2008
and the on-going Euro zone sovereign debt crisis
affected the flow of investment into the country. It
may be noted that the privatization program cannot
be conducted in isolation and is highly dependent
on both the domestic and international regulatory,
financial, economic and political environment.
Despite the challenges, the government had re
invigorated the privatization program by focusing
Manufacturing and Mining
plant machinery and equipment for the
manufacturing sectors is allowed at 5 percent
customs duty. The key factors hindering the overall
production capacity of cement industry are the
energy crises and demand and supply mechanism.
Table-3.12 presents the production and utilization
capacity along with the total production of cement.
Local Market Export (Cement Total
(Cement) + Clinker) Production
21 3 24
22 8 30
20 11 31
23 11 34
22 9 31
11 4 15
on a policy of “Privatization for the People.”
Under this program a renewed focus is placed on
domestic capital market listings. Despite many
challenges, the Privatization Commission is
actively pursuing a capital market road map, which
includes a secondary public offering of Pakistan
Petroleum Limited and an Exchangeable Bond for
the Oil and Gas Development Company Limited.
The transactions will be launched in the near future
subject to market conditions.
The Privatization Commission, besides conducting
privatization through the capital markets, is also
exercising the traditional privatization mode i.e.
the strategic sale of two entities, the National
Power Construction Company (NPCC) and Heavy
Electrical Complex (HEC). The transactions are at
an advanced stage and the privatization process is
expected to be completed soon subject to market
conditions.
In addition, the Ministry has also initiated a
landmark program for empowerment of employees
of public sector entities in the form of the Benazir
Employees Stock Scheme (BESOS), offering 12
percent stock options to employees of 78 public
organizations. It is expected that approximately
500,000 employees of 78 SOEs will benefit from
this scheme. So far, Trusts have been registered in
64 entities. Out of these, Unit Certificates have
47
Pakistan Economic Survey 2011-12
been distributed to 142,756 employees of 50
entities. The total dividend received from the
Trusts of 11 entities stands at Rs. 6.79 billion
(approx.) out of which 50 percent has been
distributed among employees of respective entities
and the remaining 50 percent has been transferred
to the Central Revolving Fund (CRF) of the
Privatization Commission (PC). Buyback claims
received till date stand at Rs. 4.45 billion, out of
which Rs. 1.160 billion has been paid.
3.6: Small and Medium Enterprises
SME-led economic growth has become the
hallmark of economic prosperity and general well-
being in the world. SMEs are globally recognized
as critical for economic development and poverty
alleviation. In Pakistan, nearly 99 percent of
economic establishments are SMEs; absorbing 80
percent of unskilled labor. These SMEs are
collectively providing undeniable support to
economic growth by contributing 40 percent to
GDP and 30 percent to the exports from the
manufacturing sector. To further boost its
significance in the economic development process
the government has introduced various initiatives
to promote SME-led economic growth with the
dual aim to accelerate industrial development and
export diversification. Most important of these
initiatives include approval of the first SME Policy
of Pakistan and Infrastructural Development
through Public Sector Development Program. In
addition to these, SMEDA as a government agency
for SME development has been involved in various
activities such as providing over the counter
services to SMEs, helpdesk facilitation, human
resource development, technological up gradation
and infrastructural support.
Parallel to infrastructural support, SMEDA, in
collaboration with international agencies like Japan
International Cooperation Agency (JICA), Deutshe
Gesellshaft Fur Internationale Zusammenarbeit
(GIZ), Senior Experts Services (SES, Germany),
Asian Productivity Organization (APO) and local
experts, is providing technical assistance to SMEs
in the relevant industrial units to upgrade their
skills and improve systems.
During July-March 2011-12, 27 industrial units
have been the direct beneficiaries of this
48
programme; whereas, 16 technical training
workshops, seminars and awareness sessions were
conducted. Major sectors facilitated under the
Industry Support Programme are: textiles
(spinning, weaving processing, garments,
sportswear and apparel), auto parts, electric fans
sector and furniture sector across the country.
The factors that impede development of the SME
sector in Pakistan are well-known. However, lack
of support of concrete data and quantifiable
research are making the task of securing attention
of policy makers and key government stakeholders
difficult. During 2011-12, SMEDA took the
initiative of bridging this information gap through
publication of the SMEDA Research Working
Papers Series.
3.7: Mineral Sector
The production of minerals are important for the
growth of mineral based industries due to their use
in the other sectors of the economy such as energy
minerals-coal; agriculture minerals- rock
phosphate, gypsum; construction minerals-
limestone, natural stones, pozzolana etc. The most
significant benefits to be derived from an
expansion of the mineral sector activities are:
expansion of employment opportunities; expanding
business opportunities for local industries; increase
revenue flow to the provincial and federal
governments; technology transfer; and regional
infrastructure development.
Pakistan has a widely varied geological
framework, ranging from Pre-Cambrian to the
present that includes a number of zones hosting
several metallic minerals, industrial minerals,
precious and semi-precious stones.
The government has extended special incentives
for mineral development through public and
private investment and facilitating private sector to
contribute in this sector. To revive industrial
growth, a 100 MW power plant was established by
using Thar coal deposits based on underground
coal gasification, which would convert into 1000
MW power plant. Efforts are for exploration and
evaluation of coalfields in Sindh and Balochistan.
These studies are aimed at enhancing the coal
resource base, supplement power generation, and
 Manufacturing and Mining

substitute furnace oil in different industrial units in
the country.
The indigenous problems faced by this sector are
inadequate provision of the geological data base,
limited mining experience and inadequate capital
resources and finally the lack of infrastructure and
security in geological promising areas.
The future programmes in the sector are: Reko Diq
Cooper Gold Prospects; utilization of indigenous
Iron ore resources at Nokkundi and Dilband area;
exploring the hidden resources through
private/multinational investment and, up
gradation/strengthening of Geosciences advance
Research labs.

49
 Chapter 4
Fiscal Development
The importance of a prudent fiscal policy cannot
be overruled as it supports economic activity
through sustainable growth and poverty alleviation.
The effective implementation of the policy
endeavors to mobilize resources through taxes and
public savings, which can fund much needed
public goods and services. It also helps to correct
fiscal imbalances as well as promote investment
and growth by optimal allocation of resources and
through improving the tax system. Consequently, a
well structured fiscal policy ensures rapid
economic growth and development in the country.
The global financial crisis and the policy responses
of the governments around the world exemplified
the potential role for fiscal policy to stabilize the
global economy and to avert an employment
collapse of the type witnessed during the great
depression. However the current global economic
environment is characterized by a fragile financial
system, high public deficits and mounting debts.
Global output is expected to increase by only 3.5
percent in 2012 as compared to 4 percent in 2011
on account of the significant rise in sovereign
vulnerabilities and deteriorated financial conditions
in the advanced countries1. Going forward, the
emerging and developing countries are also
expected to witness sluggish growth due to the
worsening external environment and the
weakening of internal demand. Accordingly,
sustained adjustment, ample liquidity and easy
1
Global Economic Outlook , April, 2012
monetary policy and most importantly restoration
of confidence are urgently required for sustained
economic recovery.
Pakistan’s economy, which largely remained
impervious to the global financial crisis due to its
lower exposure to international finance, faced
multifaceted challenges on external and internal
fronts mainly campaign against extremism,
unstable law and order situation, lingering energy
shortages and non materialization of external
inflows. Additionally the unprecedented calamity
of floods in 2010 and torrential rain in Sindh in
2011 contributed further stress on the economy.
However, the fiscal situation was well contained.
Efforts to manage the fiscal deficit within
acceptable level through an expenditure
management strategy, austerity measures and
reforms in public sector enterprises (Box-1) have
yielded results. The fiscal deficit declined from 7.6
percent in FY08 to 5.9 percent in 2010-11. In
2011-12 the fiscal deficit was projected to be 4
percent of GDP (Rs. 851 billion). Nevertheless,
during the course of the period the projection for
fiscal deficit has been revised to 4.7 percent.
However, achievement of this revised target
depends crucially on the realization of the
envisaged surpluses from provincial governments,
the non-tax revenues which depends on inflows
into the Coalition Support Fund, and strict control
over expenditures.
51
Pakistan Economic Survey 2011-12

Box-1
Snapshot of Current Economic Reforms in Pakistan

The government has undertaken various economic and financial reforms for economic stabilization. These include:-

I. Expenditure Management Strategy through,

` Containing fiscal deficit
` Elimination of general subsidies, to be replaced by targeted subsidies
` Restructuring of public sector enterprises
` Power sector reform

II. Improving domestic resource mobilization through,

` Harmonization of tax administration
` Strengthening risk based audits
` Improving efficiency of tax administration
` Broadening of tax base

III. Achieving economic efficiency through devolution through,

` Transfer of concurrent subjects to provinces
` Equitable resource transfer to provinces

IV. Strengthening social safety nets through,

` Benazir income support program
` Bait-ul-Mal
` Disaster management

these measures an amount of Rs. 5.366 billion is

In order to maintain the budgetary allocation of the
expected to be saved during the financial year
development program a number of steps have been
2011-12. In addition, to create more fiscal space
initiated such as curtailing the expenditure on
through the expansion of the tax base, various tax
traveling allowance, stationery, entertainment,
measures have been taken such as an exclusive and
advertisement, repair/maintenance and utilities by
dedicated directorate general has been created
20 percent of the budget estimates. It is also worth
specifically for broadening of tax base (BTB). In
mentioning that as a part of the austerity measures,
this regard a nationwide BTB campaign is in
the federal government has implemented the
progress. Similarly sales tax exemptions and zero
“Compulsory Monetization of Transport Facility
ratings have been withdrawn for all major items
for Civil Servants in BS-20 to BS-22” which will
except food items, health, education and
be help to save Rs. 1.3 billion per annum. From
agricultural produce (Box-2).

Box-2
Revenue Measures
The government introduced reform initiatives through presidential ordinance and withdrawal of SRO based
exemptions; amendments were made in the Sales Tax Act, 1990, Income Tax Ordinance, 2001 and Federal Excise
Act, 2005. These measures were effective from 15th and 16th March, 2011 to meet the growing need of flood
affected people and to reach the assigned target. These reforms include:

` 15 percent surcharge on income and advance taxes

` Increase in the rate of special excise duty from 1 percent to 2.5 percent, however special excise duty was
abolished in 2011-12

52
 Fiscal Development

` Withdrawal of special regime of assessable price for levy of GST at 8 percent on actual value of sugar
` Removal of SRO based exemptions from fertilizer, pesticides, tractor and elimination of zero rating from
plants, machinery and equipment
` Restriction of zero rating to registered person for export of textile, leather, carpets, sports goods and
surgical goods.
Source: FBR

discourages well documented investment and

These measures yielded a total of Rs. 29.4 billion
during 2010-11. The withdrawal of exemptions
and the left over amount of 15 percent flood relief
surcharge contributed an additional amount of
around Rs. 50 billion during July-March, 2011-12.
Fiscal Policy Development
Tax as a major source of revenue and growth plays
a vital role in building up institutions and markets.
A good tax system not only helps in equitable
distribution of economic benefits for social justice
but also attracts investment at all levels of business
activities. The absence of an efficient tax system
compels the country to rely on continuous
borrowing from internal and external sources to
finance the budgetary deficit, which may crowd
out private investment. For more than a decade
now the low tax to GDP ratio has been a major
economic issue confronting Pakistan. The overall
tax to GDP ratio has varied between 9.5 to 11.4
percent mainly due to structural deficiencies in the
tax and administration system. Pakistan is
characterized as having the lowest tax to GDP ratio
not only amongst the peer countries but also in the
region.

Table 4.1: Fiscal Indicators as Percent of GDP^

Year Overall Expenditure Revenue
Real GDP
Fiscal Total Non-
Growth Total Current Development Tax
Deficit Rev. Tax
FY01 2.0 4.3† 17.4 15.3 2.1 13.1 10.5 2.6
FY02 3.1 4.3† 18.5 15.7 2.8 14.0 10.7 3.3
FY03 4.7 3.7 18.8 16.2 2.6 14.8 11.4 3.4
FY04 7.5 2.3 16.5 13.7 2.8 14.2 11.0 3.2
FY05 9.0 3.3† 16.8 13.3 3.5 13.8 10.1 3.7
FY06 5.8 4.3*† 18.4 13.6 4.8 14.1 10.5 3.6
FY07 6.8 4.4 20.6 15.8 5.0 14.9 10.2 4.7
FY08 3.7 7.6 22.2 18.1 4.4 14.6 10.3 4.4
FY09 1.7 5.3 19.9 16.0 3.8 14.5 9.5 5.1
FY10 3.1 6.3 20.3 16.8 3.5 14.0 10.1 3.9
FY11 3.0 5.9 19.2 16.1 2.8 12.5 9.5 3.1
FY12B 3.7 4.0 18.0 14.4 3.6 13.9 10.4 3.5
Notes ^: The base of Pakistan’s GDP has been changed from 1980-81 to 1999-2000, therefore, wherever GDP appears
in denominator the numbers prior to 1999-2000 are not comparable.
† : Statistical discrepancy (both positive and negative) has been adjusted in arriving at overall fiscal deficit numbers.
* : Include earthquake related expenditure worth 0.8 and 0.5 percent of GDP for 2005-06 and 2006-07 respectively.
B : Budgted

However, the government is committed to increase
this ratio by introducing various additional tax
measures such as: monitoring and risk based audit,
strengthening electronic payment, close watch on
Afghan transit trade and recovering arrears etc.
These measures helped the FBR to collect Rs.
1,558 billion during 2010-11 against Rs. 1,008
billion in 2007-08. FBR Tax collection has shown
a significant growth of 54.6 percent since 2007-08.
For the current fiscal year 2011-12, the target of
Rs. 1,952.0 billion has been set; which is expected
to be achieved as the total collection during first

53
Pakistan Economic
E Surrvey 2011-122

ten monthhs of 2011-12

2 stood at Rs.. 1,426.0 billiion againstt Rs. 1,149..8 billion inn the compaarable
excludingg Rs 19 billion of sales tax
t on servicces period of last yearr. This is ann increase off 24.0
collected by the Sin ndh Revenuee Board (SR RB) percentt.

Fig-4.1: Fisccal Deficit

23
22
21
20
Total Revenues

Expendiitures
19
18
17 Fiiscal Deficit
16
15
14
R
Revenue
13
12
FY00 FY01
1 FY02 FY0
03 FY04 FY
Y05 FY06 F
FY07 FY08 F
FY09 FY10 FY11 FY12B

On thee revenue sidde the tax too GDP ratio either

Despite thhe numerous challenges the t country has h
remainned stagnant or showed a secular deecline.
faced sinnce 2001 including the continued and a
Conseqquently the budget
b deficiit widened during
d
intensifiedd security isssues, the fisccal position last
l
the passt four years. However, it was
w well conttained
year in terms
t of key y fiscal indiicators such as
during fiscal year 2010-11
2 desppite the challlenges
revenues, expenditurees and the fiscal defiicit
faced due to thee flood andd security reelated
indicates a notable chaange. Table 4.14 suggests thhat
expendditures.
as a perccentage of GDP G the total expendituures
remained in a narrow w band durinng the last five fi
On thee other hand the expenditture to GDP ratio
years. Deespite the larg ge demands for governmeent
witnesssed a simillar pattern to t that for total
spending on subsidies (electriccity subsidiees),
expendditures; showwing an overrall decline since
interest paayments, secu urity and floood related issuues
2007-008. The declline in total expendituree (3.0
(rehabilitaation and reconstruction) the governmeent
percenttage points of
o GDP) is shared by cuurrent
has succcessfully brought
b dowwn the tootal
expendditure (2 perrcentage poinnts of GDP)) and
expendituures from 22.2 2 percent of GDP
G in 2007--08
developpment expendditure (1.6 peercentage points of
to 19.2 peercent in 20110-11. These are expectedd to
GDP) during the pastp four yeears. During July-
decline too 18.0 perceent in fiscal year 2011-12.
March,, 2011-12 perriod total exppenditures stoood at
Every efffort has been n made to prootect the PSD DP
Rs. 2,6641.9 billion against Rs. 3,721.2 billioon set
program, which not on nly gives imppetus to poveerty
for thee fiscal yearr 2011-12. During
D the period
p
reduction but alsso creates employmeent
under review totall revenues werew Rs. 1,,747.0
opportuniities. During the current fiscal year Rs. R
billion against thee budgeted estimates off Rs.
300 billion were allocated byy the fedeeral
2,870.55 billion.
governmeent to the PSDP and noo cut has beeen
imposed. During the first nine months of the t The fisscal deficit haas declined from
fr 7.6 perceent in
current fiiscal year (Juuly-March, 2012)
2 about Rs.
R 2007-008 to 5.9 perccent in 2010-11 on accouunt of
219 billiion committed for the Public Secctor reductiion in develoopment expennditure. The fiscal
Developm ment Program m (PSDP) hass been released. deficit witnessed considerable deviation
d froom its
This accoounts 73 per cent
c of the tottal allocationn of originaal target due to some struuctural deficieencies
Rs. 300 biillion.

54
 Fiscal Developpment

in the taxx system, larg

ge additional subsidies to thet 4 perceent to 4.7 perccent of GDP.
electricityy sector andd support too public secctor
enterprisees (PSEs). However,
H the government is Structu
ure of Tax Revenues
R
committedd to contain n the fiscal deficit throuugh An effficient tax system is vital for raaising
several measures
m t economy on
as well as to put the sufficieent revenuues to fi
finance esssential
a high grrowth trajecto ory. These innclude austerrity expendditures withouut recourse too excessive public
p
measures,, broadening of the tax base through tax t sector borrowing. At present the t country has
h a
measures,, elimination of subsidiess (specially the t narroww tax base, massive tax t evasion and
power secctor subsidiess), restructurinng public secctor adminiistrative weakknesses due to the challlenges
enterprisees and powerr sector refoorms. Howevver, faced ini the impleementation off an efficiennt and
the massive floods in 2010 and 20011 have put an effectivve tax system
m. Although revenue colleection
enormouss strain on public
p financces due to thet has inccreased in recent years, thee tax to GDP ratios
unexpecteed expenditurres to meet thhe rehabilitatiion a 9.8 perceent (Table 4.2).
varied between 8.6 and
and recoonstruction needs
n and resulted
r in the
t
upward addjustment in the fiscal defficit target froom

Fig-4.2: FBR
F Tax Rev as
a % of GDP

10.0

9.5
Percent

9.0

8.5

8.0
2001-02 2002-03 2003-04
4 2004-05 2005-06 2006-07 2007-08 2008-0
09 2009-10 20
010-11 2011-12B
B

Table 4.2: Structure of Federal Tax Revenue

R (Rs. Billion)
B
Year Tax Revv as % Diirect Indirect Taxess
Total (FBRR)
of GD
DP Taaxes Cusstoms Saales Exccise Tootal
124.6 65.0 153.6 49.1 267.7
2000-01 39
92.3 9.4
[31.8] {24.3} {57.4} {18.3} [68.2]
142.5 47.8 166.6 47.2 261.6
2001-02 40
04.1 9.2
[35.3] {18.3} {63.7} {18} [64.7]
151.9 68.8 195.1 44.8 308.7
2002-03 46
60.6 9.6
[33.0] {22.3} {63.2} {14.5} [67.0]
165.1 91.0 219.2 45.6 355.8
2003-04 52
20.9 9.2
[31.7] {25.6} {61.6} {12.8} [68.3]
183.4 115.4 238.5 53.1 407.0
2004-05 59
90.4 8.9
[30.1] {28.4} {58.6} {13.0} [68.9]
225.0 138.4 294.8 55.3 488.5
2005-06 71
13.5 9.4
[31.5] {28.3} {60.3} {11.3} [68.5]
2006-07 84
47.2 9.7 333.7 132.3 309.4 71.8 513.5

55
Pakistan Economic Survey 2011-12

Table 4.2: Structure of Federal Tax Revenue (Rs. Billion)

Year Tax Rev as % Direct Indirect Taxes
Total (FBR)
of GDP Taxes Customs Sales Excise Total
[39.4] {25.8} {60.3} {14.0} [60.6]
387.9 150.7 377.4 92.1 620.2
2007-08 1,008.1 9.8
[38.5] {24.3} {60.9} {14.9} [61.5]
443.5 148.4 451.7 117.5 717.6
2008-09 1,161.1 9.1
[38.2] {20.7} {62.9} {16.4} [61.8]
526.0 160.3 516.3 124.8 801.4
2009-10 1,327.4 9.0
[39.6] {20.0} {64.4} {15.6} [60.4]
602.5 184.9 633.4 137.4 955.7
2010-11 1,558.2 8.6
[38.7] {19.3} {66.3} {14.4} [61.3]
745.0 215.0 852.0 140.0 1207.0
2011-12B 1,952.0 9.5
[38.2] {17.8} {70.6} {11.6} [61.8]
Source: Federal Board of Revenue
[ ]as % of total taxes
{ } as % of indirect taxes

Under the present tax system, some sectors are
under-taxed and others are not taxed at all. This
distortion is being addressed. Moreover, the
internal tax system has undergone substantial
changes as the share of income tax has risen
significantly from around 32 percent in 2000-01 to
38.2 percent in 2011-12. On the other hand the
composition of taxes has been rationalized with a
gradual decrease in the dependence on foreign
trade taxes and a simultaneous increase in GST.
Customs and excise duties have registered a
gradual decline on account of the tax and tariff
reforms with excise and custom comprising only
8.5 percent and 10.6 percent respectively in 2011-
12. Pakistan’s tax to GDP ratio stood at around 8.6
percent in 2010-11 and expected to be about 9.5
percent of GDP in 2011-12. The indirect tax to
GDP ratio stood at around 5.3percent and direct
tax to GDP ratio at around 3.3 percent in 2010-11.
During July-April, 2011-12 indirect tax to GDP
ratio stood at 4.3 percent and direct tax to GDP
ratio recorded at 2.6 percent. The ratio can only be
increased substantially if the major contributors to
GDP growth not included in the tax net can be
brought into the tax system.
Tax Reforms
The low tax-to-GDP ratio restricts the country’s
ability to counter inflation, deliver quality public
services or improve human resources to reach a
take-off stage for economic development. To
address this issue and others including debt
servicing and defense needs, the government has
placed Tax Administration high on its reform
agenda.
Reform Strategy
The reform strategy had three main planks (a)
policy reforms, (b) administrative reforms and (c)
organizational reforms. The policy reforms include
simpler laws, universal self-assessment,
elimination of exemptions, less dependence on
withholding taxes and effective dispute resolution
mechanism. The administrative reforms aim (i) to
transform income tax organization on functional
lines; (ii) re-engineer manual processes of all taxes
with the aim to reduce face to face contact between
taxpayers and tax collectors, increase effectiveness
of FBR, and improve skills and integrity of the
workforce and facilitation of taxpayers. The
organizational reforms also included re-
organization of the FBR on functional lines,
reduction in number of tiers and reduction in the
workforce.
In pursuance of tax reforms FBR has been re-
structured on functional lines. With a view to
supplement the level of skills in the FBR, the
government in March-April, 2001 appointed
professional members from private sector for (i)
Human Resource Management (HRM), (ii)
Information Management System (IMS), (iii)
Audit, (iv) Facilitation and Taxpayers Education
(FATE) and (v) Fiscal Research and Statistics
(FR&S). The FBR has prepared a new recruitment
policy (with greater emphasis on skills that match

56
 Fiscal Development

FBR needs), incentive and merit based
remuneration and promotion mechanism and
extensive training. FBR through its reform
program is strengthening audit and enforcement
activities.
Broad objectives of reforms included overall
increase in the revenue collection/tax-GDP ratio,
broadening of the tax base, strengthening audit and
enforcement procedures, guarantee fairer and more
equitable application of tax laws, increase in
transparency and integrity, facilitate and promote
voluntary compliance with tax laws and provide
transparent and high quality tax services.
To achieve reforms objectives, the FBR has
established Large Taxpayer Units (LTUs) and
Regional Tax Offices (RTOs) to test the re-
organized structure of income tax and sales tax and
Taxpayers Education and Facilitation Centers to
improve voluntary compliance. Customs processes
have been re-engineered and Customs
Administration Reform (CARE) was started which
has minimized the time of clearance of goods and
reduced the cost of doing business. Facility for
online filing of goods declarations and a website
for information dissemination and helpline for
taxpayers have been established (see Box-3).

Box-3
Major Achievements under TARP
General
• Gaining stakeholders respect.
• Creating business friendly environment.
• Introducing professionalism, integrity, teamwork, courtesy, responsiveness, transparency and
fairness.
• Facilitating and providing service to the taxpayers.
• Reducing the cost of doing business.
• Moving towards optimum use of automation and IT.
• Infused confidence among taxpayers through regular facilitation and tax education which has
bridged the gap between taxpayers and tax collectors.
• Creation of an enabling environment for various stakeholders
Income Tax

• Self Assessment Scheme introduced.

• Improved voluntary compliance and number of compliant taxpayers increased to more than 2.5
million.
• Efficiency of the department improved with the introduction of working on functional basis.
• Computerized and updated taxpayers profiles.
• Reduced contact between tax officials and taxpayer.
• Tax base widened.
• Simplification of Income Tax Law, Rules and Forms.
• Share in total Revenue collection increased.
Automation

a. Integrated Tax Management System (ITMS)

• 100% e-filing of corporate income tax returns.
• 100% e-filing of Sales Tax returns.
• 100% e-filing of sales tax invoice summaries.
• E-Registration.
• E-Payment.
• E-Notices and feedback to taxpayers.

57
Pakistan Economic Survey 2011-12

• Risk based refund processing (Pilot Project).

• Audit case selection through Nexus Business Intelligence System.

b. Customs Automation
• E-filing, paperless workflow and risk based selectivity.
• Nationwide e-filing.
• Post Clearance Audit (PCA) introduced.
• Electronic access to consolidated data to different stake holders.
• System based random marking of examiners and appraisers.
• Availability of country wide referential import value data.
• On-line Bank Payment System (24 NBP nation wide booths).
• Elimination of GD filling fee.
Source: FBR

Review of Public Expenditure the budgeted subsidy of Rs. 166.4 billion set for
the current fiscal year 2011-12 stood at Rs. 103
Public expenditures are significant for provision of
billion (excluding Rs. 391 billion on account of
social services, economic stabilization and growth.
debt consolidation). It is expected to increase
However, in Pakistan, public expenditures
further on account of a settlement of circular debt
remained under tremendous pressure during 2011-
issue. The permanent solution of the circular debt
12 owing to flood related expenses, continued
issue requires the rationalization of electricity tariff
security related issues and higher subsidies. During
and improving the overall efficiency of the energy
July-March, 2011-12, actual disbursement against
sector.

Table 4.3: Trends in Components of Expenditure (as % of GDP)

Revenue
Total Current Interest Defence Development Non Interest Primary
Deficit/
Expenditure Expenditure Payments Expenditure Non- Fiscal deficit
Year Defence Exp Deficit
Surplus
(TR-NI
(TR-Total
(A) (B) (C) (D) (E) (A-C-D) Exp)
CE)
1999-00 18.5 16.4 6.8 3.9 2.5 7.7 5.4 -3.0 1.7
2000-01 17.0 15.3 5.9 3.1 2.1 8.0 4.3 -2.2 2.0
2001-02 18.5 15.7 6.1 3.3 2.8 9.0 4.3 -1.7 1.6
2002-03 18.4 16.2 4.8 3.3 2.6 10.0 3.7 -1.4 1.2
2003-04 16.9 13.7 4.0 3.3 2.8 9.7 2.3 0.3 1.1
2004-05 17.2 13.3 3.4 3.2 3.5 10.5 3.3 0.5 0.0
2005-06 18.4 13.6 3.4 3.2 4.8 11.8 4.3 0.5 -0.8
2006-07 20.6 15.8 4.4 2.9 5.0 13.3 4.3 -0.9 -1.3
2007-08 22.2 18.1 5.0 2.7 4.4 14.5 7.6 -3.5 -2.6
2008-09 19.9 16.0 5.2 2.6 3.8 12.1 5.4 -1.5 -0.2
2009-10 20.3 16.8 4.5 2.5 3.5 13.3 6.3 -2.7 -1.8
2010-11 19.2 16.1 4.0 2.5 2.8 12.7 5.9 -3.5 -2.6
2011-12B 18.0 14.4 3.8 2.4 3.6 11.8 4.0* -0.5 -0.3
B Budgeted
* Budgeted number is revised to 4.7 percent of GDP

58
 Fiscal Development

Total expenditures (TE) stood at Rs. 3,455.1
billion or 19.2 percent of GDP in 2010-11 as
compared to Rs. 3,006.7 billion or 20.3 percent of
GDP in 2009-10. It is worth mentioning that
despite the unplanned expenditures due to flood
related activities at the start of the current fiscal
year, the expenditures as percent of GDP remained
at 12.8 percent (Rs. 2,641.9 billion) during July-
March 2011-12. Total expenditures are expected to
decline by 18.0 percent.
fall in interest payments. Defense expenditures
accounted for 15.5 percent of current expenditure
in 2010-11. As a percentage of GDP defense
expenditures were 2.5 percent in 2010-11 and are
likely to remain slightly below this level in 2011-
12. However in absolute terms defense expenditure
rose to Rs. 450.6 billion during 2010-11 from Rs.
375.0 billion in 2009-10. Nevertheless the budget
target is set at Rs. 495.2 billion for 2011-12 which
is around 2.4 percent of GDP.

Current expenditures (CE) are expected to remain Fiscal Performance: July-March, 2011-12
at 14.4 percent of GDP in fiscal year 2011-12.
At present Pakistan is confronting unsustainable
During fiscal year 2010-11, current expenditure
fiscal deficits and unabated debt service charges on
were Rs. 2,900.8 billion or 16.1 percent of GDP
account of both external and internal challenges
compared to Rs. 2,481.0 billion or 16.8 percent of
including electricity and gas outages that have
GDP in 2009-10. The decline came from non-
restricted the overall growth of the economy.
interest-non-defense spending. During July-March,
Similarly insufficient external inflows have
2011-12 current expenditures stood at Rs. 2,154.1
resulted in increased reliance of government on
billion or 10.4 percent of GDP compared to Rs.
domestic resources. It is, therefore, important to
1,909.8 billion or 10.6 percent of GDP in the same
revamp the strategies of domestic and external
period of fiscal year 2010-11.
financial resource mobilization through tax and
non-tax instruments.
Development expenditures in fiscal year 2010-11
remained at Rs. 506.1 billion or 2.8 percent of
Pakistan has witnessed a sharp deterioration in
GDP as compared to Rs. 517.9 billion or 3.5
fiscal indicators during the past few years due to
percent of GDP in 2009-10. In the current fiscal
the revenue-expenditure gap. The fiscal situation
year's budget, the allocation for development
was further aggravated by the domestic and
expenditure is 3.6 percent of GDP. The share of
external imbalances together with the deteriorating
current expenditure in total expenditure has
security environment, persistent inflationary
declined significantly from 89.9 percent to 84
pressures, unprecedented floods in 2010 and
percent in 2010-11. These are expected to decline
massive rains in 2011.
further by 4 percent due mainly to the substantial

Table 4.4 Consolidated Revenue & Expenditure

Budget Prov. Actual Prov. Actual Growth (%)
Estimate July-March July-March July-March
2011-12 2010-11 2011-12 2011-12
A. Total Revenue 2,870.5 1,495.3 1,747.0 16.8
a) Tax Revenue 2,151.2 1,117.6 1,379.2 23.4
Federal 2,074.2 1,074.8 1,321.5 23.0
of which FBR Revenues 1,952.0 1,020.1 1,280.4 25.5
Provincial Tax Revenue 77.0 42.8 57.6 34.6
b) Non-Tax Revenue 719.3 377.7 367.9 -2.6
B. Total Expenditure 3,721.2 2,262.6 2,641.9 16.8
a) Current Expenditure 2,976.3 1,909.8 2,154.1 12.8
Federal 2,016.3 1,345.7 1,478.7 9.9
- Interest 791.0 507.4 624.5 23.1
- Defence 495.2 335.1 348.0 3.8
Provincial 960.0 564.1 675.4 19.7
b) Development Exp. & net lending 744.9 352.7 428.0 21.3

59
Pakistan Economic Survey 2011-12

Table 4.4 Consolidated Revenue & Expenditure

Budget Prov. Actual Prov. Actual Growth (%)
Estimate July-March July-March July-March
2011-12 2010-11 2011-12 2011-12
PSDP 639.9 246.5 375.6 52.4
Other Development 97.1 35.7 45.4 27.2
c) Net Lending 7.9 70.5 6.9 -90.2
C. Overall Fiscal Deficit 850.6 783.3 894.9 14.2
As % of GDP 4.0 4.5 4.3 -4.4
Financing of Fiscal Deficit 850.6 783.3 894.9 14.2
i) External Sources 134.5 83.1 47.4 -43.0
ii) Domestic 716.1 700.1 847.5 21.1
- Bank 412.6 316.4 443.8 40.3
- Non-Bank 303.5 383.8 403.7 5.2
GDP at Market Prices 21,042 18,033 20,654 14.5
Source: Budget Wing, Finance Division and FBR

the major challenges to the economy due to the

According to the consolidated revenue and
expenditure statement of the government, total
revenues grew by 16.8 percent during July-March
2011-12 and stood at Rs. 1,747.0 billion compared
to Rs. 1,495.3 billion in the same period of fiscal
year 2010-11. The increase is mostly due to a
significant rise in FBR tax collection, which
increased by 25.5 percent during the period under
review. On the other hand non tax revenue
declined by 2.6 percent as it stood at Rs. 367.9
billion in July-March 2011-12 from Rs. 377.7
billion in the same period last year. Total
expenditures were recorded at Rs. 2,641.9 billion
during July-March; 2011-12 compared to Rs.
2,262.6 billion in the same period last year posted
a growth of 16.8 percent. External resources for
financing the budget deficit amounted to Rs. 47.4
billion - a net decline of 43 percent. Insufficient
external financing shifted greater reliance on
domestic resources to finance the budget deficit
during July-March, 2011-12. The fiscal deficit as a
percentage of GDP stood at 4.3 percent against 4.5
percent during the same period of fiscal year 2010-
11.
FBR Tax Collection
FBR tax collection for the fiscal year 2011-12 was
targeted at Rs. 1,952 billion which was higher by
25.3 percent over the actual collection of Rs. 1,558
billion during 2010-11. During July-April, 2011-12
net collection stood at Rs. 1,426.0 billion despite
dearth of electricity and gas. This reflects 24.0
percent growth over Rs. 1,149.8 billion collected
during the same period last year (Table:4.5).
Direct Taxes
The gross and net collection of direct taxes has
registered growth of 31.3 percent and 22.6 percent
respectively during the first ten months of 2011-12.
The gross and net collection increased from Rs.
462.9 billion and Rs. 431.3 in July-April, 2010-11
to Rs. 607.8 billion and Rs. 528.9 billion
respectively during July-April, 2011-12. Major
revenue spinners of direct taxes are withholding
tax, voluntary payments and collection on demand.
Indirect Taxes
During July-April 2011-12, the gross and net
collection of indirect taxes has witnessed a growth
of 23.1 percent and 24.9 percent respectively. It
has accounted for 62.9 percent of the total FBR tax
revenues.
Within indirect taxes, growth in sales tax increased
by 33.7 percent. The gross and net sales tax
collection during July-April 2011-12 reached Rs.
673.0 billion and Rs. 635.1 billion respectively,
showing growth of 30.6 percent and 33.7 percent
respectively over the corresponding period of
2010-11. Of the net collection, 44.8 percent of total
sales tax was contributed by sales tax on domestic

60
 Fiscal Development

goods and services during July-April, 2011-12,
while the rest was derived from imports. Within
net domestic sales tax collection, the major
contribution came from POL products, telecom
services, natural gas, fertilizer, other services,
sugar, cigarettes, beverages, cement and electrical
energy. On the other hand POL products, plastic,
edible oil, fertilizers, iron and steel, vehicles,
machinery, organic chemicals and oilseeds
contributed significantly to the collection of sales
tax from imports.

Table 4.5: FBR Tax Revenues Rs Billion

2010-11 2011-12 July-April % Change Achievement
Change (Actual) (B.E) 2010-11 2011-12 (Percentage)
A. DIRECT TAXES
Gross 462.9 607.8 31.3
Refund/Rebate 31.6 78.9
Net 602.5 745.0 431.3 528.9 22.6 71.0
B. INDIRECT TAXES
Gross 766.5 943.4 23.1
Refund/Rebate 47.9 46.2
Net 955.7 1,207.0 718.6 897.2 24.9 74.3
B.1 SALES TAX
Gross 515.3 673.0 30.6
Refund/Rebate 40.3 37.9
Net 633.4 852.0 475.0 635.1 33.7 74.5
B.2 FEDERAL EXCISE
Gross 102.2 95.8 -6.3
Refund/Rebate 0.0 0.2
Net 137.4 140.0 102.2 95.6 -6.5 68.3
B.3 CUSTOM
Gross 149.0 174.6 17.2
Refund/Rebate 7.6 8.1
Net 184.9 215.0 141.4 166.5 17.8 77.4
TOTAL TAX COLLECTION
Gross 1,092.3 1,551.2 42.0
Refund/Rebate -57.6 125.1
Net 1,558.2 1,952.0 1,149.9 1,426.1 24.0 73.1
Source: Federal Board of Revenue (FBR)

Custom duty collection has registered a growth of
17.2 percent and 17.8 in both gross and net terms.
The gross and net collection has increased from
Rs. 149.0 billion and 141.4 billion during July-
April, 2010-11 to Rs. 174.6 billion and Rs. 166.5
billion respectively during July-April, 2011-12.
The major revenue spinners of custom duty have
been automobiles, edible oil, petroleum products,
machinery, plastic, iron and steel, paper and
paperboard, textile materials and organic
chemicals.
collection stood at Rs. 95.6 billion during July-
April 2011-12 as against Rs. 102.2 billion during
the same period last year. The major revenue
spinners of FED are cigarettes, cement, beverages,
natural gas, POL product and services.
Provincial Budget
The total outlay of the four provincial budgets for
2011-12 stood at Rs. 1,435 billion; 21.7 percent
higher than the outlay of Rs. 1,179 billion last year

A negative growth of 6.5 percent has been

recorded in the net collection of Federal Excise
Duties (FED) during July- April, 2011-12. The net

61
Pakistan Economic Survey 2011-12

Table 4.6: Overview of Provincial Budgets (Rs Billion)

Punjab Sindh KPK Baluchistan Total
Items 2010-11 2011-12 2010-11 2011-12 2010-11 2011-12- 2010-11 2011-12 2010-11 2011-12
RE BE RE BE RE BE RE BE RE BE
A. Total Tax Revenue 502.6 625.4 310.6 359.4 160.2 195.4 100.5 111.5 1073.9 1291.7
Provincial Taxes 39.0 48.6 32.7 35.0 3.3 3.6 1.2 1.3 76.2 88.5
Share in Federal Taxes 463.6 576.8 277.9 324.4 156.9 191.8 99.3 110.2 997.7 1203.2
B. Non-Tax Revenue 26.0 20.6 12.4 19.9 5.4 5.9 2.8 3.5 46.6 49.9
C. All Others -7.5 21.2 11.3 17.9 37.6 23.9 3.8 -0.2 45.2 62.8
Total Revenues (A+B+C) 521.1 667.2 334.3 397.2 203.2 225.2 107.1 114.8 1165.7 1404.4
a) Current Expenditure 387.6 434.8 281.2 283.1 139.5 149 74.3 90.6 882.6 957.5
b) Development 138.7 220.0 65.6 141.1 65.0 85.1 27.1 31.4 296.4 477.6
Expenditure
i) Rev. Account 81.4 127.2 3.9 51.7 10.3 13.1 0.0 0.0 95.6 192.0
ii) Cap. Acount 57.3 92.8 61.7 89.4 54.7 72.0 27.1 31.4 200.8 285.6
Total Exp (a+b) 526.3 654.8 346.8 424.2 204.5 234.1 101.4 122.0 1179 1435.1
Source: Provincial Finance, Budget Wing

Punjab witnessed the highest increase of 24.4
percent in budgetary outlay, followed by Sindh
(22.3 percent), Baluchistan (20.3 percent) and
KPK (14.5 percent). The overall provincial
revenue receipts for 2011-12 are estimated at Rs.
1,404 billion, which is up by 20.5 percent
compared to last year. During 2010-11 provincial
revenues witnessed a growth of 34 percent
compared to 20.4 percent in 2009-10.

Table 4.7: 4- Years Overview of Provincial Budget Growth Rates (%) Rs. Billion
Items 2007-08 2008-09 2009-10 2010-11 FY10 FY11
A. Total Tax Revenue 504.1 612.0 697.3 1,073.9 13.9 54.0
Provincial Taxes 50.3 57.3 68.6 76.2 19.7 11.1
Share in Federal Taxes 453.8 554.7 628.8 997.7 13.4 58.7
B. Non-Tax Revenue 59.6 58.0 56.7 46.6 -2.2 -17.8
C. All Others 48.2 52.9 116.2 45.2 119.7 -61.1
Total Revenues (A+B+C) 611.9 722.8 870.2 1,165.7 20.4 34.0
a) Current Expenditure 497.5 688.9 704.8 882.6 2.3 25.2
b) Development Expenditure 262.0 314.0 291.8 296.4 -7.1 1.6
Total Exp (a+b) 759.5 1,002.9 1,357.7 1,179.0 35.4 -13.2
Source: Provincial Finance, Budget Wing

effective tool to improve efficiency in the public

The accelerated growth in revenues was mainly
sector and to stimulate economic growth. This
due to the increase in the provincial share in
devolution refers to the devolution of
federal revenues under the 7th NFC award. On the
responsibilities for public spending and revenue
other hand the consolidated fiscal balance
collection from the central to the local
deteriorated during July-March, 2011-12 and stood
governments.
at Rs. 65 billion compared to Rs. 115 billion
recorded in the same period of 2010-11. The
In 2010 the government took a major step towards
growth in total expenditure has outpaced the
fiscal decentralization by signing 7th National
significant growth in revenues.
Finance Commission (NFC) award between the
federal government and provincial governments
Allocation of Revenues between the Federal
and by passing 18th Constitutional Amendment.
Government and Provinces
This has not only allowed the transfer of more
Fiscal decentralization, or the transfer of fiscal funds but also widen the range of responsibilities
power from the national government to the sub from the federation to the provinces.
national governments, is considered to be an

62
 Fiscal Development

Table 4.8: Transfers to Provinces (NET) (Rs. Billion)

2008-09 2009-10 2010-11 2011-12B
Divisible Pool 477.4 574.1 834.7 1,043.9
Straight Transfer 82.4 81.2 163.0 159.4
Special Grants/ Subventions 40.6 82.0 54.1 55.4
Project Aid 26.3 16.0 21.9 38.2
Program Loans 0.0 0.0 0.0 16.6
Japanese Grant 0.0 0.0 0.1 0.9
Total Transfer to Province 626.8 753.3 1,073.7 1,313.7
Interest Payment 18.5 18.7 18.5 15.6
Loan Repayment 21.0 24.0 32.4 27.2
Transfer to Province(Net) 587.3 710.6 1,022.8 1,270.9
Source: Budget in Brief, 2011-12

Under the 7th NFC award, the financial autonomy
of the provinces has been ensured by increasing
their share in the divisible pool from 50 percent to
56 percent in 2010-11 and 57.5 percent from 2011-
12 onwards. The distribution of the resources has
been made on multi–weighted criteria which
consist of population (82 percent),
poverty/backwardness (10.3 percent), revenue
collection/generation (5.0 percent) and area or
inverse population density (2.7 percent). While the
share of the federal government in the net proceeds
of the divisible pool stood at 44 percent in 2010-11
and 42.5 percent from 2011-12 onwards. Total
transfers to provinces have been projected to
increase to Rs. 1,270.9 billion; an increase of 24.3
percent in 2011-12 over the actual transfer of Rs.
1,022.8 billion in 2010-11.
Priorities Committee meeting was headed by an
Additional Finance Secretary (Budget) and would
discuss only the development budget in detail. The
MTBF reform, has upgraded the committee which
is now chaired jointly by the Secretary Finance,
Secretary Planning and Secretary Economic
Affairs Division. The committee now discusses
both the recurrent and development budgets with
increased focus on policy priorities.
The Output Based Budget (OBB) has also been
institutionalized in the federal government which
presents policies of the ministries in the shape of
goals, outcomes, outputs and medium-term
budgets. The OBB also presents key performance
indicators for the outputs to introduce government
wide monitoring system.

Medium Term Budgetary Framework Similarly the MTBF reform program has drafted
the Public Finance Act to legalize the MTBF
The MTBF has improved the budget preparation
reform program. Also, the reform program is
process. Firstly, the medium-term fiscal framework
working with the Planning Commission to
and budget policies have been incorporated into a
implement strategic planning processes in line
medium-term Budget Strategy Paper on rolling
ministries and introduce an Apex Monitoring and
basis, which include medium-term indicative
Evaluation function in the government to monitor
budget ceilings for the recurrent and development
service delivery and outcomes. The reform
budgets, and provides an opportunity to discuss the
program is also interacting with PIFRA (Project to
budget between the technical and political levels
Improve Financial Reporting and Auditing) to
prior to the presentation of the annual budget. The
introduce SAP based budgeting in the line
political level involvement includes cabinet,
ministries.
Standing Committees on Finance & Revenue, and
political parties. In addition to the above, the following important
developments have been initiated as part of the
Secondly, the Priorities Committee has been
reform program:
upgraded. Before the reform program, the

63
Pakistan Economic Survey 2011-12
` The Priorities Committee, which would only
discuss project funding prior to the MTBF has
been upgraded and is chaired by Secretary
Finance, Secretary Planning and Secretary
Economic Affairs Division. The upgraded
Priorities Committee discusses policy priorities
of the Principal Accounting Officers together
with medium-term budgets.
` The Budget Strategy Paper (BSP) is discussed
with Parliamentary Standing Committees on
Finance and Revenue. This process improves
parliamentary input into the budgeting
processes of the government.
` The Budget Strategy Paper (BSP) is discussed
with political parties, economic advisory
council and chambers. This allows greater
focus on strategic economic and budgeting
agenda of the government.
Conclusion
Fiscal policy has the potential of playing a crucial
role in spurring economic growth and poverty
64
alleviation. Pakistan’s economy has fared well in
terms of fiscal deficit in the recent past, reducing
deficit from 7.6 percent in FY08 to 5.9 percent in
2010-11. In fiscal year 2011-12 the fiscal deficit
was projected to be 4 percent of GDP (Rs. 851
billion). Nevertheless, during the course of the
period the projection for fiscal deficit has been
revised to 4.7 percent. Various external factors
contributed to this revision, for instance, growing
burden from the campaign against extremism,
domestic security concerns, energy shortages,
unprecedented natural disasters, and upheaval in
the global economy. However, government efforts
to contain the fiscal situation were effective and
fiscal deficit has remained within acceptable level
through an expenditure management strategy,
austerity measures and reforms in public sector
enterprises. The achievement of the revised deficit
target depends crucially on the realization of the
expected surpluses from provincial governments,
the non-tax revenues which depend on inflows into
the Coalition Support Fund, and strict control over
expenditures.
 Chapter 5

Money and Credit

Pakistan’s monetary policy aims at stabilizing
economic growth through a number of channels. It
influences the future expectations of economic
activity and inflation. A sound fiscal position is
important for achieving macroeconomic stability.
This occurs through efficient resource allocation
and the mobilization of domestic savings. Because
of this, the central bank through its monetary
policy and strategies plays an influential role.
The global financial crisis that erupted in late 2007
not only produced the severe worldwide economic
contraction, it has also hampered the ability of
central banks to successfully manage the economy.
In reaction to the crisis, markets of developed
economies responded in a variety of ways, such as
creating measures aimed at specific sectors, as well
as more general stimulus packages aimed at
keeping financial institutions buoyant. On the other
hand, economic activity in emerging and
developing economies remained relatively
vigorous on account of strong internal demand.
The global economic activity rebounded in 2010
on the back of better macroeconomic performance
and continued accommodative macroeconomic
policies. Unfortunately, performance slowed later
in the year because countries with large public and
private debt burdens faced serious problems
accessing sovereign debt markets. Consequently,
heightened concerns about long term debt
sustainability in various parts of the world have
posed additional risks, not only to financial
stability, but also for the ability to access safe
assets.

Box 1
High Demand for Safe Assets
There is a potential threat to global financial stability due to high demand for safe assets. The threat has been driven
up on account of heightened uncertainty, regulatory reforms and the extraordinary post-crisis responses of central
banks in the advance economies. The supply of safe assets has contracted as the ability of the public and the private
sectors to produce such assets has declined. Similarly, the number of countries whose debt is considered safe has
fallen. Lack of safe asset scarcity will increase the price of safety and compel investors to move down the safety
scale. It will also lead to more short-term spikes in volatility, and shortages of high-grade collateral.

There is a need for flexibility in policy design and implementation for a smooth adjustment in the markets for safe
assets. Hence policy makers should strike a balance between the desire to ensure the soundness of financial
institutions and the costs associated with potential overly rapid acquisitions of safe assets to meet such goals.

Global Financial Stability Report, April 2012. IMF.

security risks, power shortages and a high cost of

Pakistan’s financial sector has not witnessed a
doing business posed numerous challenges for
direct impact of the global financial crisis due to its
Pakistan’s economy. Consequently, all these
limited exposure in international financial markets.
factors along with the global financial crisis caused
However, high inflationary pressures, heightened
a deceleration in the investment rate, a rise in

65
Pakistan Economic Survey 2011-12
unemployment and poverty, an increase in the debt
burden, and a sharp fall in foreign exchange
reserves. Moreover, the dearth of financial inflows
resulted in a sharp diversion of credit away from
the private sector. As a consequence, monetary
policy remained under enormous pressure to strike
a balance between supporting growth and keeping
inflation under watch.
The devastating floods in 2010 and heavy rains in
Sindh in 2011 once again brought on a plethora of
challenges. The government’s efforts to contain
the fiscal deficit were undermined by the
significant rise in federal and provincial
government’s expenditures in favor of
rehabilitation and reconstruction activities.
Moreover, the less than expected external inflows
intensified fiscal stress. In addition, changes in
key export and import prices in the international
markets and the fragile global economic recovery
are also affecting domestic economic conditions.
Despite the challenges faced by the economy due
to flood and security related issues Pakistan holds
enormous potential and resilience. This was
evident when the fiscal deficit remained within
reasonable limits, (i.e 5.9 percent of GDP in 2010-
11). The year to year CPI inflation was also
recorded at 10.8 percent in March 2012 against 13
percent in the same period of the previous year.
Table 5.1: Policy Rate
Effective from Date
21-Apr-09 14.0
17-Aug-09 13.0
25-Nov-09 12.5
30-Jan-10 12.5
27-Mar-10 12.5
02-Aug-10 13.0
30-Sep-10 13.5
30-Nov-10 14.0
01-Aug-11 13.5
10-Oct-11 12.0
30-Nov-11 until date 12.0
Source: State Bank of Pakistan
Monetary Policy Stance
The continuation of sound monetary management
is central to taking on the multifaceted challenges
faced by any economy as it deals with major issues
of price stability, control of money supply and
rationalization of administered interest rate. In
66
Pakistan, monetary management has mainly
focused on controlling inflation. Inflation has
persistently remained in double digits in the last
few years on account of difficult domestic and
external economic environment. Similarly, the
heavy reliance on domestic borrowings in the
absence of diversified and sustainable financing
sources has constricted the availability of credit to
the private sector. Furthermore, dried up external
financing and insufficient funds from non-bank
sources resulted in short-term borrowing from the
banking system. Consequently, the banking
sector’s exposure to government papers has
increased significantly.
Given the difficult economic situation, the State
Bank of Pakistan (SBP) followed a proactive
policy response to shave-off additional demand
from the economy. It has also accommodated the
fiscal deficit. The SBP adopted an expansionary
monetary policy during the fiscal year 2011-12. It
slashed the discount rate by 50 bps points to 13.5
percent from 14 percent on the back of an
improved fiscal position. The decision continued to
show progress, as the consumer price index (CPI)
and government borrowings from the Central Bank
remained lower than its level at the end of June.
However, the rate was further reduced by 150 bps
points to 12 percent on October 8th, 2011, in order
to boost to private sector credit and investment.
Similarly, for a smooth functioning of a payment
system and financial stability, SBP has injected
substantial short term liquidity in the system.
Nevertheless, risks to macroeconomic stability due
to fiscal weakness and decline in foreign inflows
have not retreated. The power crisis and the
precarious law and order situation are still an
impediment to provide an environment conducive
for productive activities. Hence, there is a need for
a cautious approach to keep the inflation
expectations around the medium term targets of 9.5
percent for fiscal year 2012-13 and 8 percent for
fiscal year 2013-14. On the other hand increase in
government borrowing to finance the budget
deficit is adversely affecting the inflation outlook.
Keeping the overall macroeconomic situation in
view, the SBP has decided to keep the policy rate
unchanged at 12 percent w.e.f. April 13, 2012.
 Money and Credit
C

Recent Monetary
M and
d Credit Development the banking
b systtem, along with incrreased
governnment borrow wing and a one-off settlemeent of
During thhe first elevenn months of thhe current fiscal
circular debt. During the first hallf of the fiscaal year
year, Julyy – 11th May 2012 broad money
m (M2), or
2011-12, a significaant decline in capital finaancial
money annd close substitutes for mooney, witnesssed
accounnt inflows reesulted in depletion
d of SBP
an expanssion of 9.09 percent
p as commpared to 11..47
foreignn exchange reeserves to finaance the majoor part
percent during
d the samme period inn 2010-11. TheT
of currrent account deficit.
d The profile
p of monnetary
deceleratiion in money y supply is primarily
p drivven
indicattors for fiscall year 2010-111 and 2011--12 is
by the siggnificant fall in the Net Fooreign Assets of
demonstrated in Tabble 5.2.
Table 5.2: Profile of Mo
onetary Indicaators Rs. Billion
Jul--14May Jul-11Maay
2010-11 2011-12
1. Net government sectorr Borrowing(a+ +b+c) 506.5 1,003.3
a. Borrowwing for budgeetary support 603.3 1,084.4
b. Comm modity operatio ons -101.1 -81.6
c. Otherss 4.2 0.5
2. Credit too Non-governm ment Sector (d++e+f+g) 118.7 92.9
d. Creditt to Private Secctor 107.8 234.8
e. Credit to Public Secttor Enterprises (PSEs) 10.6 -142.6
f. PSEs Special
S Accoun nt-Debt repaym
ment with SBP -0.2 0.0
g. Other Financial Instiitutions(SBP crredit to NBFIs)) 0.5 0.7
3.Other Iteems(net) -143.6 -215.3
4.Net Dom mestic assets (NNDA) 481.66 (9.20%) 880.9 (14.899%)
5.Net Foreeign Assets (NF FA) 181.1 -272.2
6.Monetaryy Assets(M2) 662.6 (11.47%) 608.7 (9.099%)
Source: Staate Bank of Paakistan

Net Domeestic Assets (NDA)

( from July
J – 11th May
M circular debt issue the governm
ment borroweed Rs.
2012 stoood at Rs. 880 0.9 billion aggainst Rs. 481.6 391 biillion from commercial
c b
banks throughh 12-
me period last year, reflectiing
billion duuring the sam month treasury bills and 5-year Pakkistan
an increasse of 14.9 percent over thhe last year. The
T Investm
ment Bonds.
expansionn in NDA is mainly duue to a rise in
demand forf private seector credit and
a governmeent Figu
ure-5.1: Net Fo
oreign Assets
borrowinggs.
200
Converselly, Net Foreig gn Assets (NF
FA) witnessedd a 100
n on account of reduction in
significannt contraction 0
SBP’s forreign exchan nge reserves that
t arose froom -100
the widdening curreent accountt deficit and a -200
deteriorating capital and finaancial accouunt -300
surpluses.. NFA of thee banking sysstem during thet -400
2007-08

2008- 09

2009-10

2010-11

11May 2012
Jul-14May 2011

period unnder review declined

d to Rs.
R 272.2 billiion
as comparred to an inccrease of Rs. 181.1 billionn in
Jul-11May

the same period

p of 2010-11.
Jul

During Juuly – 11th MayM 2012, credit

c to pubblic
sector entterprises (PSE
Es) registeredd a sharp decliine
from Rs. 10.6 billion n in 2010-111 to Rs. 1422.6 Govern
nment Bank
k Borrowing
billion. Credit
C to PSEss was mostly concentratedd in The government
g b
borrowing fr
from the baanking
electricityy generationn companiess, however in system
m for budgettary supportt and comm modity
Novembeer 2011 in orrder to partiaally resolve the t operatiions stood at Rs. 1,003.3 billion
b duringg July

67
Pakistan Economic
E Surrvey 2011-122

– 11th Maay 2012 on account

a of rissing subsidy on Rs. 2177.7 billion. Financing
F fromm scheduled banks
b
commoditties, public sector
s enterprrises' losses and
a witnesssed a net incrrease of Rs. 642.1 billion during
d
less than target reven nue collectioon. Governmeent the perriod under reeview againstt Rs. 385.6 billion
b
borrowingg for budgetaary support allone stood at Rs last yeear. Non-bannk and exterrnal financinng for
1,084.4 billion as commpared to Rs. 603.3 billionn in budgettary supportt was less than expeected,
the same period
p of the last year. Thee SBP financiing compellling the govvernment to borrow from m the
has increaased to Rs. 442.3
4 billion as comparedd to SBP annd scheduled banks.
Figure 5.2: Gov
vernment Borrrowings
800.00

600.00 500.0
From SBP
Rs. Billion

400.00
350.0 From Scheduled baanks

200.00
TTotal borrowings
200.0
0.00
2007‐08 2008‐09 20
009‐10 2010‐‐11 July‐14Mayy  July‐ 11May 
-200.00 2011 2012 50.0

The heavyy reliance on n the borrowiing requiremeent

Figgure 5.3: Comm
modity Financce
of the goovernment fro om the bankking system has h
also led to the slugg gish growth in the private 450
sector, unnder the crowd ding out effecct. Accordingg to 400
350
the recennt SBP Am mendment Act, A 2012, thet
Rs Billion

300
governmeent borrowing g from the SB BP is requiredd to
250
be repaidd at the end d of each quarter
q and the
t 200
existing sttock is to be retired
r withinn eight years. 150
100
Commod
dity Finance 50
0
Commodiity finance aimsa to provvide short teerm
advances either to thee governmennt, public secctor
corporatioons or privatee sector for the
t procuremeent
of the coommodities such
s as cottoon, wheat, riice,
sugar andd fertilizer.
The goovernment proocurement tarrget is 7.72 million
m
During Juuly – 11th May y 2012, loanss for commoddity tons (M
MT) of wheat this year, andd the supportt price
financing registered a net retiremeent of Rs. 81.6 has beeen raised too Rs. 1050 perp 40 kg foor the
billion against the retirrement of Rs. 101.1 billionn in forthcooming wheat crop. Additiionally, decliine in
the samee period of fiscal year 2010-11. The T internaational wheaat prices has h reducedd the
retirementt was prim marily concenntrated in the t incentive for its export
e by thhe private sector.
s
second quarter
q of fiscal year 2012 as the t fore, a conssiderable risse in the credit
Therefo
governmeent released Rs.R 78 billion to procuremeent requireement for whheat procureement is exppected
agencies for the settlement
s of accumulatted during the rest of thhe months of current fiscal year
th
subsidies. On 11 May, 2012 the stock of 2011-12.
governmeent borrowing gs for commoodity operatioons
stood at Rs
R 315.9 billio on (Figure 5.33).

68
 Money and Credit
C

Credit to Private Secttor desiredd boost in priivate investm

ment demand could
not takke place duee to energy shortages annd an
The credit availed by y the privatee sector duriing
unfavoorable law and order situaation. Additioonally,
July-11th May,
M 2011-12 2 stood at Rs 234.8 billionn as
substanntial governmment borrowinng has crowdeed out
comparedd to Rs 107.8 8 billion in thhe same periiod
the priivate sector from
f receivinng credit. Thiis has
last year. On the otherr hand year too year growthh in
limitedd the availability of credit. Similarly, due
d to
private seector credit was
w 7.5 percent up until 11
rising non-perform ming loans (NPLs) banks b
May, 2012. There is a strong relatiionship betweeen
preferrred to investt in liquid assets
a rather than
private sector
s credit and econnomic grow wth.
t private sector.
extendiing credit to the
However,, heavy borrrowing from m the bankiing
system haas restricted the credit exxpansion to the t
private sector. Fiig-5.4 : Growth of Private Sector
S

2
25.0
The privaate sector wiitnessed the highest
h flow of
2
20.0

percentages
credit in the
t second qu uarter of fiscaal year 2011--12
standing at Rs. 28 82.2 billion.. Despite the t 1
15.0
substantiaal credit flow, the cum mulative private 1
10.0
sector creedit (PSC) ex xpansion durring July – 11 1 th 5.0
May 20122 was limited d to Rs 234.8 billion becauuse
0.0
of more thhan usual seaasonal retirem ments in the fiirst

2005-06

2006 07
2006-07

2007-08

2008-09

2009-10

2010-11

2011-12(July-11
quarter off fiscal year 2012.

(Ju y
May)
Credit to Private Secttor (Sectorall Analysis)

0
The revivval of private investment in
i the econommy
was one of
o the main concerns
c for SBP
S to ease the
t
monetary policy stancce in 2011-122. However, the
t
Table 5. 3: Credit to Private Sector Rs Billion
B
Ju
uly-March
End June Sttocks Growth Raates
Sectors (Flows)
Jun-10 Ju
un-11 2010--11 2011-12 2010-11 2011-12
Overall Crredit (1 to 5) 2,749.3 2
2,918.2 228.3 41.6 8.3 1.4
1. Loans to Private Secto or Business 2,258.5 2
2,431.8 222.1 42.9 9.8 1.8
A. Agricullture 169.5 180.5 3.3 10.5 2.0 5.8
B. Mining and Quarrying g 17.5 17.9 0.4 -2.8 2.3 -15.7
C. Manufaacturing 1,263.6 1,385.4 205.3 65.0 16.2 4.7
Textiles 470.2 514.7 105.5 16.4 22.4 3.2
D. Electriccity, gas and waater supply 215.5 269.4 28.1 -12.2 13.1 -4.5
E. Construuction 67.1 67.7 -0.9 -9.5 -1.4 -14.0
F. Commerrce and Trade 229.7 213.7 -18.1 -4.3 -7.9 -2.0
G. Transpoort, storage andd communications 105.1 106.2 -0.6 -2.5 -0.6 -2.3
I. Other priivate business n.e.c 23.6 29.4 3.6 -1.4 15.1 -4.8
2. Trust Fuunds and NPO Os 13.1 18.0 3.4 -1.0 25.7 -5.4
3. Personaal 321.5 294.0 -17.6 -7.8 -5.5 -2.6
4. Others 11.1 16.4 6.7 -0.1 60.6 -0.6
5. Investment in Security y & Shares of Private
P
145.1 158.0 13.6 7.5 9.4 4.7
Sector
Source: Staate Bank of Paakistan

registerred a sharp decline.

d In flow
w terms, the credit
Sector wiise growth in
n credit to the private secctor
expanssion during thhe period undder review stoood at
shows thhat loans to private secctor businessses
Rs. 42..9 billion agaainst Rs. 222.1 billion in July—
J

69
Pakistan Economic Survey 2011-12

March 2011. However, the stocks reached Rs In agriculture, overall credit disbursement by five
2474.7 billion in March 2011-12 against the end major commercial banks1 stood at Rs. 107.6 billion
June stock of Rs 2431.8 billion, reflecting an in July—March 2012 as compared to Rs. 93.3
increase of only 1.8 percent. All of the major billion in July—March 2011 posting an increase of
sectors, excluding agriculture, registered a decline Rs. 14.4 billion or 15.4 percent. Total credit
in credit when compared to last year. Particularly, disbursement to agriculture sector during July-
loans to textile sector are significantly lower than March 2012 surged by 17 percent on year to year
last year. The ample profitability of textile sector basis to Rs. 197.4 billion against total
in 2010-11, along with subsequent decline in disbursement of Rs. 168.7 billion in the same
cotton prices in 2011-12 explains the relatively period of fiscal year 2010-11.
lower requirement for credit during July - May
2012. Net decline in consumer financing during July -
March 2012 stood at Rs8.5 billion as compared to
The manufacturing sector advanced over 100 the decline of Rs 17.4 billion in the comparable
percent (Rs 65.0 billion) of total PSC, followed by period of 2010-11 , thereby registered a decline of
textiles (38.2 percent), and agriculture (24.5 3.9 percent as compared to the decline of 7.1
percent). On the other hand, credit to trade and percent during the period under review.
construction declined by 14 percent, followed by
electricity, gas and water supply (4.5 percent), and
then commerce and trade (2 percent).
Table 5.4: Consumer Financing Rs. Billion
July-March Growth (%)
Description
2010-11 2011-12 2010-11 2011-12
Consumer Financing -17.40 -8.50 -7.10 -3.90
1) For house building -5.40 -5.20 -10.00 -10.90
2) For transport i.e. purchase of car -10.60 -5.60 -16.40 -11.00
3) Credit cards -3.40 -1.70 -12.20 -7.00
4) Consumers durable 0.03 0.10 13.90 37.10
5) Personal loans 0.40 2.70 0.40 3.00
6) Other 1.60 1.20 55.70 27.00
Source: State Bank of Pakistan

Each category within the consumer finance

Loans for consumer durables witnessed a net
segment has registered a persistent increase in the
expansion of 37.1 percent during July 2011 -
loan infection ratio for the last three years. This
March 2012 against 13.9 percent in the same
increase has been a combination of rising NPLs
period last year. However, auto loans, mortgages,
and declining credit to each category with the
credit cards and personal loans have consistently
exception of consumer durables.
been on the decline since January 2008 on account
of multiple factors (e.g. fragile economic
Monetary Assets
conditions, rising cost of credit and increasing
default). The stock of consumer finance reduced to The component of monetary assets (M2) include:
Rs. 209.1billion in March 2012 from its peak of currency in circulation, demand deposit, time
Rs. 371.3 billion exactly four years earlier. deposits (excluding IMF A/C, counterpart), and
resident’s foreign currency.

1
Allied Bank, Habib Bank Limited, MCB Bank Limited, National Bank of Pakistan and United Bank Limited

70
 Money and Credit

Table-5.5 Monetary Aggregates (Rs Million)

Items End June July-11May
2010 2011 2010-11 2011-12
A.Currency in Circulation 1,295,385 1,501,409 1,550,840 1,705,749
Deposit of which:
B. Other Deposits with SBP 6,663 10,145 10,359 11,924
C.Total Demand &Time Deposits incl.RFCDs 4,475,186 5,183,640 4,878,666 5,586,202
of which RFCDs 345,438 374,945 368,012 416,962
Monetary Assets Stock (M2) A+B+C 5,777,234 6,695,194 6,439,864 7,303,874
Memorandum Items
Currency/Money Ratio 22.4 22.4 24.1 23.4
Other Deposits/Money ratio 0.1 0.2 0.2 0.1
Total Deposits/Money ratio 77.5 77.4 75.8 76.5
RFCD/Money ratio 6.0 5.6 5.7 5.7
Income Velocity of Money 2.7 2.9 2.7 2.7
Source: State Bank of Pakistan

same period last year. Similarly, the currency in

Currency in Circulation
During July – 11th May 2012, currency in
circulation (CIC), in flow terms, stood at Rs. 204.3
billion as compared to Rs. 255.5 billion in the
circulation as percent of money supply (M2) has
declined to 23.4 percent in 2011-12 as against 24.1
percent during the same period in 2010-11.

Fig-5.5 : Currency in Circulation % M2 & GDP

CIC/M2 CIC/GDP
25.0 10.5

24.0 10.0
9.5
23.0
9.0
22.0
8.5
21.0 8.0
20.0 7.5
2006 2007 2008 2009 2010 2011 2012(July-11May)

offset by the increase in demand and time deposits.

Broad money (M2) grew by 9.09 percent during
Similarly, resident foreign currency deposits
July – 11th May 2012, as compared to an increase
(RFCDs) have increased to Rs. 42.0 billion as
of 11.47 percent during the same period last year.
compared to Rs. 22.6 billion during the same
The decline in broad money (M2) came from the
period last year.
decline in both currency in circulation and deposit
money.
Monetary Management
Deposits Efficient monetary management is crucial in
th providing a sound and secure financial
During July – 11 May 2012, demand and time
environment that is favorable for the attainment of
deposits stood at Rs. 402.6 billion as against Rs
both macroeconomic stability and growth.
403.5 billion during the same period last year.
Moreover, a well-developed financial system
Hence the decline in currency in circulation is
facilitates the exchange of goods and services by

71
Pakistan Economic Survey 2011-12

providing payment services. It also allocates
society’s savings to its most productive use by
acquiring and processing the information about
enterprises and finds possible investment projects.
Finally, it helps diversify and reduce liquidity and
inter-temporal risk. A stable financial system is
essential for an efficient, deep and liquid market.
crisis led to the closing of many credit lines and
erosion various of financial mechanisms.
Pakistan’s financial markets witnessed a slowdown
in deposit mobilization and profitability in the
sector. Conversely, the financial sector remained
generally immune to the contagion of the unstable
financial sector.

The strains on the financial sector and the credit

crunch in the aftermath of the global financial
Table 5.6: Summary of OMO's Rs. billion
Injections Absorptions
2010-11 2011-12 2010- 11 2011-12
July 75.05 408.45 20.50 -
August 165.05 640.35 - -
September 196.55 1025.10 54.40 -
October 36.85 1058.65 171.50 -
November 67.55 1381.45 102.50 -
December 34.10 1418.90 128.55 24.00
January 106.85 969.15 11.50 -
February 119.40 1244.40 51.20 -
March 230.85 1210.90 - 3.00
Total 1,032.25 9357.35 540.15 27.00
Source: State Bank of Pakistan

During the first half of fiscal year 2011-12 reliance
on the banking system to fund the government’s
finances created further challenges to striking a
balance between cautious liquidity operations and
payment system stability. Furthermore, the excess
volatility in short term interest rates increased the
challenges of monetary management, mainly due
to a sharper deterioration in the external current
account deficit, a declining trend of foreign
inflows, and a higher currency to deposit ratio.
However, other market interest rates, such as
KIBOR and the weighted average lending rate
(WALR), have largely followed the policy rate
reductions. The average spread between the policy
rate and the 6 month KIBOR has narrowed to 12
bps after the cumulative 200 bps reduction in the
policy rate.

Table 5.7: Market Treasury Bills Auctions Rs. Million

JUL-JUN Jul-March
FY2010-11 Offered Accepted W.A.Rate*
W.A FY1
Offered Accepted FY11 FY12 FY11 FY12 FY11
Rate* 2
3-Months 2,837,276 1,668,408 12.8 2,479,501 671,490 1,484,235 363,478 12.8 12.5
6-Months 2,226,878 1,614,552 13.0 1,101,412 1,501,433 809,208 883,012 13.0 12.7
12-Months 908,194 599,015 13.2 437,602 2,086,003 234,144 1,239,758 13.2 12.8
Total 5,972,348 3,881,975 4,018,515 4,258,926 2,527,587 2,486,247
Source: State Bank of Pakistan
Average of maximum and minimum rates

72
 Money and Credit
C

The SBP P accepted Rs. R 2486.2 billion from the t Figu

ure-5.6: Contrribution of T-b
bills
primary market
m of T-bills
T duringg July 20111 -
March 20012 as comp pared to Rs. 2527.6 billiion FY 11 FY
Y12
58.7
during thee same periodd of fiscal yeaar 2010-11. The
T 60.0
0
market offfered a total amount of Rs.R 4259 billiion 49.9

during thee first nine months

m of currrent fiscal yeear 35.5
32.0

Percent
2011-12. 40.0
0

14.6
In an anticipation of a further cut inn the policy rate
r 20.0
0 9.3
in Octobeer 2011 and onwards
o invesstment in longger
tenure paapers increassed. During the first niine
months of 2011-12 months
m T-billss, accounted for 0.00
49.9 perceent of the totaal accepted am mount follow
wed 3-Months 6-Months 12-Months
by 35.5 peercent in 6 mo onths T-bills

Fig--5.7: Weighted
d Average Intterest Rates 6-Month
hs
14.5 12-Montths
14.0
13.5
13.0
12.5
12.0
11.5
11.0
Feb-09

Feb-10

Feb-12
J 08
Jun-08
Aug-08

Apr-09
Jun-09
Aug-09

Apr-10
Jun-10
A 10
Aug-10

Feb-11
Apr-11
Jun-11
Aug-11

Apr-12
Oct-08

Oct-09
Dec-09

Oct-10
Dec-10

Oct-11
Dec-11
Dec 08
Dec-08

g
Table 5.8: Pakistan Investment Bond
ds Auctions Rs. Million
Offered Accepted *W.A
* Rate Offered A
Accepted
*W.A Rate
R
PIBs Jul-Jun Jul-March
FY 2010-11 FY 11 FY
Y12 FY 11 FY 12 FY 11 F 12
FY
3 Years 81,960 49,712 14.0 42,227 744,171 18,684 50,607 14.0 12.8
5 Years 33,306 16,668 13.3 18,662 577,277 6,674 41,938 13.3 12.6
10 Years 176,840 101,355 14.1 111,246 1088,032 57,537 64,370 14.1 12.8
15 Years 2,966 460 14.1 2,031 2
2,446 B
BR 2,262 Nil 13.5
20 Years 7,875 875 14.2 6,500 200 525 0 14.2 0.0
30 Years 12,413 225 14.2 11,113 210 B
BR 0 Nil 0.0
Total 315,360 169,295 191,779 2422,336 83,420 159,177
Source:SBBP
* : Average of Minimum
m and Maximum
m rates

During 2011-12, the SBP rose upp to Rs. 1599.2 offeredd a total amoount of Rs. 2442.3 billion ini the
billion frrom the priimary markeet of Pakisttan first ninne months off the fiscal year 2011-12 aggainst
Investmennt Bonds (PIBBs) as compaared to Rs. 833.4 Rs. 1911.8 billion in 2010-11.
billion inn the same period last yeear. The markket

73
Pakistan Economic
E Surrvey 2011-122

percentt while the weighted aveerage deposit rate

Figure- 5.8: Contrribution of PIB
Bs
(includding zero marrk-up) stood at 6.98 perceent in
75.0 March 2012. This resulted in a spread off 5.82
percentt. The decliine in the weighted avverage
FY 10
60.0 lendingg rate is due d to the lag involveed in
Percentages

FY11 contraccting fresh loans in thhe new decllining

45.0 interestt rate environnment and thhe decline in banks
b
return on
o governmennt securities.
30.0

It is pertinent
p to mention
m that since the Central
15.0
Bank was
w followingg a tight monnetary policyy until
Augustt 2011 and thet interest rates
r were moving
m
0.0
up, thet bankingg spread remained high.
3 Years 5 Years 10 Years
Conseqquently, theree was a lackluuster movement in
depositt rates.

During thhe period und der review, heeavy investmeent Pakistaan’s Financial Sector
occurred in
i 10 years PIIBs which constituted almmost
40.4 perceent of the totaal accepted am
mount. A weell-developed financial sector playys an
importaant role in overall
o econoomic developpment,
Table 5.99: Lending and Deposit R Rates Weightted as it mobilizes
m saviings for prodductive investtment,
Average (W W.A.) facilitaates capital inflows
i and remittances from
LRR DR Spread abroadd, and stimulaates investmennt in both phyysical
Dec-10 14.220 7.41 6.79 and human
h capitaal. It includdes banks, stock
Jan-11 14.222 7.20 7.02 exchannges, credit unions, insuurance companies,
Feb-11 14.119 6.99 7.20 microfi finance instittutions and money lennders.
Mar-11 14.224 7.09 7.15 Hence a sound and stable financial sector s
Apr-11 14.337 7.35 7.02 contribbutes to econoomic and sociial developmeent.
May-11 14.221 7.45 6.76
Jun-11 14.225 7.22 7.03 Comm
mercial Bankss
Jul-11 14.662 7.46 7.16
Aug-11 14.222 7.40 6.82 The assset base of the
t banking system
s and itts key
Sep-11 14.228 8.40 5.88 elemennts posted a sttrong growth trend, particuularly
Oct-11 13.997 8.03 5.94 in term
ms of the depposit base. However,
H the asset
Nov-11 13.558 7.48 6.10 mix off the bankingg system shift fted further tooward
Dec-11 13.223 7.06 6.17 investm
ment, as baanks continuued to inveest in
Jan-12 13.118 7.12 6.06 governnment paperss and bonds of public sector s
Feb-12 13.114 7.03 6.11 enterprrises (PSEs). On a Year to year basiis the
Mar-12 12.880 6.98 5.82 asset base
b of the banking systtem registereed an
Source: Staate Bank of Paakistan increasse of 15 perceent and stood at Rs. 8207 billion
b
in Deceember 2011 as a compared to t Rs. 7138 billion
b
The weighhted average lending rate (including zeero
in Deceember 2010.
mark-up) on outstand ding loans stood
s at 12..80
Table 5.100: Highlights of
o the Bankingg System Rs biillion
CY*05 CYY06 CY07 CY08 CY Y09 Dec-10 Sep-11 Dec-11
Total Asseets 3,660 4,353
4 5,172 5,628 6,5516 7,138 7,763 8,207
Investmentts (net) 800 833 1,276 1,087 1,7737 2,142 2,845 3,053
Advances (net) 1,991 2,428
2 2,688 3,173 3,2240 3,349 3,263 3,341
Deposits 2,832 3,255 3,854 4,218 4,7786 5,450 5,769 6,238
Equity 292 402 544 563 6
660 697 753 784
Profit Befoore Tax (PBT) 94 124 107 63 81 111 116 170

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 Money and Credit

Table 5.10: Highlights of the Banking System Rs billion

CY*05 CY06 CY07 CY08 CY09 Dec-10 Sep-11 Dec-11
Profit After Tax (PAT) 63 84 73 43 54 65 76 110
Non-Performing Loans 177 177 218 359 446 548 613 607
Non-Performing Loans (net) 41 39 30 109 134 182 210 202
Base-I Base-II
Capital Adequacy Ratio (all banks) 11.3 12.7 12.3 12.3 14.0 14.0 14.9 14.6
Source: State Bank of Pakistan
* Calendar year

major challenge for banks. NPLs reached Rs. 607

The deposits of the banking system increased to
billion in December 2011 against Rs. 548 billion
Rs. 6238 billion in December 2011 from Rs. 5450
recorded in December 2010. The capital adequacy
billion in December 2010 thus posted a growth of
ratio also increased to 14.6 percent from 14 percent
14.4 percent year to year basis.
during the period under review (Table 5.9).
With continuous growth in the non-performing
loans (NPLs) since CY07, credit risk has been a
Fig-5.9: Capital Adequacy Ratio (percent)
15.5
14
12.5
11
9.5
8

Table5.11: Key Indicators of Pakistan's

BOX-2
Financial Development
Financial Development
Years M2/GDP DD+TD/M2
Financial development in reference to the increase in the ratio of 2000-01 36.7 75.4
money supply to GDP suggests that the more liquid money is 2001-02 40.0 75.4
available in the economy, the more opportunities exist in economy 2002-03 43.1 76.2
for sustainable economic growth. Therefore, the development of the 2003-04 44.9 76.8
financial system (financial deepening) is interlinked with the 2004-05 45.1 77.6
economic development of any country. 2005-06 45.0 72.5
2006-07 46.6 74.1
Considering M2 as a proxy for the size of the financial sector,
2007-08 44.7 73.3
increase in M2/GDP ratio reveals that in nominal terms the financial
2008-09 39.2 72.0
assets are growing faster than the non financial assets. In case of
2009-10 39.4 71.5
Pakistan, the financial market has shown great resilience in the
wake of global financial crisis due to low integration with global 2010-11 37.1 71.8
financial markets. July-May
2010-11 35.0 70.0
Table 5.11 suggests that the M2 to GDP ratio has shown a rising 2011-12 34.9 70.1
trend since 2000-01 with growing economic activity and rose from 36.7 percent to 47 percent in 2006-07. The ratio

75
Pakistan Economic Survey 2011-12

started to decline gradually and stood at 37.1 percent in 2010-11. During July —May 2012 M2 to GDP ratio has
declined further to 34.9 percent as compared to 35 percent in the same period last year on account of the pressure to
the liquidity profile of the financial markets mainly due to the rising government’s borrowing needs. On the other
hand another significant ratio DD + TD/M2, which represents monetary depth, has also shown the declining trend
since 2004-05 by decreasing from 77.6 percent to 71.8 percent in 2010-11. This is the period when the monetary
policy stance changed from accommodating to tightening. However, reduced policy rate by 200 bps to 12 percent
during the current fiscal year 2011-12, resulted in a slight increase of 70.1 percent during July 2011—May 2012
from 70 percent during the same period last year.

In an effort to improve financial deepening and competition in the banking system, SBP is already encouraging
depositors to put their savings in government securities through Investor’s Portfolio Securities (IPS) accounts which
may lead to better returns on deposits over time. Moreover, in May 2008, SBP introduced a minimum percent floor
on all categories of Savings/PLS Saving Products. Consequently, average deposit rate of all saving related products
increased from 2.1 percent to 5.25 percent, with no significant change thereafter. The saving deposits category now
account for 38 percent of all bank deposits and 52 percent of total number of deposit accounts.1

Islamic Banking momentum in the wake of fragile economic

conditions. Over the past six years it has witnessed
The Islamic banking industry in Pakistan has
an average growth of 30 percent.
maintained a strong and sustainable growth
Table 5.12: Islamic Banks Rs. Billion
CY05 CY06 CY07 CY08 CY09 Dec-10 Dec-11
Assets of the Islamic banks 71.5 119.3 205.9 276.0 366.3 477.0 641.0
Deposits of the Islamic Banks 49.9 83.7 147.4 201.6 282.6 390.1 521.0
Share in Banks Assets 1.95% 2.79% 3.98% 4.90% 5.60% 6.68% 7.80%
Share in Bank Deposits 1.75% 2.62% 3.82% 4.78% 5.90% 7.16% 8.40%
Source: Islamic Banking Department, State Bank of Pakistan
*Provisional data

The asset base of the industry reached Rs. 641
billion reflecting 34 percent Year to year (YOY)
growth, while the share in bank assets increased to
7.8 percent from 6.7 percent during the period
under review. The growth in assets is mainly
attributed to financing and investment that together
grew by 40 percent year to year basis. On the other
hand deposits reached to Rs. 521 billion depicting
YOY growth of 34 percent by end of Dec 2011.
Thus it contributed 8.4 percent in banks deposits
against 7.2 percent in Dec 2010. Similarly
operating performance indicators also witnessed
encouraging performance in 2011, as non-
performing financing (NPFs) declined while return
on assets (ROA) and return on equity (ROE) both
remained higher than that of overall banking
industry average.
The breakup of financing in CY11 indicates that
Murabaha dominates followed by Diminishing
Musharaka and Ijara with all other modes
constituting a relatively small share.
Microfinance
The Government of Pakistan and the SBP remain
committed to promoting microfinance as a long
term strategy to broaden access to financial
services by the low income segments, thus
improving their livelihood and income generating
opportunities.

1
Monetary Policy statement, April, 2011-12

76
 Money and Credit

Table 5.13: Financing Products by Islamic banks %age

Mode of Financing CY05 CY06 CY07 CY08 CY09 CY10 CY11
Murabaha 44.4 48.4 44.5 36.5 42.3 44.9 43.8
Ijara 29.7 29.7 24.0 22.1 14.2 12.7 10.4
Musharaka 0.5 0.8 1.6 2.1 1.8 2.9 2.4
Mudaraba 0.3 0.2 0.4 0.2 0.1
Diminishing Muskaraka 12.8 14.8 25.6 28.9 30.4 29.5 32.0
Salam 0.6 1.9 1.4 1.8 1.2 1.4 2.4
Istisna 1.4 1.4 1.0 2.9 6.1 5.8 4.4
Others 12.1 3.0 1.6 5.4 3.6 2.6 4.4
Source : State Bank of Pakistan

The overall microfinance sector witnessed loan
portfolio growth of 13 percent over the year. Its
gross loan portfolio stood at Rs. 28.84 billion as
the quarter ended in December 2011 with 2.07
million active borrowers. On the deposit side, the
number of depositors of Micro Finance Banks
(MFBS) increased to 1.44 million with a deposit
base of Rs. 13.6 billion as of March 31, 2012.
The overall performance of the sector remained
positive in spite of the various challenges including
the heavy floods/rains that adversely affected
various parts of the country especially Sindh, for
the second consecutive year. The loan portfolio
growth is attributable to the recent microfinance
sector strategy that stresses the need for
microfinance providers to diversify portfolio in
different economic and geographic segments. The
NPLs of microfinance banks have also dropped to
two (2) percent as the quarter ended in March 2012
against 5.29 percent in March 2011 depicting
effectiveness of the credit process. The sector was
able to expand its retail network to 1,739 business
locations across the country.

Table 5.14: Microfinance Industry Indicators

Year Institution Gross loan Average
Number Number of Total No. of Total No. of Deposits
portfolio Loan Size
of MFBs Branches Borrowers Depositors
(Rs. In '000) (Rs) (Rs. In '000)
Dec-08 MFBs 7 271 542,641 6,461,462 11,907 254,381 4,115,667
MFIs 20 1,186 1,190,238 11,952,000 14,940 - -
Total 27 1,457 1,732,879 18,413,462 10,626 254,381 4,115,667
Dec-09 MFBs 8 284 703,044 9,004,000 13,576 459,024 7,099,206
MFIs 21 1,159 1,123,001 12,719,000 11,326 - -
Total 29 1,443 1,826,045 21,723,000 12,131 459,024 7,099,206
Dec-10 MFBs 8 284 717,141 10,528,000 20,151 780,294 10,289,000
MFIs 21 1,252 1,342,395 14,966,000 17,180 - -
Total 29 1,536 2,059,536 25,494,000 18,385 780,294 10,289,000
Dec-11 MFBs 9 303 733,931 14,650,000 19,691 1,362,202 13,927,066
MFIs 23 1,436 1,339,140 14,195,000 10,600 - -
Total 32 1,739 2,073,071 28,845,000 13,914 1,362,202 13,927,066
Source: State Bank of Pakistan

the present market situation and MFBs’

Microfinance Policy Initiatives
The policy framework for microfinance has
evolved in tandem with sector growth. It
encourages private sector participation by
supporting a multi-institutional approach. The
regulatory instructions are developed in view of
preparedness allowing adequate room for further
innovation and market development. During the
past two consecutive years Pakistan was globally
ranked first by the ”Economist Intelligence Unit”
(EIU) of the Economist magazine, in terms of

77
Pakistan Economic Survey 2011-12

microfinance regulatory framework via its reports
released in 2010 and 2011.
In September, 2011 the Waseela Microfinance
Bank was granted a license under the
“Microfinance Institutions Ordinance, 2001” to
operate nationwide. In addition, the Auriga Group
acquired the district wide Network Microfinance
Bank with the intent of upscaling its operations as
a nation wise MFB. Also in the same month, the
general provisioning requirement for MFBs was
withdrawn in cases where loans were backed by
liquid securities, gold, or other cash collateral with
appropriate margin. However, in case of all other
loans, microfinance banks shall maintain general
provision of 1%.
In March 2012, the State Bank has revised
Prudential Regulations No. 10 and 11 for MFBs to
facilitate lending to microenterprise segment. For
these purposes, the term microenterprise shall
mean projects or businesses in trading,
manufacturing, services, and agriculture sectors
that lead to livelihood improvement and income
generation. Microenterprises are undertaken by
micro-entrepreneurs who are either self-employed
or employ few individuals; these businesses do not
exceed 10 employees and they excluded seasonal
labor.
The revisions will facilitate lending of up to Rs.
500,000 to eligible microenterprises. Moreover,
MFBs that previously were unable to tap the
microenterprise market constraints of lending up to
Rs. 150,000 under the general loans category will
now be able to upscale their credit operations.

Box-3
Program’s initiatives:

SBP is playing a pivotal role in promoting inclusive finance through implementation of government and donor
funded programs. These programs are managed with the objective of enhancing the provision of financial services to
unbanked segments especially to the poor and marginalized population through sustainable models. The updates on
government programs and SBP market interventions are as follows:
1. Financial Inclusion Program (FIP):
FIP is implemented with grant assistance of 50 million pounds from the UK Government’s Department for
International Development (DfID). SBP has successfully launched a number of market interventions under FIP since
2008. Progress under each of these interventions is as follows:

a. The Institutional Strengthening Fund (ISF) was launched to strengthen institutional and human resource
capacity of MFB is in order to enhance scale and sustainability of microfinance services. So far funding support
of Rs. 819 million has been approved for 19 microfinance providers including top and middle tier MFBs and
MFIs as well as the Pakistan Microfinance Network. The grant covers 22 projects addressing institutional
strengthening needs of the grantee institutions for capacity building/ HR training, IT development, business
plan/ strategic reviews, market research, branchless banking, corporate governance, credit ratings, remittances,
and treasury functions, and others.

b. Microfinance Credit Guarantee Facility (MCGF) was launched to mobilize wholesale commercial funding for
microfinance providers through partial guarantees to commercial banks. So far, fourteen (14) guarantees with a
total exposure of Rs. 957 million have been issued for mobilizing Rs. 3,275million.

c. Credit Guarantee Scheme (CGS) for Small and Rural Enterprises aims to facilitate credit to small and rural
businesses through partial guarantees. So far partner banks have booked guarantees of Rs. 1,107 billion against
sanctioned loans of Rs. 2.711 billion for 3,846 small and rural enterprises by the end of March 2012.

d. Financial Innovation Challenge Fund (FICF): was launched in May 2011. It aims to foster innovations and test
new markets, lower cost of delivery, enable systems and procedures to be more efficient and provide new ways
of meeting the unmet demand for financial services. A number of applications were received under the 1st

78
 Money and Credit

round and the selected applicants will be announced after due process.

2. Improving Access to Financial Services Fund (IAFSF)

The following interventions have been taken under IAFSF:

a. Nationwide Financial Literacy Program has been launched in January 2012 to disseminate basic education
about financial concepts, products and services to the masses.

b. Grass Root Level Training Programs on Microfinance is a series of 40 individual training programs
expected to benefit 1000 participants from various microfinance providers. So far 12 training Programs
have been organized.

Insurance Sector modest as compared to other jurisdictions while

the insurance sector remained underdeveloped
The insurance industry in Pakistan is relatively
relative to its potential. As of December 2010, the
small compared to its counterparts in the region.
industry’s total premium revenue stands at Rs.
The insurance penetration and density remained
100.58 billion.
Fig-5.10: Insurance Penetration in Pakistan

Box-4
Way Forward

1. Development of New Insurance Law: SECP is considering embarking upon the initiative of revamping of
insurance laws in Pakistan. The derived benefits will include a new regulatory and supervisory framework
encompassing enhanced reserves and capital requirements, insurance industry’s risk-focused surveillance
mechanisms, training and capacity building to support the implementation of the improvised insurance
regulatory framework. Under this new regime, certain new regulations will also be introduced where no such
framework exists currently such as regulations for reinsurance, regulations for insurance & reinsurance brokers,
regulations for alternate distribution channels, regulations for disclosure requirements and consumer protection,
regulations for Takaful Investment Products, and others.
2. Voluntary Pension Schemes by Insurance companies: Although there are already nine (9) Pension Funds

79
Pakistan Economic Survey 2011-12

operating under the Voluntary Pension System Rules, 2005, none of the insurers have so far ventured in this area
while registering itself under these rules. The SECP intends to make the existing Rules more conducive and equally
attractive for insurers by initiating a consultative process with the relevant stakeholders and encouraging the
insurance companies to offer voluntary pension products.

3. Development of Crop Insurance in Pakistan: The agriculture sector contributes approximately 21 percent to
Pakistan's GDP and generates about 45 percent of employment. It also contributes to the economic growth of the
country by supplying raw materials to the industry as well as for export purposes. With the proliferation of
numerous initiatives launched by the public and private sector, including the access to financial services in rural
areas, it has become imperative that measures be taken to mitigate risks to which farmers are exposed. It is a known
fact that agricultural production can increase if the vagaries of nature and the risks associated with it can be better
managed. While, the majority of areas of our agricultural economy are exposed to adverse weather events such as
floods and droughts, crop diseases and other disasters, the immediate need is to provide it with a carefully designed
tool to mitigate such inherent risks. As the apex regulator of the insurance industry, it is the endeavor of SECP to
develop and promote the agricultural insurance in order to ensure the well-being of the economy. Also, while
augmenting the efforts of government whereby it formed a crop insurance scheme in year 2008 and the recent
interest to develop a scheme available to all farmers of the country involved in the cultivation of the major crops,
there is a need of bringing all stakeholders, including SECP, State Bank of Pakistan, insurance industry, agriculture
and livestock development departments/ agencies, together to articulate the development of crop insurance in
Pakistan. SECP will be working to help in building a market-based approach in the design and pricing of crop
insurance products.

Conclusion inflation. Efforts continue in avoiding high

inflationary pressures, mitigating heightened
Pakistan’s financial institutions are doing the
security risks, eliminating power shortages and
utmost to continue to respond to the global
providing a lower cost of doing business, in order
economic and financial volatility. Although
to boost Pakistan’s economy. With evidence of its
Pakistan was not heavily affected by the financial
past resilience in rough economic times, the future
crisis of 2007, it is taking every precaution in how
roles of money and credit in Pakistan remain
it moves forward to support growth and monitor
optimistic.

80
 Chapter 6
Capital Markets
Introduction
The capital market, like the money market plays a
significant role in the national economy. A
developed, dynamic and vibrant capital market can
contribute significantly in the speedy economic
growth and development. It mobilizes funds from
people for further investments in the productive
channels of an economy, activating idle monetary
resources and puts them in proper investments.
Capital market also helps in capital formation.
Capital formation is net addition to the existing
stock of capital in the economy. Through
mobilization of ideal resources it generates
savings; the mobilized savings are made available
to various segments such as agriculture, industry,
etc. This helps in increasing capital formation. It
raises resources for longer periods of time. Thus it
provides an investment avenue for people who
wish to invest resources for a longer period of
time. It provides suitable interest rate return also to
investors. Instruments such as bonds, equities,
units of mutual funds, insurance policies, etc.
definitely provide diverse investment avenues for
the public.
The capital market enhances production and
productivity in the national economy. As it makes
funds available for long periods of time, the
financial requirements of business houses are met
by the capital market. It helps in research and
development. This helps in increasing production
and productivity in the economy by generation of
employment and development of infrastructure.
The lack of an advanced and vibrant capital market
can lead to underutilization of financial resources.
The developed capital market also provides access
to foreign capital for domestic industry. Thus the
capital market definitely plays a constructive role
in the overall development of an economy.
Capital markets consist mainly of Stock (equity)
and Debt markets. The capital market provides an
avenue for raising the long-term financing needs of
business through equity and long term debt by
attracting investors with a long term investment
horizon.
Pakistan Equity Markets
The Karachi Stock Exchange (KSE) is the biggest
and most liquid exchange in Pakistan with an
average daily turnover of 254 million shares and
market capitalization of US $ 41.0 billion as of the
first week of May, 2012. The international
magazine 'Business Week' declared the KSE as the
best performing world stock market in 2002. Since
then, international investors have given due
considerations to the KSE in making decisions
regarding foreign investment in equity markets.
Since 1991, foreign investors have an equal
opportunity together with local investors to operate
in the secondary capital market on the Karachi
Stock Exchange. The establishment of the new
policy for foreign investors and the privatization
initiated in Pakistan has accelerated the
development of the KSE, which had 591
companies listed in 2012.
The Karachi Stock Exchange trades the KSE-100
Index. It is a highly-diversified index of 100
largest capitalization companies’ stocks from all
sectors of Pakistan’s economy. A constantly
revised index is a good indicator of the overall
exchange performance over a period of time. In
May, 2012, 92 percent of the KSE total market
81
Pakistan Economic Survey 2011-12
capitalization was represented by the KSE-100
Index.
The Lahore Stock Exchange is the second stock
exchange established in Pakistan in 1971. Today,
the LSE is the only domestic exchange to have
more than one trading floor and is also the only
exchange in the region to have established a
unified order book with another domestic stock
exchange in the country. The institution was
established to facilitate the investors of Punjab and
Northern areas by providing them an access to the
capital market and enabling them to take part in the
progress of the corporate sector of the
country. The Lahore Stock Exchange Twenty Five
company index, the LSE25, calculates the
performance of stocks of major companies.
The third stock exchange, the Islamabad Stock
Exchange, was incorporated as a guarantee limited
company in 1989 in Islamabad with the main
object of setting up a trading and settlement
infrastructure, information system, skilled
resources, accessibility and a fair and orderly
market place. The purpose for establishment of the
stock exchange in Islamabad was to cater to the
needs of less developed areas of the northern part
of Pakistan. ISE10 index monitors the performance
of the ISE.
Developments in 2011-12
The Pakistan stock markets remained range bound
during the first half with a predominantly declining
trend. The obscure movement of the stock market
statistics was consequent to various challenges
faced by the country including escalating political
upheaval, uncertainty due to worsening law and
order situation as well as rumours on the economic
front pertaining to reduction in military and civil
aid from international donors, the Pak rupee
depreciation and increasing fiscal deficit of the
government. However, the KSE-100 index
resumed its momentum during the 3rd quarter of
2011-12 owing to certain encouraging measures
like considerable reduction in discount rate by the
SBP during latter period of the first half of Current
Financial Year and increase in foreign exchange
reserves. Further, the market sentiment was
boosted by the proposed promulgation of the
Capital Gain Tax Ordinance under which the
82
National Clearing Company of Pakistan Limited
(NCCPL) has been appointed as an intermediary
entity to compute, determine, collect and deposit
the Capital Gain Tax (CGT) on listed securities.
The subject Ordinance was finally promulgated on
the 24th April, 2012.
In Pakistan, securities trading remained exempt
from CGT for 36 years till June 30, 2010. The
imposition of CGT on securities from July 1, 2010
has not only impacted the tax revenue (less than 10
percent of figure three years ago) but also reduced
average traded value to the lowest level during the
last ten years. During the period of exemption, the
investors kept making gains from the securities
trading which remained undocumented due to
exemption from requirement of filing of income
tax returns relating to exempt income. In 2010,
after the imposition of CGT, investors were
required to file the income tax returns along with
declaring the source/evidence of investments for
which they did not have the documented details.
Due to this the investors reduced investments in
the stock markets and the average daily turnover
reduced along with the reduction in the share
prices.
To address the distress condition of share trading
in the stock market, some mechanism was required
to provide relief to the investors who were
subjected to 100 percent documentation of the
gains and increase in the tax revenue. This has now
been done with the promulgation of the CGT
Ordinance under which NCCPL has been
appointed as an intermediary entity to compute,
determine, collect and deposit the CGT on listed
securities.
NCCPL is a clearing company where all the
amounts relating to the trading activity in the stock
markets in Pakistan are settled. Therefore the
NCCPL can capture and tax all the transaction in
which capital gain arises under the income tax law.
The NCCPL will compute tax for all type of
investors except the few financial intermediaries,
foreign institutional investors and any other person
specified by FBR. The tax rate for CGT will be 8
percent and 10 percent for investment holding up
to six months and 12 months respectively till June
30, 2014. NCCPL will be depositing the tax with
the FBR on an annual basis.
 Capital Markets

In addition, no question relating to the
source/nature of money will be asked by the tax
authorities if the money remains invested in the
stock market for a period of 45 days (till June 30,
2012) and 120 days (till June 30, 2014) before and
after the promulgation of CGT Ordinance with a
condition that the investor files with FBR a
statement of investment, wealth statement, income
tax returns and statement that the due tax has been
paid. Further the automated system of the NCCPL
will be audited on a quarterly basis and the
NCCPL will submit quarterly statements to FBR
relating to the CGT.
quarter. The average daily volume for the nine
months was 108.21 million shares.
The investment by foreign investors in the capital
markets during the period from July 2011 to March
2012 depicted a net outflow of USD 176.303
million.
Fig-1: Net Inflow of Foreign Investment
600,000
400,000
200,000

US 000 $
0
(200,000)
Performance of Karachi Stock Exchange (400,000)
A total of 591 companies were listed at the Karachi (600,000)
(800,000)
Stock Exchange (KSE) as of May 04, 2012 with a
(1,000,000)
total listed capital of Rs1,059.087 billion. The
(1,200,000)
aggregate market capitalization as on May 04,

2007-08

2008-09

2009-10

2010-11

(Jul-Mar)
2011-12
2012 stood at Rs. 3,730.489 billion which
remained below 18.1 percent of the provisional
estimates of GDP, fiscal year 2012.

Market performance in terms of volumes also

remained sluggish during the first half of the
2011-12 but volumes gathered pace in the 3rd
Table 6.1: Profile of Karachi Stock Exchange
Description 2007-2008 2008-2009 2009-2010 2010-2011 2011-12
(end March 2012)
Total listed companies 652 651 652 639 591

New companies listed 7 8 8 1 3

Fund mobilized (Rs. in billion) 62.88 44.95 111.83 31.04 107.29

Total Listed Capital
706,419.98 781,793.81 909,893.67 943,732.85 1,058,455.26
(Rs. in million)
Total Market Capitalization
3,777,704.89 2,120,650.87 2,732,373.61 3,288,657.32 3,528,143.84
(Rs. in million)
Total Shares Volume
63,316.12 28,332.78 42,959.12 28,018.14 23,633.28
(million)
Average Daily Share volume
256.34 115.64 172.53 111.63 127.75
(million)
Source: Karachi Stock Exchange

also touched its highest level of 14,617.97 points

The closing value of KSE 100-index as on May 07,
on May 07, 2012 and lowest level of 10,842.26
2012 stood at 14,617.97 points registering a
points on August 23, 2011.
growth of 17.04 percent as compared to July 01,
2011 when the index stood at 12,484.17 points. It

83
Pakistan Economic Survey 2011-12

Table 6.2: Leading Stock Market Indicators on KSE (KSE-100 Index: November (1991=1000)
Months 2010-11 2011-12
KSE Index Market Turnover KSE Index Market Turnover
(end month) Capitalization Of shares (end month) Capitalization Of shares
(Rs. Billion) (billion) (Rs. Billion) (billion)
July 10,519.02 2,992.5 1.5 12,190.37 3,247.4 1.2
August 9,813.00 2,781.3 1.2 11,070.58 2,938.0 1.0
September 10,013.31 2,810.3 1.2 11,761.97 3,125.8 1.4
October, 10,598.40 2,943.1 2.2 11,868.88 3,119.1 1.8
November 11,234.76 3,113.8 2.3 11,532.83 3,022.6 0.9
December 12,022.46 3,324.4 2.9 11,347.66 2,960.1 0.8
January 12,359.36 3,392.6 3.6 11,874.89 3,064.0 1.6
February 11,289.23 3,109.9 1.8 12,877.88 3,317.7 3.9
March 11,809.54 3,181.1 2.2 13,761.76 3,501.8 7.0
April, 12,057.54 3,2241.8 1.6 13,990.38 3,548.9 6.6
May 12,123.15 3,249.9 1.6
June 12,496.03 3,315.8 1.7
Source: Karachi Stock Exchange

Fig-2: KSE Index

15000

14000

13000

12000

11000

10000

9000

Fig-3: Market Capitalization

3900
3700
3500
3300
3100
2900
2700
2500

84

Various steps are being taken by the SECP to
encourage new listings. These include the
following:
` The management of unlisted public companies
is being approached through stock exchanges
to motivate them for listing at the stock
exchanges. An initial public offering (IPO)
summit has also been organized to identify
potential IPOs and to attract them to list their
companies on the stock exchanges.
` Various regulatory bodies such as PTA,
OGRA, DGPC, PPIB, SBP and BOI have been
approached so that their regulated entities can
be motivated for listing.
` Formation of a technical committee,
comprising members from all the three stock
exchanges and the commission to take
necessary steps for encouragement of new
listing. Such steps include review of the
existing regulatory framework for new listing;
introduction of venture/SME board for listing
of small capital based companies and venture
companies; amendments in the listing
regulations for reviewing the minimum
allocation of capital to the general public;
devising a procedure for allocation of capital to
various categories of applications during IPOs,
and bringing uniformity in the listing
regulations of all the three stock exchanges of
Pakistan.
Sector wise Performance
Oil and gas Sector, food producers, chemicals,
construction and materials were the outperforming
sectors during the current year. Performance of
some of the major sectors is mentioned below.
Oil and Gas
In this sector 12 companies are listed at the
Karachi Stock Exchange. In addition to the oil and
gas exploration companies, oil marketing
companies and refineries are also listed in this
sector. Due to global increase in prices and higher
consumption, Pakistan’s oil and gas sector has also
shown good profits, and continued to be the major
market player. In the year 2011 the total profit
before tax was Rs. 196,116.97 million, whereas
profit after tax was Rs. 134,496.29 million. In the
Capital Markets
year 2010 the profit after tax was Rs. 104,249.82
million. As on March 31, 2012 the total market
capitalization of this sector was Rs. 1,186,015
million as against total paid up capital of Rs.
74,537.225 million.
Chemicals
Within this sector 32 companies are listed, with
total paid up capital of Rs. 95,480.23 million and
the market capitalization was Rs. 393,536.80
million. The profit after tax of this sector was Rs.
49,515.7 million. Six fertilizer manufacturing
companies are included in this sector which has
earned good profits during the year. These include
Engro Chemicals, Fatima Fertilizer Company,
Fauji Fetilizer Company and Fauji Fetilizer Bin
Qasim etc.
Construction and Materials
This sector comprises of 36 companies, with total
listed capital of Rs. 77,003.96 million and the
market capitalization of Rs.113,500.56. On the
back of higher cement prices and increase in local
demand the sector also showed growth which
translated into good financial results compared to
last year. In 2011 the total loss after tax has come
down to Rs.404.275 million as against total loss of
Rs. 6,107.25 million in year 2010.
Automobile and Parts
The sector comprises of 16 companies with the
total paid up capital of Rs. 6,940.80 million and the
total market capitalization was Rs. 43,857.87
million. The sector posted total profit of Rs.
4,519.86 million in year 2011. Automobile sales
also picked up in spite of increase in prices of
locally manufactured cars.
Personal Goods
This is the largest sector with 188 companies
(mostly related to the textile sector) with a listed
capital of Rs. 54,366.23 million and market
capitalization of Rs. 54,366.23 million. The total
profit after tax of this sector was Rs. 26,807.96
million.
Fixed Line Communication
The sector comprises of 5 companies which
includes PTCL with capital of Rs. 51,000 million.
85
Pakistan Economic Survey 2011-12

The total paid up capital of this sector is Rs.
68,858.86 million and the market capitalization of
Rs. 51,638.25 million. The total profit after tax was
Rs. 2,828.473 million in year 2011.
Food Producers
This sector comprises of 57 companies (mostly
sugar related) with total paid up capital of Rs.
20,476.29 million and market capitalization of Rs.
383,406.15 million. The profit after tax of this
sector was Rs.16, 462.50 million in year 2011.
Commercial Banks
The sector comprises of 23 listed banks with listed
capital of Rs. 382,507 million and market
capitalization of Rs. 774,521.13 million. The total
profit after tax of this sector increased to Rs.
104,213.46 million from Rs. 65,060.58 million in
year 2010.
Pharmaceuticals and Bio Tech
The sector comprises of 9 listed pharmaceutical
companies with paid up capital of Rs. 4,955.77
million; whereas the market capitalization was Rs.
33,509.46 million. The total profit after tax of this
sector was Rs. 4,041.26 million.
Performance of some Blue Chips
During July-March 2011-2012, the total paid up
capital of fifteen big companies (Oil & Gas
Development Company Limited, Pakistan
Petroleum Limited, Nestle Pakistan Limited, Fauji
Fertilizer Company Limited, Habib Bank Limited,
MCB Bank Limited, Pakistan Oilfields Limited,
Unilever Pakistan Limited, National Bank of
Pakistan, United Bank Limited, Allied Bank
Limited, FATIMA Fertilizer Limited, Fajui
Fertilizer Bin Qasim limited, Hub Power Company
Limited and Pakistan Telecommunication Limited)
was Rs. 215.87 billion, which constituted 20.7
percent of the total listed capital at KSE.
These fifteen companies earned a profit after
taxation of Rs.248.19 billion in the fiscal year up
to March 2012. Out of the total profit after tax, the
share of OGDCL and PPL was Rs. 94.98 billion
representing 38.3 percent of the fifteen big
companies. For the period ending March 31, 2012,
earnings per share for the top rated companies
ranged from a 1.46 in the case of PTCL to 307.98
in respect of Unilever Pakistan. This indicates that
the business environment in the current fiscal year
has improved considerably for the blue chip
companies (Table 6.3).

Table 6.3: Price to Earnings Ratio of Top Fifteen Companies

Name of Company Profit After Paid up EPS Market Price PE ratio Market
Tax in Capital (Rs.) Capitalization
(Rs. billion) (Rs. billion) March 31, (Rs. billion)
2012
Oil & Gas Development Company 63.53 43.01 14.77 167.66 11.35 721.09
Limited
Pakistan Petroleum Limited 31.45 11.95 26.31 182.79 6.95 218.43
Nestle Pakistan Limited 4.67 0.45 102.94 4447.00 43.20 201.67
Fauji fertilizer Company Limited 22.49 8.48 26.52 124.84 4.71 105.88
Habib Bank Limited 20.74 11.02 18.82 111.37 5.92 122.74
MCB Bank Limited 19.42 8.36 23.23 175.44 7.55 146.71
Pakistan Oilfields Limited 10.82 2.37 45.72 365.24 7.99 86.40
Unilever Pakistan Limited 4.09 0.66 307.98 5601.00 18.19 74.46
National Bank of Pakistan 17.60 16.82 10.47 45.62 4.36 76.30
United Bank Limited 15.50 12.24 12.66 76.68 6.21 93.18
Allied Bank Limited 10.14 8.60 11.79 63.92 5.42 54.99
FATIMA Fertilizer Limited 4.12 20.00 2.06 23.72 11.52 47.44
Fajui Fertilizer Bin Qasim limited 10.77 9.34 11.53 41.57 3.61 38.83
The Hub Power Company Limited 5.42 11.57 4.69 37.63 8.03 43.54
Pakistan Telecommunication 7.43 51.00 1.46 12.31 8.45 62.78
Limited
Source: Karachi Stock Exchange

86
 Capital Markets

Performance of Lahore Stock Exchange Rs. 981.7 billion in March, 2012. The LSE25 index
which was at 3,051.1 points level in June, 2011,
The top market indicators witnessed an
increased to 3,707.6 points in March, 2012. The
encouraging trend at the Lahore Stock Exchange
market capitalization of the LSE has increased
(LSE). The turnover of shares on the LSE during
from Rs. 3,166 billion in June, 2011 to Rs. 3,294.1
Jul-March, 2011-12 was 0.587 billion shares
billion in March, 2012. Two new companies were
compared to 0.923 billion during the same period
listed with the LSE during Jul-Mar 2011-12 in
last year. The total paid-up capital with the LSE
addition to listing of seven Open End Funds and
increased from Rs. 888.2 billion in June, 2011 to
one TFC and Bond during the same period.
Table 6.4: Profile of Lahore Stock Exchange
2011-12
2006-07 2007-08 2008-09 2009-10 2010-11
(Jul-Mar)
Total Number of Listed Companies 520 514 511 510 496 460
New Companies Listed 10 2 9 25 9 2
Fund Mobilized (Rs billion) 38.8 29.7 32.8 67.5 18.1 5.5*
Listed Capital (Rs billion) 594.6 664.5 728.3 842.6 888.2 981.7
Turnover of Shares (billion) 8.2 6.5 2.7 3.4 1.1 0.6
LSE 25 Index 4,849.9 3,868.8 2,132.3 3092.7 3,051.1 3,707.6
Aggregate Market Capitalization (Rs
3,859.8 3,514.2 2,018.2 2622.9 3,166.0 3,294.1
billion)
* : Funds mobilized through Right issues.
Source: Lahore Stock Exchange

Performance of Islamabad Stock Exchange index 2,907.97 was witnessed on March 05, 2012
as compared to the lowest level of 2,302.8 as on
The Islamabad Stock Exchange (ISE) witnessed a
August 23, 2011. The average daily turnover of
mixed trend during the first nine months of 2011-
shares in the ISE during Jul-March, 2011-12 was
12. The ISE-10 index started at 2,722.8 points on
0.11 million shares as compared to 0.14 million
July 01, 2011 and closed at 2,821.9 points level at
shares during 2010-11. ISE index however
the end of March, 2012 showing an increase of
increased to 2,942.01 points on May 07, 2012.
99.1 points (3.6 percent). The highest level of the

Table 6.5: Profile of Islamabad Stock Exchange

2011-12
2006-07 2007-08 2008-09 2009-10 2010-11
(Jul-Mar)
Number of Listed Companies 246 248 261 244 236 254
New Companies Listed 12 7 15 2 - -
Fund Mobilized (Rs. billion) 30.7 24.6 24.8 76.7 17.8 20.8
Listed Capital (Rs. billion) 488.6 551 608.6 715.7 727.0 830.5
Turnover of Shares (billion) 0.2 0.6 0.3 0.2 0.04 0.01
ISE 10 Index 2,716 2,749.6 1,713 2,441.2 2,722.8 2,821.9
Aggregate Market Capitalization (Rs billion) 3,060.6 2,872.4 1,705.1 2,261.7 2,621.1 2,824.4
Source: Islamabad Stock Exchange

compared to 29.16 billion shares during the last

The total funds mobilized during Jul-Mar, 2011-12
financial year.
in the three stock exchanges amounted to Rs. 133.6
billion compared to Rs. 66.9 billion in the last
Corporatization and Demutualization of Stock
fiscal year. The total turnover of shares in the three
Exchanges
stock exchanges during the first three quarters of
the current fiscal year was 24.24 billion shares, The Stock Exchanges (Corporatization,
Demutualization and Integration) Act, 2012, was

87
Pakistan Economic Survey 2011-12

promulgated with the signing of the bill by the shareholders. Demutualization would result in
President of Pakistan on May 7, 2012. The enhanced governance and transparency at the stock
demutualization bill was approved on March 27, exchanges and greater balance between interests of
2012, in a joint session of the Parliament. various stakeholders by clear segregation of
commercial and regulatory functions and
The demutualization law provides a framework for separation of trading and ownership rights.
the corporatization, demutualization and
integration of the stock exchanges and had been Demutualization will assist in expansion of market
drafted by the SECP after consensus with all the outreach, resulting in larger number of investors,
stakeholders. The law requires the stock exchanges improved liquidity and better price discovery. A
to be demutualized within 119 days of its demutualized stock exchange will be in a better
promulgation in line with pre-defined timelines position to attract international strategic partners
specified for completion of various milestones and good quality issuers. Demutualization will also
involved in the demutualization exercise. facilitate consolidation of brokers leading to
financially strong entities.
At present, the Pakistan stock exchanges are
operating as non-profit companies with a Demutualization is a well-established global trend
mutualized structure wherein the members have and almost all stock exchanges worldwide operate
the ownership as well as trading rights. This in a demutualized set up. The enactment of this law
structure inherently creates conflict of interest as will bring the Pakistan capital market at par with
members predominantly control the affairs of the other international jurisdictions such as India,
stock exchange which results in lack of Malaysia, Singapore, the US, the UK, Germany,
transparency in the operations of the stock Australia, Hong Kong, and Turkey.
exchange and compromises investors’ interest.
Also, due to lack of resources our exchanges have Listing Guide Book
not been able to grow to the expectations of In order to facilitate the issuers/offerers of
investors, as trading activity is mostly concentrated securities and to create awareness among the
of these exchanges with the dominant share going general public about the process of initial public
to the Karachi Stock Exchange. offerings (IPOs), a listing guide book (LGB) has
been published by the SECP. LGB not only
Corporatization and demutualisation of stock
contains general information about the purpose and
exchanges would entail converting the stock
benefits of listing but also contains all major legal
exchanges’ structure from non-profit, mutually
requirements applicable to IPOs and listings.
owned organizations to for-profit entities owned by
Box-1
Measures to encourage New Equity Listings:
Various steps are being taken to encourage new listings which include the following:
` The management of unlisted public companies is being approached through stock exchanges to
motivate them for listing at the stock exchanges. An IPO Summit has been organized to identify
potential IPOs and to attract them to list their companies on the stock exchanges
` Various regulatory bodies such as PTA, OGRA, DGPC, PPIB, SBP and BOI have been approached so
that their regulatees can be motivated for listing
` Formation of a technical committee, comprising members from all the three stock exchanges and the
commission to take necessary steps for encouragement of new listing. Such steps include
o revision of the existing regulatory framework for new listing
o introduction of SME board for listing of small capital based companies and venture
companies
o amendments in the listing regulations for reviewing the minimum allocation of capital to the
general public

88
 Capital Markets

o devising a procedure for allocation of capital to various categories of applications during

IPOs, and
o bringing uniformity in the listing regulations of all the three stock exchanges
of Pakistan

Global Stock Markets 500 (6.65 percent), Indonesia Jakarta composite

(5.99 percent) and Tokyo Nikkei 225 (2.72
During fiscal year 2011-12, the leading stock
percent). It may be noted that compared with the
markets indices of the world observed mixed
other world indices, the Pakistan stock market
trends. Some of the markets witnessed negative
performed well during the current fiscal year. This
growth ranging from 18.1 percent (China) to 3
was mainly due to the steps taken by the current
percent (UK). Whereas major stocks which
government to boost the confidence of the equity
observed positive growth include, Philippines
market investors which included reforms in the
(19.03 percent), Pakistan (10.13 percent), US S&P
Capital Gains Tax, etc.

Table 6.6: Global Stock Indices during June 30, 2011 to March 2012
Date Change June 2011-Mar Local Currency V/s
Index 2012 US$
30-Jun-2011 31-Mar-2012 Points % 30-Jun-2011 31-Mar-2011
KSE 100 Index 12496.03 13,761.76 1265.73 10.13 85.95 91.02
Philippines PSE Composite 4291.21 5,107.73 816.52 19.03 43.33 42.90
Jakarta Composite 3888.57 4,121.55 232.98 5.99 8,570.00 9,138.00
Kuala Lumpur KLSE Composite 1579.07 1,596.33 17.26 1.09 3.02 3.06
US S&P 500 132064 1,408.47 87.83 6.65 -
New Zealand NZX 50 3448.35 3,509.55 61.20 1.77 1.21 1.22
UK FTSE100 5945.70 5,768.50 -177.20 -2.98 0.62 0.62
Australia AORD 4659.80 4,420.00 -239.80 -5.15 0.93 0.97
Seoul Composite 2100.69 2,014.04 -86.65 -4.12 1,068.88 1,131.95
Tokyo Nikkei225 9816.09 10,083.56 267.47 2.72 80.73 82.84
Singaporer Strait times 3120.44 3,010.46 -109.98 -3.52 1.23 1.26
Hong Kong Hang Seng 22398.10 20,555.58 -1842.52 -8.23 7.78 7.77
Bombay Sensex 18845.87 17,404.20 -1441.67 -7.65 44.70 50.87
Taiwan T.weighted 8652.59 7,933.00 -719.59 -8.32 28.79 29.53
China Shanghai Comp 2762.08 2,262.79 -499.29 -18.08 6.46 6.30
Source: Karachi Stock Exchange

Debt Capital Markets government has a ‘market-completion’ role in the

development of the debt market. As the primary
The importance of a sound and diversified
issuer of sovereign bonds of various tenors, the
financial sector, which efficiently performs the
government effectively establishes the benchmark
function of financial intermediation, can hardly be
for the pricing of private sector debt instruments.
overemphasized. However, it has been observed
In most Asian countries, as in Pakistan, the bond
over the years that Pakistan’s economy relied
market is dominated by government bonds.
mostly on the banking system to meet the
financing needs of the economy, whereas the
The major drivers of financial assets in Pakistan
capital markets developed relatively slowly. In
are deposits and government bonds, whereas
Pakistan, within the overall capital markets, equity
corporate bonds remain a very small portion.
markets have grown more significantly. During the
Pakistan Investment Bonds (PIBs) remain the
past few years the significance of debt markets and
longest tenor sovereign bonds, providing the
in particular, the bond markets has been realized as
benchmark yield curve for private issuances. The
a complementary source of finance. Notably, the
National Savings Schemes (NSS), on the other

89
Pakistan Economic Survey 2011-12

hand, with tenors up to 10 years, provide risk-free The government conducted fourteen auctions of
investment options to retail and institutional PIBs in 2009-10, seven in 2010-11 and seven in
investors. 2011-12 (Jul-Mar) raising Rs. 64.7 billion,
Rs.169.291 billion and Rs. 159.246 billion
Government Securities respectively.
Pakistan Investment Bonds (PIBs) are long term
A well-developed corporate bond market is
bonds issued by the Government of Pakistan and
essential for the growth of the economy as it
sold through the State Bank of Pakistan via
provides an additional avenue to the corporate
periodic auctions. These are long term Bonds
sector for raising funds for meeting their financial
issued by the Government of Pakistan, offering a
requirements. During the period under review July-
risk free investment to the bond holders at
December 2011 two listed debt instruments were
premium interest rates depending on the maturity
offered to the general public i.e. offering Rs. 2
of the bond. PIBs are issued with tenors of 3, 5, 7,
billion Term Finance Certificates (TFC) with a
10, 15, 20 and 30 Years. Backed by the
Greenshoe Option of Rs. 1 billion by Engro
government, they present a low risk long term
Corporation Ltd and offering Rs. 1.5 billion TFCs
investment option. The Pakistan Investment Bonds
by Summit Bank Limited. The TFCs by Engro
offer a fixed semiannual coupon and repayment of
Corporation Ltd., were offered to retail investors
principal at maturity. They are highly liquid
only whereas, TFCs offered by Summit Bank Ltd.,
Statutory Liquidity Requirement (SLR) eligible
were offered to both institutional and retail
securities that are actively traded in the secondary
investors. TFC Issue by Engro Corporation Ltd.,
market. The minimum denomination of PIBs is
was oversubscribed, whereas, TFC Issue by
Rs.100, 000.
Summit Bank Ltd., was under subscribed.

Table 6.7: Listing of Debt Instruments during July 2011 to March 2012
S.No. Name of the Company Floated on Formal Listing Listed at Issue Size:
Date (In billion
rupees)
i. Engro crop. Ltd. June 01,2011- August November 04, 2011 KSE 2.00
(2nd Issue) 31,2011 LSE
(2nd issue-Engro Rupiya
Certificate)
ii. Summit Bank Limited October 27, 2011 01-Dec-11 KSE 1.50
TOTAL 3.50
Source: Securities Exchange Commission of Pakistan

securities issued through private placement were

Further, in addition to the above, during the period
reported. The details of these privately placed
July 2011 to March, 2012 a total of five debt
corporate debt issues are as follows:
Table 6.8: Debt Securities issued through Private Placement during July 2011 to March 2012
S. No. Name of Security No. of Issues Amount
(In billion rupees)
i. Private Placed Term Finance certificate) 01 1.00
ii. Sukuk* 04 112.29
iii. Commercial Papers 01 0.21
Total 06 113.51
*includes two Sukuk Issues of Rs.108.393 billion by Pakistan domestic Sukuk company Limited.
Source: Securities Exchange Commission of Pakistan

As of March 31, 2012 a total of 131 corporate debt 500.433 billion. Details are presented in Table 6.9
securities were outstanding with an amount of Rs. below:

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 Capital Markets

Table 6.9: Debt Securities Outstanding as on March 31, 2012

S. No. Name of Security No. of Issues Amount outstanding
(In billion rupees)
i. Listed Term Finance Certificates (L-TFCs) 37 66.51
ii. Private placed term Finance certificates (PP-TFCs) 39 68.18
iii. Sukuk 54 365.53
iv. Commercial Papers 01 0.21
Total 131 500.43
Source: Securities Exchange Commission of Pakistan

Box-2
Measures for the development of debt markets:
` In order to encourage listing of debt securities on the exchanges, a separate set of regulations for debt securities
are being framed
` Regulatory framework for the credit rating agencies (CRAs) are being revamped so that CRAs play a more
effective role in the development of the debt market. In this regard a committee, comprising of the
representative of SECP and SBP and CRA has been constituted by the Commission which has been mandated
with the tasks of:
o Review of the existing regulatory framework for CRAs in line with the international best practices
o Strengthening of the existing regulatory Framework for CRAs viz the credit rating companies rules, 1995
and the code of conduct for CRAs dated February 17, 2005
o Review of the proposals of CRAs regarding enhancement of the rating universe
o Diversification of capital structure of CRAs and their listing on the stock exchanges
o Regulatory framework for establishment of a Bond Pricing Agency (BPA)
o In order to rationalize the cost of issue of corporate bonds, steps are being taken to reduce the rate of stamp
duty applicable on issue and transfer of Term Finance certificates (TFCs) and commercial papers.

Development of new regulatory framework
In one of the major moves towards development of
a vibrant debt market in Pakistan, the Securities
and Exchange Commission of Pakistan has
recently approved notification of the Debt
Securities Trustee regulations (DST Regulations).
The main objective of the DST Regulations is to
protect the interests of debenture holders and to
safeguard the breach of provisions of the Trust
Deed, monitor the working of debenture trustees
by calling for details regarding compliance by the
issuers of the terms of the trust deed, creation of
security, payment of interest, redemption of
debentures and redress of complaints of debenture
holders.
Development of New Regulatory Regime for
Brokers
In order to ensure that standards and principles
adopted in the markets conform to international
best practices, a revised market participant regime
is being proposed. The proposed regime would
address some of the most significant issues
pertaining to the business of stock brokerage and is
expected to increase the efficiency of our capital
market.
Capital Market Reforms and Development
Activities
During the period under review, the Securities and
Exchange Commission of Pakistan (SECP)
continued with its reform agenda for strengthening
the Pakistani capital market with the objectives of
improved risk management, increased
transparency, investor protection and new
product/market development. The highlights of
reform measures introduced during the period
under review are as follows:
o For development of the debt market, the Bonds
Automated Trading System (BATS) at the

91
Pakistan Economic Survey 2011-12
stock exchange was revamped along the lines
of the Bloomberg-based-E-Bond with various
system enhancements for facilitating the price
discovery process of debt instruments and
price negotiation between the market
participants. Further, to facilitate investors
trading in Term Finance Certificates (TFCs)
listed at different exchanges, a regulatory
framework was introduced for facilitating
inter-exchange trades in listed TFCs. A broker-
to-broker functionally was introduced in BATS
which enables settlement of the inter-exchange
trades directly with the National Clearing
Company of Pakistan Limited (NCCPL);
resulting in greater efficiency and transparency
in the trading and settlement process. Also, a
centralized platform was developed at the
NCCPL for mandatory reporting of trades
executed in the unlisted TFCs, which provides
access to real-time trading information in un-
listed TFCs thereby providing better price
discovery and transparency.
o To fulfill the hedging requirements of various
groups of investors in the commodities market,
new futures contracts were introduced at the
Pakistan Mercantile Exchange Limited
(PMEX) in sugar, cotton, wheat, crude oil (10
barrel), silver (100 ounces), silver (10 tola) and
gold (10 ounces). Further, the concept of
market makers was introduced which will
promote liquidity and investors’ confidence
through enhanced profitability, reduced
volatility in prices and efficient execution of
orders.
o To ensure easy access to financing and
liquidity to the market, amendments were
approved to the Securities (Leveraged Markets
and Pledging) rules, 2011 thereby removing
practical hindrances and creating flexibility for
margin financing and margin trading products.
Through the amended rules, reduced cash
margin requirements were prescribed and
individual investors were allowed to
participate as financiers in the margin trading
market, along with waiver of the mandatory
condition of prescribing minimum liquidity
requirement for selecting securities eligible for
margin financing.
o To add depth and diverse investment
alternatives to the market, various new
product/system development initiatives were
92
undertaken. In line with international best
practices, Exchange Traded Funds (ETFs)
were introduced at the Karachi Stock
Exchange (KSE). EFTs are a globally popular
investment product which allow investment in
a diversified portfolio of securities tracking a
benchmark index and provide investors with
benefits such as trading flexibility, overall
portfolio diversification and transparency.
o To implement robust Anti-Money Laundering
and combating the financing of Terrorism
regime in the Pakistan capital market in light
of the Financial Action Task Force (FATF)
recommendations and international best
practices, effective Know-Your-Customer
(KYC) and Customer-Due-Diligence (CDD)
policies and procedures were introduced for
the capital market and its intermediaries.
o To ensure improved monitoring of internet
trading activities offered by the brokers,
internet trading regulations were approved for
KSE which comprehensively cover various
aspects while effectively addressing issues
unique to this segment including risk
management and privacy of investors’
accounts.
o To strengthen monitoring and compliance by
market intermediaries with the applicable
regulatory provisions and to improve
enforcement power of the regulators,
regulations governing system audit of the
brokers of KSE were revamped with major
changes in the brokers’ audit process and
scope.
National Savings Schemes
Central Directorate of National Savings (CDNS) is
engaged in making innovative efforts to promote a
saving culture in the country. The CDNS offers
attractive saving products to various categories of
people to suit their specific needs. CDNS is
currently engaged in restructuring of the CDNS to
better cater for the needs of the investors and
introduce more profitable products. Focus is on
introducing short term saving certificates and
expansion of CDNS network not only across the
country but also to overseas Pakistanis. Details of
the investment made in the saving schemes are
given in Table: 6.10.
 Capital Markets

Table 6.10: National Savings Schemes (Net Investment) (Rs. Billion)

2011-12
S.No. Name of Scheme 2007-08 2008-09 2009-10 2010-11
(Jul-Mar)
1 Defence Savings certificates (4,317.43) (27,411.28) (32,493.15) 9,748.10 4,656.64
2 National Deposit Scheme 0.05 (2.71) (0.13) (1.01) (0.71)
3 Khaas Deposit Scheme (6.99) (1.64) (3.84) (2.62) (0.26)
4 Premium Saving Certificate -- -- -- -- --
5 Special Savings Certificates(R) 13,800.57 128,469.03 61,856.60 43,960.21 (24,189.99)
6 Special Savings Certificates(B) (0.18) (8.53) (0.30) (0.74) (0.70)
7 Regular Income Certificates (273.53) 40,094.28 44,538.27 46,946.79 31,419.74
8 Bahbood Savings Certificates 38,799.69 78,537.96 59,267.18 61,731.56 38,128.51
9 Pensioners’ Benefit Account 18,695.93 22,215.74 18,166.85 17,940.32 11,107.85
10
Savings Accounts 8,989.12 (10,899.15) 1,021.30 (625.30) 1,566.09
11 Special Savings Accounts 5,521.48 21,627.05 31,375.53 14,240.79 3,331.26
12 Mahana Amdani Accounts (24.97) (50.03) (195.73) (77.94) 61.62
13 Prize Bonds 8,277.07 14,649.97 38,556.68 41,083.40 41,314.32
14 National Savings Bonds -- -- 3,625.16 -- --
Total 89,460.81 267,220.71 225,714.46 234,943.98 107,484.37
Source: Central Directorate of National Savings

Mutual Funds Laundering Act 2010. Further, SECP to facilitate

The period July 2011 to March 2012 marked a
substantial rise in mutual funds with total assets of
the industry surging by 24 percent from Rs. 290
billion to Rs. 400 billion. As of March 31, 2012,
the number of mutual funds in the industry stood at
146 compared to 137 in June 2011. The upward
trend in the assets of the mutual funds industry is
primarily attributed to soaring investment in
money market and capital protected funds since the
industry continues to be predominantly risk averse.
Though the equity markets have depicted a bull run
in the current financial year, equity funds have not
been very successful in attracting substantial
inflows. Influx in income funds is expected to
remain subdued so long as the debt market is
revitalized.
During the period July-March, 2011-12, the
Securities Exchange Commission of Pakistan, in
its continuous efforts to curb money laundering,
issued a circular on reporting/submission of
suspicious transaction/currency transaction by Non
Banking Finance Companies (NBFCs) to the
Financial Monitoring Unit under the Anti-Money
the industry, brought about significant amendments
in the Non-Banking Finance Companies and
Notified Entities Regulations, 2008. Some of the
important amendments made included the
following:
o Registration of trustee to bring it within the
regulatory ambit
o Eliminating the seed capital requirement for
new funds
o Empowering unit holders of a mutual fund to
change its management rights in case
redemption of units is suspended beyond
fifteen days, and
o Enhanced oversight by trustee of a mutual fund
in line with best international practices.
Furthermore, the SECP also allowed equity-
oriented mutual funds to invest in all kinds of
futures contracts to effectively achieve their
investment objectives. This measure was also
taken in anticipation of its potential impact on
growth and development of the futures market.

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Pakistan Economic Survey 2011-12
Table 6.11: Major highlights of mutual funds during February 2012
Total assets of Industry*
Total number of funds*
Total number of AMCS/IAs*
Assets Size of AMCs/IAs*
Discretionary /Non-discretionary portfolio
Funds launched during the month
Source: Securities Exchange Commission of Pakistan
*include assets under management of Arif Habib and MCB amounting to Rs.34.9 billion.
Modaraba
The modaraba sector has an established legal
framework that allows it flexibility to provide a
wide range of financial products and services
under the tenets of Islamic shariah which reflect
the innovative and dynamic nature of the industry.
Modarabas have played a vital role in the
development and growth of Islamic modes of
financing in the country and the capital markets
since their inception in 1980. Most of the
Modarabas in Pakistan are doing business in the
financial sector while a few are engaged in the
industrial, trading or other services sectors. Like
any other industry, modarabas create a distinctive
value proposition that meets the needs of its
customers.
Despite the prevailing financial and economic
crises in the country, most of the modarabas
continued to perform well and record profits.
Currently, 40 registered modaraba companies are
in existence and the total number of operational
modarabas are 26. As per the quarterly financial
statements of modarabas, as on February 29, 2012,
the aggregate paid-up fund of modarabas was Rs.
8.896 billion. The total assets of the modaraba
sector stood at Rs. 26.757 billion against Rs.
26.392 billion in June, 2011. Similarly, total equity
of the modaraba sector was Rs. 11.486 billion
(inclusive of revaluation reserves) compared to Rs.
11.560 billion during June, 2011.
In order to improve the financial standing and
image of modarabas in the financial sector of the
country, the SECP, after detailed consultation with
stakeholders and industry experts, introduced
“Shariah compliance and Shariah audit
Mechanism” for modarabas. These will strengthen
the Shariah compliance by modarbas and help
them to be recognized as true Islamic financial
institutions in the financial sector. In terms of the
94
Rs. 399 billion*
128
24
Rs. 43.136 billion
Rs. 44 billion
-
said mechanism, the modarabas are required to
appoint independent Shariah advisors who would
provide necessary guidance to the management
companies to carry out the business operations of
modarabas in accordance with the Shariah
principles. The first report of the Shariah Advisors
on the affairs of modarabas will be disseminated to
the stakeholders with the annual audited accounts
of modarabas for the year ending June 30, 2012.
During the current financial year, the joint session
of the Parliament unanimously approved the
Modaraba Companies and Modaraba (Floatation
and Control) Ordinance, (Ammendment) Bill,
2009. The bill seeks to empower the Securities and
Exchange Commission of Pakistan to make
regulations and issue circulars, code and guidelines
etc. so as to strengthen regulatory framework for
the modaraba sector and enable the Commission to
safeguard the interest of stakeholders in a more
proactive and effective manner.
Investment Banks and Leasing Companies
Investment banking started to take root in Pakistan
in the second half of the 1980s. A broad range of
business services were envisaged that include
money and capital market activities, project
financing, corporate financial services, and
operations in the call and money market. The
investment banking sector showed a strong
performance and continued to flourish till the mid-
1990s. However, due to non-diversification of their
portfolio, they could not absorb the changing
economic conditions of the country. Therefore, this
sector started facing severe problems and
witnessed a declining trend. At present, there are
only seven functional investment banks operating
in Pakistan compared to 13 in 2005. Significant
reasons for the downfall of investment banking
sector are small capital bases with limited ability to
absorb significant shocks, focus on quasi banking

activities, maturity mismatch in their assets and
liabilities, failure to develop competencies for
delivering non-fund based services, high cost of
funds, limited capacity to expand outreach, and the
rise of universal banking.
In order to revive the investment banking sector,
necessary amendments were made to the
regulatory framework to allow investment banks to
undertake brokerage business from their own
platform instead of forming a separate company.
The objective was to encourage investment banks
to focus on providing non-fund based services; to
play a crucial role in the capital market; to promote
corporate brokerage houses culture; and, to address
the corporate governance issues in the brokerage
industry. Presently, the possibility of introducing
an appropriate regulatory regime for non-deposit-
taking and non-listed Non Banking Finance
Companies and ensuring that only licensed entities
engage in investment banking activities are being
explored for reviving the investment banking
sector.
Table 6.12: Financials of Investment Banks in
February, 2012
Amount
Particulars
(Rs in millions)
Total Assets 18,273
Total Equity 3,300
Total Deposits 7,040
Source: Securities Exchange Commission of Pakistan
Leasing is a mature business model. However, the
leasing sector in Pakistan has been facing a
multitude of challenges like liquidity issues, low
capitalization, limited sources for resource
mobilization, high cost of funds, high level of non-
performing assets and limited outreach. Several
important amendments to the applicable regulatory
framework have been made over a period of time
in order to promote this sector. During 2011, an
important amendment was made in the Non
Banking Finance Compinies & Notified Entities
(NBFC & NE) Regulations, 2008 i.e. deleting the
condition that requires a leasing company to fix the
period of finance lease for not less than three years.
The amendment is expected to increase in the
business volumes of leasing companies as they will
be able to entertain customers who desire a shorter
lease period and finance assets with a shorter
Capital Markets
economic life. The total number of active leasing
companies was 9 as of February 29, 2012.
Table 6.13: Financials of Leasing Companies in
February, 2012
Amount
Particulars
(Rs in millions)
Total Assets 34,242
Total Equity 4,566
Total Deposits 5,650
Source: Securities Exchange Commission of Pakistan
Voluntary Pension System
The last two decades witnessed pension reforms
globally. In high-income countries, the driving
force has been the threat that the current pension
system will become unaffordable as demographic
developments presented a major risk. The
countries that were in the process of transition
from a controlled economy to a market economy
confronted the challenge of introducing a public
pension system in place of social security available
to their populace under the socialist system.
However, again the demographic change and
affordability have been the driving force for
reforms in these countries. It is anticipated that
Pakistan shall also face similar challenges in the
near future. Lately, the government has been
considering reforming the current pension system.
Luckily, the dependency ratio at this point of time
is extremely favourable for Pakistan to shift from a
defined benefit system to a defined contribution
system. While reforms at the national level will
take some time, the SECP has introduced
Voluntary Pension System (VPS), with the
approval of the government. VPS envisages
contributions by Pakistani nationals in a pension
fund approved by the SECP. The pension fund
promises a stream of income to its members after
retirement. The government has given tax
incentives to individuals under the current tax
regime.
The penetration of VPS is low at the moment
because these are still new to Pakistan and non-
binding upon employers and individuals. It is
hoped that, with the passage of time and
complementary reforms in defined benefit
retirement schemes, the system would gain a
foothold and acquire substance. So far, 11 pension
funds have been launched under VPS.
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Pakistan Economic Survey 2011-12

Table 6.14: Growth of Pension Funds since 2007 REIT

No. of pension Net assets in Rs.
Date Real Estate Investment Trusts (REITs) provide
funds million
30-JUN-07 4 420 property owners an opportunity to securitize their
30-JUN-08 7 766 properties. It also provides the investors with small
30-JUN-09 7 870 capital base an opportunity to invest in the real
30-JUN-10 9 1,301 estate assets. Currently there are two REIT
30-JUN-11 9 1,557 management companies, operating in Pakistan.
31-DEC-11 11 1,829 Keeping in view the macroeconomic indicators,
29-FEB-12 11 1,979 the SECP has taken necessary measures to attract
Source: Securities Exchange Commission of Pakistan entrepreneurs to venture into the regulated real
estate business. Amongst these, amending the
Before June 2011, the maximum limit for tax REIT regulations in 2010 was one notable
credit for savings through VPS to individuals was initiative. Significant amendments included
up to Rs. 500,000 of taxable income. In the last reduction of fund size, introduction of hybrid
budget the limit has been increased up to 20 REITs and reduction in share capital for the REIT
percent of taxable income. The limit is still lower management companies (RMCs). However, these
than that available to those employed in private or measures still proved inadequate in attracting high
public sector institutions. To encourage funding of yield properties into REITs. To improve the
retirement schemes VPS needed to be made regulatory framework a committee has been
interchangeable with other retirement schemes, formed which includes the leading market players.
provident fund, and gratuity and superannuation This committee will review the REIT models in
funds. This will encourage funded schemes leading different jurisdictions and suggest an appropriate
to accumulation of assets and efficient deployment regulatory model for our market. Currently, work
of retirement savings. of the committee is in progress.

Box-3
Future Road Map
In consultation with relevant stakeholders, a comprehensive three-year Capital Market Development Plan (2012-14)
has been drafted. The plan envisages introduction of key structural and regulatory reforms, development of equity,
derivative, debt, commodities and currencies markets, development of Shariah-compliant investment alternatives,
and measures for improving governance, risk management, efficiency and transparency in capital market operations.
Efforts are underway for achieving the plan’s objectives within timelines provided, most important of which are
given below:
` The Stock exchanges (Corporatization), Demutualization and Integration Bill has been approved in the joint
session of Parliament in March 2012. The bill provides a framework for the corporatization, demutualization
and integration of the stock exchanges. Demutualization would result in enhanced governance and transparency
at the stock exchanges and greater balance between interests of various stakeholders by clear segregation of
commercial and regulatory functions and separation of trading rights and ownership rights. It will also assist in
expansion of market outreach, resulting in larger number of investors, improved liquidity and better price
discovery at the stock exchanges. A demutualized stock exchange will be in a better position to attract
international strategic partners and good quality issuers. Demutualization will also facilitate consolidation of
brokers leading to financially strong entities. The SECP, along with the stock exchanges, is in the process of
ensuring that subsequent to the enactment of the law, the activities set out therein are completed in a timely
manner.
o In line with international best practices, efforts will be undertaken for NCCPL to function as Central
Counter Party; establishment of a settlement guarantee fund; and transfer of risk management to
NCCPL.
` For developing the commodities market, the SECP may explore the possibility of allowing new commodity
exchanges to function in the country, as presently the potential offered by this market segment is not being
utilized to the maximum. This measure will also facilitate healthy competition and business generation in this
segment while contributing towards greater market outreach to the investors resulting in growth in the size of
the commodities market.

96
 Capital Markets

` For developing an Islamic capital market in line with global best practice, the SECP is contemplating the
establishment of a Shariah Board comprising of eminent Islamic scholars and market professionals to ensure
that all products/services offered under this umbrella are in conformity with the Shariah principles. Also, efforts
will be made for consideration of existing Islamic institutions and development of innovative Shariah compliant
institutions, products and services in order to deepen the capital market.
` Regarding new product/system development, the future SECP agenda includes introduction of trading in index
option to provide investors with avenues to develop better investment and hedging strategies. Also, to boost
activity in index futures market, dialogue will be initiated with foreign stock exchanges for cross listings of
foreign indices at Pakistani stock exchanges. For investors in the commodities segment, efforts will be made for
introduction of new futures contracts in commodities like cotton seed, oilcake, crude palm oil and maize, and
rolling currency contracts on foreign currency exchange rate pairs. Also, work is underway for establishment of
a collateral management company that would have a national network of approved warehouses with storage,
grading/certification capabilities for commodities market.
` To accelerate growth in the debt market, endeavors will be made for listing of government debt instrument at
the stock exchanges and integration of National Savings Schemes instruments in to the mainstream capital
market, in coordination with relevant stakeholders including the federal government and the State Bank of
Pakistan. Also, to promote transparency and price discovery of debt securities and minimize pricing issues of
debt securities, establishment of an independent Bond Pricing Agency (BPA) conforming to international
standards, is in the pipeline. The BPA is expected to contribute towards stimulating activity in the primary and
secondary debt markets, increasing market depth, reducing information asymmetry, increasing credibility of
financial statements through accurate asset-liability valuation, product development etc.
From the standpoint of risk management and transparency, a Centralized KYC Agency will be established for
registration and maintenance of investors’ KYC records in line with the international best practices pertaining to
KYC and CDD policies. These KYC records will be available for access by all market intermediaries and this
measure will assist in removing the duplication presently faced in the KYC process by bringing uniformity to the
same.

Conclusions rate by the SBP during latter period of the first half
of current fiscal year and increase in foreign
The performance of stock markets presented a
exchange reserves. Further, the market sentiment
mixed trend during the current fiscal year. Various
was boosted by the proposed promulgation of the
factors such as unstable law and order situation,
Capital Gain Tax Ordinance under which the
natural disasters, rumours on the economic front
National Clearing Company of Pakistan Limited
pertaining to reduction in military and civil aid
(NCCPL) has been appointed as an intermediary
from international donors, the Pak rupee
entity to compute, determine, collect and deposit
depreciation and increasing fiscal deficit of the
the Capital Gain Tax (CGT) on listed securities.
government have all contributed to the
The subject Ordinance was finally promulgated on
underperformance of the capital market during first
the 24th April, 2012. The government is committed
half of current fiscal year. However, the KSE-100
to formulating timely and effective policy to spur
index resumed its momentum during the 3rd quarter
activity in, and shore up the strength of, the capital
of the 2011-12 owing to certain encouraging
market.
measures like considerable reduction in discount

97
 Chapter 7

Inflation

The global economy experienced significant markets and broadly on the process of investment
financial crises in 2007-08. The financial crisis in the production of goods and services. This
emanated in subprime mortgage loan portfolio and coupled with spike in commodity and oil prices led
shocked the confidence of the international to a decline in the aggregate demand and raised
institutions and markets which in turn badly inflation the world over. In Pakistan the affect was
deteriorated the economic development and felt much severely as the country was also
balance of payments across the world. In the experiencing internal security issues and compaign
developing countries, the crisis was seen at the against terrorism. The surge in food and
time when they were already experiencing severe commodity prices witnessed during 2008-09
terms of trade and slower economic growth. The pushed the consumer prices index (CPI) to a record
financial meltdown led to a backlash on consumer level of 25.3 percent in August 2008.

Fig-7.1: Inflationary Trend

25.0
Old Base New Base
CPI 2000‐01=100 2007‐08=100
20.0

15.0

10.0

5.0

0.0
Jul-08

Nov-08

Jan-09

Jul-09

Nov-09

Jan-10

Jul-10

Nov-10

Jan-11

Jul-11

Nov-11

Jan-12
Sep-08

Sep-09

Sep-10

Sep-11
Mar-09

May-09

Mar-10

May-10

Mar-11

May-11

Mar-12

The rising trend in domestic prices in tandem with overall food inflation rate than the rest of
global food and fuel prices affect several macro- developing Asia. The report further pointed out
economic dynamics - consumption, investment, that the region, with a large number of people
inflation, trade and fiscal balances and ultimately already living close to the poverty line, is one of
resulted in slow down of GDP growth. the most vulnerable regions in the world to food
price shocks. The World Bank has also rated high
Asian Development Bank (ADB) report of 19th food prices as the biggest challenge facing most
March, 2012 titled “Food Price Escalation in South developing countries. This rising trend in inflation
Asia” noted that the region suffers from a higher is not specific to Pakistan. Regional inflation is

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Pakistan Economic Survey 2011-12

estimated to have also risen in India, Bangladesh and Thailand (Table 7.1).
Table: 7.1 Regional Countries Food Price Inflation
Pakistan India Bangladesh Thailand Sri Lanka
CPI Food CPI Food CPI Food CPI Food CPI Food
Jul-11 12.4 17.1 8.4 8.2 11.0 13.4 4.1 7.2 7.4 9.3
Aug-11 11.6 13.2 9.0 9.6 11.3 12.7 4.2 8.4 7.0 8.2
Sep-11 10.5 9.9 10.1 9.6 12.0 13.8 4.1 8.9 6.4 6.6
Oct-11 11.0 11.7 9.4 10.2 11.6 10.9 4.2 9.9 5.1 3.8
Nov-11 10.2 10.0 9.3 8.5 11.6 12.5 4.1 10.2 4.7 2.1
Dec-11 9.7 9.5 6.5 0.7 10.6 10.4 3.6 9.1 4.9 2.5
Jan-12 10.1 9.2 5.3 -0.5 11.6 10.9 3.4 7.7 3.8 -0.2
Feb-12 11.0 10.5 8.8 6.1 10.4 8.9 3.4 7.2 2.7 -4.1
Mar-12 10.8 9.8 9.5 9.9 10.1 8.3 3.4 7.1 5.5 -2.5
Apr-12 11.3 10.7 - - 9.9 8.1 2.7 4.9 6.1 0.2
Source: PBS, BBS, Ministry of Commerce & Industry India, Bank of Thailand.

12. The coverage of cities has also been increased

Food insecurity is a multi dimensional problem
and deserves to be tackled through a multi pronged
strategic approach where demand, supply and
distribution factors need to be taken into account.
Availability and access, two important components
of food security needs to be addressed
simultaneously. Food carries the largest weight in
three price indices and hence influences the
movement of these indices even with slight
variation in prices. The most visible impact of
rising food prices on the economy is acceleration
of inflationary pressure. In such a situation
controlling the inflation becomes unmanageable.
Pakistan is experiencing double-digit inflation over
the last several years mainly due to increase in
prices of food.
Inflation is generally measured by the Consumer
Price Index (CPI). The other measures of inflation
used in Pakistan are the Wholesale Price Index
(WPI) and Sensitive Price Indicator (SPI).
The Pakistan Bureau of Statistics (PBS) has
changed the base year of the price indices from
2000-01 to 2007-08, which by comparison with the
previous base has undergone considerable change
in terms of revision to commodity groups; their
weights derived from Family Budget Survey 2007-
08; and, coverage of items to capture the changing
pattern of consumption of the people.
The old basket of commodities in the CPI has been
revised and the commodities increased from 374 to
487 items and the commodity groups from 10 to
from 35 to 40. Proper representation has been
given to large cities (population of 500,000 and
above), medium cities (population 100,000 to
500,000), medium small cities (population 50,000
to 100,000) and small cities (population below
50,000). The food group weight has been reduced
from 40.3 percent to 34.8 percent and 21 items in
the old basket have been dropped while 111 new
items have been added. Health and Restaurant two
new sub indexes have been included. The sub
index of transport and communication in the old
base year has been split into two separate sub
groups as transport and communication group.
Rent being an important component of CPI is now
computed on the basis of real rental value rather
than using wage rates and prices of construction
materials. In the CPI series with base 2000-01, the
coverage in terms of income groups is as below:
i. Up to Rs. 3000
ii. Rs. 3001 to Rs. 5000
iii. Rs. 5001 to Rs. 12000, and
iv. Above Rs. 12000
In the new series with base 2007-08, the income
groups have been divided into five income
quintiles as under:
i. Up to Rs. 8000
ii. Rs. 8001 to Rs. 12000
iii. Rs. 12001 to Rs. 18000, and
iv. Rs. 18001 to Rs. 35000
v. Above Rs. 35000

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 Inflation

The basket of goods that makes up the WPI has
also been revised for the base year 2007-08 due to
change of consumption patterns. In the current
series of WPI, items are categorized into five
commodity groups namely: (i) food products,
beverages and tobacco, textiles, apparel and leather
products (ii) agriculture forestry and fishery
products (iii) ores and minerals, electricity gas and
water (iv) other transportable goods except metal
products, machinery and equipment (v) metal
product machinery and equipment. A set of 463
items have been selected instead of 425 items to
accommodate changes in the production and sales
of commodities in the wholesale market in 21
major cities instead of 18; with coverage of 112
commodities.
The SPI indicates the weekly change of prices of
53 selected items of daily use prevailing in 17
major cities as consumed by six groups (Table 7.2)
whose monthly income ranges from Rs. 8,000 to
Rs. 35,000 per month and an overall households
(“combined”) category.

Table:7.2 Inflation by Consumer Income Groups

Upto Rs. Upto Rs. Upto Rs. Above
Combined Upto Rs.8000
8001-12000 12001-18000 18001-35000 Rs.35000
Source: Pakistan Bureau of Statistics (PBS)

The key changes in the computation of the various indices are summarized in Table 7.3 below:

Table:7.3 Price Indices in Pakistan

Base Year 2007-08=10 Base Year 2000-01=100
Features CPI SPI WPI Features CPI SPI WPI
Cities covered 40 17 21 Cities covered 35 17 18
Markets covered 76 53 21 Markets covered 71 53 18
Items covered 487 53 463 Items covered 374 53 425
Commodities covered 89 - 112 Commodities covered 92 - 106
No. of commodity groups 12 - 5 No. of commodity groups 10 - 5
No. of price quotations 148048 11236 2366 No. of price quotations 106,216 11236 1,550
Reporting Frequency Monthly Weekly Monthly Reporting Frequency Monthly Weekly Monthly
Income Groups (in base Income Groups (in base
Six Quintile Six Quintile - Four Four -
year) with separate basket year) with separate basket
Source: Pakistan Bureau of Statistics (PBS)

Inflationary Trends percent. Thereafter it increased steadily and

reached 11.3 percent in April 2012. Food inflation
The year 2011-12 (Jul-Apr) witnessed both
on a year to year basis was highest in July 2011
demand pull and cost push inflation when viewed
and lowest in January 2012 at 9.2 percent. Non-
in the backdrop of the affects of the floods of 2010
food inflation was lowest in July 2011 at 9.2
and heavy rains in 2011, which almost wiped out
percent and highest at 11.6 percent in April 2012.
the major and minor standing crops in Sindh
Core inflation during the last nine months of the
province, created disruption in the supply chain
year remained almost at double digit levels except
which resulted in surging inflation. The global
in July 2011 when it dropped to single digit at 9.5
spikes in commodities and fuel prices also exerted
percent (Table 7.4). The main factor contributing
pressure on domestic inflation.
to the rise of non-food inflation was the upward
Inflation on year to year basis reveals that the CPI adjustment of energy, gas and fuel prices.
was highest in July 2011 at 12.4 percent. However,
in December 2011 it declined to single digit at 9.7

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Pakistan Economic Survey 2011-12

Table 7.4 Inflation on year on year (Y-o-Y) Basis %Change

Commodity Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12
CPI 12.4 11.6 10.5 11.0 10.2 9.7 10.1 11.0 10.8 11.3
Food 17.1 13.2 9.9 11.7 10.0 9.5 9.2 10.5 9.8 10.7
Non-Food 9.2 10.4 10.9 10.4 10.3 9.9 10.7 11.5 11.5 11.6
Core 9.5 10.0 10.6 10.4 10.4 10.1 10.2 10.6 10.8 10.8
WPI 20.3 18.7 17.0 15.4 12.0 8.3 8.7 7.2 4.5 3.8
SPI 12.7 11.9 8.7 8.2 5.9 5.1 6.8 8.3 8.4 9.7

Wholesale Price Index (WPI), during Jul-Apr

The Consumer Price Index (CPI) on average basis
2011-12 recorded as 11.2 percent as against 21
recorded as 10.8 percent during Jul-Apr 2011-12 as
percent last year. Food and non-food under WPI
compared to 13.8 percent during the same period
was noted as 6.7 percent and 13.3 percent during
last year. The two broad component of CPI, food
current period whereas it was recorded to be 23.5
and non-food inflation recorded an increase of 11.1
percent and 19.9 percent during the same period
percent and 10.7 percent respectively during the
last year. The following table and graph represent
period under review compared to 18.8 percent and
the trends in the CPI, WPI and SPI.
10.8 percent during Jul-Apr 2010-11. While the

Table:7.5 Rate of Inflation on the basis of various price indices (Average percent)
Items 2010-11(Jul-Apr) 2011-12(Jul-Apr)
A Consumer Price Index 13.8 10.8
Food 18.8 11.1
Non-Food 10.8 10.7
B Wholesale Price Index 21.0 11.2
Food 23.5 6.7
Non-Food 19.9 13.3
C Sensitive Price Indicator 18.1 8.5

Fig-7.2: CPI (Food, Non-food), WPI (Food, Non-food) and SPI (Percent)
Sensitive Price Indicator 8.5
18.1

Non-Food 13.3
19.9

Food 6.7
23.5

Wholesale Price Index 11.2

21.0
10.7
Non-Food 10.8

Food 11.1
18.8

Consumer Price Index 10.8

13.8
2011-12(Jul-Apr)
2010-11(Jul-Apr) 0.0 5.0 10.0 15.0 20.0 25.0

CPI inflation during the period (Jul-Apr) 2011-12 considerable effect on overall prices. A slight
increased by 10.8 percent on average and that of variation in food prices has a large impact on
food increased by 11.1 percent. The food group inflation (Table 7.6).
with 34.8 percent weight in the CPI basket has a

102
 Inflation

Table:7.6 Rate of Inflation on the basis of Food and Non-Food Groups

Items 2010-11(Jul-Apr) 2011-12(Jul-Apr)
A Consumer Price Index (CPI) 13.8 10.8
B Food Group) 18.8 11.1
C Non-food Group 10.8 10.7
D Core 9.3 10.4
Source: Pakistan Bureau of Statistics

Fig: 7.3 Inflation by Groups

Core

Non-food Group

Food Group)

CPI

2011-12(Jul-Apr)
0 2 4 6 8 10 12 14 16 18 20
2010-11(Jul-Apr)
Percentage points

to the scarcity of water in certain regions, supply

Both supply and demand side factors are
short fall in the global food markets and oil supply
responsible for food price escalation. These
shocks resulting from geopolitical instability in the
included supply disruption on account of the
Middle East etc.
natural calamities during the year as well as the
increase in transportation cost due to high fuel
The non-food prices increased at a slower pace of
prices; on the demand side, the price hike is the
10.7 percent than food prices. The divergent trend
consequence of the inflationary gap measured as
is due to different factors influencing these two
the difference between monetary expansion and
broad components of CPI differently, such as items
growth of overall national productivity.
coverage, nature of items and impact of seasonal
variation and availability etc. Among the non–food
The reasons for the rising food prices are manifold.
items, the hike in fuel related items such as diesel,
The demand and supply side factors responsible
petrol, gas, CNG and power tariff rates pushed the
for the food price hike in 2007-08 also seem to
production and transportation cost up thereby
continue in the current food price hike. These
accelerating inflation.
include rapid economic growth in emerging
countries leading to the increase in international
Core inflation which is nonfood - nonenergy is
food demand, lower agricultural productivity due
estimated at 10.4 percent during Jul-Apr 2011-12.
Table-7.7: (Percent) Change In Price Indices
On Average Basis (%) Point Contribution
Commodity Weights July –Apr July –Apr July -Apr July –Apr
2010-11 2011-12 2010-11 2011-12
General (CPI) 100.0 13.8 10.8 13.8 10.8
Food, & Non Alcoholic Beverages 34.8 18.8 11.1 6.6 3.9
Alcoholic Beverages& Tobacco 1.4 11.8 7.5 0.2 0.1
Non-Food 65.2 10.8 10.7 7.0 6.9

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Pakistan Economic Survey 2011-12

Table-7.7: (Percent) Change In Price Indices

On Average Basis (%) Point Contribution
Commodity Weights July –Apr July –Apr July -Apr July –Apr
2010-11 2011-12 2010-11 2011-12
Non-Food Non Energy 53.5 9.3 10.4 5.0 5.6
Clothing & Foot wear 7.6 11.4 14.9 0.9 1.1
Housing, Water ,Elec. Gas & other Fuel 29.4 11.0 7.5 3.2 2.2
Furnishing &Household Equip. 4.2 9.2 17.4 0.4 0.7
Maintenance
Health 2.2 8.1 11.1 0.2 0.2
Transport 7.2 11.2 15.5 0.8 1.1
Communication 3.2 13.8 0.6 0.4 0.02
Recreation & culture 2.0 5.3 5.7 0.1 0.1
Education 3.9 6.6 12.3 0.3 0.5
Restaurant & Hotels 1.2 16.5 13.7 0.2 0.2
Miscellaneous 2.1 13.3 19.9 0.3 0.4
Source: Pakistan Bureau of Statistics (PBS)

Inflation by Income Groups reflects the highest incidence of inflation (11.4

percent) in the highest income earning group. As
Inflation by income groups affects the
already stated food carries the highest weight (34.8
consumption pattern of various income groups.
percent) in consumer items. This reveals the fact
The current CPI covers the consumption of those
that a greater portion of expenditure of an average
households whose monthly income ranges from
household is spent on food whereas the prices have
Rs. 8,000 to Rs. 35,000 per month. Table 7.8
recently increased significantly.
Fig-3: Monthly % Change of CPI, Food and Non-Food
18.0
17.0
16.0
15.0 CPI Food Non-Food
14.0
13.0
12.0
11.0
10.0
9.0
Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Jan-12

Feb-12
Dec-11

Mar-12

Apr-12

Table:7.8 Inflation by Consumer Income Groups

Fiscal Year Combined Upto Upto Rs. Upto Rs. Upto Rs. 18001- Above Rs.35000
Rs.8000 8001-12000 12001-18000 35000
Spliced with Base Year 2007-08 = 100
2008-09 17.0 18.0 17.8 18.1 17.6 16.8
2009-10 10.1 10.5 10.5 10.6 10.3 9.8
2010-11 13.7 14.5 14.3 13.0 14.7 13.3
Jul-Apr
2010-11 13.8 14.8 14.6 13.2 14.9 13.4
2011-12 10.8 9.8 10.2 10.3 10.6 11.4
Source: Pakistan Bureau of Statistics (PBS)

104
 Inflation

Fig-7.8: Inflation By Income Groups Combined

Upto Rs.8000
19
Upto Rs. 8001-12000
18 Upto Rs. 12001-18000
17 Upto Rs. 18001-35000
Above Rs.35000
16
15
Percent

14
13
12
11
10
9
2008-09

2009-10

2010-11

2010-11

2011-12
Jul-Apr

Jul-Apr
Wholesale Price Index largest increase in wholesale prices was recorded
for fertilizer at 55.5 percent, followed by furnace
The wholesale price index on annual average basis
oil 36 percent, gram (whole), diesel and kerosene
has increased by 11.2 percent during (Jul-Apr)
oil at 27 percent each (Table 7.9). Further analysis
2011-12. The increase in the food and non-food
of the acceleration in wholesale prices reveals the
group averaged 6.7 percent and 13.3 percent
considerable spike in prices of cotton, cement,
respectively. The 14 major commodities covered
vegetable ghee, fresh vegetable, milk, meat, rice
under various sub groups of WPI contributed about
and tea are the major contributory factors in the
8 percent point to the overall increase in WPI. The
increase in WPI.

Table: 7.9 Percentage point contribution of major WPI items

Weight %Change Impact
Fertilizer 2.9 55.5 1.6
Furnace Oil 3.3 35.9 1.2
Gram (Whole) 0.5 27.6 0.1
Diesel Oil 5.3 27.3 1.4
Kerosene Oils 0.2 26.5 0.1
Vegetable Ghee 1.6 23.4 0.4
Meat 3.5 23.8 0.8
Vegetables 1.2 24.3 0.3
Fresh Milk 4.4 18.5 0.8
Rice 2.4 22.1 0.5
Tea 0.7 18.9 0.1
Cotton 1.2 15.2 0.2
Soaps 0.8 17.4 0.1
Cement 1.8 15.4 0.3
Total 30 8.0
Source: Pakistan Bureau of Statistics (PBS)

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Pakistan Economic Survey 2011-12

Fig: 7.9 Percent Change of major commodities in WPI

60
50
%Change

40
30
20
10
0

Cotton
Furnace Oil

Vegetable

Fresh Milk

Rice
Vegetables

Soaps
Fertilizer

Gram (Whole)

Meat

Tea

Cement
Diesel Oil

Kerosene Oils

Ghee
Table: 7.10 (Percent) Change In Price Indices
Commodity On Average Basis (%) Point Contribution
Weights
July –Apr July -Apr July –Apr July –Apr
2010-11 2011-12 2010-11 2011-12
General(WPI) 100.0 21.0 11.2 21.0 11.2
Agriculture Forestry & Fishery 42.1 30.7 1.6 12.9 0.7
Non-Food 57.9 19.8 13.3 11.5 7.7
Ores & Minerals 12.0 15.1 11.2 1.8 1.4
Food Products, Beverages 31.1 23.4 6.7 7.3 2.1
Other Transportable Goods 22.4 11.6 28.3 2.6 6.3
Metal Products Machinery 8.7 13.1 21.4 1.1 1.9
Source: Pakistan Bureau of Statistics

Sensitive Price Indicator (SPI) increase came from the increase in the prices of 11
The SPI measures the changes in weekly prices of basic items. These few items account for 40
53 essential items. During the current fiscal year percent of the weight in the SPI and contributed
(July—April) 2011-12, the increase in SPI is around 4.0 percent to the overall increase in the
estimated at 8.5 percent over the corresponding SPI. The contribution of onion is estimated at 0.6
increase of 18 percent last year. An item wise percent, gram pulse 0.2 percent, tomatoes 0.2
review of these 53 items which can be further percent, tea 0.4 percent, beef 0.5 percent, mutton
categorized into food, non-food, utility and 0.2 percent, rice 0.2 and vegetable ghee 0.1 percent
transport groups, indicates that the majority of the (Table7.11).

Table:7.11 Essential items point contribution in SPI

(% Change)
Items Unit SPI Weight Contribution
April 12/ July 11
Onions KG 1.4 40.5 0.6
Gram Pulse KG 0.6 36.4 0.2
Tomatoes KG 1.2 20.1 0.2
Tea (Packet ) 200 GM. 2.2 17.4 0.4
Beef KG 4.3 11.7 0.5
Mutton KG 2.1 10.8 0.2
Rice Basmati Broken KG 1.9 8.4 0.2

106
 Inflation

Table:7.11 Essential items point contribution in SPI

(% Change)
Items Unit SPI Weight Contribution
April 12/ July 11
Milk Fresh LTR 16.8 7.8 1.3
Veg. Ghee (Loose) KG 2.7 4.8 0.1
Chicken Farm KG 3.6 3.5 0.1
Cooking Oil (Tin) KG 2.3 3.5 0.1
Total 40.0 4.0

Fig: 7.11 Change in prices of essential items in SPI (% CHANGE) April 12/ July 11

45
40
35
30
%Change

25
20
15
10
5
0

Chicken Farm

Cooking Oil
Tea (Packet )

Mutton
Beef

Milk Fresh

Veg. Ghee
Rice Basmati
Onions

Tomatoes
Gram Pulse

(Loose)
Broken

(Tin)
The current increase in the prices of edible oil and the overall price is bound to show an increase too.
rice represents the global price trend in the prices The price of rice has increased by 17.2 percent in
of these commodities and the domestic demand- the international market. Pakistan, being part of the
supply situation. Palm oil prices in international global economy, cannot remain immune to such
market increased from $1,088 per ton in July 2011 global developments on the price front. These are
to $1,152 per ton in March 2012; an increase of 6 then reflected in the local markets.
percent. When the prices of basic inputs increase,
Fig7.7
International Prices of Major Domestic Prices of Major Commodities
Commodities
Wheat ($/Ton) Wheat (Rs/Kg)
Rice ($/Ton) 84 515
Rice Basmati (Rs/Kg)
690 Sugar ($/Ton) 1230
Crude ($/Brl) Sugar (Rs/Kg)
74 510
590 Palm Oil ($/Ton) Cooking Oil (Rs/2.5 Kg)
1180
64 505
Cooking Oil

490
Palm OIl

1130
54 500
390
1080
290 44 495

190 1030 34 490

90 980 24 485
Jul-11
Aug-11
Sep-11
Oct-11

Dec-11
Nov-11

Jan-12
Feb-12
Mar-12
Apr-12

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Jan-12

Feb-12

Mar-12
Dec-11

Apr-12

107
Pakistan Economic Survey 2011-12

A review of the price trend of essential variety of reasons. The increase in price of chicken
commodities during the period (Jul-Apr) 2011-12 (farm), fresh milk, beef and mutton is attributable
suggests that the current price hike is the outcome to supply shortage of these items in the market.
of rising food prices which influenced overall The increase in prices of tomatoes and onion is
inflation. Prices of vegetable, fruit, meat and owing to damage to the crops by the floods as well
chicken (farm) etc. experienced larger increase as seasonal volatility. Details of the commodity
during the period July 2011 to April 2012. The wise movement of prices are given below: (Table-
prices of essential items have increased for a 7.12).
Table:7.12 Prices of Essential Items
July Aug Sep Oct Nov Dec Jan Feb Mar Apr
Items Unit %Change
2011 2011 2011 2011 2011 2011 2012 2012 2012 2012
Wheat Kg 25.4 25.4 25.9 26.2 26.7 27.3 27.4 27.4 27.5 27.4 7.9
Wheat Flour Kg 29.7 28.6 29.7 29.9 30.2 30.7 30.7 30.8 30.9 31.0 4.4
Rice Basmati Kg 57.3 58.9 58.9 59.1 59.9 59.7 59.1 59.0 60.1 62.1 8.4
Rice Irri-6 Kg 43.7 44.7 45.3 45.2 45.2 45.0 45.4 45.4 46.0 46.9 7.3
Masoor Pulse Kg 107.5 106.0 106.1 105.7 104.6 101.2 98.8 98.3 101.6 100.9 -6.1
Moong Pulse Kg 140.3 139.5 137.1 134.0 129.6 124.3 120.9 118.8 122.5 122.6 -12.6
Mash Pulse Kg 154.5 153.3 150.8 148.6 147.3 145.1 143.0 141.4 143.4 141.8 -8.2
Gram Pulse Kg 72.4 72.9 72.7 72.5 71.6 71.4 70.9 75.2 97.3 98.7 36.3
Beef Kg 233.7 239.8 244.6 249.1 252.2 252.2 253.5 257.1 259.6 261.0 11.7
Mutton Kg 451.1 458.1 463.6 469.9 477.1 479.8 485.0 491.9 498.6 499.9 10.8
Eggs Dozen 79.0 79.8 81.8 82.7 88.5 100.4 116.8 103.5 90.4 72.4 -8.4
Sugar Kg 71.3 75.1 75.4 70.0 65.2 53.7 51.7 50.3 54.9 55.6 -22.0
Milk Fresh Liter 55.9 56.0 56.1 56.5 57.1 57.7 57.8 58.0 59.0 60.2 7.7
Veg.Ghee 2.5Kg 495.0 495.0 495.0 495.0 495.0 495.0 495.0 495.0 497.6 512.4 3.5
Veg.Ghee (loose) Kg 166.2 166.4 165.9 161.8 160.8 160.4 161.5 161.6 170.3 174.2 4.8
Cooking oil 2.5Ltr. 495.0 495.0 495.0 495.0 495.0 495.0 495.0 495.0 497.6 512.4 3.5
Potato Kg 31.6 31.0 31.4 29.4 28.5 21.8 18.6 18.3 18.9 23.5 -25.6
Onion Kg 18.2 24.0 32.3 42.7 53.2 36.0 43.4 37.6 31.8 25.6 40.7
Tomato Kg 41.8 36.8 47.7 76.5 78.1 61.6 49.4 43.1 33.3 50.3 20.3
Red chillies Kg 253.4 252.6 283.1 313.8 319.5 318.2 316.4 311.7 307.5 308.4 21.7
Tea pack 200 Gms 121.1 121.1 131.6 131.6 131.6 131.6 131.6 134.5 140.0 142.1 17.3
Chicken Farm Kg 160.8 164.4 143.5 132.1 127.1 131.9 160.3 162.2 156.9 166.5 3.5
Source: Pakistan Bureau of Statistics (PBS)

in time it showed an increase of 67 percent, this

The prices of pulses show a mixed trend. The gram
was due to seasonal affect as major crops of
pulse presents an increase of 36 percent. This was
tomatoes in Sindh was destroyed. Now with the
due to the prolonged winter season and
arrival of this vegetable from Punjab, a declined
unfavourable climate resulted in delay of its supply
trend in its prices was noted in May 2012. The SPI
as a result gram pulse was imported while the
of the last two weeks of April and first two weeks
prices in international market were also rising.
of May 2012 suggests a negative trend as given in
Tomato being a heavy weight item, its prices
the table below.
remained high during April 2012, and at one point
Table 7.13: SPI (53 Items) 2007-08=100
Percentage Change over Percentage Change over
Week ended SPI for lowest Combined
prev. week corr. Week prev. week corr. Week
on income group SPI
2011-12 2010-11 2011-12 2010-11
05/04/2012 174.76 0.95 7.89 183.66 1.05 9.87
12/04/2012 175.47 0.41 7.88 184.54 0.48 10.00
19/04/2012 175.22 -0.14 7.29 184.36 -0.10 9.48
26/04/2012 174.41 -0.46 7.03 183.53 -0.45 9.24
03/05/2012 174.17 -0.14 7.90 183.31 -0.12 9.30
10/05/2012 174.07 -0.06 7.55 183.28 -0.02 8.97

108
 Inflation

Regional Prices chilies were lower in Pakistan than in the other

regional countries. Prices of 08 items i.e. rice
Prices of essential consumer items prevailing on
basmati, beef, mutton, chicken (farm), sugar,
10th May, 2012 in Pakistan as compared with
tomatoes, red chilies and garlic are lower in
neighboring countries including India, Bangladesh,
Pakistan as compared to India.
Sri Lanka, Iran and Afghanistan indicate that
prices of rice, beef, chicken (farm), sugar and red

Table 7.14: Prices of Selected Essential Items in Neighboring Countries Value in Pak Rupees
Items Unit Islamabad New Delhi Dhaka Colombo Tehran Kabul
10/5/2012 10/5/2012 2/5/2012 2/5/2012 15/4/2012 12/4/2012
Wheat Kg 27.8 27.2 39.1 -- -- 54.0
Wheat Flour Kg 30.3 28.9 38.0 85.0 -- 58.0
Rice Basmati Kg 100.1 160.5 150.7 127.5 216.8 135.0
Masoor Pulse Kg 118.1 91.8 111.6 106.2 222.2 220.0
Moong Pulse Kg 131.9 119.0 122.8 106.2 259.2 202.0
Mash Pulse Kg 156.9 143.5 122.8 106.2 -- 276.0
Gram Pulse Kg 113.8 88.4 78.1 106.2 222.2 127.0
Beef Kg 280.0 283.0 290.2 368.3 1133.3 496.0
Mutton Kg 556.9 567.0 502.3 708.2 1851.6 652.0
Chicken Farm Kg 148.9 321.0 178.6 311.6* 318.5 309.0
Eggs Dozn 85.1 83.0 117.2 76.4 171.8 127.0
Sugar Kg 58.8 59.5 69.2 87.1 133.3 92.0
Veg. Ghee (loose) Kg 206.0 147.9 468.9 -- -- 190.0
Edible Oil(Dalda) Ltr 206.0 183.6 145.1 208.9 244.4 181.0
Potato Kg 35.8 28.9 22.3 70.8 459.2 54.0
Onion Kg 36.9 23.8 20.1 63.7 459.6 54.0
Tomato Kg 36.3 37.4 16.7 56.7 162.9 127.0
Red Chilies Kg 321.3 378.0 -- -- 888.8 398.0
Garlic Kg 126.3 227.0 78.1 141.6 259.2 147.0
Tea Kg 710.6 544.0 362.8 424.9 -- 469.0
Source: Planning & Development Division
-- Not available, * : Price of chicken is without feather

Price Stabilization Measures also monitors the prices of essential commodities

The government is focused to restrict inflation to
12 percent during the current fiscal year 2012.
Different policy measures have been taken to deal
with food and fuel price hikes and to contain the
inflation through monetary policy, augmenting
supply, streamlining distribution and interventions
to stimulate productivity.
Given that the average inflation for (Jul-Apr)
2011-12 was 10.84 percent and in view of the
international food and fuel price trend the
government is keeping a close watch on the
movement of price trend through weekly ECC and
Cabinet Meetings. In addition to the above, the
National Price Monitoring Committee (NPMC)
in consultation with the Provincial governments
and the concerned Federal Ministries/ Divisions
and Organizations. The NPMC has so far held
twelve meetings to monitor the price and supply
situation. The SBP controls inflation through the
policy rate under the monetary policy. The recent
inflationary pressure has necessitated a tight
monetary policy to suppress aggregate demand.
The State Bank of Pakistan continued to keep
money supply on a tight leash. To maintain fiscal
discipline, the government has also focused on
prudent expenditure management. Expenditures
are being contained through austerity measures and
administrative mechanisms. The Senate Standing
Committee on Finance Revenue, Economic
Affairs, Statistics and Planning Division has

109
Pakistan Economic Survey 2011-12
recently approved the report of the sub committee
on the control of price of essential commodities
which is primarily aimed at finding ways and
means to control prices.
Flood Impact
Severe monsoon rains have triggered floods in
Southern Pakistan of unprecedented scale, both in
terms of volume and spatial coverage. According
to report of ADB, it is estimated that
approximately 9.6 million people have been
affected in Sindh and Balochistan as a result of the
floods. The overall damage from 2011 floods is
estimated at Rs 324.5 billion (1.6 percent of GDP),
Table 7.15: 2011 Kharif Area Affected by Flood
Crop Area
Province Damaged
Cotton Rice
(000‟ ha)
Balochistan 21.42 1.29 14.30
Sindh 859.61 494.94 163.85
Total 881.03 496.22 178.14
The floods have had a large and direct impact on
the Kharif cropping season. It has been estimated
by the World Bank and Asian Development Bank,
that about 10 percent (142,434 ha) of the affected
Kharif crop area will not be available for
cultivation in Rabi and 5 percent in the Kharif
2012. The main Rabi crop in Pakistan is wheat
which is grown on some 8.5 million ha. In Sindh
95 percent of the land was allocated to wheat in
Rabi 2010. There is a high possibility that wheat
planting in Sindh may face substantial constraints,
mainly due to fact that the flood waters have not
fully receded. In Balochistan, water have receded
except for some low lying areas and, provided the
necessary support system for land clearing and
input supplies are put in place for the planting
season, wheat planting may not be substantially
affected. However, damage to watercourses and
tube wells, which are a critical source of
supplementary water, may affect yields. Another
factor that may contribute to decrease in the area
under wheat will be the delayed start of sugarcane
crushing but a recovery in the gap may be filled by
the early clearing of the damaged cotton areas.
SUPARCO estimates 0.5 million tons loss of
110
with direct damages amounting to 1.3 percent of
GDP and indirect losses of 0.2 percent of GDP.
The floods remained confined to Sindh and
Balochistan, with almost 96 percent of the damage
occurred in Sindh. The flood in terms of their
economic impact, especially in Sindh was more
devastating and caused an estimated damage of Rs
311 billion (6.1 percent of provincial GDP) in the
province. The floods impacted the richer districts
on the left bank of Indus, the agricultural heartland
of the province. The damage just in agriculture is
estimated to be Rs. 151 billion. On the other hand,
damages in Balochistan in 2011, are Rs. 12 billion,
(1.4 percent of provincial GDP).
Area Damaged (000 Ha)
Sugarcane Maize Vegetables Fruit Other
- - 1.78 0.17 3.88
88.40 - 99.24 13.19 -
88.40 - 101.03 13.36 3.88
wheat production in Sindh due to non availability
of land. These damages of crops may affect the
supply position and as a result prices may rise. The
increase in wheat procurement prices from Rs. 950
per maund to Rs. 1,050 per maund may add to
price increase.
Future Outlook
The government is focusing on restricting inflation
to 12 percent during the current fiscal year 2011-
12. The current trend of inflation reported during
the first 10 months Jul-Apr 2011-12 suggests that
inflation has been stabilized on account of
pursuing tight monetary policy and declining trend
in global commodity prices. Inflation is likely to
further decelerate gradually over the next few
months, as better crops production and better
management of supply chain may bring price
stability in the country. The decline in inflation
may continue further by falling global commodity
prices and steps towards fiscal consolidation to
contain inflation. However, long term solutions lie
increase in agricultural investment; strong market
integration; and, regional cooperation to secure
food supplies for the country’s growing
population.
 Chapter 8
Trade and Payments
The unfavorable global environment has slowed
down the world output and trade volume during
2011; world output which grew by 5.3 percent in
2010 decelerated to 3.9 percent in 2011. This
slowing down of the global economic activity has
caused a sharp decline in the growth of world
trade. Against the strong pick up of nearly 13.0
percent in 2010 the growth of world trade dropped
to 5.8 percent in 2011. The global economic
slowdown and consequential decline in the growth
of world trade has also depressed the international
commodity prices. The prices of non-fuel
commodities witnessed a deceleration from 26.3
percent in 2010 to 17.8 percent in 2011; and, are
projected to grow negatively by 10.3 percent in
2012.
These developments can be attributed to the
ongoing European Sovereign Debt Crisis, the
turmoil in the Arab Countries and the natural
disasters that hit Thailand and Japan which caused
disruptions in the supply chain.
The growth in world output and trade volume is
projected1 to decelerate further during 2012 due to
the downside risks of deepening of the sovereign
debt crisis and worsening financial stress, increase
in oil prices, and geo-political risks. It is projected
that world output will grow by 3.5 percent and
trade volume will increase by 4.0 percent during
the period.
Amid the difficult global economic environment,
the slowing down of the world trade, the drop in
international commodity prices, and the energy
1
: World Economic Outlook April 2012, IMF
shortages domestically, the exports from Pakistan
remained higher by US$ 14.0 million during July-
April 2011-12 over the same period last year and
stood at $ 20,474 million. During the period July-
April 2011-12, the growth of imports at 14.5
percent remained more or less the same as the
corresponding period’s growth in the previous
period. So as exports declined imports continued to
grow highlighting the dominant role of external
developments. Pakistan’s exports growth would
have been in much better position had there been
normalization in international prospects during the
period. In fiscal year 2011-12, workers’
remittances grew by $ 1.83 billion over the last
year.
Current Account Balance
The current account deficit stood at $ 3,394 million
during July-April 2011-12.This deficit in the
current account was largely caused by the
widening of trade and services account deficit.
However, continued support from current transfers
in the form of workers’ remittances helped in
containing further increase in the current account
deficit during the period under review.
The trade deficit expanded mainly due to the 14.5
percent growth in imports and the 0.1 percent
increase in exports; thereby widening the trade
deficit by 49.2 percent during the period. The
major factor behind the widening of the trade
deficit was the sharp rise in the import bill during
July-April 2011-12 which increased due to the
higher international prices of crude oil
111
Pakistan Economic Survey 2011-12

Table 8.1: Summary Balance of Payments US$ Million

July-June July-April*
Items
2009-10 2010-11 2010-11 2011-12
Current Account Balance -3,946 214 466 -3,394
Trade balance -11,536 -10,516 -8,499 -12,683
Goods: Exports 19,673 25,356 20,460 20,474
Goods: Imports 31,209 35,872 28,959 33,157
Services Balance -1,690 -1,940 -1,225 -2,347
Services: Credit 5,229 5,768 4,917 4,101
Services: Debit 6,919 7,708 6,142 6,448
Income Account Balance -3,282 -3,017 -2,465 -2,655
Income: Credit 561 716 563 668
Income: Debit 3843 3733 3028 3323
Current Transfers Net 12,562 15,687 12,655 14,291
of which:
Workers remittances 8,906 11,201 9,046 10,877
Capital & Financial Account 5,272 2,262 772 1,367
Capital Account 175 161 82 167
Financial Account 5,097 2,101 690 1,200
Direct Investment In Pakistan 2,151 1,635 1,293 668
Portfolio Investment (Net) -65 338 295 -126
Other Investment 3,087 172 -846 721
Net Errors and Omissions -60 16 -29 -515
Overall Balance 1,266 2,492 1,209 -2,542
Source: State Bank of Pakistan
*: Provisional

12, compared to the corresponding months of the

Analysis on a comparative month to month basis
previous year.
shows that the current account balance remained
under pressure during the months of September
2011, October 2011 and November 2011. The Fig-8.1: Monthly Current Account Balance
month of September 2011 witnessed the highest
deficit in current account in the entire July-April 800

2011-12 period due to the fall in remittances and 400

the increase in the trade deficit during the month.
US$ Million

The current account deficit remained lower in the 0

following months alongwith a surplus of $ 142 ‐400
million in March 2012.
‐800
The monthly average exports increased by 0.1
‐1200
percent during July-April 2011-12 and stood at $
Aug‐10

Nov‐10
Dec‐10
Jan‐11
Mar‐11
May‐11
Jun‐11
Aug‐11

Nov‐11
Dec‐11
Jan‐12
Mar‐12
Jul‐10
Sep‐10
Oct‐10

Feb‐11
Apr‐11

Jul‐11
Sep‐11
Oct‐11

Feb‐12
Apr‐12

2,047 million per month as against the average of $

2046 million per month during the comparable
period last year. Source: State Bank of Pakistan

The month-wise imports averaged $ 3,316 million
during July-April 2011-12 and remained higher
than the average import of $ 2,896 million in the
same period last year. With the exception of March
2012, monthly imports remained higher in all the
remaining periods of the current fiscal year 2011-
During July-April 2011-12, the services account
deficit recorded an expansion of $ 1,122 million.
This deterioration in the services account was
primarily due to the 16.6 percent fall in services
exports. In addition to this, the 5.0 percent increase
in imports also contributed to the deterioration in

112
 Trade and Payments

the services account during the period under contributors to the overall increase in services
review. imports during July-April 2011-12.

Within services export, government services Workers’ Remittances

witnessed a major decline of 34.4 percent during
According to World Bank estimates the
July-April 2011-12 compared to the same period
remittances flows to developing countries in 2011
last year. This was the outcome of the absence of
increased by 8.0 percent from $ 325 billion in 2010
logistic support inflows during July-April 2011-12
and is forecast to grow at 7 to 8 percent annually
as compared to $ 743 million in the corresponding
till 2014.
period last year.
Compared to the 10.1 percent growth in South
The other major categories of services export
Asia, remittances to Pakistan witnessed a strong
which showed a fall during July-April 2011-12
growth of 25.8 percent in 2011 over previous year.
remained transportation, other business services
Pakistan has become the fifth largest remittances
and communication services; these services
recipient developing country in 2011. The general
declined by $ 51.0 million, $ 68.0 million and $
upward trend in remittances during the period
21.0 million respectively over the July-April 2010-
under review was composed of a per annum
11. On the other hand, the major service exports of
average growth from U.A.E of 32.2 percent
insurance, computer and information and travel
followed by U.K. (30.1 percent), Saudi Arabia
witnessed a major increase during July-April 2011-
(27.3 percent), EU countries (25.3 percent), Other
12.
GCC Countries (15.1 percent) and USA (9.5
percent) during the period 2007-08 to 2010-11.
Government services and travel remains the major

Fig-8.2:Remittances By Country of Source FY 08 FY 09 FY 10 FY 11

3,000
2,700
2,400
2,100
US$ Million

1,800
1,500
1,200
900
600
300
0
USA U.K. Saudi Arabia U.A.E. Other GCC EU Countries
Country

More recently, following the impressive
performance of the last year, worker’s remittances
continued to provide strength to the current
account. During July-April 2011-12, worker’s
remittances grew by 20.2 percent and stood at $
10.9 billion. The cumulative increase of $ 1.83
billion during July-April 2011-12 over July-April
2010-11 is largely attributed to the government’s
efforts to divert remittances from the informal to
the formal channel. Since the launch of the
Pakistan Remittances Initiative (PRI), the share of
worker’s remittances coming through the banking
channel has increased considerably, from 75
percent in 2009-10 to 91 percent in 2011-12. PRI
has taken a number of steps to enhance the flow of
remittances through formal channels which

113
Pakistan Economic Survey 2011-12

include: (a) preparation of national strategies on
remittances (b) taking all necessary steps to
implement the overall strategy (c) playing the
advisory role for financial sector in terms of
preparing a business case, relationship building
with overseas correspondents, creating separate
efficient remittance payment highways and (d)
becoming a national focal point for overseas
Pakistanis through round the clock call centre,
separate web site etc.
the largest; with UAE and USA having the second
and third largest shares. Other countries like UK
and Other GCC Countries also contributed to the
increase in remittances during the period under
review
Fig- 8.3: Monthly Workers' Remittances
1400
1200

US$ Million
Monthly analysis shows that with the exception of
1000
September and November 2011, the growth in
workers’ remittances remained higher during July-
April 2011-12 compared to the corresponding 800

years. It also crossed the one billion mark during

these months. 600

Oct-10
Dec-10
Jul-10

Nov-10
Jan-11
Feb-11

Jul-11

Oct-11
Dec-11
Aug-10
Sep-10

Jun-11
Aug-11

Nov-11
Jan-12
Feb-12
Sep-11
Mar-11
Apr-11
May-11

Mar-12
Apr-12
Country-wise data shows that remittances from
almost all major traditional sources increased. The Source: State Bank of Pakistan
share of Saudi Arabia in overall remittances was

Table:8.2. Country/Region Wise Cash Workers' Remittances ($ Million)

Country/ Region Jul-Apr
2010-11 2011-12* % Change % Share
USA 1,677.9 1,922.4 14.6 17.7
U.K. 990.9 1,263.7 27.5 11.6
Saudi Arabia 2,085.8 2,987.9 43.2 27.5
UAE 2,091.3 2,386.3 14.1 21.9
Other GCC Countries 1,063.5 1,226.6 15.3 11.3
EU Countries 290.8 304.6 4.8 2.8
Other Countries 846.4 785.7 -7.2 7.2
Total 9,046.6 10,877.0 20.2 100.0
Source: State Bank of Pakistan
* Provisional

Financial Account
The financial account posted a surplus of $ 1,200
million during July-April 2011-12 against a surplus
of $ 690 million in the corresponding period last
year. Foreign direct investment declined by $ 625
million and portfolio investment witnessed a fall of
$ 126 million. Other investment stood at $ 721
million during July-April 2011-12.
During the period July-April 2011-12, Foreign
Direct Investment (FDI) declined by 48.3 percent.
This decline was primarily due to lower investment
in the telecommunication, financial business and
power sector during the period. The fall in FDI in
Pakistan appears to be the result of factors such as
energy crises and circular debt. However, the Oil
& Exploration remained the major attraction
during current fiscal year as its share in overall
FDI stood at 69.8 percent with 37.9 percentage
points increase during the period.
Foreign Exchange Reserves
In current fiscal year 2011-12, Pakistan’s foreign
exchange reserves reached by $ 16.49 billion at the
end-April 2012 compared to $ 17.05 billion in
corresponding period last year.

114
 Trade and Payments

This was mainly due to current account deficit and

Fig-8.5: Monthly Exchange Rate
repayment of $ 400 million to the IMF.
95

On the other hand, the rising inflows of scheduled 90

banks reserves on account of healthy rise in FE-25

Rs./US$
85
deposits and trade NOSTROs helped increase
reserves in scheduled banks by $ 1.10 billion. 80

75
Fig 8.4: Gross Foreign Exchange
Reserves 70
20.0

Apr-09

Apr-10

Apr-11

Apr-12
Dec-08

Dec-09

Dec-10

Dec-11
Aug-08

Aug-09

Aug-10

Aug-11
SBP Banks
16.0

12.0 Source: State Bank of Pakistan
$ billion

8.0
4.0
0.0
FY07 FY08 FY09 FY10 FY11
Source: State Bank of Pakistan
Exchange Rate
After witnessing the continuous decline in
depreciation of average annual exchange rates
during 2009-10 and 2010-11, the domestic
currency remained under pressure through most of
fiscal year 2011-12. This pressure is emerging
from the deficit in the overall external account of
the country during July-April 2011-12. As a result
Pakistan’s currency vis-à-vis the US dollar
depreciated during July-April 2011-12.
In absolute terms, the exchange rate averaged Rs.
85.50/US$ during July-April 2010-11, whereas it
Real Effective Exchange Rates
Conceptually, the REER is defined as the weighted
average of nominal exchange rates adjusted for
Jul-Apr relative price differential between the domestic and
FY12 foreign countries. Given the weakness against the
US dollar, the Pak Rupee depreciated by 8.8, 5.7
and 3.7 percent, against Yen, Euro and Great
Britain Pound, respectively. Despite the
depreciation against the US dollar and other major
currencies in nominal terms, the Pakistan currency
appreciated by 0.51 percent in real terms during
Jul-Dec 2011-12 against an appreciation of 0.16
percent during Jul-Dec 2010-11. The appreciation
in real terms was due to the sharp and persistent
rise in the relative price index (RPI).
Figure 8.6: REER, NEER and RPI
REER  RPI NEER (RHS)
180.0 70
68

averaged at Rs. 88.55/US$ during July-April 2011-

Index (FY04=100) 

66
150.0
12. The Pak Rupee depreciated by 3.4 percent 64
during July-April 2011-12 over the depreciation of
2.2 percent in July-April 2010-11 period due to the 62
120.0
widening current account deficit and speculations 60
on account of the repayment of IMF loan during
58
the period.
90.0 56
Apart from the deficit in the current account
balance during July-April 2011-12 other domestic
factors as well as the speculative environment in Source: State Bank of Pakistan
the foreign exchange market added volatility to the
exchange rate.

115
Pakistan Economic Survey 2011-12

Commodity-Wise Performance of Exports and
Imports2
Exports
Group-wise analysis of exports growth suggests
that the exports of the “other manufacturers”
witnessed an impressive growth of 19.9 percent
during July-April 2011-12 over the same period
last year. Its share in overall exports also increased
by 3.9 percentage points and stood at 20.0 percent
during current fiscal year 2011-12. Jewelry,
chemicals and pharmaceutical products, surgical
goods & medical instruments, guar and guar
products and engineering goods remained the
prominent categories among the positive
contributors to the overall increase in “other
manufactures” group. Furthermore, these five
items collectively added $ 668.6 million in the
overall exports during July-April 2011-12. Jewelry
exports have witnessed a significant $ 335.6
million increase over the last year and its share in
“other manufactures” group also increased from
10.0 percent to 17.0 percent during July-April
2011-12. Moreover, cement exports also increased
by 3.5 percent during July-April 2011-12 against
the fall of 9.9 percent during July-April 2010-11.
This increase in cement export receipts is mainly
the outcome of higher unit values, which increased
by 12.9 percent during the period. The decline in
quantum exports of cement which witnessed a fall
by 8.3 percent during the period tampered the
increase in cement export receipts.
However, the overall increase in “other
manufactures” group was offset to some extent by
the negative growth of carpets (5.9 percent),
leather garments (15.6 percent) and cutlery (6.3
percent) during July-April 2011-12. The export
category of carpets, rugs and mats declined due to
increased competition from the neighboring
countries of Pakistan.
The value of exports from the food group stood at
$ 3509.7 million during July-April 2011-12
compared to $ 3597.6 million in the corresponding
period last year, thereby showing a negative
growth of 2.4 percent. In absolute terms this
represents a fall of $ 87.9 million during the
period. Further details reveal that the lower
quantity of exports of most of the food items
remains the major reason behind the overall
decline. The unit values of different food items
remained largely positive during the period. The
major factors behind the overall fall in food
exports remain wheat, rice and vegetables. In
absolute terms these three items fell by $ 442.3
million during the first ten months of the current
fiscal year 2011-12. Rice exports followed last
year’s trend and declined by 3.2 percent during
July-April 2011-12. This fall in rice export is due
to the overall quantum exports of rice by 9.1
during the period. The major reason behind the fall
in rice exports remained the higher availability of
rice internationally. The other reason for the fall in
rice exports was the higher proportion of non-
basmati rice in the overall export quantum of rice.
Wheat exports declined due to the internationally
lower demand and prices as quantity and unit value
of wheat both witnessed a negative growth of 70.6
percent and 8.3 percent, respectively.
On the other hand, fruits exports witnessed a major
increase during 2011-12; in absolute terms fruit
exports increased by $ 70.5 million during July-
April 2011-12 over the same period last year.
In contrast to the 32.1 percent growth in July-April
2010-11 textile exports declined by 9.6 percent
during July-April 2011-12. This fall in textile is
mainly attributed to decline in quantity exports; the
majority of the textile categories show a negative
growth in the quantities exported. The major
reason behind this phenomenon is the energy crisis
hitting the textile sector and the fall in international
demand. Owing to this, the share of the textile
sector in overall exports declined from 55.8
percent in July-April 2010-11 to 52.4 percent
during July-April 2011-12 and on absolute term it
fell by $ 1076 million during the period.

2
: The analysis of exports and imports is based on trade data released by Pakistan Bureau of Statistics (PBS) on Customs
basis which differs from exchange record data by SBP.

116
 Trade and Payments

Table 8.3: Structure of Exports ($ Millions)

July-April Absolute
Particulars % Change
2011-12* 2010-11* Change
A. Food Group
Rice 1,735.2 1,792.2 -3.2 -57.0
Fish & Fish Preparation 259.3 234.4 10.6 24.9
Fruits 322.4 252.0 28.0 70.5
Vegitables 131.9 211.7 -37.7 -79.8
Wheat 112.7 418.2 -73.0 -305.5
Spices 38.6 38.7 -0.3 -0.1
Oil Seeds, Nuts & Kernels 23.4 14.5 60.6 8.8
Meat & Meat Preparation 141.6 122.0 16.0 19.6
B. Textile Manufactures
Raw Cotton 433.1 327.3 32.3 105.8
Cotton Yarn 1,451.7 1,880.0 -22.8 -428.3
Cotton Cloth 1,969.8 2,081.2 -5.4 -111.4
Knitwear 1,624.5 1,870.1 -13.1 -245.6
Bed Wear 1,453.1 1,686.0 -13.8 -232.9
Towels 556.5 607.8 -8.4 -51.3
Readymade Garments 1,326.6 1,396.5 -5.0 -69.9
Made-up Articles 472.7 509.0 -7.1 -36.3
C. Petroleum Group
Petroleum Products 291.9 752.9 -61.2 -461.0
Petroleum Top Naptha 518.4 388.5 33.4 129.9
D. Other Manufactures
Carpets. Rugs & mats 104.3 110.9 -5.9 -6.6
Sports Goods 269.2 262.9 2.4 6.2
Leather Tanned 358.7 370.8 -3.3 -12.2
Leather Manufactures 435.3 450.3 -3.3 -14.9
Surgical Goods & Medical.Inst. 249.6 212.6 17.4 37.0
Chemicals & Pharma. Pro. 909.0 725.5 25.3 183.5
Engineering Goods 230.1 196.4 17.2 33.7
Jewellary 649.7 314.1 106.9 335.6
Cement 387.3 374.2 3.5 13.1
Source: PBS
* Provisional

The negative effects of the energy shortages
domestically and the slowdown of global demand
are especially visible in the decline in the quantity
of exports despite the increase in the unit values of
the majority of items during the period July-April
2011-12. Due to this phenomenon, the quantum
exports of high value added items such as
knitwear, bed wear, towels and readymade
garments have shown negative growth during the
period under review.

117
Pakistan Economic Survey 2011-12

Fig-8.7: Textile Exports (July-April 2011-12) Quantity Unit Value

100
75
50
% Growth

25
0
-25
-50
-75
-100
RAW COTTON COTTON YARN COTTON CLOTH COTTON  YARN OTHER  KNITWEAR BED WEAR TOWELS TENTS,CANVAS  READYMADE  ART,SILK & 
CARDED OR  THAN COTTON  & TARPULIN GARMENTS SYNTHETIC 
COMBED YARN TEXTILE
Source: PBS

Concentration of Exports
Notwithstanding the higher international prices, the
petroleum group export receipts declined by 29.0 The process of decrease in concentration of exports
percent during the first ten months of the current items continued in the current fiscal year (July-
fiscal year compared to the same period last year. April 2011-12) as the share of other items in
This decline in the petroleum group is due to the overall exports increased to 39.0 percent against
decline in quantum export as petroleum products the 28.5 percent during 2006-07, a 10.5 percentage
and naptha fell by 68.4 percent and 13.9 percent points increase during the period. Moreover, the
respectively causing a decline of $ 331.0 million in share of the other items category witnessed a 6.2
net absolute terms in export receipts from percentage points increase during July-April 2011-
petroleum group over the corresponding period last 12 compared to the same period last year. In spite
year. The circular debt problem in the country of this structural change in exports of the country,
remained the major reason for the decline in the the major share of Pakistan’s export is still
petroleum group exports during July-April 2011- concentrated in a few items with only three items
12. Moreover, the share of the petroleum group (cotton manufactures, leather and rice) making up
also declined by 1.50 percentage points during the 61.0 percent of total exports during July-March
period under review. 2011-12.
Table 8.4:Pakistan’s Major Exports (Percentage Share)
Jul-Mar*
Commodity 06-07 07-08 08-09 09-10 10-11
10-11 11-12
Cotton Manufacturers 59.7 51.9 52.6 50.6 52.9 53.7 50.1
Leather** 5.2 5.8 5.4 4.5 4.4 4.5 2.2
Rice 6.6 9.8 11.2 11.3 8.7 9.0 8.7
Sub-Total of three Items 71.5 67.5 69.2 66.4 66 67.2 61.0
Other Items 28.5 32.5 30.8 33.6 34.0 32.8 39.0
Total 100 100 100 100 100 100 100
Source: Pakistan Bureau of Statistics
*Provisional, ** Leather & Leather Manufactured

Direction of Exports percent of the country’s exports were concentrated

in five markets (USA, UK, Germany, Hong Kong
Despite being concentrated in a few markets,
and U.A.E.) of the world and remaining share of
Pakistan has witnessed some geographical
all other countries was 52.8 percent. This
diversification in exports. During 2005-06, 47.2

118
 Trade and Payments

concentration is on continuous decline since 2005-
06 and recently the share of these five market
stood at 35.2 percent whereas the share of all other
countries increased to 64.8 during July-March
2011-12 compared to 52.8 percent share during
2005-06. This improvement in geographical
diversification was mainly the result of the
Strategic Trade Policy Framework (STPF-2009-
12) introduced by the government and the resulting
increase in exports to China, Afghanistan and
Bangladesh.

Table 8.5: Major Exports Markets (Percentage Share)

Jul-Mar
Country 05-06 06-07 07-08 08-09 09-10 10-11
10-11 11-12*
USA 25.5 24.6 19.5 18.9 17.4 16.0 15.9 14.7
UK 5.4 5.6 5.4 4.9 5.3 4.9 5.0 5.1
Germany 4.2 4.1 4.3 4.2 4.1 5.1 5.0 4.8
Honk Kong 4.1 3.9 2.7 2.1 2.2 2.0 2.2 1.6
U.A.E. 8.0 8.2 10.9 8.2 8.9 7.3 7.3 9.0
Sub-Total 47.2 46.4 42.8 38.3 37.9 35.3 35.4 35.2
Other Countries 52.8 53.6 57.2 61.7 62.1 64.7 64.6 64.8
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: Pakistan Bureau of Statistics
*Provisional

the result of higher international prices and higher

Imports
domestic demand during the period, resulting in an
Structure of imports indicates that food group increase in the palm oil import bill in absolute
imports accounted for 11.4 percent of total imports terms by $ 292 million. In addition, the import bill
and showed a negative growth rate of 1.7 percent for tea during 2011-12 also increased by 4.8
during July-April 2011-12 compared to last year. percent on the back of higher import prices during
This fall in the overall food import bill is the result the period.
of a decline in the quantity of imports of most of
the food items despite the increase in the unit Fig-8.8: Sources of Change in
values of food group items. Petroleum Imports (Jul-Apr 2011-12)
90
Within food group imports, the major contribution 80
70
came from sugar as its import bill declined by $
60
665.0 million in absolute terms during July-April
% age

50
2011-12 compared to the same period last year. 40
This fall in sugar imports came on the back of 30
improved sugar production domestically due to 20
higher crop production of sugarcane during the 10
fiscal year under review. Moreover, the import bill 0
of spices and pulses also witnessed a fall during Price Effect Quantity Effect
the period. Source: PBS

The import bill for edible oil increased by 16.5

percent and has added $ 273 million to this year’s
import bill. Palm oil imports surged in quantity,
value and per unit value as it increased by 5.1
percent, 18.3 percent and 12.5 percent,
respectively. The higher import bill of palm oil is
The Import of petroleum group products grew by
43.5 percent during July-April 2011-12 against the
8.4 percent growth in the corresponding period last
year reflecting mainly the impact of higher
international oil prices since per unit values of

119
Pakistan Economic Survey 2011-12

petroleum products and petroleum crude increased
by 28.9 percent and 36.6 percent, respectively.
Moreover, during July-April 2011-12, the
petroleum group import bill increased by $ 3,815.3
million over the same period last year. Nearly 76.4
percent of this increase in the import bill is
contributed by the price impact and 23.6 percent
by the quantum impact.
The increase in the petroleum import bill is also
evident from the international monthly average
prices of oil. These surged from $ 76.4 per barrel
in July 2010 to $ 120.5 per barrel in April 2012.
Moreover, the quantity of petroleum product
imports increased by 31.7 percent while quantum
imports of crude oil declined by 19.5 percent
during July-April 2011-12. This phenomenon in
quantum imports results from the effect of the
circular debt problem in the country faced by
refineries.
Fig-8.9: International Monthly Oil
Prices (Average)
140
120
100
80
$/Brl
percent during the period. During July-April 2011-
12, the increase in road motor vehicle imports was
the outcome of higher import of CBU (complete
build-up unit) which increased by $ 234.3 million
over the last year due to the import of cars and
buses, trucks and other heavy vehicles categories
increasing by 161.0 percent and 91.3 percent
respectively during the current fiscal year period
under review. Moreover, the complete knocked
down-down (CKD)/semi-knocked-down (SKD)
category of road motor vehicles also increased by
6.8 percent during July-April 2011-12. Within this
category, motor cycles and buses, trucks and other
heavy vehicles contributed positively during the
period. Due to these developments, the import
quantum and value of rubber tyres and tubes
witnessed an increase of 25.4 percent and 14.4
percent respectively during July-April 2011-12.
Increase in the overall import bill of consumer
durables is generally the outcome of the fall in
duties on automobiles, deep freezers, air
conditioners and beverages along with the cut in
taxes announced by government.
Telecom imports grew by 22.9 percent during the
first ten months of the current fiscal year. In
absolute terms the import in the telecom sector
witnessed an increase of $ 195.2 million. Out of
the total increase in telecom imports, 65.4 percent

60
has been contributed by mobile phone imports
which grew by 29.0 percent and added $ 127.7
40 million to the import bill during July-April 2011-
12 as compared to the corresponding period last
20
year. This increase may be the result of increased
0 availability of cheaper mobile phones in the
country.
Oct

Dec

Oct

Dec
Jul 10
Aug
Sep

Nov

Jan
Feb

May
Jun

Nov

Jan
Feb
Mar
Apr

Jul 11
Aug
Sep

Mar
Apr 12

The machinery group imports decreased to $

The import of consumer durables added $ 229.8
million to the overall import bill for July-April
2011-12. The contribution to the increase in
consumer durables imports remained road motor
vehicles. Their import bill increased by $ 229.3
million. Moreover, the import of electric
machinery and appliances also increased by 0.1
3148.4 million during the first ten months of the
current fiscal year 2011-12 as against $ 3595.9
million in the corresponding period last year.
Among the different items of the machinery group,
textile machinery, air crafts, ships and boats and
other machinery witnessed a decline during the
period under review. The decline in textile
machinery import may be attributed to the fall in
external demand; decline in export prices; and,
energy problems faced by textile sector.

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 Trade and Payments

Table 8.6: Structure of Imports ($ Million)

Particulars July-April Absolute
% Change
2010-11 2011-12 Change
A. Food Group
Milk & milk food 129.5 134.3 3.7 4.9
Wheat Unmilled 5.2 0.0 -100.0 -5.2
Dry fruits 74.4 72.3 -2.8 -2.1
Tea 288.3 302.0 4.8 13.7
Spices 91.3 86.6 -5.2 -4.7
Edible Oil (Soyabean & Palm Oil) 1,660.3 1,933.6 16.5 273.3
Sugar 679.9 14.4 -97.9 -665.5
Pulses 344.6 320.3 -7.1 -24.3
B. Machinery Group
Power Gen. Machines 865.6 877.2 1.3 11.6
Office Machines 195.6 239.8 22.6 44.2
Textile Machinery 399.4 339.0 -15.1 -60.4
Const. & Mining Mach. 98.6 111.0 12.6 12.4
Aircraft Ships and Boats 713.5 305.8 -57.1 -407.7
Agriculture Machinery 77.6 103.0 32.7 25.4
C. Petroleum Group
Petroleum Products 4,919.9 8,354.8 69.8 3,434.8
Petroleum Crude 3,847.6 4,228.1 9.9 380.5
D. Consumer Durables
Electric Mach. & App. 674.8 675.3 0.1 0.5
Road Motor Vehicles 1,082.8 1,312.1 21.2 229.3
E. Raw Materials
Raw Cotton 852.8 369.5 -56.7 -483.4
Synthetic fibre 464.2 434.6 -6.4 -29.5
Silk yarn (Synth & Arti) 444.7 503.9 13.3 59.2
Fertilizer 499.6 1,081.7 116.5 582.1
Insecticides 122.3 110.4 -9.8 -11.9
Plastic material 1,263.8 1,287.5 1.9 23.7
Iron & steel and Scrap 423.9 446.8 5.4 22.9
Iron & steel 993.9 1,119.0 12.6 125.1
F. Telecom 854.3 1,049.5 22.9 195.2
Source: Pakistan Bureau of Statisics

On the other hand, the items which grew positively
continued to be the power generating machinery,
office machines, construction and mining
machinery and agri machinery. Power generating
machinery imports increased due to energy
shortfalls in the country. As a result the import bill
stood at $ 877.2 million during July-April 2011-12.
The increase in import of construction and mining
machinery reflects the increase in construction
activities in the country. This improvement can be
attributed to the start of public projects and is also
the result of the increase in remittances which went
primarily into the construction sector. The higher
demand for agricultural machinery imports ($ 25.4
million) is mainly the outcome of remarkable
improvement in the agriculture sector.
The import of products in the raw material group
surged by 7.4 percent and accounted for 22.4
percent of total imports during the period of July-
April 2011-12. Within raw material imports, raw
cotton declined in absolute terms by $ 483.4
million mainly due to increased availability of the
crop domestically. The prominent increase
witnessed in the imports of fertilizer is due to
decline in domestic production owing to gas
shortages. As a result the import bill of fertilizer
increased by $ 582.1 million over the last year. Of

121
Pakistan Economic Survey 2011-12

this total increase around 87.6 percent was due to

Fig-8.10 Source of Change in Fertilizer
increase in quantity and the remaining 12.4 percent Import (Jul-Apr 2011-12)
due to higher prices. 600

500
Direction of Imports

US$ Million
400
Despite being fairly concentrated in a few markets,
Pakistan’s import sources are witnessing a change 300
in direction since 2007-08. The combined share of
200
Pakistan’s major imports markets (Saudi Arabia,
Kuwait, Japan, U.S.A., Germany and U.K.) has 100
been declining from the 36.7 percent in 2007-08 to
0
30.2 percent at present thereby showing a 6.5
Price Effect Quantity Effect
percentage points fall during the period under
review. Source: PBS

Table-8.7: Major Sources of Imports (Percentage Share)

Country 07-08 08-09 09-10 10-11 Jul-Mar
10-11 11-12*
U.S.A. 6.1 5.4 4.6 4.5 4.3 3.3
U.K. 1.9 2.6 1.7 1.6 1.6 1.2
Germany 3.2 3.8 3.4 2.3 2.3 2.5
Japan 4.6 3.6 4.4 4.1 4.2 4.2
Kuwait 7.5 6.6 6.9 8.2 6.8 8.4
Saudi Arabia 13.4 12.3 9.7 11.3 11.7 10.6
Sub-Total 36.7 34.3 30.7 32.0 30.9 30.2
Other Countries 63.3 65.7 69.3 68.0 69.1 69.8
Source: Pakistan Bureau of Statistics
*Provisional

Measures/steps taken by the government businesses in international markets by

regarding exports and imports concluding Free Trade Agreements (FTAs)
and Preferential Trade Agreements (PTAs)
` In July, 2009 the Federal Cabinet approved
with different countries.
complete zero-rating of exports.
` Trade Development Authority of Pakistan
` Incentives have been given to boost exports
(TDAP) is undertaking various export
such as concessionary financing, duty free
promotional activities through trade
imports of raw material under temporary
exhibitions and delegations in the new markets
importation scheme/Duty Tax Remission on
viz China, Hong Kong, Russia, Malaysia,
Exports (DTRE), duty drawback scheme,
Africa region, America and Eastern Europe
concessions in duty/taxes on import of
etc.
machinery and raw material of priority export
sectors, development of export clusters. ` The following measures have been taken
during 2011-12 in the import / export regime,
` Through active trade diplomacy, Government
through Amendments in the Import Policy and
is trying its level best to get better market
Export Policy Orders:
access for the local

122
 Trade and Payments

Amendments in Exports – Imports Policy orders during 2011-12

Sr. No. Gist of Amendment Rationale/Justification
1. Allowing export of organic brown sugar. To encourage local production of
organic brown sugar.
2. Allowing units registered under DTRE scheme also to import To bring DTRE users at par with
inputs given in restricted list of the Import Policy Order (IPO), normal importers.
subject to fulfillment of conditions mentioned therein.
3. Restricting import of exhausted batteries to industrial consumers To safeguard environment.
only subject to a fool proof mechanism.
4. Restricting disposal of ambulances before ten years imported as a To avoid misuse of ambulances as
donation in secondhand used condition by imposing duty taxes commercial vehicle after import.
applicable at the time of import.
5. Importer duly registered with Oil and Gas Regulatory Authority To safeguard consumers interest.
for importing automotives engine/gear oil etc.
6. Another 17 categories were included in the positive list of items To reduce cost of doing business.
importable from India.
7. Allowing export oriented textile and leather sector to import To facilitate export sector.
accessories on import cum export basis from India.
8. Allowing raw material/inputs including polythene, polypropylene, To reduce cost of doing business.
newsprint and pure terephtalic acid from India through Wagha via
land route.
9. Banning import of CNG cylinders and conversion kits. The ban To check fast depletion of existing
shall however not apply in the following cases: gas resources.
a) For which letters of credit established prior to 15-12-
2011.
b) Public transport vehicle i.e. buses and vans.
10. Positive List with India has now been replaced with a Negative To normalize Pakistan’s trade
List of 1209 items. relations with India.

123
 Chapter 9

Pub
blic Debt
D

duction
9.1 Introd myriadd of domestic issues andd the internaational
recession and creddit crises haave impactedd the
Developinng countries hinge in a delicate
d balance;
countryy’s debt position. Higher interest paym ments,
they needd to borrow in order to facilitate thheir
large suubsidies speccially food annd energy, groowing
developmment process - on the other o hand the
t
securityy spending neeeds, narrow tax base and rising
borrowingg should be allocated
a effiiciently in view
internaational commmodity prices have resultted in
of their reepayment abiility. Debt maay well act as a
large twwin account (i.e.
( fiscal annd current acccount)
catalyst inn the course of
o growth of an
a economy, but b
deficitss. The financcing of the fiscal deficitt is a
only if itt is undertaken to facilitaate a very well
w
growinng challenge ini the wake of o the shrinkinng net
thought out
o road map devised withh due diligennce.
foreignn assets of thhe banking system
s in Pakkistan
Such meaasures can also a lead to strengtheningg a
owing to the currennt account deeficit; the resultant
country’s capacity off repayment. Unsustainabble
liquiditty crunch is exerting pressure on dom mestic
levels of debt can plague econom mic growth by
interestt rates. Low wer FDI and other nonn-debt
lowering the actual dev velopmental expenditure
e d
due
creating flows due tot energy shorrtages and security
to heavy debt servicing requiremennt. This intricate
concernns have contributed towards t neggative
scenario calls
c for a coomprehensivee, dynamic anda
balancee of paymennt and draw wdown on offficial
rule basedd policy whicch ensures thhe right choicces
foreignn currency reserves of thhe country. Total
among several opttions, addreesses financcial
Liquid Foreign Exxchange Reseerves were $16.49 $
constraintts and ensurees intergenerrational welfa fare
billion by end-Aprril 2012, com mpared to $18.24
$
impact.
billion as of end Junne 2011.
Pakistan’ss debt dy ynamics havve undergoone
substantiaal changes since
s fiscal year 2007. A

Fig-9.1: Public Deb

bt (as percent of
o GDP)

100%
90%
80%
70%
60%
50%
40%
30%
20%
FY80

FY90

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12-Q3

125
Pakistan Economic Survey 2011-12

9.2 Public Debt revenues is also a charge on the balance of

payment and must be serviced from foreign
Total public debt is a measure of government
exchange earnings, reserve drawdown, and
indebtedness. It includes all government and
additional borrowings.
government guaranteed obligations denominated in
rupee as well as foreign currency. It is an important
As at end of March 2012, public debt stood at Rs.
means of bridging government financing gaps.
12,024 billion registering an increase of Rs. 1,315
However, excessive reliance on public debt and
billion or 12.3 percent as compared to fiscal year
inappropriate public debt management raise
2011. The increased amount includes Rs. 391
macroeconomic risks, impede economic growth,
billion consolidated by the government into public
and hinder economic development. Domestic and
debt against outstanding previous years subsidies
external debt should be treated separately.
related to the food and energy sectors. Public debt
Domestic debt is a charge on the budget and must
as a percent of GDP stood at 58.2 percent by end-
be serviced through government revenues and/or
March 2012 compared to 55.5 percent of GDP
additional borrowings whereas external debt (both
during the same period last year.
public and private) in addition to government

Table-9.1 Public Debt

1990 1995 2000 2005 2008 2009 2010 2011 2012*
(In billion Rs.)
Domestic Currency Debt 374 790 1,576 2,178 3,275 3,859 4,654 6,015 7,206
Foreign Currency Debt 428 873 1,442 1,913 2,780 3,736 4,284 4,694 4,818
Total Public Debt 801 1,662 3,018 4,091 6,055 7,595 8,938 10,709 12,024
(In percent of GDP)
Rupee Debt 42.8 42.3 41.2 33.5 32.0 30.3 31.4 33.4 34.9
Foreign Currency Debt 48.9 46.8 37.7 29.4 27.1 29.4 28.9 26.0 23.3
Total Public Debt 91.7 89.1 78.9 62.9 59.1 59.7 60.4 59.4 58.2
(In percent of Revenue)
Rupee Debt 235 245 308 242 218 208 224 266 251
Foreign Currency Debt 269 270 281 213 185 202 206 208 168
Total Public Debt 505 515 589 455 404 410 430 474 419
(In percent of Total Debt)
Rupee Debt 46.6 47.5 52.2 53.2 54.1 50.8 52.1 56.2 59.9
Foreign Currency Debt 53.4 52.5 47.8 46.8 45.9 49.2 47.9 43.8 40.1
Memo:
Foreign Currency Debt 19.5 28.1 27.5 32.1 40.7 45.9 50.1 54.6 53.1
($ Billion)
Exchange Rate 21.9 31.1 52.5 59.7 68.3 81.4 85.5 86.0 90.7
(Rs./U.S.$, E.O.P)
GDP (in Rs. Billion) 874 1,866 3,826 6,500 10,243 12,724 14,804 18,033 20,654
Total Revenue (in Rs. Billion) 159 323 513 900 1,499 1,851 2,078 2,261 2,871
Source: State Bank of Pakistan, Budget Wing, Economic Adviser’s Wing & Debt Policy Coordination Office
* End-March

sufficient external financing i.e. domestic

Historically, public debt stock accounted for
borrowings inched up in share from 46.6 percent in
almost the same burden from domestic and
fiscal year 1990 to 59.9 percent at end March,
external sources. However, government has
2012.
increasingly focused on the domestic part over the
last few years owing to non-availability of

126
 Publicc Debt

Fig-9.2 Sources of Public

P Debt (p
percent)
60
55
50
45
40
35
30
25
20
15
10
5
0
FY90

FY95

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

Q3-FY12
FY 11
Domesstic Currency Debtt F
Foreign Currency Debt
D

The publlic debt maay be underrstated withoout 9.2.1 Dynamics

D of Public
P Debt Burden
B
reporting contingent liabilitiess. Contingeent Borrowwing domesticcally or exterrnally is a noormal,
liabilities are not addeed to the oveerall debt of the
t indeed, necessary partp of econoomic activityy. The
country. However, contingent liabilities are a econom mic rationalee for debt creation is that
possible obligations
o hat arises froom past events
th borrowwers can earn a higher ecoonomic returnn than
and whose existence will
w be confirm med only by the
t the cosst of investedd funds and thhat these econnomic
occurrencce or non-occcurrence off one or moore returnss can then be translated
t intoo financial reeturns.
uncertain future even nts not whoolly within the t Debt problems
p forr governmennts arise if debt-
control off the governmment. In the case of Pakistan, servicinng capacity does
d not keepp pace with grrowth
these incllude, for insstance, expliccit and impliicit of debbt. This mayy also be expressed
e as debt
guaranteees issued to Public Secctor Enterprisses exceedding sustainabble levels.
(PSEs) annd unfunded losses of statee owned entitiies.
The Goovernment of o Pakistan issued new The level of debt depends on the t debt servvicing
guaranteees aggregating g Rs. 146.6 billion or 0..71 capacitty of the ecoonomy i.e. exxport earninggs and
percent of o GDP. Total outstannding stock of revenuue generationn. The debtt burden caan be
governmeent guarantees as of Marchh 2012 stoodd at expresssed in terms of the stockk ratio i.e. deebt to
Rs. 487 biillion. GDP, external
e debt to GDP or flow
fl ratios i.e. debt
to revvenue, externnal debt to foreign exchhange
Table-9.2 Guarantees Outstanding
O
earninggs. It is commmon practicce to measurre the
as of Marcch 31, 2012 (Rs. Billion))
public debt burdenn as a perccentage of GDP;
Outstandinng Guaranteess extended 4877
to PSEs howeveer, it makes more sensee to measuree debt
-Domesttic Currency 2566 burdenn in terms of flow ratioss because eaarning
-Foreignn Currency 2311 potentiial reflects more
m accurateely on repayyment
Memo: capacitty as GDP changes do not fully translatte into
Foreign Cuurrency (US$ Million)
M 2,5444 revenuues, particularly in case of Pakistan
P wheere the
Source: Deebt Policy Coordination Officce taxation systems area inelastic and the taxxation
machinnery is weak.

127
Pakistan Economic Survey 2011-12

Table-9.3 Dynamics of Public Debt Burden

2007 2008 2009 2010 2011 2012*
Public Debt to GDP 60.1 59.1 59.7 60.4 59.4 58.2
Real Growth of Public Debt 2.3 8.3 5.2 4.3 1.1 2.4
Real Growth of Revenues 11.9 -0.6 2.9 0.3 -8.4 1.5**
Real Growth of Public Debt Burden -9.7 8.9 2.3 4.0 9.5 0.9
Real Growth of GDP 6.8 3.7 1.7 3.8 2.4 3.7
Source: Budget Wing, SBP and Debt Policy Coordination Office
*End March, 2012
**Growth as compared to same period in 2011

If the primary balance (fiscal deficit before interest
payments) is zero and the real growth in revenue is
higher than the real growth in debt, the debt burden
will ease. Pakistan saw a primary surplus in fiscal
year 2004, however, since then it is running a
primary deficit. In fiscal year 2009 the government
was able to bring the deficit down to 0.1 percent of
GDP from 2.5 percent in fiscal year 2008 as a
result of fiscal consolidation and rationalization of
expenditure. However since fiscal year 2010,
owing to increased security expenditure, sustained
food and energy subsidies and the great floods of
2010, the fiscal adjustment path was altered and
the primary deficit reached 2.5 percent of GDP at
the end of June 2011.
A similar pattern was witnessed in terms of real
growth of revenues; from a high of 11.9 percent in
fiscal year 2007 it declined to -8.4 percent in fiscal
year 2011. On the other hand a gradual decline in
real growth of debt has been witnessed since fiscal
year 2008. However, the real growth of debt has
been greater than the real growth of revenues; and,
this complemented by the primary deficit resulted
in increase of the debt burden. The public debt
stood at 4.7 times government revenues at the end
of fiscal year 2011. Ideally the debt to revenue
ratio should be 3.5 or lower.
9.2.2 Servicing of Public Debt
Increases in the outstanding stock of total public
debt have implications for the economy in the
shape of a greater amount of resource allocation
towards debt servicing in the future. In order to
meet debt servicing obligations, an extra burden is
placed on limited government resources and might
have costs in the shape of foregone public
investment or expenditure in other sectors of the
economy.

Table-9.4 Public Debt Servicing

2010-2011 2011-2012
Percent Percent of Percent Percent of
Budgeted Actual of Govt. Current Budgeted Actual* of Govt. Current
Revenue Expenditure Revenue Expenditure
(In billion Rs.) % % (In billion Rs.) % %
Servicing of External 76.8 68.4 3.0 2.4 76.3 45.9 2.6 2.1
Debt
Repayment of External 174.4 154.2 6.8 5.3 243.2 94.5 5.4 4.4
Loans
Servicing of Domestic 621.8 629.7 27.9 21.7 714.7 578.6 33.3 26.9
Debt
Servicing of Public Debt 872.9 852.2 37.7 29.4 1,034.2 719.0 41.3 33.4
Source: Debt Policy Coordination Office
* July-March, 2012

128

During the year 2010-11, servicing of public debt
amounted to Rs. 852.2 billion as opposed to a
budgeted amount of Rs. 872.9 billion (Table 9.4).
The saving of Rs. 20.7 billion has mostly been due
to stable dollar rupee parity; which reduced the
amount used for interest and principal repayments
of foreign loans in Rupee terms. Repayment of
foreign loans stood at Rs. 154.2 billion as opposed
to a target of Rs. 174.4 billion, while interest
payments on foreign loans, which were budgeted at
Rs. 76.8 billion, reached Rs 68.4 billion by end-
June 2011. An amount of Rs. 629.7 billion was
spent on account of servicing of domestic debt
against the budgeted estimate of Rs. 621.8 billion.
The increase in domestic debt servicing is partly
the result of a tight monetary stance taken in order
to arrest the monetary overhang caused by
previous policies. As at the end of March 2012,
servicing of the public debt stood at Rs. 719 billion
against the budget amount of Rs. 1,034.2 billion.
9.3 Domestic Debt
Pakistan’s domestic debt comprises permanent
debt (medium and long-term), floating debt (short-
term) and unfunded debt (made up of the various
instruments available under the National Savings
Scheme) having shares of 21.6 percent, 54.5
percent and 23.9 percent respectively in total
domestic debt. Banks’ preference of risk-free
sovereign credit in view of mushrooming non-
performing loans augured well for the government
Fig-9.3 Trends in Permanent, Floating & Unfunded Debt
3700
3200
2700
Rs. billion
2200
1700
1200
700
200
FY99 FY00 FY01 FY02
Public Debt
securities market and overwhelming participation
was witnessed in the auctions of T-Bills, PIBs and
Government Ijara Sukuk.
The composition of major components shaping the
domestic debt portfolio has undergone a
transformation from a high dominance of unfunded
debt to an increasing dependence on floating
component of the domestic debt. The unfunded
category comprising about 44.6 percent of the
aggregate domestic debt stock in fiscal year 2002
has declined to 23.9 percent by end March, 2012.
Contrary to this, the share of floating debt to total
domestic debt has reached 54.5 percent by end-
March 2012 as compared with 31.4 percent in
fiscal year 2002 indicating an over reliance on
shorter duration instruments i.e. 54.5 percent of the
total domestic debt has the duration of 0.31 years
at end March 2012 which is fairly low owing to
market appetite for shorter duration reflecting
inflationary expectations and higher interest rates
in the second half of the fiscal year 2012. Undue
reliance on short-term sources of financing raises
the rollover or refinancing risk for the government.
Failure to issue new debt in order to mature a large
amount of outstanding short term debt may trigger
a liquidity or debt rollover crisis. The increase in
frequency of such operations (due to their short
term nature) coupled with any adverse rise in
interest rates may leave the government vulnerable
to the high cost of debt. The trends in domestic
debt are discussed in the following graph:
Permanent Debt
Floating Debt
Unfunded Debt
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12-
Q3
129
Pakistan Economic Survey 2011-12

9.3.1 Outstanding Domestic Debt 307.5 billion). In relation to GDP the domestic
debt stood at 34.9 percent which is higher than
The total domestic debt was positioned at Rs.
end-June 2011 level at 33.4 percent. The domestic
7,206.9 billion at end-March 2012, representing an
debt grew by 19.8 percent in first nine months of
increase of Rs. 1,190.5 billion in the first nine
current fiscal year. The focus on deficit financing
months of the current fiscal year. This increase
through internal sources owing to lower external
stems from net issuance of market debt namely
receipts has been the major cause.
Treasury bills (Rs. 576.4 billion) and PIBs (Rs.

Table-9.5 Trends in Domestic Debt

2002 2003 2004 2005 2008 2009 2010 2011 2012*
(In billions Rs.)
Permanent Debt 424.8 468.8 570.0 526.2 616.8 685.9 797.7 1125.3 1554.6
Floating Debt 557.8 516.3 542.9 778.2 1637.4 1903.5 2398.7 3235.4 3926.9
Unfunded Debt 792.1 909.5 899.2 873.2 1020.4 1269.2 1457.5 1655.8 1725.4
Total 1774.7 1894.5 2012.2 2177.6 3274.5 3858.7 4653.9 6016.4 7206.9
(In percent of GDP)
Permanent Debt 9.7 9.7 10.1 8.1 6.0 5.4 5.4 6.2 7.5
Floating Debt 12.7 10.7 9.6 12.0 16.0 15.0 16.2 17.9 19.0
Unfunded Debt 18.0 18.9 15.9 13.4 10.0 10.0 9.8 9.2 8.4
Total 40.3 39.3 35.7 33.5 32.0 30.3 31.4 33.4 34.9
(In percent of Total Debt)
Permanent Debt 23.9 24.7 28.3 24.2 18.8 17.8 17.1 18.7 21.6
Floating Debt 31.4 27.3 27.0 35.7 50.0 49.3 51.5 53.8 54.5
Unfunded Debt 44.6 48.0 44.7 40.1 31.2 32.9 31.3 27.5 23.9
Memo:
GDP (in billion of Rs.) 4402 4823 5641 6500 10243 12724 14804 18033 20654
Source: Budget Wing, Ministry of Finance
* End-March

billion as at end-March 2012 compared to Rs.

The following section highlights the developments
in the various components of domestic debt during
first nine months of the outgoing fiscal year.
I. Permanent Debt
Permanent Debt mainly consists of medium to long
term instruments including Pakistan Investment
Bonds (PIBs), Government Ijara Sukuk bond, Prize
Bond etc. PIBs are non-callable instruments, with
semi-annual coupon payment. PIBs are issued in
tenors of 3, 5, 7, 10, 15, 20 and 30 ‐years maturity.
The 3, 5 and 10 years tenor are most liquid while
longer maturities are thinly traded. Government
Ijarah Sukuks are medium term Shariah compliant
bonds currently issued in 3 years tenor. The
purpose of issuance was to raise money from
Islamic banking which has grown substantially in
Pakistan in recent years.
The total share of permanent debt in the
government’s domestic debt stood at Rs. 1,554.6
1,125.3 billion in 2011 registering an increase of
Rs. 429.3 billion. The share of permanent debt in
total domestic debt inched up from 18.7 percent in
2011 to 21.6 percent at end March 2012. Sizeable
receipts from Government Ijara Sukuk bond and
Pakistan Investment Bonds contributed to this
expansion. Government mopped up net of
retirement Rs. 80.5 billion through successful
auctions of Ijara Sukuk bond and Rs. 307.5 billion
through Pakistan Investment Bonds during July-
March, 2012.
II. Floating Debt
Floating debt consists of short term domestic
borrowing instruments such as Treasury Bills and
State Bank borrowing through the purchase of
Market Related Treasury Bills (MRTBs). Treasury
Bills are zero coupon or discounted instruments
issued in tenors of 3 months (introduced in 1997),
6 months (introduced in 1990) and 12 months

130

(introduced in 1997). The share of 3 months, 6
months and 12 months maturity in total T-Bills
portfolio is 9 percent, 20 percent and 71 percent
respectively as at end-Mar 2012. In order to raise
short term liquidity, the government borrows from
the domestic banks through auction in the form of
Treasury Bills. The auction of Treasury bills is
arranged by the State Bank of Pakistan (SBP)
twice a month. Treasury Bills having maturity of 6
months are also created by SBP on average rate of
interest of previous auction on need basis.
Floating Debt share in overall public debt and
domestic debt stood at 32.7 percent and 54.5
percent respectively as at end-March 2012. During
July-March, 2012, the floating debt grew by Rs.
691.5 billion or 21.4 percent. Around 58 percent of
the total increase in government domestic debt
stock was contributed by floating debt instruments
during July-March, 2012.
Much of the proceeds accrued through Market
Treasury Bills (MTBs) as Rs. 576.4 billion was
added to the stock of June 30, 2011. On the other
hand, government borrowed Rs. 167.3 billion by
issuing Market Related Treasury Bills (MRTBs) to
SBP.
III. Unfunded Debt
Unfunded Debt made up of the various instruments
available under the National Savings Scheme
(NSS). A number of different schemes are offered
under NSS in the investment horizon of 3 years to
10 years. The total share of unfunded debt in the
government’s domestic debt stood at Rs. 1,725.4
billion or 23.9 percent on end-March 2012. The
stock of unfunded debt increased by Rs. 69.6
billion or 4.2 percent compared with fiscal year
2011. Net receipts in Regular Income Scheme were
up by 17.2 percent in July-March, 2012, as the
stock increased from Rs. 182.6 billion in June,
2011 to Rs. 214 billion at end-March 2011. Special
NSS Schemes including Bahbood Savings
Certificates and Pensioner’s Benefits Accounts
registered a combined nominal increase of Rs. 49.3
billion compared to Rs. 59 billion during July-
March 2011. Rates of return on NSS instruments
were revised downward in October 2011 and
January 2012 in response to the decrease in the
benchmark discount rate.
Public Debt
9.3.2 Duration of Domestic Debt
As at end March 2012, duration of domestic debt
stood at 2 years excluding SBP Market Related
Treasury Bills (MRTBs). Duration including
MRTBs stood at 1.61 years. This estimate of
duration may be a little inconsistent owing to the
non-availability of actual maturity profile of NSS
and manual operations of Central Directorate of
National Savings (CDNS). A behavioral analysis
was undertaken to estimate the maturity of NSS
instruments. Generally, across the globe,
governments desire to incur the lowest annual debt
servicing cost while ignoring portfolio risks. It is
important for the government to take necessary
measures to lengthen the maturity profile of
domestic debt. Though this may result in additional
debt servicing cost in the short term, it would
certainly help in reducing the associated liquidity
and refinancing risks in the domestic debt
portfolio.
9.4 External Debt and Liabilities
Pakistan’s external debt and liabilities (EDL)
include all foreign currency debt contracted by the
public and private sector, as well as foreign
exchange liabilities of the State Bank. EDL has
been dominated by Public and Publically
Guaranteed Debt having share of 76 percent owing
to current account deficit which is financed
through loans from multilateral and bilateral
donors. Debt obligations of the private sector are
fairly limited and have been a minor proportion of
EDL (6 percent). Borrowing from IMF contributed
13 percent in EDL Stock which was intended for
Balance of Payment (BoP) support and is reflected
in foreign currency reserves of the country. The
explicit concessional terms of loans (low cost and
long tenors) contracted with international financial
institutions or donor countries have concealed the
inherent capital loss associated with foreign
currency debt to some extent. However, the
analysis of currency movement of last 20 years
reveals that cost of foreign currency borrowing
adjusted for exchange rates movement has been 1.5
percent lower than the average domestic interest
rates.
Pakistan External Debt and Liabilities (EDL) stock
was recorded at $60.3 billion as of March 2012.
During July-March 2012, $179 million was added
131
Pakistan Economic
E Surrvey 2011-122

to the ED DL stock. AsA a percentaage of GDP in Figg-9.4 External Public Debt

dollar terrms, the EDL L was downn by 200 baasis (as perceent of GDP)
points in July-March,
J 2012
2 compareed to fiscal yeear 60%
2011 andd approximatted to 26.5 percent. Sinnce 50%
fiscal yeaar 2010, EDL L has increased in absoluute 40%
terms, butt decreased in
n relation to GDP Howevver, 30%
focusing on the absolute
a inccrease in the t 20%
outstandinng stock of EDL
E can be misleading for 10%
two main reasons. Firsstly, the outsttanding stockk of 0%
debt mustt be analyzedd in relation too the size of the
t

Q3-FY12
FY80
FY90
FY95
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
economy and its repay yment capaciity (in terms of
GDP annd other macroeconom
m mic indicatorrs).
Secondly,, the absolutte change inn EDL negleects
classificattion between an actual inncrease in stoock
The coomposition annd structure off Pakistan Exxternal
and inccreases caused by fluctuations
fl in
Debt as
a on March 31, 2012 iss depicted thrrough
internationnal exchange rates.
followiing graphs:

Fig-9.5: Struccture of EDL - Fig-9.6 : Components off EDL -

End March, 2012
2 End March h, 2012
Schedduled
Bannks' Foreign
Foreign Otthers Borrowwing, Exchangee
Exchange 6% 6 1%
% Liabilitiess,
Liabilities 4%
4% Paris Club F, 13%
IMF
IMF 25%
13% Privaate
Nonn-
Privaate Guarannteed
Nonn- Debt, 6%
Guarannteed
Debbt
6%
%
Other Public and
B
Bilateral Multilaterall Publically
4% 42% Guaranteedd
Debt, 76%

The followwing section highlights thhe developments bilateraal sources inncludes loann contracted with
in the varrious componnents of EDL during the fiirst Paris Club
C countriees and other countries ouutside
nine montths of the outg
going fiscal year.
y the Parris Club. It is second larggest componeent of
Pakistaan’s EDL. It witnessed ann increase off $137
I. Publicc and Publiclly Guaranteeed Debt (PPG
G) millionn during the period
p under review.
r
At the end-March
e 2012,
2 Publicc and publiccly
II. IM
MF Debt
guaranteeed debt accou unted for the largest share of
76 percennt in EDL. Pu ublic and publlicly guaranteeed At thee end-Marchh 2012, debbt owed to IMF
debt is doominated by the loans froom bilateral and
a aggregated up to $88.1 billion. Paayment amouunting
multilaterral donors. Multilateral
M debbt, which is the
t to $793 million hass been made in the 3rd annd 4th
largest coomponent of Pakistan’s ED DL witnessedd a quarterr of fiscal yeaar 2012.
decrease of $730 milllion during thhe period undder
review. The projecct-based natture of loaans
contractedd under this category
c hingees on Pakistann’s
ability too instill projject efficienccy. Debt froom

132
 Public Debt

III. Private Non-Guaranteed Debt stock of private non-guaranteed debt decreased by

$147 million; from $3.48 billion in June 2011 to
The share of private non-guaranteed debt in total
$3.34 billion by end-March 2012.
EDL stood at 6 percent at end-March 2012. The

Table-9.6: Pakistan External Debt and Liabilities

2012-
2004 2005 2006 2007 2008 2009 2010 2011
Q3
1. Public and Publically Guaranteed debt 29.9 31.1 32.9 35.3 40.6 42.6 43.1 46.7 46.4
A. Medium and long term(>1 year) 29.9 30.8 32.7 35.3 39.5 41.1 42.3 46.1 45.8
B. Short Term (<1 year) 0.0 0.3 0.2 0.0 1.1 1.5 0.8 0.6 0.6
2. Private Non-guaranteed Debt (>1 yr) 1.7 1.3 1.6 2.3 2.9 3.3 3.4 3.5 3.3
3. IMF 1.8 1.6 1.5 1.4 1.3 5.1 8.1 8.9 8.1
Total External Debt (1 through 3) 33.4 34.0 36.0 39.0 44.9 51.1 54.6 59.1 57.8
4. Foreign Exchange Liabilities 2.0 1.8 1.6 1.5 1.3 1.3 1.3 1.0 2.5
Total External Debt & Liabilities 35.3 35.8 37.6 40.5 46.2 52.3 55.9 60.1 60.3
(1 to 4)
(of which) Public Debt 31.3 32.1 33.9 36.5 40.9 46.3 49.5 54.6 53.1
(In percent of GDP)
Total External Debt (1 through 3) 34.1 31.1 28.2 27.3 27.4 31.5 30.9 28.1 25.4
1. Public and Publically Guaranteed debt 30.6 28.4 25.8 24.7 24.8 26.3 24.5 22.1 20.1
A. Medium and long term(>1 year) 30.5 28.1 25.7 24.7 24.1 25.4 24.0 21.8 19.8
B. Short Term (<1 year) 0.0 0.2 0.1 0.0 0.7 0.9 0.4 0.3 0.2
2. Private Non-guaranteed Debt (>1 yr) 0.02 0.01 0.01 0.02 0.02 0.02 0.02 0.02 0.01
3. IMF 1.8 1.5 1.2 1.0 0.8 3.2 4.6 4.2 3.5
4. Foreign Exchange Liabilities 2.0 1.6 1.2 1.0 0.8 0.8 0.6 0.5 1.1
Total External Debt & Liabilities 36.1 32.7 29.5 28.3 28.2 32.3 31.5 28.5 26.5
(1 to 4)
Memo:
GDP (in billion of Rs.) 5641 6500 7623 8673 10243 12724 14804 18033 20,654
Exchange Rate (Rs./U.S. dollar, Period Avg.) 57.6 59.4 59.9 60.6 62.5 78.5 83.8 85.6 90.8
Exchange Rate (Rs./US$, EOP) 57.9 59.7 60.2 60.6 68.3 81.4 85.5 86.0 90.7
GDP (in billions of U.S. dollars) 98.0 109.5 127.4 143.0 163.8 162.1 176.5 210.8 227.8
Source: State Bank of Pakistan, EAD and Debt Policy Coordination Office

II. Disbursements
9.4.1 Composition of Foreign Economic
Assistance During July-March 2010-11, disbursements of
$1,660 million were for different purposes like
The total amount of foreign economic assistance
Project Aid ($1,113 million), Programme-
received in the first nine months of 2011-12 stood
loans/Budgetary Support ($99 million) and relief
at $1,660 million. The composition of this
($448 million). Project aid accounted for 67
assistance is as follows:
percent of the total disbursements.
I. Commitments
9.4.2 External Debt Servicing
The commitments of foreign economic assistance
During fiscal year 2011, external debt servicing
were $4,580 million during 2010-11, while during
summed to US$ 4,799 million that is 14.3 percent
July-March 2012, total commitments amounted to
lower than the previous year. A segregation of this
$1,967 million. About 76 percent of total
aggregate number shows a payment of US$ 2,348
commitments during July-March 2012 were in the
million in respect of maturing EDL stock where
shape of project aid while the remaining comprised
interest payments were US$ 963 million. US$
non-project aid. Out of total non-project aid, share
1,488 million was rolled-over.
of BOP/budgetary support was 78 percent.

133
Pakistan Economic
E Surrvey 2011-122

Table-9.7 Pakistan's Pu ublic External Debt Apart from

f net freshh disbursemeents, exchangge rate
Servicing fluctuaations in US$$ against theese currenciees can
Actual Amount Total also reesult in changge in External Debt Stocck i.e.
Years Amount Rolled appreciiation of US$ against othher currenciess will
Paid Over result in
i decrease ini External Debt
D Stock orr vice
(iin million of US$)
U versa. The total traanslational gaain on accouunt of
2006-07 2,326 1,300 3,6266 cross-ccurrency movvement againnst US$ amoounted
2007-08 2,558 1,200 3,7588
to $1,129 million which can be attributeed to
2008-09 3,986 1,600 5,5866
appreciiation of US $ against haard currencies like
2009-10 3,880 1,723 5,6033
2010-11 3,311 1,488 4,7999
Euro, Japanese
J yen (JPY), SDR by b 7.9 percennt, 2.0
2011-12* 2,325 1,243 3,5677 percentt and 3.2 perccent respectivvely.
Source: Staate Bank of Paakistan
*July-Marcch 2012 9.4.4 External
E Debt Sustainabillity

Servicing of external debt

d and liabilities during the
t Analyssis of the cuurrent accounnt deficit proovides
first nine months of fiiscal year 2012 amountedd to importaant clues as to the futurre direction of o the
$3,567milllion. Out of the total, $1,6692 million was
w externaal debt path. Higher curreent account in i the
paid againnst principal while
w interestt payments weere absence of offsettinng increases to t current trannsfers
$633 milllion. US$ 1,2 243 million was
w rolled-ovver. and noon-debt creatinng capital floows can add to t the
When com mpared to a stock of apprroximately US$U stock of
o external debt.
d Similarlyy, any increaase in
60.1 billiion at the en nd of fiscal year 2011, thet interestt rates and exchange
e ratee depreciationn will
relatively smaller am mount of interest payments increasse the debt seervicing cost of the countrry and
made durring the first three quarterrs of fiscal yeear will afffect the soveereign debt portfolio.
p Exxternal
2012 signnal towards the concessiional nature of Debt and
a Liabilitiess expressed as a a percentaage of
most of the
t foreign lo oans contracted by Pakistan. GDP might
m be a coommon meanss of measurinng the
Notwithsttanding, with h the IMF-SB BA repayments indebteedness of an a economyy, but repayyment
over next two years, thhe servicing will
w increase. capacitty is more accurately captured thrrough
expresssing the levells of debt as a percentage of the
pact of Excha
9.4.3 Imp ange Rate Flu
uctuations econommy’s foreiggn exchangee earnings and
reservees. In ordeer to ensuure sustainabbility,
Pakistan External Deb bt is contraccted in multipple governnment can asssign thresholdd levels to thee debt
currenciess, however, outstanding
o b
balance of theese stock as a ratio of economiic indicatorss and
loans is coonverted into
o US$ for repoorting purposses. comparrison with innternational thhresholds proovides
As at end March 2012, 94 percent of o total Externnal insightt into a countrry’s debt posiition.
Debt is contracted in 4 major currencies as
depicted in
i the followinng graph: Duringg 2010-11, thhe non interest current acccount
showedd a surplus ofo 0.8 percentt of nominal GDP
Fig--9.7 Currency Wise Externaal Debt on acccount of im mproved tradee balance (hhigher
Com o March 2012)
mposition (as on cotton prices) and swelling
s infloows in remittaances.
Otherrs
This inndicator showwed a downw ward trend in fiscal
6% EUR year 20012 by recordding a deficitt of 1.2 perceent of
12% nominaal GDP com mpared to a surplus of 0.66
USD
26%
percentt of nominall GDP duringg the same period
p
last yeaar owing to high value of oil
o imports.
JPY
30% EDL as a perceentage of Foreign F Exchhange
Earninggs (FEE) givves a measuure of a counntry’s
debt reepayment cappacity by coomparing leveels of
SD
DR externaal debt to the
t sum of exports, serrvices
26
6%
receiptts, and privvate unrequiited transferrs. A
generallly acceptablee threshold reequires a counntry’s

134
 Public Debt

EDL to remain below 2 times of FEE.
Improvement was observed in the EDL-to-FEE
ratio, which was 1.3 in fiscal year 2011 compared
to 1.5 in fiscal year 2010 at the back of strong
workers’ remittances and a positive turn-around in
export earnings. The improvement of this ratio
suggests that Pakistan’s stock of external debt and
liabilities is growing at a slower rate than its
foreign exchange earnings. During July-March
2012, the ratio stood at 1.7against 1.3 during the
same period last year.

Table-9.8 External Debt Sustainability (in percent)

External Debt Indicators 2007 2008 2009 2010 2011 2012*
Non Interest Current Account/GDP -3.8 -7.1 -4.5 -1.4 0.8 -1.2
EDL/FEE (times) 1.2 1.2 1.5 1.5 1.3 1.7
EDL/FER 2.5 4.0 4.2 3.3 3.3 3.6
EDL/GDP 28.3 28.2 32.3 31.5 28.5 26.5
EDL Servicing/FEE 12.6 11.7 18.0 16.5 11.4 10.0
STD/EDL 0.1 2.4 2.8 1.4 1.0 0.9
Source: EAD, SBP & Debt Policy Coordination Office
* July - March 2012
FEE: Foreign Exchange Earnings; STD: Short-term Debt; EDL: External Debt and Liabilities; FER: Foreign
Exchange Reserves

A decrease in EDL in relations to Foreign and a positive turn-around in export earnings. A

Exchange Reserves reflects the consolidation of
foreign exchange reserves and a general
improvement of the country’s repayment capacity
or vice versa. On the onset of SBA in 2008, the
ratio declined to 3.3 in 2009-10 as EDL growth
slowed and foreign exchange reserves shored up.
The ratio did not improve in fiscal year 2011
mainly because of stagnation in reserves and lower
growth in EDL stock. By end-March 2012, the
ratio deteriorated slightly to 3.6 compared to 3.3 by
end June 2012 mainly because of drawdown on
reserves owing to lower Foreign Direct
Investments and other non-debt creating flows.
A major improvement has been witnessed in EDL-
to-GDP ratio as it improves from 31.5 percent in
fiscal year 2010 to 28.5 percent in fiscal year 2011.
By end-March 2012, EDL as a percent of GDP
stood at 26.5 percent, thereby showing a decrease
of 2.0 percentage points in first nine month of
current fiscal year. This improvement is mainly
due to faster growth in nominal GDP in relation to
slower growth in external debt owing to lower
financing from external sources.
External Debt Servicing as a percentage of Foreign
Exchange Earnings has been declining since fiscal
year 2010 and stood at 11.4 percent during fiscal
year 2011 owing to strong workers’ remittances
generally acceptable threshold requires a country’s
EDL servicing to remain below 20 percent of FEE.
The current levels of servicing are bound to
increase as IMF-SBA repayments initiate in fiscal
year 2012, that require serious efforts to enhance
the export earnings.
Pakistan’s level of Short Term Debt (STD) as a
percentage of EDL has historically been lower than
most other developing countries. It was just 0.1
percent in 2006-07. Fiscal year 2009-10 has seen
an improvement in STD as a percentage of EDL to
1.4 percent which decreased to 1 percent in fiscal
year 2010-11. During July-March 2012, the ratio
stood at 0.9 percent.
9.5 Pakistan’s Link with International Capital
Market
The first ten months of the current financial year
witnessed a period of substantial volatility in the
global markets, largely as a consequence of fears
relating to the Eurozone’s peripheral economies.
The Emerging Market Bond Index (“EMBI”), a
benchmark index for measuring the total return
performance of international government bonds
issued by emerging market countries, has depicted
an increase over June 2011 levels, implying an
increase in costs for tapping international debt

135
Pakistan Economic Survey 2011-12
capital markets. However, since January 2012 the
EMBI has shown a slight decrease indicating that
the debt capital markets might be improving,
however, uncertainty with respect to the Euro area
remains and continues to affect the credit risk
appetite of global investors. In the backdrop of
prevailing uncertainty in the global markets, the
situation for Pakistan is further affected by
concerns over higher commodity prices,
consequent energy shortages, flood etc. Given the
general risk awareness and volatility prevailing in
the international markets, Pakistan has not issued
any new debt instrument since 2008. The
government plans to tap the global markets once
the conditions become more favourable.
9.6 Recent Performance of 2017 And 2036
Eurobonds
Pakistan has witnessed an increase in spreads on its
2016, 2017 and 2036 Eurobonds in the first ten
Table-9.9 Selected Secondary Market Benchmarks
Ratings
Issuer Coupon (%)
(Moody’s/S&P)
Pakistan B3/B- 7.125
Pakistan B3/B- 6.875
Pakistan B3/B- 7.875
Source: Bloomberg, as at May 9th, 2012
9.7 Conclusion
Pakistan’s public debt position declined slightly in
the current fiscal year. A host of internal and
external factors contributed to the decline. Higher
interest payments, large subsidies specially food
136
months of 2010-11. External factors mainly
contributed to the spread performance of
Pakistan’s bonds over the past year, with an overall
tightening witnessed since the beginning of 2012.
However, levels remain high when compared to
levels seen at the beginning of 2010.
The Eurobond maturing in 2016 is currently (as of
May 9th, 2012) trading at a spread of UST+1098
basis points. The 2017 maturity bond, that had an
issue spread of UST+200 basis points, is trading
currently at a spread of UST+1157 basis points.
The 2036 bond, compared to the issue spread of
UST+302 basis points and a spread of 681 basis
points last year, is trading currently at a spread of
UST+1002 basis points. The following table
contains the latest position of bond issued by
Pakistan along with their current yields.
Spread over UST
Maturity Yield (%)
(bps)
Mar 2016 1098 11.714
Jun 2017 1157 12.312
Mar 2036 1002 13.024
and energy, growing security spending needs,
narrow tax base and rising international
commodity prices have resulted in large twin
account (i.e. fiscal and current account) deficits.
Prudent government policy will be necessary to
address the issue of public debt.
 Chapter 10
Education
Introduction
The primary objective of government policy in the
last few years has been to improve the level and
quality of education in Pakistan. The government
vision is to expand primary education and this
measure can be used to assess whether government
schools have increased their coverage, by
increasing enrolments faster than the growth in
population, especially at the primary level because
that level forms the core of the literate population.
Literacy and primary school enrolment rates in
Pakistan have shown improvement during last five
years but they are still lagging behind other
countries of the region. Scarcity of resources and
inadequate provision of facilities and training are
the primary obstacles in imparting and expanding
education. The present government’s strategy for
the sector includes improving the functioning and
utilization of existing schools, improving the
quality of education, increasing enrolment,
improving access to education and expanding the
primary education system.
Under the 18th constitutional amendment control
and management of the education sector has been
devolved to the provinces. They are now
responsible for the key areas of the education
sector i.e. curriculum and syllabus, centers of
excellence, standards of education up to
intermediate level (Grade 12) and Islamic
education. Planning and policy and standards of
education beyond Grade 12 are covered under
Federal Legislative List. All the provinces have
shown their commitment to the National Education
Policy 2009.
This chapter presents an overview of the National
Education Policy, followed by a discussion of
literacy and enrolment statistics. Educational
budget and programmes and issues related to
technical and vocational training are discussed
next, followed by a description of the activities and
achievements of the Higher Education
Commission. The last section presents a brief
summary of the Annual Status of Education Report
Survey.
National Educational Policy 2009
The National Educational Policy (NEP) 2009 is a
milestone which aims to address a number of
issues including:
` quality and quantity in schools and college
education
` universal primary education
` improved Early Children Education (ECE)
` improved facilities in primary schools
` converting primary schools to elementary
schools
` detaching classes XI-XII from college
education
` adopting a comprehensive definition of ‘free’
education
` achieving regional and gender parity especially
at elementary level
` provide demand based skills and increase in
the share of resources for education in both
public and private sectors
The policy also defines the role of government
at the federal as well as the provincial level in
the field of education.
137
Pakistan Economic Survey 2011-12

Literacy likely to have a longer run impact on other

important indicators of national welfare. According
The National Education Policy 2009 proposes that
to the latest Pakistan Social and Living Standards
the literacy rate be increased up to 86 percent by
Measurement (PSLM) Survey 2010-11, the literacy
2015 through up-scaling of ongoing programmes
rate for the population (10 years and above) is 58
of adult literacy and non-formal education in the
percent during 2010-11, as compared to 57 percent
country and achieving universal primary education
in 2008-09. Literacy remains much higher in urban
and ensuring zero-drop rates at the primary level.
areas than in rural areas and much higher for men
The provinces will allocate a minimum of 4
than for women. Province wise data suggest that
percent of education budget for literacy and non-
Punjab leads with 60 percent literacy followed by
formal education. Existing school infrastructure
Sindh with 59 percent, Khyber Pakhtunkhwa with
wherever feasible shall be used for literary and non
50 percent and Balochistan with 41 percent. The
formal education. Literacy is one of the important
details are given in Table 10.1.
indicators of education because its improvement is

Table 10.1: Literacy Rate (10 Years and Above)-Pakistan and Provinces (Percent)
2008-09 2010-11
Province/Area
Male Female Total Male Female Total
Pakistan 69 45 57 69 46 58
Rural 63 33 48 63 35 49
Urban 81 67 74 81 67 74
Punjab 69 50 59 70 51 60
Rural 63 39 51 64 42 53
Urban 82 71 76 80 71 76
Sindh 71 45 59 71 46 59
Rural 61 22 43 60 22 42
Urban 81 65 73 82 68 75
KPK 69 31 50 68 33 50
Rural 67 27 47 67 29 48
Urban 76 48 62 77 50 63
Balochistan 62 23 45 60 19 41
Rural 57 16 38 54 13 35
Urban 78 47 64 79 40 61
Source: Pakistan Social and Living Standards Measurement Survey, 2010-11

Primary Enrolment Rates 2010-11 increased to 92 percent from 91 percent in

Gross Enrolment Rates (GER)
The GER or the participation rate is the number of
children attending primary schools divided by the
number of children who ought to be attending. The
GER at the primary level excluding katchi (prep)
for the age group 5-9 years at national level during
2008-09. Amongst the provinces, Punjab shows a
marginal increase from 97 percent in 2008-09 to 98
percent in 2010-11. Sindh remained stable with 84
percent, Khyber Pakhtunkhwa improved from 87
percent to 89 percent and Balochistan declined
slightly from 75 percent to 74 percent in 2010-11.
The details are given in Table 10.2.

138
 Education

Table 10.2: National and Provincial GER (Percent)

2008-09 2010-11
Province/Area
Male Female Total Male Female Total
Pakistan 99 83 91 100 83 92
Punjab 102 92 97 103 93 98
Sindh 93 75 84 94 72 84
Khyber Pakhtunkhwa 102 70 87 101 76 89
Balochistan 93 54 75 92 52 74
Source: Pakistan Social and Living Standards Measurement Survey, 2010-11

abadies) level for the age group 5-9 years. The

Net Enrolment Rates (NER)
The NER at the primary level refers to the number
of students of primary school age enrolled in
primary schools divided by the number of children
in the age group for that level of education. In
other words, for Pakistan, the official primary NER
is the number of children aged 5 to 9 years
attending primary level divided by the total
number of children aged 5 to 9 years.
NER at the national level during 2010-11 slightly
decreased to 56 percent from 57 percent in 2008-
09. Punjab shows a decrease from 62 percent in
2008-09 to 61 percent in 2010-11. Sindh also
shows decrease from 54 percent to 53 percent in
2010-2011, Khyber Pakhtunkhwa witnessed a
decrease from 52 percent to 51 percent and
Balochistan improved from 44 percent in 2008-09
to 47 percent in 2010-11.

Table 10.3 show the Net primary level enrolment

rates at the national/provincial (excluding katchi

Table 10.3: National and Provincial NER at Primary Level (Percent)

2008-09 2010-11
Province/Area
Male Female Total Male Female Total
Pakistan 61 54 57 60 53 56
Punjab 64 60 62 62 59 61
Sindh 57 49 54 57 48 53
Khyber Pakhtunkhwa 58 45 52 57 45 51
Balochistan 51 36 44 56 35 47
Source: Pakistan Social and Living Standards Measurement Survey, 2010-11

Educational Institutions and Enrolment (18.77 million) was observed during 2010-11. It is
estimated to increase by 2.2 percent to 19.57
i) Pre-Primary Education
million in 2011-12. [Table 10.4].
Pre-Primary education is the basic component of
Early Childhood Education (ECE). Prep or Katchi iii) Middle Education (Classes VI-VIII)
classes are for children between 3 to 4 years of
A total of 41,951 middle schools with 334,984
age. An increase of 7.4 percent in Pre-Primary
teachers were functional in 2010-11. An increase
enrolment (9.41 million) in 2010-11 over 2009-10
in middle enrolment (5.64 million) in 2010-11 over
(8.76 million) has been observed and it is
2009-10 (5.50 million) has been observed during
estimated to increase by 4.8 percent to 9.86 million
2010-11. It is estimated to increase by 1.3 percent
in 2011-12. [Table 10.4].
(5.72 million) in 2011-12. [Table 10.4].
ii) Primary Education (Classes I – V)
iv) Secondary Education (Classes IX-X)
A total of 155,495 Primary Schools with 440,523
A total of 25,209 secondary schools with 452,779
Teachers were functional in 2010-11. An increase
teachers were functional in 2010-11. An increase
in primary enrolment (19.16 million) over 2009-10

139
Pakistan Economic Survey 2011-12

in secondary enrolment (2.63 million) in 2010-11 estimated to increase further to 1.45 million during
over 2009-10 (2.58 million) has been observed the year 2011-12. [Table 10.4].
during 2010-11. It is estimated to increase by 3.6
percent to 2.73 million in 2011-12. [Table 10.4]. Fig-10.1: Enrolment at each level Primary
Middle
v) Higher Secondary / Inter Colleges (Classes 25000
High
XI-XII)
20000
A total of 3,435 higher secondary schools and inter

(In thousand)
colleges with 81,183 teachers were functional in
15000
2010-11. An increase in secondary enrolment (1.19
million) in 2010-11 over 2009-10 (1.17 million) 10000
has been observed. It is estimated to increase by
8.7 percent to 1.291 million in 2011-12 [Table 5000
10.4].
0
vi) Degree Colleges Education (Classes XIII- 2009-10 2010-11 2011-12 E
XIV)
An enrolment of 1.02 million students is expected
Primary
during 2011-12 in degree colleges against an Fig-10.2: Institution at each level Middle
enrolment of 0.76 million in 2010-11. A total of
180 High
1,558 degree colleges with 36,349 teachers were
160
functional during 2010-11. [Table 10.4].
140
(In thousand)

vii) Universities Education (Classes XV 120

onwards) 100
80
An enrolment of 1.41 million is estimated in 2011-
60
12 in higher education (universities) over 1.11
40
million in 2010-11. There are 135 universities with
20
63.557 thousand teachers in both private and
0
public sectors are functional during 2010-11.
2009-10 2010-11 2011-12 E
[Table 10.4].

Overall Assessment Primary

Fig-10.3: Teachers at each level
The overall educational situation, based on key Middle
indicators such as likely enrolments, number of 500 High
institutes and number of teachers, has shown a 450
slight improvement. The number of enrolments 400
(In thousand)

during 2010-11 was 39.9 million as compared to 350

38.2 million during the same period last year. This 300
shows an increase of 4.4 percent. It is estimated to 250
increase to 41.6 million during 2011-12. The 200
150
number of institutes stood at 227,800 during 2010-
100
11 as compared to 228,400 during the same period
50
last year. This shows a decrease of 0.3 percent.
0
However, the number is estimated to increase to
228,300 during 2011-12. The number of teachers 2009-10 2010-11 2011-12 E
during 2010-11were 1.41 million compared to 1.39
million during the same period last year showing
an increase of 1.7 percent. This number is

140
 Education

Table 10.4: Number of Mainstream Institutions, Enrolment and Teachers by Level (Thousands)
Year Enrolment Institutions Teachers
2009-10 2010-11 2011-12 2009-10 2010-11 2011-12 2009-10 2010-11 2011-12
(E) (E) (E)
Pre-Primary 8762.5 9412.5 9863.2 - - - - - -
Primary* 18771.6 19157.6 19571.0 157.5 155.5 154.6 441.7 440.5 435.5
Middle 5504.5 5643.7 5717.5 41.3 42.0 42.6 331.5 335.0 342.6
High 2583.4 2630.1 2725.1 24.8 25.2 25.8 447.1 452.8 463.9
Higher Sec./ 1166.0 1187.8 1291.0 3.3 3.4 3.6 77.2 81.2 85.0
Inter
Degree Colleges 478.4 760.9 1015.2 1.4 1.6 1.7 30.8 36.3 45.4
Universities 935.6 1107.7 1413.5 0.132 0.135 - 57.8 63.6 72.6
Total 38202.0 39900.3 41596.5 228.4 227.8 228.3 1386.1 1409.4 1445.0
Source: Ministry of Professional & Technical Training, AEPAM, Islamabad
E: Estimated,*: including Pre-primary and Mosque Schools

Education Programme under PSDP 2010-11 Balochistan Rs. 1.6 billion) for schools and college
education.
Financial
During the fiscal year 2010-11, an amount of Rs. Physical Achievement
2.87 billion was provided in the Federal PSDP for
Expenditures for basic missing facilities were
expansion and development of basic and college
provided to 180 schools to develop and improve
education. The provincial governments were
basic and college education. The province/area
allocated Rs.26 billion (Punjab, Rs. 10.4 billion,
wise details are given in Table 10.5.
Sindh Rs. 4.5 billion, KPK Rs. 9.3 billion and

Table 10.5: Province/Area wise provision of missing facilities in Schools (Numbers)

Khyber Gilgit
Sindh Balochistan AJK FATA Total
Pakhtunkhwa Baltistan
50 32 26 22 25 25 180
Note: Excluding Punjab Province as it had its own programme.

200 principals, head teachers, district education

Introduction of M.Com. classes at FG College of
Commerce, H-8/4, Islamabad and up-gradation of
5 primary schools to middle level remained in
progress. A number of scholarships were provided
to needy and talented students at all levels. A total
of 180 students from Balochistan and FATA were
enrolled in quality institutions and provided
scholarships. Work continued on the 4 Polytechnic
Institutes. Work on construction of 14 Cadet
Colleges also continued. Rs. 1 billion was spent
under the Canadian Debt Swap Projects on in-
service training of 40,000 teachers, head teachers
and master trainers. Provision of scholarships to
200 student-teachers, repair and maintenance of 25
teachers training institutions were also in progress.
The Academy of Educational Planning and
Management (AEPAM) has provided training to
officers and educational administrators for their
capacity building.
The achievements of provincial educational
departments
Punjab: Campaign for enhancement of literacy
was launched specially for promotion of primary
education for girls in rural areas. The revamping of
existing science laboratories of 1,000 schools was
completed. Construction of library rooms was
completed in 450 elementary schools.
Sindh: In order to improve the quality of teachers,
B.Ed classes were introduced at the Provincial
Institute of Teachers Education (PITE) at Benazir
Abad. Early childhood education and early

141
Pakistan Economic Survey 2011-12
learning programmes have been introduced in the
province. Post-graduate courses have been
introduced in degree colleges as well.
Khyber Pakhtunkhwa: A total of 100 Primary
schools on need basis have been completed and
300 additional class rooms have been constructed.
Stipend to girl students was provided to reduce the
drop-out rate. Construction of library blocks,
boundary walls and provision of water facilities
have been completed in various degree colleges of
the province.
Balochistan: A total of 50 primary schools were
upgraded to middle level. Buildings were provided
for various shelter-less primary schools.
Rehabilitation of the Government Degree College
and provision of residence facilities for lecturers
remained in progress.
Development Programme 2011-12
Financial
An allocation of Rs. 2.51 billion was made for the
financial year 2011-12 for development projects
for education. This includes Rs. 677.4 million for
projects under the Capital Administration and
Development Division (CADD), and Rs. 1.65
billion for the teacher training programme under
CIDA, Rs. 30.3 million for projects of education in
cantonment and garrison areas under Ministry of
Defense, Rs. 1.7 million under the Cabinet
Division for printing of a comprehensive
biography of Faiz Ahmad Faiz in Urdu, Rs. 82.3
million for Kashmir Affairs and Baltistan Division
and Rs. 23.7 million for scholarship schemes under
Inter Provincial Coordination Division.
Major Programmes
1. Establishment of degree colleges for boys at
Shihala and for girls at Bhara Kahu,
Islamabad.
2. The construction work on provision of
computer labs in 119 schools is going on. The
academic activities in Degree College for
Women at Sector I-14 are expected to start
from September 2012.
3. An allocation of Rs. 1.65 billion under
Canadian Debt Swap has been made for
capacity building of teacher training institutes
142
(For Islamabad, AJK, Gilgit-Baltistan and
FATA Rs. 150.0 million, for Punjab Rs. 705.1
million, for Sindh Rs. 315.9 million, for KPK
Rs. 260.6 million and for Balochistan Rs.
181.8 million).
4. An allocation of Rs. 81.3 million has been
made for provision of scholarships; three
schemes under Inter-Provincial Coordination
Division and one scheme under the Defense
Division. A scheme for provision of quality
education to 200 students belonging to
Balochistan and FATA for studying in quality
institutions of other provinces has also been
launched.
Technical and Vocational Education
There is a need to enhance and upgrade technical
and vocational education in the country to cater to
the labour demand in emerging sectors. In this
context the government is endeavoring to focus on
enhancing productivity and skill development
industries particularly in the SME sector and in
economic opportunities within and outside the
country.
The National Vocational and Technical Training
Commission (NAVTTC) is an apex body and a
national regulatory authority that has been set up to
address the challenges of technical and vocational
education and training (TVET) in the country. It is
involved in policy making, strategy formulation,
and regulation and revamping of the TVET system.
The commission is establishing and promoting
linkages among various stakeholders at the
national as well as international level. Since 2006,
the commission has given a high priority to un-
addressed areas and challenges faced by TVET. In
order to combat these challenges during 2011-12,
following steps have been taken:
` NAVTTC has developed 60 new curricula of
different vocational trades and technologies,
which are being taught in public and private
sector institutes across the country.
` A MoU has been signed between NAVTTC
and the Sri-Lankan Tertiary and Vocational
Education Commission to share copy rights of
their 107 National Skill Standards and
Training Learning Resource.

` A total of 134,118 youth received vocational
and technical training under the President’s
Funni Maharat Programme and Prime
Minister’s Hunermand Pakistan Programme.
` 117 new Vocational Training Centres were
established in 72 tehsils of the country which
were hither to without any TVET Centre.
` NAVTTC is assigned by its Act to establish an
internationally acceptable system of
accreditation for TVET institutions. NAVTTC
has formulated a mechanism and has obtained
consensus of the stakeholders in the provinces
on this mechanism. This is the first ever
attempt in Pakistan to develop such a system
involving the TVET Sector. NAVTTC has
formulated a framework for accreditation of
TVET institutes (public and private)
throughout the country. In this connection a
manual for accreditation in consultation with
the concerned stakeholders has been developed
and is under implementation.
` NAVTTC has signed a MoU with Asia-Pacific
Accreditation and Certification Commission
(APACC), Manila. Under which one institute,
the Construction Technology Training
Institute, Islamabad has been accredited. While
nine other institutes are in the process of
accreditation. Moreover, the initial phase of
accreditation of 12 institutes (both from public
and private sectors) has started from March 30,
2012.
` The Code of Conduct and Professional Ethics
for Technical and Vocational Training (TVT)
was developed and printed for implementation.
The code serves as an instrument and provides
an important base for promoting good
practices in teaching and learning of
international standards.
` An agreement for Technical and Vocational
Education and Training (TVET) Reform
Support Programme for a period of five years
at a cost of €42.40 million has been signed
with the GIZ (German Development
Agency).The programme is aimed at reforming
the TVET sector as whole. The reform
components cover (i) TVET governance and
institutional buildings (ii) national
qualification framework and human resource
Education
development and (iii) effective and innovative
training delivery and labour market
information services.
` NAVTTC has signed a memorandum of
understanding with the well known Pakistani
NGO-AKHUWAT for providing interest free
loan of Rs. 50,000 to the successful trainees of
NAVTTC. All NAVTTC trainees are expected
to benefit from this scheme.
` NAVTTC has constituted 22 advisory groups
of experts from different industries and
chambers of commerce. The advisory group is
expected to play a major role in articulating the
criteria for providing quality training to the
required skilled force.
` NAVTTC has constituted Project Monitoring
Advisory Committees at the Tehsil level for
monitoring the NAVTTC sponsored training
programmes. These committees are comprised
of notable and dedicated volunteers without
any political affiliation.
` NAVTTC has acquired ISO 9001 Certification
as a step towards a better managed and
efficient system.
` NAVTTC has developed institutional linkages
with a number of the world’s important
organizations dealing with TVET sector. These
organizations are:
• United Nations Educational, Scientific &
Cultural Organization (UNESCO)
• United Nations Industrial Development
Organization (UNIDO)
• British Council (BC)
• European Union (EU)
• Turkey International Cooperation Agency
(TIKA)
• International Labor Organization (ILO)
• Colombo Plan Staff College for
Technician Education (CPSC) for Human
Resources Development in Asia and the
Pacific Region, Philippines.
• Japan International Cooperation Agency
(JICA).
• Korean International Cooperation Agency.
143
 Pakistan Economic Survey 2011-12

Higher Education Commission (iv) Financial management and sustainability

Since its inception in 2002, the Higher Education (v) Research, innovation and entrepreneurship
Commission (HEC) has been striving to encourage
universities to play a greater role in the economic Key achievements of the Higher Education
development of the country. After implementing Commission are as follows:
the MTDF 2005-2010, HEC has proposed its next
Human Development
five year plan viz. its second MTDF – 2010-2015
to create the knowledge capital and technology Human resource development within the higher
required to enable Pakistan to join the ranks of the education sector lies at the heart of the HEC’s
industrially advanced countries within the next reform process. This is an area in which vital and
decade. The few prime physical targets of the significant progress has been made. With the dual
proposed 5-year plan are: objective of increasing institutional capacity and
enhancing local research activities, the major thrust
(i) Promoting excellence in learning and research of the programmes in this area have been primarily
aimed at improving the academic qualifications of
(ii) Developing leadership, governance and
management university faculty. However, scholarships schemes
are also open to individuals working in the private
(iii) Universities building economies and or government sectors as well as Pakistani
communities students. The projects and programmes are given
in Table-10.6.
Table 10.6: Projects/Programmes (Numbers)
Scholarship Scholars
Project Name
Availed Completed Studies
Provision of HE Opportunities for Students
2000 28
of Balochistan/ and FATA
Japanese Need Based Merit Scholarships
950 935
Program
Financial Support for Meritorious Needy
165 148
Students Program
Indigenous PhD Scholarship Schemes 1512 819
692 People are placed in HEIs under Interim Placement of Fresh PhDs Programmes.
Source: Higher Education Commission

qualification at various levels on merit basis in line

HEC is also playing its role in running different
with requirements. The details are given in Table
scholarship programmes to enhance academic
10.7.
Table 10.7: Scholarships (Numbers)
Scholars
Scholarships Scholars
Project Name Completed
Awarded Proceeded
Studies
Post-Doctoral Fellowship Programmes 590 477 449
1000 Cuban Scholarships for Studies in General Comprehensive
604 604 N/A
Medicine
US needs based Scholarship Programme for Pakistani University
901 901 659
Students
MS / M. Phil leading to PhD Scholarships for teachers of Weaker
21 21 1
Universities.
MS leading to PhD Faculty Development Programme of UESTP/UETs
189 117 2
Universities.
Overseas scholarship scheme for PhD in selected fields Phase - 1 19 19 383
Overseas Scholarships Phase-II 1439 1200 132
Fulbright Scholarship Programme 233 233 24
Source: Higher Education Commission

144
 Educcation

h and Develop
Research pment econom
mic scenarioss. HEC has allocated
a funnds in
accordaance with thhe needs of the
t country in
i the
Research and develop
pment (R&D)) is essential to
R&D arena
a (see Figg 10.4).
be comppetitive in the
t changing internationnal

Fig-10.4: Funds
F Allocatted for Promotion of Researrch
900
80
00 800
800 726
680
700 650

600
Rs. Million

500 44
42
400
300
270
300
200
100 47
0
2002-03

2003-04

2004-05

2005 06
2005-06

2006-07

2007-08

2008-09

2009-10

2010-11
Soource: HEC

Learningg Innovation at HEC Pakistaan, are beingg implementted by the HEC.

These programmees are dessigned to make
Faculty training prrogrammes, designed for
internaational standdard educatiion availablle to
building a high quality pool of academics aand
studentts. The details of this initiaative are pressented
managem a learning institutions of
ment staff at
in Tablle 10.8.
Table 10.88: Province-W
Wise Distribution of Faculty Members/Maanagement Staaff Trained (Num
mbers)

Programmes Federaal Punjab Sindh KPK Baalochistan A

AJ&K Tootal
Total numbber of Universiities 21 18 13 15 05 02 74
HE Facultyy Trained 9
970 21466 1279 1347 573 114 6431
Managemeent Staff Traineed 94 1033 87 71 39 7 401
Grand Totaal 10064 22499 1366 1418 612 121 6832
Source: HE
EC

Quality Assurance
A Prrogrammes efficienncy of the faculty
fa membbers by creatting a
healthyy competitioon among them, alloowing
Quality assurance
a is one
o of the obbjectives of thet
freedom m of researchh and teachinng, as well asa the
HEC. I order to achieve it some quallity
In
financiial independeence to pursue these objecctives.
parameterrs have been developed annd implementted
To datee a total of 1,3378 faculty members
m havee been
to fill thhe gaps in quality provvision betweeen
appoinnted by 58 puublic sector universities/D
u Degree
national and internaational systeems of highher
Awarding Institutes (DAIs). Due D to continnuous
learning. The Tenuree Track Sysstem (TTS) of
supporrt to research journals by the HEC, ressearch
appointmeents has been n introduced in public secctor
output from Pakistaan is now more m visible at
a the
universitiees. It aims at enhancing performance
p a
and

145
Pakistan Economic Survey 2011-12
international level. Almost 45 research journals are
now in the Institute of Scientific Information (ISI)
master list with 11 journals having an impact
factor.
Plagiarism Eradication System
The HEC's goal is to combat plagiarism effectively
in an academic environment in all institutions of
Pakistan while ensuring that the students and
academicians know that stealing intellectual
property is unethical and leads to serious
consequences. HEC is committed to eradicate
plagiarism from higher education institutes. For
this, the IT Division had sought a technological
solution and acquired an online software tool to
assist in identifying plagiarized material. The
software tool, “Thenticate” is one of the leading
software used globally for this purpose.
Anti-Plagiarism Service “Turnitin”
Plagiarism detection service ‘Turnitin’ has been
provided to all public and private sector HEIs by
the HEC in order to facilitate authentication of
contents. Some of the salient features of this
strategy are as follows:
` Unlimited accounts have been acquired for a
one year period and each university has been
Table 10.9: Plagiarism Eradication System Facilities
Key Indicators
No. of Universities given access to Turnitin
No. of Registered Instructors
No. of Registered Students
No. of Submission for Originality Report
Source: HEC
In person and remotely managed trainings are
arranged for the focal persons of all the universities
to rise to the level of master trainer, so that they
can in turn extend trainings in-house to their
respective universities/ institutes’ faculty and post
graduate students. All universities’ users are also
encouraged to go through the training material
available at the Turnitin site and webinars arranged
by the service provider on a regular basis. In
addition, a master trainer program was also
arranged through the Turnitin service provider for
the focal persons nominated by the
146
given 1000 user accounts. The service is
provided to a focal person nominated by the
university, who will be the resource person for
faculty members.
` Technical support and facilitation through
emails, phone and personal visit
` Updating Turnitin guidelines for instructors
and circulation of the same to universities
` Monitoring usage by the universities
` Involved focal persons for conducting training
sessions at respective campuses
For the past three years, all public sector
universities have been provided with campus
version of plagiarism detection solution, named as
Turnitin. This online service is available at
http://www.turnitin.com and 1000 licenses for each
of the public sector universities/ institutes have
been acquired for teaching faculty, post graduate
students and researchers in order to address the
issue at the grass root level. This year HEC has
provided ten (10) months trial access to Turnitin
service to all the Private sector universities/
institutes, after having negotiations with I
Paradigm (Turnitin parent company).
(Numbers)
2008 2009 2010 2011
10 50 13 54
- 763 2263 4144
- 2094 6855 15811
2885 10446 69042 146297
universities/institutes while selecting top ten (10)
extensive users of Turnitin Service.
Impact of Plagiarism Policy
The zero tolerance policy of the HEC towards
plagiarism has had a positive impact on research
activities being carried out in higher education
institutions and R&D organization. Because of
increased awareness about proper documentation,
literature referred during research activities has
improved and researchers are more vigilant in
citing information in their scholarly works.
 Education

Financial Scenario projects. The HEC expects to complete 48

development projects during the current financial
For efficient allocation and disbursement of public
year. The year wise breakup is given in Table
funds, HEC has developed a formula based
10.12. and Fig-10.5.
funding mechanism that assigns appropriate
weights to different need and performance
Table 10.12: Development Expenditure(Rs. Billions)
indicators along with students and faculty strength.
Financial Year Allocation Releases
The detail of recurring funds released to higher 2008-09 18.00 16.42
education sector during last 4 years is given in 2009-10 22.50 11.30
Table 10.10. 2010-11 15.76 14.06
*2011-12 14.00 8.96
Table 10.10: Recurring Grant Released Total 70.26 50.74
(Rs. Million)
Source: HEC
2007-08 12,536.5 *The releases are till Dec. 2011
2008-09 15,766.4
2009-10 21,500.0
2010-11 29,057.0 Fig 10.5: Development Expenditure Allocation
25.00
Source: HEC 22.50 Releases
Note: For the year 2011-12, Rs. 26.9 million have
been allocated as annual recurring grant out of which 20.00 18.00
16.42 15.76
55 percent has been released so far. 14.06 14.00
15.00
Rs. billion

To streamline and support institutional processes
and operations, the HEC has successfully
introduced/installed SAP Enterprise Resource
Planning (ERP) application in its offices. The HEC
has introduced a tenure track system, which offers
a market based competitive salary package to
attract and retain intelligentsia in public sector
institutions of higher learning. Currently, there are
1,257 tenure track teachers working in different
public sector universities. In addition to recurring
funds, development funds were also released under
the “Subsidy to Scholars under Cultural Exchange
Programme”. The details are given in Table 10.11.
Table 10.11: Subsidy to Scholars (Rs. Millions)
Year Subsidy Tendered
2008-09 21.5
2009-10 77.0
2010-11 75.7
2011-12 13.5
Total 187.8
Source: HEC
Planning & Development
In the development portfolio of HEC, there are 174
ongoing projects. Only 3 new projects were
allowed to be included in the current year PSDP.
Up till March 2012, 70 percent of the original
allocated funds have been released to development
11.30
8.96
10.00
5.00
0.00
2008-09 2009-10 2010-11 *2011-12
Source: HEC
Education Survey
Annual Status of Education Report (ASER) is a
citizen led household based learning survey mostly
in rural and selected urban areas. It measures
learning levels of children 5-16 years the same age
group as identified for compulsory education in
Article 25 A of the Constitution of Pakistan. ASER
is conducted each year across Pakistan and will
continue up to 2015. It is led by the Idara-e-
Taleem-o-Aagahi (ITA) in collaboration with the
National Commission for Human Development
(NCHD), Sindh Education Foundation and many
other Civil Society Organizations (CSOs). In 2011,
84 rural and 3 urban city districts, 2,502 villages,
97 urban blocks and 3,642 government/private
schools were surveyed. The survey included
49,793 households and 146,874 children. The
ASER 2011 Survey was conducted in 84 rural and
3 Urban districts (Lahore, Peshawar and Karachi)

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Pakistan Economic Survey 2011-12

of Pakistan by 5000 active citizen volunteers throughout Pakistan.

Box 1
ASER 2011 National Summary (RURAL)
Enrolment Characteristics

` In 2011, 79.9 percent of 6-16 year olds in rural Pakistan were enrolled in schools while 20.1 percent were out of
school. This number has held steady since 2010. Nationally there is a persistent gender gap in out of school
children with more girls than boys being out of school except for the 14-16 age group where slightly more boys
are out of school than girls (boys 3.1 percent, girls 2.9 percent)
` Pre-school enrollment (3-5 years) was 42.8 percent, which is quite close to the overall EFA/National Plan of
Action (NPA) target of 50 percent enrolment in pre-school by 2015. The highest enrolment in this age group
was 51.3 percent in Punjab and lowest in Gilgit-Baltistan (29.4 percent) with majority enrolled in government
schools. For urban areas this trend is highest in Karachi (68.9 percent) with majority of children in private
schools
Private school enrolment is on the rise:
` Nationally, non-state private school enrolment stood at 25.5 percent. Highest private school enrolment was
seen in Gilgit-Baltistan (43.6 percent) with FATA (40.5 percent) and Punjab (33.2 percent) close behind
` Madrasah enrolment increased from 0.9 percent in 2010 to 2.1 percent in 2011
` According to provincial data, highest Madrasah enrolment was found in Balochistan at 6.5 percent while district
wise data show that Bahawalpur had the highest Madrasah enrolment (6.4 percent)
No major changes in Drinking Water and Toilet Facilities
` National figures for 2011 do not show any significant improvement in the proportion of schools with useable
water and toilet facilities. Of the total government primary schools surveyed, 55.4 percent had useable water
facility and 43 percent had a functional toilet
` In ASER 2010, it was found that 57.5 percent of the government primary schools surveyed had useable water
while 45.3 percent had a functional toilet
` Facilities in government schools have improved most in Punjab followed by Khyber Pakhtunkhwa (KPK). In
Punjab 80 percent government schools have a useable water facility and 70 percent have a functional toilet
whereas in KPK 59 percent government schools were found with a useable water facility and 52 percent with a
functional toilet
Arithmetic Competencies Improved but Basic Reading Levels show a Decline
` Like 2010 the ASER 2011 evidence is most worrying on learning levels across school systems
` Arithmetic levels have improved: Basic arithmetic levels estimated in ASER 2011 show a slight improvement.
For example, nationally, the proportion of class 5 children able to solve a 3 digit division problem has increased
from 34.3 per cent in 2010 to 37.3 per cent in 2011. The improvement is most visible in the provinces of
Punjab, Gilgit-Baltistan and Balochistan.
` Urdu reading levels are estimated to have declined slightly: The proportion of children in class 5 able to read a
class 2 level Urdu story text has dropped from 51.6 per cent in 2010 to 47.4 per cent in 2011. Balochistan,
however, has shown a visible improvement. The proportion of children in class 5 able to read a class 2 level
Urdu story text has increased from 26.1 percent to 41.7 percent.
` English Reading Levels: In ASER 2010, 42.3 percent of class 5 students were reported as being able to read
sentences compared to 40.6 percent of class 5 students who could read sentences in the previous year.
Children's Attendance has Declined
` Overall student attendance in government schools (rural) was recorded at 79.7 percent. This is a drop from the
2010 attendance level of 81.5 percent. The highest attendance level was found in Azad Jammu Kashmir (88.5
percent) while the lowest was in Sindh (61.6 percent).

148
 Education

Class 2 sitting together with other Classes:

` Nationally, for rural government schools, about half of all classes visited are multigrade. For example, at the
national level class 2 children were sitting with one or more other classes in 44 percent of the surveyed schools.
This figure was 11.3 percent for class 8.
Private Tuition Trends:
` Of the enroled children in the rural sample, 11 percent reported paying for private tutors.
` The incidence of attending private tutors was lower among children in public sector schools (7.1 percent) as
compared to children in private sector schools (24 percent).
` Children in Punjab (20.2 percent) are by far the most intensive users of private tutors in the country.
Mothers’ Literacy:
` Mother’s literacy stood at 34.5 percent. Lowest being 12.8 percent in FATA and highest being in Punjab (41.6
percent)

Source: ASER-Pakistan 2011

Conclusion in the region, they have been improving over the

past five years. To achieve the goals of providing
The government of Pakistan is committed to
higher quality education and expanding the
improving both the quality and the coverage of
coverage of educational services, more resources
education through effective policy interventions
will need to be allocated to providing training and
and expenditure allocations. While literacy and
high quality facilities
enrolment rates are lagging behind other countries

149
 Chapter 11

Health and Nutrition

Access to good health can contribute positively to
the economic and social development of a country.
Thus, key issues that impact the health status of
people ought to be addressed through a diverse set
of policy tools comprising short and long term
measures to secure better health outcomes.
The people of Pakistan have grown healthier over
the past three decades. The vision for the health
sector comprises a healthy population with sound
health, enjoying good quality of life through the
practice of a healthy life style. In order to achieve
this vision, significant measures have been taken
toward disease prevention, health promotion,
greater coverage of immunization, family
planning, and provision of female health worker
services.
This chapter is structured as follows: the next
section presents the National Health Policy and its
primary objectives, followed by an overview of the
state of health indicators, expenditures, and
Table:11.1 National Health Policy 2009 Health Sector Indicators (Baseline, Benchmarks and Targets)
facilities in Pakistan. The targets and
accomplishments for the 2011-12 are then
described, followed by a discussion of the
government’s special focus on cancer treatment
and the response waged to counter dengue
outbreaks. The chapter then focuses on the
challenges of narcotics trafficking and the burdens
of growing incidence of drug addiction in Pakistani
society. The government’s efforts at augmenting
food security and enhancing the availability and
uptake of nutrients are examined before presenting
conclusions.
National Health Policy
In light of the health related MDGs, reducing child
and maternal mortality by 2015 is a high priority
for the government of Pakistan. Health spending
has increased progressively over the years as the
National Health Policy adopted in 2009 focuses on
making the population healthier. Some of the
important targets of the policy are summarized in
the table below:

Indicators Baseline Benchmarks and Targets

2006-07 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
I <5 mortality rate (per 1000 lb) 94 78 73 68 65 60 55
II Infant mortality rate (per 1000 lb) 78 66 62 58 55 48 43
III Maternal mortality ratio (per 276 240 220 200 175 165 150
100,000 lb)
IV % of children (12-23 months) 76 (47) 78 80 82 84 84 85
fully immunized (disaggregation
by gender and income)
V TB - Case detection rate (SS+) - 51 74 77 79 80 83 84
%
VI TB - Treatment success rate - % 87 87 88 88.5 89 90 91
Source: National Health Policy 2009
Note: lb refers to Live Births

151
Pakistan Economic Survey 2011-12

(ii) Health status varies between urban-rural

The objectives of the health policy are being
achieved through the following targeted
interventions.
i. Making the health system more responsive and
accountable
ii. Introducing reforms in the health sector to
make pragmatic progress in meeting MDG
targets and tackling effectively newly
emerging and re-emerging health issues
iii. Effectively engaging private health sector and
civil society organizations to improve health
outcomes
iv. Prioritizing vulnerable and disadvantaged
groups in society as recipients of social uplift
programmes.
Despite these positive efforts, the health indicators
have been slow to improve due to various external
and natural factors. Communicable diseases still
account for a major cause of death. Maternal health
problems are widespread and the current infant
mortality at 63/1000 is the highest in South Asia.
Analysis suggests that:
(i) Infectious and nutritional deficiency related
diseases dominate the causes of mortality in
the country.
locations and by economic status.
(iii) Health achievements in Pakistan contrast
sharply with those of its neighbours.
Special efforts and considerable resources are
required to achieve the desired health outcomes.
Health Indicators
The most recent data on health performance of
other South Asian countries suggest that Pakistan
lags behind in infant mortality rate (at 63 per 1000
live births) and the under 5 years mortality rate (at
86.5 per 1000 live births). These indicators
continue to remain high mainly on account of
unhealthy dietary habits, water borne diseases,
malnutrition and rapid population growth.
However, the average life expectancy at 66 years
compares well with India, Nepal and Bangladesh.
Pakistan is committed towards achieving the
MDGs. The MDGs 4, 5 and 6 relate to child
mortality, maternal health and combating HIV &
Aids, Malaria and other diseases. Considerable
efforts and immense resources are required to
achieve the desired health outcomes.

Table 11.2: Regional Human Development Indicator

Country Life Expectancy Mortality Rate Infant Mortality Population Growth
2011 under 5 per 1000 Rate per 1000 Rate (%)
2010 2011 2011
Pakistan 65.99 86.5 63.26 2.03
India 66.80 62.7 47.57 1.34
China 74.68 18.4 16.06 0.49
Indonesia 71.33 35.3 27.95 1.07
Bangladesh 69.75 47.8 50.73 1.57
Sri Lanka 75.73 16.5 9.70 0.93
Malaysia 73.79 6.3 15.02 1.58
Nepal 66.16 49.5 44.54 1.60
Thailand 73.60 13.0 16.39 0.57
Philippines 71.66 29.4 19.34 1.90
Source: World Development Report 2011

152
 Health and Nutrition

Health Expenditure (federal and provincial) declined from Rs. 79

billion in 2009-10 to Rs 42 billion in 2010-11. For
To maintain the expansion of health facilities, the
2011-12 these have been increased to Rs 55.12
financial allocation for the health sector has been
billion; comprising Rs 26.25 billion as
increasing steadily. However, the massive floods
development expenditure and Rs 28.87 billion as
of 2010 caused a significant downwards
non-development (current) expenditure. Rs 15.72
rationalization of health and nutrition expenditures
billion has been provided in the federal PSDP for
which had to be diverted to the relief and
2011-12.
rehabilitation effort. Total health expenditures
Table 11.3: Health & Nutrition Expenditures (2000-01 to 2011-12) (Rs. Billion)
Fiscal Years Public Sector Expenditure (Federal and Provincial) Percentage Health
Total Health Development Current Change Expenditure as %
Expenditures Expenditure Expenditure of GDP
2000-01 24.28 5.94 18.34 9.9 0.72
2001-02 25.41 6.69 18.72 4.7 0.59
2002-03 28.81 6.61 22.21 13.4 0.58
2003-04 32.81 8.50 24.31 13.8 0.57
2004-05 38.00 11.00 27.00 15.8 0.57
2005-06 40.00 16.00 24.00 5.3 0.51
2006-07 50.00 20.00 30.00 25.0 0.57
2007-08 60.00 27.22 32.67 20.0 0.57
2008-09 74.00 33.00 41.10 23.0 0.56
2009-10 79.00 38.00 41.00 7.0 0.54
2010-11 42.00 19.00 23.00 (-)47 0.23
2011-12 55.12 26.25 28.87 31.24 0.27
Source: Planning & Development Division

Fig: 11.1 Health & Nutrition Expenditures

75

65
Pak Rs (billion)

Health & Nutrition Expenditures 
55

45

35

25 Decline due to rationalization on

account of Flood 2010
15
2000‐01

2001‐02

2002‐03

2003‐04

2004‐05

2005‐06

2006‐07

2007‐08

2008‐09

2009‐10

2010‐11

2011‐12

Source: Planning and Development Division

Year

three decades. This has resulted in the

Health Facilities
establishment of a large network of health facilities
The health facilities and health related manpower with 108,137 hospital beds, 149,201 doctors,
have expanded substantially due to the greater 10,958 dentist and 76,244 nurses by 2011. The
focus on health sector programmes over the last current position of health personnel is as follows:

153
Pakistan Economic Survey 2011-12
Table 11.4: Healthcare Facilities
Health Manpower 2009-10
Registered Doctors 139,555
Registered Dentists 9,822
Registered Nurses 69,313
Population per Doctor 1183
Population per Dentist 16914
Population per Bed 1592
Source: Planning & Development Division
Insufficient health spending and rapid population
growth have contributed to continuing low
facilities to population ratios particularly in the
case of dentists, nurses and hospital beds. The
potential pay off of investing in and improving the
overall health services is enormous.
The health care system in Pakistan comprises both
public and private health facilities. The public
sector until recently was under the domain of the
Ministry of Health. However, under the 18th
amendment of the constitution of Pakistan, the
Ministry of Health has been devolved in June 2011
and the functions of the ministry have been
transferred to provincial health departments. The
provinces are now responsible for developing their
own strategies, programmes and interventions
based on their local needs.
The private health system now stretches across the
spectrum from primary to tertiary care and exists
all over the country in both urban and rural areas.
This sector provides varying levels of care and
constitutes a diverse group of doctors, nurses,
pharmacists, traditional healers and laboratory
technicians. The services they provide include
hospitals, nursing homes, and maternity clinics.
The private sector has developed considerably by
capitalizing on the existing demand. The majority
of the private sector hospitals in Pakistan follow
either a sole proprietorship or a partnership model
organization. People sometime prefer private
health services over public health care due to
concerns about quality of care in public facilities.
Given the complex nature of the healthcare
delivery system in Pakistan and the limited
resources available to the health care sector,
concerted efforts are required through inter-
154
2010-11 2011-12
144,901 149,201
10,508 10,958
73,244 76,244
1,222 1,206
16,854 16,426
1,701 1,665
sectoral collaboration focusing on the
disadvantaged segment of population.
Health insurance is one of the complementary
interventions for the safety net beneficiaries with
the purpose of improving their access to health
care services and reducing income loss due to
catastrophic shocks. An important consideration in
social insurance relates to the extent of health
cover to be provided. Zakat, Bait-ul-Mal, Workers
Welfare Fund, Employees Old Age Benefit and
Workers Participation Fund are all forms of social
security. These funds provide assistance in a
limited number of cases to cover medical treatment
costs.
Targets and Achievements during 2011-12
The targets for the health sector during 2011-12
included establishment of 10 rural health centres
(RHC), 50 basic health units (BHUs) and
renovation of 20 existing RHCs and 50 BHUs. The
manpower targets include the addition of 5,000
doctors, 500 dentists, 4,000 nurses, 5,000
paramedics and 550 traditional birth attendants.
Under the preventive program, about 7.5 million
children were targeted to be immunized and 22
million packets of oral rehydration salt (ORS) were
to be distributed during 2011-12.
The achievements in the health sector during 2011-
12 included the establishment of 7 rural health
centres (RHCs), 30 basic health units (BHUs) and
renovation of 15 existing RHCs and 35 BHUs and
addition of 4,000 hospital beds. The manpower
development achievements include entry of 4,300
new doctors, 450 Dentists, 3,000 nurses and
completion of training for 9,500 Lady Health
Workers (LHWs). 60 percent of the set target was
 Health and Nutrition

achieved in the case of BHUs and 95 percent in the were immunized and 20 million packets of ORS
case of training of Lady Health Workers. Under were distributed till March, 2012.
the preventive program, about 7 million children
Table: 11.5 Physical achievements 2011-12
Estimated achievements
Sub Sectors Targets (Number) Achievement (%)
(Numbers)
A. Rural Health Programme
New BHUs 50 30 60
New RHCs 10 7 70
Strengthening/ Improvement of BHUs 50 35 70
Strengthening/ Improvement of RHCs 20 15 75
B. Hospital Beds 5000 4000 80
C. Health Manpower
Doctors 5000 4300 86
Dentists 500 450 90
Nurses 4000 3000 75
Paramedics 5000 4500 90
TBAs 550 500 91
Training of LHWs 10000 9500 95
D. Preventive Programme
Immunization ( Million Nos) 7.5 7 93
Oral Rehydration Salt (ORS) (Million
22 20 91
Packet)
Source: Planning & Development Division

LHWs as of March 2012. More than 60 percent

Health Programs
of the total population and 76 percent of the
In pursuance of the 18th amendment to the target population is covered by LHWs. Out of 30
constitution of Pakistan, the health sector has million children, about 16 million were
been devolved to the provinces and the federal immunized by LHWs during National
Ministry of Health has been abolished. Immunization Days (NIDS) Similarly, in high
However, national planning in the health sector risk districts out of 5 million target women, 4.5
and cooperation with the provinces and million were vaccinated by LHWs.
international development partners is vested
with the Planning and Development Division. 2. Expanded Program on Immunization
All the vertical health programs have also been
The National EPI Program provides
devolved to the provinces. However, upon
immunization against the seven killer diseases -
request of the provinces, the Council of
childhood tuberculosis, poliomyelitis,
Common Interests (CCI) in its meeting held on
diphtheria, pertussis, neonatal tetanus, measles
28th April 2011 decided that the federal
and hepatitis B. Initiated in 1978, the EPI
government (Planning and Development
programme is an effective public health
Division) shall fund these programs till currency
intervention that has a great impact on the health
of the 7th NFC award at a predefined share.
of the population. By reducing the cost of
Accordingly, the following national health
treating diseases, immunization offers
programmes continue to be financed by the
opportunities for poverty reduction. Every year a
federal government in the post devolution
nation wide National Immunization Day (NID)
scenario till 2014-15.
is carried out to give polio vaccine to all children
below 5 years of age. The mass immunization
1. National Program for Family Planning
campaign has gained a great deal of acceptance
and Primary Health Care
across the country.
The program has recruited more than 103,000

155
Pakistan Economic Survey 2011-12
3. Malaria Control Program
Malaria is the second most prevalent and
devastating disease in the country and has been a
major cause of morbidity in Pakistan. More than
90 percent of the disease in the country is in the
56 highly endemic districts, mostly located in
Balochistan (17 districts), FATA (7 agencies)
and Sindh (12 districts). More than 40 percent of
the reported cases from these districts are due to
flaciparum malaria which is the more dangerous
form of malaria. The Federally Administrated
Tribal Areas (FATA) is the second highest
malaria affected belt of the country accounting
for 12-15 percent of the total case load of the
country.
The National Strategy for Malaria Control is
based on the following six key Roll Back
Malaria (RBM) elements.
1) Early diagnosis and prompt treatment.
2) Multiple prevention
3) Improved detection and response to
epidemic
4) Developing viable partnership with national
and international partners
5) National commitment
6) Intensive and comprehensive public
education activities to enhance public
awareness of malaria, treatments and
prevention
4. National TB Control Program
Pakistan is sixth amongst the top 22 high disease
burden country. National Tuberculosis Control
Programme (NTP) has achieved 100 percent
Directly Observed Treatment System (DOTS)
coverage in the public sector; in the last five
years NTP and partners have provided care to
more than half a million TB patients in Pakistan.
Despite this the global target of 70 percent case-
detection has not been achieved. There are
certain areas where there is room for the NTP to
further improve such as, at the client level -
suspect management, contact management,
quality bacteriology services; at the community
level, the NTP can strengthen engagement with
all care providers through public private
156
partnership and inter-sectoral collaboration,
monitoring and supervision, research for
evidence based planning and Advocacy,
Communication and Social Mobilization
(ACSM). The prevalence rate of TB is nearly
300 per 100,000 of population whereas the
absolute number of cases is 211,500 and the
treatment success rate is 91 percent. The
percentage of TB case-detection rate is 80
percent and cure rate is 74 percent.
5. HIV/ AIDS Control Program
The government is implementing an HIV/ AIDS
Control Programme since 2003 at a cost of Rs
2.9 billion for five years. The major focus is on
Behaviour Change Communication (BCC),
services to high-risk population groups,
treatment of Sexually Transmitted Infections
(STIs), supply of safe blood and capacity
building of various stakeholders. A total of
4,500 HIV positive cases have been reported to
the national and provincial AIDS Control
Programmes. These include 2,700 full blown
AIDS. Around 1,030 patients are receiving free
treatment through 12 AIDS Treatment Centers.
6. National Maternal and Child Health
Programme
National Maternal and Child Health Programme
has been launched in order to improve maternal
and neonatal Health services for all, particularly
the poor and the disadvantaged, at all levels of
the health care delivery system. It aims to
provide improved access to high quality mother
and child health and family planning services,
train 10,000 community health and nutrition
women workers, provide Comprehensive
Emergency Obstetric and National Care
(EMONC) service in 275 hospitals/ health
facilities, provide basic EMONC services in 550
health facilities, and family planning services in
all health outlets.
7. National Programme for Prevention and
Control of Blindness
The National Programme for Prevention and
Control of Blindness (NP-PCB) was launched
by the federal Ministry of Health in 2005. The
Program is in line with “VISION 2020”, the

global initiative of WHO for elimination of
preventable causes of blindness by the year
2020. An allocation of Rs. 246.9 million was
made for this program during 2011-12.
Cancer Treatment
The Pakistan Atomic Energy Commission
(PAEC) is playing a vital role in the health
sector by using nuclear and other advanced
techniques, for diagnosis and treatment of
cancerous and allied diseases, as well as national
cancer awareness and prevention programmes.
Presently the PAEC is operating 14 modern
cancer hospitals in the country while four others
are in the final stages of completion and are
expected to start functioning by June 2012.
These hospitals are manned by skilled teams of
more than 2,000 professionals; including
doctors, engineers, scientists, paramedical,
technical and other supportive staff. These
hospitals bring facilities for early diagnosis and
treatment of cancer within the reach of a very
large proportion of the population of the
country. The major services provided at these
hospitals are diagnostic and therapeutic nuclear
medicine, hormonal assays, radiotherapy,
chemotherapy, indoor/wards facilities, breast
care clinics, biochemistry, ultrasonography,
color Doppler, diagnostic radiology,
histopathology, hematology, molecular based
diagnostics and cancer prevention and awareness
programmes. About 527,633 patients were
treated from July to March 2012. Work
continues in the following areas:
• Research continued on various International
Atomic Energy Agency (IAEA) TC/
Regional Cooperative Agreement (RCA)
projects and others in collaboration with
different international/ national organization.
• The cancer awareness and
prevention/control campaign was launched
especially for early diagnosis of breast
cancer and treatment leading to better
prognosis through arranging lectures,
seminar, and workshops in remote areas, and
through print and electronic media and
mobile breast care clinics.
Health and Nutrition
• Provision of state of the art treatment
(radiation therapy) facility at Atomic Energy
Medical Centre (AEMC), Karachi.
In order to provide better treatment facilities to
the patients at their door steps, the PAEC
continued working on the following projects:
` 4 Hospitals (3 in KPK and 1 in Sindh
province) have almost been completed and
out patient departments have started
working. These hospitals are expected to
start functioning at full capacity by June
2012.
` Addition of latest and advanced diagnostic
and therapeutic facilities on par with
international standards is also underway and
Positron Emission Tomography- Computed
tomography (PET/ CT) facility at the PAEC
Cancer Hospital Institute of Nuclear
Medicine and Oncology (INMOL) in Lahore
has been added and patients throughout
Pakistan are benefitting from these facilities.
` PAEC Cancer Registry Programme (PCRP),
started in 2007, is now in completion phase
and is expected to be completed in August
2012.
` Patients in remote areas also benefited with
mobile breast care clinics being arranged on
fortnightly and monthly basis for awareness,
diagnosis and treatment of patients.
Dengue Epidemic and Control Programme
In Pakistan, the outbreak of Dengue
Hemorrhagic Fever (DHF) was first reported in
Karachi in 1994, followed by outbreaks in 2005,
2008, and most recently in 2011. Heavy
monsoon rains in Punjab provided ideal
conditions for dengue-bearing mosquitoes to
thrive in stagnant water. Although the disease
spread in all provinces, Punjab was badly
affected.
21,292 confirmed cases of dengue were reported
in Punjab in 2011, 352 of these cases were fatal.
No deaths have been reported so far in 2012. In
order to prevent the dengue epidemic, the
following steps have been taken:
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Pakistan Economic Survey 2011-12
` The Punjab government has established a
provincial task force headed by the Chief
Minister of Punjab.
` A provincial steering committee headed by
the Chief Secretary of the province has been
constituted.
` District implementation committees headed
by DCOs are operational.
` Chief Minister (CM’s) Dengue Research
and Development (R&D) cell was
established to carryout applied and
operations research on dengue.
` Emphasis is placed on utilizing latest
technology for combatting dengue
epidemics. A system has been developed
and put in place for online dengue case
surveillance, while Global Positioning
System (GPS) mapping of cases, vector, and
digital monitoring of dengue prevention and
control activities are being carried out.
` Environmental management measures have
also been taken including proper disposal of
waste water, de-silting operations, supply of
safe water, time repair of leaks in plumbing
systems, use of water filters, management
and regulation of used tyres, and cleanliness
drives in eateries.
` All teaching hospitals have established
isolation wards and high dependency units
with all facilities. On the average 200 extra
beds were allocated for dengue patients in
each teaching hospital. About 10,000 bed
nets treated with insecticide were provided
to each hospital for dengue isolation wards.
` For the arrangements of platelets, cell
separator machines with platelet kits were
made available on an urgent basis at the
Institute of Blood Transfusion Services,
Jinnah Hospital Lahore, Children’s Hospital
Lahore and Lahore General Hospital. In
other hospitals centrifuge machines have
been provided for platelet segregation.
` Delegates of dengue experts from Sri Lanka
and Indonesia also visited Pakistan to review
the strategies and provide guidance on larva
surveillance and capacity building on vector
control and case management. Job positions
158
of 875 sanitary patrols, 337 CDC
supervisors, 292 LHW’s and 66 data entry
operators were created. The creation of 718
positions of lady sanitary patrols is under
process.
In Khyber Pakhtunkhwa a total of 386
confirmed cases with 7 deaths were reported
from Peshawar, Abbotabad, Mansehra, Haripur,
Mardan, Swat and Nowshera. Rs 55 million was
released for purchase of larvicides, insecticides,
spray machines, foggers, and social mobilization
activities. To address future dengue outbreaks a
scheme at a cost of Rs 265.7 million has been
approved. The scheme will be implemented in
all 25 districts of the province for three years.
Main components of the scheme include
institutionalization, advocacy, social
mobilization and communication, vector control
and surveillance, disease management and
surveillance, and research and development.
In Sindh, a total of 1,547 suspected cases were
reported out of which 1,326 were from Karachi
and 221 were from the rest of Sindh. 18 of these
cases were fatal, 16 from Karachi and 2 from the
rest of Sindh. Sindh’s response to this outbreak
includes detailed situation analysis (need
assessment and gap analysis) of epidemiology
and entomology of transmitting vectors.
Provincial Strategic planning for sustained
control of vector borne diseases involve:
` Adopting integrated diseases control for
dengue, malaria and leishmaniasis
` Restructuring of vector control programme
to fill existing planning
` Capacity building of care providers for
clinical management of dengue cases using
guidelines specific to Pakistan
` Development of coordination and
collaboration with UN Agencies, other line
department and development partners for
resource mobilization and technical
assistance
The incidence of dengue in Balochistan was
much less compared to other provinces.
However, the government of Balochistan also

took necessary measures to overcome any
emergency situation related to dengue.
Drug Abuse
Illicit drug consumption, production and
trafficking have emerged as a serious global
issue. Drug abuse has also affected Pakistan in
many ways. Proliferation of drugs and
psychotropic substances within Pakistani society
and the subsequent increase in number of drug
addicts are emerging challenges.
A Drug Control Master Plan (2010-14) has been
prepared to reduce the health, social and
economic cost associated with drug trafficking
and substance abuse in Pakistan. The plan
includes short, medium and long term initiatives
for implementation of the National Anti-
Narcotics Policy 2010. The Ministry of
Narcotics Control in collaboration and
cooperation with the provincial governments and
other stakeholders, is taking measures to
effectively implement the policy.
Currently, there are 16 ongoing development
projects being implemented at a total cost of
Rs.4.67 billion including local cost of Rs.2.13
billion and foreign aid of Rs.2.52 billion.
Table: 11.6 Drug Seizures
S.No. Kind of Narcotics Quantity of Drugs
Seized (in Kgs)
i Opium 8,725.006
ii Morphine 1,249.000
iii Heroin 1,641.014
iv Hashish 65,445.850
Source: Narcotic Control Division
Pakistan is one of the top three countries where
the confiscation rate, seizure of narcotics, drugs
and precursor chemicals is high. The seizures of
narcotics by the Anti-Narcotics Force (ANF)
during the period July 2011 – 15th February,
2012 are given in the table 11.6:
1
Planning and Development Division 2012
Health and Nutrition
Food and Nutrition
The links between malnutrition, ill health and
poverty are well known. Disease contributes to
poverty due to the costs of illness and reduces
earning capacity during and after illness. Good
health is a first step towards prosperity and
reduction of poverty. It is therefore, critical to
move towards a system which will address
health challenges and prevent households from
falling into poverty due to poor health. In
Pakistan, health sector investments are viewed
as part of the government’s poverty alleviation
endeavors.
Food security is a national priority. According to
the recent National Nutrition Survey (NNS)
2011, about 32 percent children under the age of
five years and 15 percent mothers are
underweight. About 30 percent babies have low
birth weight, reflecting the poor nutritional
status of mothers.
The national food availability estimated through
food balance sheets, has been satisfactory for
major food items during the fiscal year 2011-12.
The average calories estimated based on food
availability has been 2,430 per capita per day.
The overall food availability trend of essential
food items for the last five years is given in the
following table.
The consumption of essential food items shows
slight improvement in calorie intake from 1,650
to 1,700 and protein from 44 to 46gm per capita
per day in 2010-11 compared to data from the
HIES 2007-08. The change in food consumption
between 2007-08 and 2010-11 has mainly been
through increase in cereals: wheat 3 percent, rice
12 percent, pulses 30 percent, vegetable ghee
and oil 8 percent, meat 5 percent, fruits and
vegetables 11 percent. Consumption decreased
for sugar (1 percent) and milk (3 percent). Food
consumption remained lower than food available
and the minimum food basket1
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Pakistan Economic Survey 2011-12

Table:11.7 Food Availability per capita

Items Year/ units 2006-07 2007-08 2008-09 2009-10 2010-11 (E) 2011-12 (T)
Cereals Kg 151.1 158.1 160.3 158.8 158.7 160.0
Pulses Kg 7.7 7.2 5.8 6.8 6.7 7.0
Sugar Kg 30.3 30.0 25.6 26.1 26.5 29.5
Milk Ltr 164.7 165.4 167.2 169.1 169.8 170.0
Meat Kg 19.2 20.0 20.0 20.5 20.9 21.5
Eggs Dozen 5.4 5.5 5.6 5.8 6.0 6.0
Edible Oil Ltr 12.8 12.8 12.5 12.6 12.6 13.0
Calories per day 2398 2410 2425 2415 2420 2430
Protein per day (gm) 69.0 72.0 72.5 71.5 72.0 72.5
Source: Planning & Development Division
E: estimated T: targets

and women of child bearing age continued

The cost of the food basket for the fiscal year
2011-12 (July- March) fluctuated and a cumulative
increase of about 1 percent from Rs.1,745 to
Rs.1,767 was noted. The change in cost among
provinces has been highest in Khyber
Pakhtunkhwa with a 5 percent increase owing to
lower availability with respect to demand and
lowest in Punjab where there was a 2 percent
decrease.
The nutrition related activities/programmes are
summarized below:
` Food security and social safety net measures
especially for poor households continued to be
in place to combat the impact of food inflation.
The Benazir Income Support Program (BISP)
and Pakistan Bait-ul-Mal’s Food Support
Program for poorest of the poor households
continued to provide cash incentive support
during the year throughout the country.
` Food quality control is also an important food
security concern. A reference food laboratory
for strengthening of food quality control
system at the Nutrition Division of the
National Institute of Health (NIH), Islamabad
was completed during the year and is currently
operational.
` Nutrition improvement through micronutrient
supplementation to address anemia, and
vitamin-A deficiency in children under five
along with growth monitoring, counseling of
breastfeeding and weaning practices and
raising awareness through 98,000 Lady Health
Workers in primary health care (PHC)
continued across the country to cover more
than 60 percent of the total population.
` Micronutrient Deficiency Control Program to
address major micronutrient deficiencies of
iodine, iron and vitamin-A& D are being
addressed through food fortification in the
public and private sector. The emphasis during
the fiscal year remained on improving the
quality of fortified products.
Conclusion
This chapter discussed the state of health and
nutrition in Pakistan. An overview of the National
Health Policy and its primary objectives are
presented, followed by a discussion of the state of
health indicators, expenditures, and facilities in
Pakistan. The targets and accomplishments for the
2011-12 are described, followed by a special focus
on cancer treatment and the government’s response
to dengue outbreaks. The chapter highlights the
challenges of narcotics trafficking and growing
incidence of drug addiction in Pakistani society.
Finally the chapter documents the government’s
efforts at augmenting food security and enhancing
the availability and uptake of nutrients.

160
 Chapter 12
Population Labour Force and
Employment
Balanced growth in population is crucial for the
welfare of the country or improving the productive
capacity of the economy. It is important to know
the size of a country’s population, its growth rate
and other demographic attributes in order to
analyze the dynamics of the population, labour
force and employment and to estimate the quantity
of goods and services that will be needed to meet
future demand.
The population of a country plays a vital role not
only in the economic development but also for the
social well-being of the people. However, poor
management of human resources can lead to social
distress and reduced economic performance. Due
to rapid population growth and lack of well-
developed human resources, Pakistan is faced with
socioeconomic crises including food insecurity,
and unemployment. Nevertheless, with continuous
efforts of the government, the situation has started
to improve.
Due to improved health facilities and promotion of
population welfare activities through the Ministry
of Population Welfare the crude birth and fertility
rates have been reduced considerably which has
led to a reduction in the average growth rate of the
population. This has been accompanied by an
increased labor participation rate. However despite
these improvements Pakistan is still lagging behind
in comparison to its neighboring countries. For
example, the fertility rate in Pakistan is still higher
than neighboring countries like India, Bangladesh,
Sri Lanka, Nepal and China. As a result population
growth rate is not reducing considerably and at the
same time dependency ratio is increasing.
Therefore, it is imperative to put further efforts for
development of better human resources.
Since its creation Pakistan has exhibited a
continuously high rate of population growth. When
measured by population size it has moved from the
thirteenth largest country in 1950 to the sixth
largest country in 2011. According to World Bank
projection it will become the fifth largest country
by 2050. This rapid increase in population leads to
greater demand for food, infrastructure, and
services and puts an enormous strain on food
security and provision of basic services.
This chapter presents a discussion of the structure
of Pakistan’s population and the evolution of
demographic indicators, followed by a thorough
overview of the structure of labour force, including
unemployment statistics and details of government
projects and programmes aimed at boosting
employment opportunities.
Overview of Population and Demographic
Indicators
The structure and growth pattern of population can
be evaluated through certain key indicators. These
are briefly explained below:
Crude Birth Rate: The average annual number of
births during a year per thousand persons in the
population at midyear is known as the crude birth
rate. The birth rate is the main factor in
determining the rate of population growth. It
depends on both the level of fertility and the age
structure of the population. The Crude Birth Rate
(CBR) does not take into account the age or sex
differences among the population. A crude birth
rate of more than 30 per thousand is considered
high and a rate of less than 18 per thousand is
considered low. The global crude birth rate in 2011
was 20 per thousand. The CBR in Pakistan is
161
Pakistan Economic Survey 2011-12

estimated at 27.2 per thousand in 2011-12; in 2008
it was 25.0 per thousand. This indicates a
marginally improving trend.
Similarly, the crude death rate measures the rate of
deaths per one thousand people in a given
population per year. A crude death rate of less than
ten per thousand is considered as low while above
twenty per thousand is considered as high.
According to the World Population Data Sheet
2011, the global crude death rate in 2010 was 8
persons per thousand. In Pakistan it was 7.3 per
thousand in 2011. It is worth mentioning that the
births. The status of maternal health is improving
in Pakistan. The maternal death rate decreased
from 400 per 100,000 live births in 2005-06 to 276
per 100,000 live births in 2010. This decline is the
result of the strengthening of the four pillars of
safe motherhood including family planning,
antenatal care, clean safe delivery and essential
obstetrical care.
Crude birth rate
Fig-12.1: Population Overview Crude death rate
Population (mln)
30 185

Crude Birth & Death Rate

25 180
crude death rate decreased from 7.7 per thousand
in mid-year 2008 to 7.2 per thousand in mid-year 20 175
2012, which shows an improving trend (Fig.1).
15 170

Infant mortality in Pakistan has also improved as 10 165

the country experienced a considerable decline in
5 160
maternal and infant mortality. Infant mortality was
70.20 per thousand in mid year 2008, which 0 155
reduced to 69.00 per thousand live births in mid 2008 2009 2010 2011 2012
Source: National Institute of Population Studies (NIPS)
year 2012. The major reason for this decline is Population Census Organization
provision of improved health facilities to control
diarrhea and pneumonia which can be fatal for Some of the selected demographic indicators for
infants. Nevertheless, this decline is not the period (2010-11 and 2011-12) are posted in
significant, given the repeated pregnancies and Table 12.1.

Table 12.1: Selected Demographic Indicators

2010-11 (1st July) 2011-12 (1st July)
Total Population (Million) 177.1 180.71
Urban Population (Million) 65.3 67.55
Rural Population (Million) 111.8 113.16
Total Fertility Rate (TFR) 3.5 3.4
Crude Birth Rate (Per thousand) 27.5 27.2
Crude Death Rate (Per thousand) 7.3 7.2
Population Growth Rate (Percent) 2.05 2.03
Life Expectancy (Year)
- Females 65.8 66.1
- Males 63.9 64.3
Source: P&D Division, National Institute of Population Studies

The demographic indicators reflect improvement
in the structure of the population and point to
future trends. There is improvement in life
expectancy and a fall in the population growth rate.
Increase in life expectancy indicates the provision
of a better living environment and health facilities
in the country. The decline in fertility and the
resultant decline in population growth lead to a
lower dependency ratio which may help in
improving living standards in the country.
However the population growth rate is still higher
than other neighboring countries and is still a
challenge for the government.

162
 Population, Labour Force and Employment

Age Composition of Population to have large dependent population which puts a

considerable stress on the economy. This higher
The age composition of a population gives insight
percentage has a dual impact on the country’s
to the size of the future productive human
future economic and social wellbeing. The
resource. It also highlights changes in the
growing youth population will only add marginally
dependency levels. During 2011, the under-15
to the productive resources of the country but will
population was 62 million, whereas 104 million
put a large burden on health, education and decent
were between the ages 15-59 years. The available
jobs, if they are not trained properly. This will
projections of the population by age categories
worsen both the economic and social situation.
indicate that those below 30 years of age will
Conversely with effective government policies for
constitute more than 53 percent of the total
their education and training, these youth can
population by 2030. Countries, like Pakistan,
become a powerful force for economic
having a very young age structure are more likely
development.
Table 12.2: Population by Age Groups Million
Age Group 1998 2011 2015 2020 2025 2030
00-04 19.59 22.02 22.76 23.28 22.44 20.35
05-09 20.72 20.40 21.33 22.35 22.95 22.18
10-14 17.14 19.94 20.07 21.24 22.28 22.88
15-19 13.73 20.27 20.12 20.01 21.19 22.24
20-24 11.88 17.72 19.8 20.05 19.95 21.14
25-29 9.76 15.25 17.13 19.71 19.98 19.89
30-34 8.24 12.95 14.72 17.04 19.62 19.91
35-39 6.32 10.83 12.4 14.62 16.94 19.53
40-44 5.89 8.90 10.36 12.27 14.49 16.81
45-49 4.68 7.32 8.49 10.2 12.01 14.31
50-54 4.26 6.01 6.88 8.26 9.95 11.84
55-59 2.86 4.83 5.53 6.57 7.93 9.60
60-64 2.72 3.78 4.31 5.13 6.14 7.45
65+ 4.64 6.81 7.82 9.39 11.39 13.93
Total 132.43 177.03 191.72 210.12 227.26 242.06
Source: National Institute of Population Studies, Planning & Development Division, June 2010

Regional Demographics Iran and Egypt have experienced a considerable

decline in the Total Fertility Rate (TFR). In
The Pakistan family planning indicators, though
Pakistan an important reason for the slower decline
improving, do not compare favorably with other
is the low Contraceptive Prevalence Rate (CPR)
countries. Table 12.3 and 12.4 present a
due to the lack of awareness because of which
comparison of the family planning indicators with
people hesitate in practicing contraception. The
neighboring and some brotherly Islamic countries.
following table provides a comparison with
It is evident from the data that the performance of
regional countries on TFR, CPR and the
Pakistan when compared with these countries is
Population Growth Rate (PGR).
modest. Many Muslim countries such as Turkey,
Table 12.3: Family Planning Indicators of Regional Countries-2011
Contraceptive Prevalence
Country Total Fertility Rate Population Growth Rate%
Rate %
Asia 2.1 67 0.9
Bangladesh 2.2 56 1.3
Bhutan 2.3 31 1.5

163
Pakistan Economic Survey 2011-12

Table 12.3: Family Planning Indicators of Regional Countries-2011

Contraceptive Prevalence
Country Total Fertility Rate Population Growth Rate%
Rate %
India 2.5 56 1.3
Maldives 1.7 35 1.3
Nepal 2.6 48 1.7
Sri Lanka 2.2 68 0.8
Pakistan 3.4 27 2.03
Source: i) State of the world population 2011, United Nation Fund for Population Activities (UNFPA) Population
Projection by Planning Commission’s Working Group on Population Sector, 2010
ii) Sub Group II on Population Projections for the 10th Five Year People’s Plan 2010-15

Table 12.4: Family Planning Indicators of Muslim Countries-2011

Country Total Fertility Rate Contraceptive Prevalence Population Growth
Rate % Rate%
Egypt 1.7 60 2.6
Morocco 2.2 63 1.0
Turkey 2.0 73 1.1
Iran 1.6 73 1.0
Indonesia 2.1 61 1.0
Malaysia 2.6 55 1.6
Pakistan 3.4 27 2.03
Source:
i) State of the world population 2011, United Nation Fund for Population Activities (UNFPA) Population Projection
by Planning Commission’s Working Group on Population Sector, 2010
ii) Sub Group II on Population Projections for the 10th Five Year People’s Plan 2010-15

countries. If this trend prevails, it is expected that

Fertility in Pakistan
Pakistan’s population will double in 2046, and
The Total Fertility Rate (TFR) of a population is other things remaining the same Pakistan’s rank in
the average number of children that are born to a terms of the selected social and economic
woman over her life time. The TFR is closely tied indicators in comparison with other developing
to the population growth rates of a country and can Asian countries may deteriorate further. Therefore,
be a good indicator of future population trends. vigorous efforts are needed to control population
Awareness of contraception is increasing in the growth and reduce the TFR.
country. According to the Demographic and Health
Survey of Pakistan 2006-07 by the Ministry of
Fig-12.2: Trend in Fertility Rate (%)
Population Welfare, 96 percent of women who
have ever been married are aware of at least one 4.5
family planning method compared to 78 percent in 4.3
4.1
1991.The survey also shows that less than 30 3.9
percent of married women were using 3.7
contraception. The fertility rate per woman has 3.5
3.3
been reduced to 3.4 percent in 2012 from 4.0 3.1
percent in 2006 and the population growth rate has 2.9
come down to 2.03 percent. 2.7
2.5
The results are still not encouraging when 2006 2007 2008 2009 2010 2011 2012
compared with other developing countries of the
Source: Sub group II on  population projection for the 
region. Pakistan has the highest birth as well as 10th Five Year People Plan 2010‐15 (Planning and 
total fertility rate among the Asian developing Development Division)

164
 Population, Labour Force and Employment

Reproductive Health the social and academic environment available to

them. A healthy and educated mother, therefore,
Reproductive health is a state of complete physical,
plays an extremely important role in making sure
mental and social well-being (and not merely the
that her children are physically healthy,
absence of disease or infirmity), in all matters
intellectually developed and academically active.
relating to the reproductive system, and to its
Similarly every child has the right to avail good
functions and processes. The provision of
quality health care, safe drinking water, balanced
comprehensive, voluntary family planning and
diet and clean and safe environment. The first
reproductive health services is a fundamental
focus of population welfare, therefore, has to be on
human right. Contrary to its importance, the
the education and health of a country’s female
general public is not sensitive about realizing and
population which has direct relevance to children’s
understanding the importance of reproductive
future. At the International Summit on Population
health and as a result a large proportion of the
and Development in 1994, nations of the world
population is reluctant to use contraception. The
agreed that progress in addressing population
prevailing social mindset of son preference and the
issues could be better achieved through
limited role of women in decision making for the
empowering women and girls to participate in their
welfare of the family hinder the effective
societies and economies on equal footing with men
implementation of any reproductive health
and boys and to make fundamental decisions about
program in many parts of the country.
their lives, including decisions related to the timing
and spacing of pregnancies and births.
The Rights of Women and Children
The future of a country depends largely on the
quality of maternal guidance to the children and

Box 1
Measures for Empowering Women
• Equal access to education, training and science and technology
• The government has signed national and international commitments like Convention On Elimination of all
Forms of Discrimination Against Women(CEDAW) and Millennium Development Goals(MDGs)
• Increase of women quota up to 10% for recruitment in public sector
• Reservation of thirty three percent seats for women in all local bodies, seventeen percent seats have been
reserved in the Senate, Provincial Assembly and in National Assembly
• Protection of women against harassment at workplace
• Benazir Income Support Programme (BISP) for enhancing the confidence of women
• Establishment of working women hostel, provision of transport facilities to female employees and
establishment of day care centre are part of the government initiatives to resolve the problems faced by
employed women

Population Welfare Programme programme for a four year period. The population
welfare department played an impressive role in
Since 2002 the service delivery of the Population
the promotion of health and family planning
Welfare Programme has been under the
related services throughout the country. Major
administrative control of the provinces. Now the
achievements are listed as below:
provincial governments are responsible for
implementing the Population Welfare Programme.
` The population welfare program has
The federal government will be funding the
established 2,891 family welfare centres

165
Pakistan Economic Survey 2011-12
(FWC) during 2010-11. The FWC is one of the
main service delivery networks of the program
established in rural and urban areas for the
provision of Mother Child Health Services
(MCH), contraceptives and the treatment of
minor ailments.
` Reproductive Health Services-A Centres
(RHSA) are hospital based units which provide
the full range of family planning methods
including contraceptive surgery services.
These centres also assist in public health
education campaigns and raising awareness
about personal hygiene. There are 207 RHS-A
centres functioning throughout the country.
Table-12.5: Physical and Contraceptive Users Targets
(Cumulative Number) Name of Service 2010-11
Outlet / Unit (Target)
Public Sector
Family Welfare Centers (FWCs) 3084
Reproductive Health-A Centers 258
Mobile Service Units (MSUs) 293
Contraceptive users (million) 9.953
Private Sector
RHS-B Centers 145
Registered Medical Practitioners 24273
(RMPs)
Hakeems and Homeopaths 13925
Source: Planning and Development Division
Urbanization
Urbanization is a process which involves the
absolute and relative growth of towns and cities
within defined areas. Major reasons for
urbanization are better economic opportunities and
living conditions as compared to rural areas. Due
to the growing needs and limited work
opportunities people are rapidly moving towards
urban centers. Resultantly urbanization has been
accelerated worldwide. This is the first time in
human history that the majority of the world's
population has been shifted to urban areas. At
present 3.3 billion people (more than one half of
world population) are living in urban areas. It is
predicted that by 2030 at least 60 percent of the
population will be living in cities. In developing
countries, about 60 million people move from rural
to urban areas each year and this rate of movement
is expected to continue.
166
` At present 292 Mobile Service Units (MSU)
are functioning in the country. The MSU
extends reproductive health and family
planning services to villages through regular
(twice a week) camping services.
` The hospitals registered as RHS-B Centres are
providing training for doctors and paramedics.
During 2010-11, the government launched 133
RHS-B Centers.
` Registered Medical Practitioners, Hakims and
Homeopaths are a significant source of health
care provision in both the urban and rural areas
of the country.
2010-11 2011-12
(Achievement) (Target)
2891 3427
207 269
292 300
2.734 10.241
133 184
9297 27576
8071 14009
In Pakistan cities are growing rapidly as a result of
the movement of people from rural areas in search
of jobs, opportunities to improve their lives and
make a better future for their children. Moreover
the lack of basic facilities in rural areas like
electricity, sanitation, safe drinking water and
schooling are some of the reasons for rapid
urbanization. The population in urban areas
increased from 65.28 million in 2011 to 67.55
million in 2012. This means that within a year, two
million people shifted from rural to urban areas in
Pakistan. The annual population growth in urban
areas is expected to increase further in coming
years which may cause socio economic problems
in future.
In order to cope with the situation, the government
is not only trying to create a better economic and
healthy environment in urban areas but also
provide basic facilities in slum areas. Some of the
reforms to manage urbanization are:
 Population, Labour Force and Employment

` Provision of adequate infrastructure, such as country. Pakistan has a very large labour force due
roads, houses, electricity, water and sanitation to its large population size. Since independence,
services, public transportation, schools and six labour policies have been announced by the
health clinics. government. These were announced in 1955, 1959,
1969, 1972, 2002 and 2010. These policies laid
` Transforming slums into legitimate
down the parameters for the growth of trade
communities.
unionism; protection of workers’ rights; the
` Government supportive policies for settlement of industrial disputes and the redress of
agricultural sector. workers grievances. The policy of 1972 was the
most progressive one in terms of reforming the
Table 12.6: Urban and Rural Population (Million) labour laws. The present government, recognizes
Mid-Year Urban Population Rural Population that there should be a cordial relationship between
2008 57.32 105.06 workers and employers and at the same time both
2009 60.87 109.07 must enjoy reasonable benefits without inflicting
2010 63.05 110.46 any set back on the economy. This is only possible
2011 65.28 111.82 if there is a mutual awareness and understanding
2012 67.55 113.16 between workers and employers of the rights and
Source: Planning and Development Division obligations.
Labour Force and Employment
The labour policy 2010 has been developed within
The labour force can be defined as that part of the a framework of objectives and initiatives; some of
economically active population which can supply which are summarized in Box-2
labour for production of goods and services in the
Box 2
Labour Policy 2010
Objectives

` Promotion of employee’s social security and social insurance programme

` Adequate security of jobs should be available to the workers
` Conditions should be created so that workers and employers are committed to enhancing labour productivity
` Promotion of higher jobs be ensured at all levels based on suitability and merit
` Forced labour in all its forms to be eliminated
` Just and humane conditions of work be guaranteed to all workers

Initiatives
` The government has increased the minimum wages from Rs.7,000 to Rs.8,000 per month (announced by Prime
Minister on 1st May, 2012).
` Consolidation of labour laws is underway
` Mine workers, whether contracted or permanent, will be provided with the same protection as other workers
` The government has started the process to regularize/confirm contract employees
` Elimination of gender discrimination
` Special emphasis on education of workers children
` Regulate and control child labour

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Pakistan Economic Survey 2011-12

previous year. The total number of people

According to the Labour Force Survey (LFS)
employed during 2010-11 was 53.84 million, 0.63
2010-11, Pakistan has a labour force of 57.24
million more than the preceding year.
million people which is 0.91million more than the
Table-12.7: Civilian Labour Force, Employed and Unemployed for Pakistan (Million)
YEAR 2003-04 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Labour Force 45.5 50.05 50.33 51.78 53.72 56.33 57.24
Employed 42 46.95 47.65 49.09 50.79 53.21 53.84
Unemployed 3.5 3.1 2.68 2.69 2.93 3.12 3.40
Source: Various Issues of Labour Force Survey, 2010-11

19.4 percent. Therefore the net effect on

Labour Force Participation Rates
The Labour force participation is estimated on the
basis of the Crude Activity Rate (CAR) and
Refined Activity Rate (RAR).The CAR is the
percentage of the labour force in the total
population while RAR is the percentage of the
labour force in the population of persons 10 years
of age and above. The RAR gives a relatively
better picture of change in the labour force
participation in the country because it is comprised
of the active labour force. Between 2008-09 and
2010-11, the CAR showed a mixed trend in the
rural areas. The male CAR decreased from 49.2
percent to 48.6 percent whereas at the same time
the female CAR increased from 18.5 percent to
participation in rural areas was zero. In the case of
the urban areas the female CAR increased more
than the male CAR and there was an increase in
the overall participation rate. The RAR for the
rural areas shows a marginal decrease during the
2009- 2011 period. There is a marginal increase in
the female RAR and a decrease in the male RAR.
However in the urban areas both male and female
RAR increased which on aggregate eliminated the
effect of reduction in the rural RAR. Therefore as a
whole, no change has been seen in RAR at the
country level. An important insight in this change
is that female participation is increasing in urban
areas. This is a good sign of female empowerment.

Table-12.8: Labour Force Participation Rates

Indicators 2008-09 2009-10 2010-11 Indicators 2008-09 2009-10 2010-11
Crude Activity (Participation) Rates (%) Refined Activity (Participation) Rates (%)
Pakistan Pakistan
Total 32.8 33.0 32.8 Total 45.7 45.9 45.7
Male 49.6 49.5 49.3 Male 69.3 68.8 68.7
Female 14.9 15.5 15.6 Female 20.7 21.5 21.7
Augmented Augmented
Total 38.8 38.8 38.4 Total 53.9 53.9 53.5
Female 27.0 27.2 27.0 Female 37.5 37.9 37.4
Rural Rural
Total 34.3 34.5 34.3 Total 49.2 49.4 49.1
Male 49.2 49.0 48.6 Male 71.0 70.2 70.0
Female 18.5 19.3 19.4 Female 26.4 27.6 27.6
Augmented Augmented
Total 42.7 42.6 42.2 Total 61.2 61.0 60.4
Female 35.6 35.8 35.4 Female 50.7 51.2 50.3
Urban Urban
Total 29.9 30.0 30.0 Total 39.3 39.5 39.5
Male 50.4 50.6 50.6 Male 66.3 66.4 66.4
Female 7.6 7.8 8.1 Female 10.1 10.3 10.7
Augmented Augmented
Total 31.0 31.1 31.0 Total 40.8 41.0 40.8
Female 9.9 10.1 10.1 Female 13.1 13.3 13.3
Source: Labour Force Survey 2010-11

168
 Population, Labour Force and Employment

Table 12.9: Employment Trend and Changes from 1999-00 to 2010-11 (Million)
Year Pakistan Rural Urban
Employed Change Employed Change Employed Change
1999-00 36.32 2.19 25.55 1.68 10.77 -0.01
2001-02 38.88 2.56 26.66 1.11 12.22 1.45
2003-04 42.00 3.12 28.81 2.15 13.19 0.97
2005-06 46.95 4.95 32.49 3.68 14.46 1.27
2006-07 47.65 0.70 33.11 0.62 14.54 0.08
2007-08 49.09 1.44 34.48 1.37 14.61 0.07
2008-09 50.79 1.70 35.54 1.06 15.25 0.64
2009-10 53.21 1.08 37.25 0.79 15.96 0.29
2010-11 53.84 0.63 37.85 0.60 15.99 0.03
Source: Various issues of Labour Force Survey (2010-11) Pakistan Bureau of Statistics

Age Specific Labour force Participation rates 19 age groups whereas an increasing trend (0.70
percent) was found in females of the same age
There is an unambiguous disparity between the
group. In case of the 20-24, 25-34 and 35-44 age
male and female participation rates in Pakistan in
groups both male and female participation has
age groups of 15 to 29 and 60+. The total labour
increased. In the 45-54 and the 55-59 age groups
force participation rate increased from 32.81
the participation rate has decreased compared to
percent in 2008 to 32.83 percent in 2010-11. The
last year. In the 60+ category the male
participation rate in the 10-14 age groups
participation rate has decreased while an increasing
decreased for both males and females. There was a
trend is observed in the female group in this
declining trend (1.10 percent) for males in the 15-
cohort.
Table-12.10: Age Specific Labour Force Participation Rate (%)
Age 2008-09 2009-10 2010-11
Groups Total Male Female Total Male Female Total Male Female
10-14 13.1 16.2 9.5 12.6 15.4 9.2 11.8 14.3 8.8
15-19 37.0 52.7 18.9 37.1 52.7 19.2 36.4 51.6 19.6
20-24 53.8 85.4 22.7 54.7 84.5 23.9 53.8 84.3 24.2
25-29 57.5 96.6 22.8 58.0 96.3 24.7 58.9 96.8 25.0
30-34 58.8 97.9 24.6 59.1 97.6 26.4 59.5 98.2 25.9
35-39 62.2 98.5 27.7 62.2 97.4 29.0 62.5 98.4 29.0
40-44 62.7 98.2 27.6 62.4 97.7 26.6 64.2 98.3 30.0
45-49 62.6 97.3 26.8 65.0 97.4 29.5 64.8 97.8 28.6
50-54 63.1 95.9 24.5 64.7 96.4 29.3 63.5 96.6 28.1
55-59 62.8 93.7 26.4 62.6 93.3 28.0 61.5 92.2 26.3
60+ 38.6 56.4 15.2 37.6 55.5 13.5 37.3 55.0 11.9
Source: Labour Force Survey 2010-11

role in the provision of employment. The

Employment by Sectors
Most of the labour force in Pakistan works in the
rural areas where agriculture is the dominant
activity. The total labour force working in the
agricultural sector remained unchanged during the
2008- 2011 period. However, female participation
has shown an increase of 1.4 percent during this
period. Contrary to that the male participation
shows a declining trend. The manufacturing and
construction sectors are also playing an important
employment share by manufacturing sector has
increased from 13.2 percent in 2009-10 to 13.7
percent in 2010-11 and the share of construction
sector has increased from 6.7 percent in 2009-10 to
7.0 percent in 2010-11. The Share of wholesale
and retail trade has decreased from 16.3 percent to
16.2 percent while, the share of community / social
and personel service sector has decreased from
11.2 percent to 10.8 percent in 2010-11.

169
Pakistan Economic
E Surrvey 2011-122

Table-12.111: Employmeent Shares by Industry (%))

Major Induustry Divisionss 2008-09 2009-10 2010-11
Total Male Fem male Total Male Female Total Male Feemale
Total 100 100 1000 100 100 1
100 100 100 100
Agriculturee/ forestry/ 45.1 37.3 744.0 45.0 36.6 7
74.9 45.1 36.2 7
75.4
hunting & fishing
Manufactuuring 13.0 13.3 111.9 13.2 13.9 11.0 13.7 14.5 110.9
Constructioon 6.6 8.3 0
0.4 6.7 8.5 0
0.3 7.0 8.9 0.2
Wholesale & retail trade 16.5 20.5 1.6 16.3 20.2 2
2.1 16.2 20.4 1.6
Transport/ storage & 5.2 6.6 0
0.2 5.2 6.6 0
0.3 5.1 6.6 0.1
communication
Communitty/social & 11.2 11.1 111.6 11.2 11.2 11.2 10.8 10.8 1
11.5
personal seervice
*Others 2.4 2.9 0
0.3 2.4 3.0 0
0.2 2.1 2.6 0.3
Source: Paakistan Bureau of Statistics, Labour
L Force Survey
S 2010-111

Fig-12.4: In
ndustry-wise Employment
E S
Share
2%
11% Agriculture / forestry / hunting
g & fishing
5% 45%
Manufacturiing

Constructionn

Wholesale & retail trade

16%
Transport / sstorage & commun
nication

Communityy / social & personaal service

Others
7%

14%

decreassed from 655 percent to 63.4 percennt and

Employm
ment Status
males from 20.2 peercent to17.3 percent. Thee data
The struccture of emplloyment as shown
s in Tabble indicattes that unpaidd family helpers have decrreased
12.12 suuggests that the emplooyee and seelf- from 15.10 million in 2008-10 to t 14.91 milliion in
employedd category acccount for 36 percent
p and 399.9 2010-11. In the ruural populatioon the numbber of
percent of the to otal employyed workforrce unpaidd family helppers is muchh larger thann the
respectiveely. This is followed by unpaid fam mily urban areas. Thiss indicates that there is a
helpers at
a 27.7 perccent and em mployers at 1.4 possibiility that thhe services are not prooperly
percent. 0f the unpaaid family helpers, femaales countedd in the rural areas.
Table12.122: Employmen nt Status by Sex
S (%)
20008-09 2009-10 2010-11
Total M
Male Femaale Total Male Femmale Total Male Feemale
Employerss 1.2 1.5 0
0.1 1.3 1.6 0.1 1.44 1.8 0.1
Self emplooyed 33.3 38.7 133.1 34.2 40 13.6 39.99 40.5 15.6
Unpaid fammily Helpers 29.7 20.2 65 29.1 18.7 66.3 27.77 17.3 63.4
Employeess 35.8 39.6 211.8 35.4 39.7 20 36.00 40.4 20.9
Total 100 100 100 100 100 100 1000 100 100
Source: Laabour Force Su
urvey 2010-11

170
 Population, Labour Force and Employment

Table 12.13: Employment Status by Region (Million)

2008-09 2009-10 2010-11
Total Urban Rural Total Urban Rural Total Urban Rural
Employers 0.60 0.46 0.14 0.67 0.50 0.17 0.77 0.53 0.24
Self employed 16.91 4.59 12.32 18.21 4.90 13.30 18.77 5.01 13.76
Unpaid family Helpers 15.10 1.84 13.26 15.48 1.82 13.67 14.91 1.83 13.08
Employees 18.18 8.36 9.82 18.85 8.73 10.12 19.39 8.62 10.77
Total 50.79 15.25 35.54 53.21 15.95 37.26 53.84 15.99 37.85
Source: Labour Force Survey 2010-11, Pakistan Bureau of Statistics

rural informal sector stood at 76.2 percent which

Formal and Informal Sectors
The informal sector covers a wide range of labour
market activities and plays an important and
sometimes controversial role. It provides jobs and
reduces unemployment but in many cases jobs are
low paid. This sector employs 73.8 percent of
Pakistan’s total labour force. The employment
ratio in rural informal sector (76.5 percent) is
higher compared to that in the urban areas (71.2
percent). Table 12.14 illustrates that the female
employment rate in the rural informal sector is
showing an increasing trend while in the urban
informal sector; the employment rate has decreased
(from 67.2 percent in 2008-09 to 63.1percent in
2010-11). According to the Labour Force Survey
(LFS) 2008-09, the male employment rate in the
remained constant in 2010-11. However, in the
urban informal sector employment has increased
from 70.6 percent to 72.4 percent during this
period. The overall percentage of persons working
in the informal sector shows an increase in both the
rural (from 76.3 percent to 76.5 percent) and urban
areas (from 70.4 percent to 71.2 percent).
The formal sector did not show any significant
changes with respect to employment level during
the 2008-2011 period. The total employment in
this sector reduced marginally from 26.7percent to
26.2 percent. However in urban areas there was a
significant reduction from 29.4 percent to 28.8
percent during this period.

Table 12.14: Formal and informal Sector-Distribution of non-Agriculture Workers (%)

Sector 2008-09 2009-10 2010-11
Total Male Female Total Male Female Total Male Female
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
- Formal 26.7 26.6 27.6 26.7 26.7 26.9 26.2 25.9 28.9
- Informal 73.3 73.4 72.4 73.3 73.3 73.1 73.8 74.1 71.1
Rural 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
- Formal 23.8 24.0 22.2 23.7 23.8 22.3 23.5 23.8 21.0
- Informal 76.2 76.0 77.8 76.3 76.2 77.7 76.5 76.2 79.0
Urban 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
- Formal 29.4 29.1 32.8 29.6 29.4 31.6 28.8 27.6 36.9
- Informal 70.6 70.9 67.2 70.4 70.6 68.4 71.2 72.4 63.1
Source: Labour Force Survey 2010-11 Pakistan Bureau of Statistics.

Unemployment
Unemployment is the situation in which people,
willing and able to work at the prevailing wage
rate are unable to find jobs. In Pakistan the labour
force is classified to include all persons who are
ten years of age and above and during the period
are without work, currently available and seeking
work. On the basis of the existing population of
180.71 million with a labour force participation
rate of 32.83 percent, the total labour force is
approximately 57.24 million.

171
Pakistan Economic
E Surrvey 2011-122

Table 12.115: Unemployment rate by area a

Area/sex Unemployed laboour force (in million)
m Unnemployment rate (%)
Tottal R
Rural Urban Total Rural Urban
2008-09 2.93 1.76 1.17 5.55 4.7 7.1
2009-10 3.12 1.89 1.23 5.66 4.8 7.2
2010-11 3.40 1.85 1.55 6.00 4.7 8.8
Source: Paakistan Bureau of Statistics, Labour
L Force Survey
S 2010-111

hard reeality is that the

t industrial sector is faciing an
The unem mployment raate has increeased from 5.6 5
acute shortage
s of energy
e resourrces and therrefore
percent inn 2009-10 too 6.0 percent in 2010-11. In
there is a reductionn in job oppoortunities. It isi not
rural areaas unemploymment rate has decreased froom
only afffecting econnomic develoopment but iss also
4.8 percennt in 2009-10 to 4.7 perccent in 2010--11
hamperring social life.
l The comparison among
a
due to suupportive poliices of goverrnment. Oftenn it
provincces shows thhat the unem mployment raate in
is perceivved that the unemployment rate of ruural
Punjabb is high (aas shown in Table 12.16) as
areas is greater
g becau
use in rural areas
a there iss a
comparred to otherr provinces. The number of
lower chance of emp ployment coompared to the t
unemployed peoplee in Sindh has h increased from
urban areeas where em mployment oppportunities are a
0.44 million
m in 20088-09 to 0.70 million
m in 2010-11
relatively better due to
o greater ecoonomic activiity.
while in Khyber-P Pakhtunkhwa (KPK) a fall fa in
Contrary to this percepption, the situuation seems to
unemployment has been observved. Howeveer, in
be the oppposite. As is evident from
m the data in thet
Baluchhistan numbber of uneemployed people p
above tabble, the unempployment ratee in urban areeas
increassed from 0.006 million inn 2008-09 too 0.07
has increaased from 7.2 2 percent in 2009-10 to 8.8 8
millionn in 2010-11.
percent inn 2010-11. The
T apparentt reason of this t

Fig-12.5: Un
nemployment Rates
R over thee Years Totaal Rural Urban
10
9
8
7
6
5
4
2003 2004 2005 2006 2007 2
2008 2009 2010 2
2011

Table-12.116: Unemploy
yed – Pakistan
n and Provincees M
Million
Province /A
Area Unemplloyment
2008-09 20099-10 2010-11
Totall Male Female T
Total Malee Female Total Male Fem
male
Pakistan 2.93 1.87 1.06 3.12 1..91 1.21 3.40 2.22 1.18
Rural 1.76 1.06 0.70 1.89 1..12 0.77 1.85 1.14 0.71
Urban 1.17 0.81 0.36 1.23 0..79 0.444 1.55 1.08 0.47
Punjab 1.87 1.21 0.66 1.94 1..18 0.76 2.10 1.31 0.79
Rural 1.14 0.70 0.44 1.16 0..68 0.48 1.25 0.76 0.49

172
 Population, Labour Force and Employment

Table-12.16: Unemployed – Pakistan and Provinces Million

Province /Area Unemployment
2008-09 2009-10 2010-11
Total Male Female Total Male Female Total Male Female
Urban 0.73 0.51 0.22 0.78 0.50 0.28 0.85 0.55 0.30
Sindh 0.44 0.28 0.16 0.57 0.35 0.22 0.70 0.54 0.16
Rural 0.14 0.06 0.08 0.24 0.12 0.12 0.15 0.10 0.05
Urban 0.30 0.22 0.08 0.33 0.23 0.10 0.55 0.44 0.11
KPK 0.56 0.36 0.20 0.55 0.35 0.20 0.53 0.32 0.21
Rural 0.44 0.29 0.15 0.45 0.29 0.16 0.41 0.25 0.16
Urban 0.12 0.07 0.05 0.10 0.06 0.04 0.12 0.07 0.05
Balochistan 0.06 0.02 0.04 0.06 0.03 0.03 0.07 0.05 0.02
Rural 0.04 0.01 0.03 0.04 0.02 0.02 0.04 0.03 0.01
Urban 0.02 0.01 0.01 0.02 0.01 0.01 0.03 0.02 0.01
Source: Labour Force Survey 2010-11

Employment Expansion policies throughout the country to provide them quality

technical training. A stipend of Rs 2,000 per month
Employment expansion policies are based on
is paid to the participants
accelerating the rate of growth of the economy
along with a special emphasis on the development
Skill Development Councils: Five Skill
of the relatively more labour intensive sectors. The
Development Councils (SDCs) one each at
specific policies are as follows:
Islamabad, Karachi, Lahore, Peshawar and Quetta
has been established. These Councils are fulfilling
Micro Credit Facilities: The Khushali Bank was
the diversified training needs of the industrial and
established to provide loans of up to Rs.30, 000 per commercial sectors. The SDCs assess the training
person to unemployed people to set up their own needs of their geographical areas; prioritize them
business. Moreover, the SME Bank was
on the basis of market demand and facilitate the
established to provide financial assistance and
training of workers through the public and private
business support to small and medium enterprises.
sector.
President’s Rozgar Scheme by National Bank of Overseas Employment: Overseas employment
Pakistan (NBP): The National Bank of Pakistan also provides an opportunity to developing
has developed a full range of products under the
countries to reduce poverty and to improve income
President’s Rozgar Scheme with the brand name of
distribution through growth in employment
“NBP KAROBAR”. Under this scheme, a loan up
linkages. In 2011 the total number of registered
to size of Rs. 100,000 is given for a maximum
Pakistani workers in different countries was
period of five years with a grace period of three 456,893. The Bureau Emigration and overseas
months for establishing the business. employment is making concerted efforts to boost
overseas employment.
National Vocational and Technical Education
Commission: The National Vocational and
Information Technology: The development of
Technical Education Commission (NAVTEC) was
the IT and telecom sector has created considerable
established with a view to overcoming skill gaps,
employment opportunities, both directly or
and the non‐ availability and lack of
indirectly, for educated unemployed in a wide
standardization of proper curricula. NAVTEC
range of areas like call centres, telecom
initiated two major training programs
engineering, telecom sales, customer services,
(President’s Funnee Maharat Program and the
finance and accounting etc. This is one of the
Prime Minister’s Hunarmand Pakistan
fastest growing sectors of the economy.
Program) in the country under the President and
the Prime Minister’s directives. These programs
remained focused on young men and women

173
Pakistan Economic Survey 2011-12
National Internship Program: The first phase of
the National Internship Program (NIP) has been
completed. Under the first phase, 25,826 applicants
were offered internship at the Federal, Provincial
and District government levels. The second phase
of the NIP was launched in February 2008. A total
of 71,915 applications were received. So far
21,138 applications have been verified by HEC
and NADRA and are being placed in ministries,
divisions, departments and provincial governments
and at district level.
Investing in Increasing Water Resources:
Agriculture is the largest sector of Pakistan’s
economy and provides employment to nearly 45
percent of the country’s work force. More than
two‐ thirds of the county’s population lives in the
rural areas and depends directly or indirectly on the
agriculture sector for their livelihood. GDP growth
originating in agriculture is more effective in
raising the income of the poor and increasing
overall employment than other sectors of the
economy. The major constraint in Pakistan’s
agriculture has been the lack of availability of
water resources. The government is making a
heavy investment to develop water resources
which will not only be helpful in increasing water
availability and electricity but will also expand the
employment opportunities in the country.
Table 12.17: Number of Pakistani workers registered for overseas employment through Bureau of
Emigration & Overseas Employment during the period 2008-2011
S.# Countries 2008
1 UAE 221765
Kuwait 6250
3 Malaysia 1756
4 Oman 37441
5 Qatar 10171
6 Saudi Arabia 138283
7 UK 756
Source: Bureau of Emigration and Overseas Employment
Saudi Arabia being a Muslim state is attractive for
millions of Pakistani workers seeking jobs abroad.
Due to this fact Saudi Arabia has become the
largest market for Pakistani workers in the world
besides the Gulf States such as United Arab
174
Employee Projection Policies: Efforts are being
made to establish an efficient, equitable and rights-
based labour market that provides mechanisms to
allow productivity growth in the economy and
result in real wage increases. The Zakat fund
provides a monthly subsistence allowance and a
rehabilitation grant is given to all the needy
Muslims. The Bait-ul-Mall Fund has different
projects such as Individual Financial Assistance,
Free Skill Development and the Food Support
Programme for helping the needy people. The
Public Sector Benevolent Fund and Group
Insurance provide benefits to government
employees especially in the form of education
scholarships to their children and other financial
aid at the time of emergency.
Export of Manpower
The government of Pakistan is making sincere
efforts to boost overseas employment which will
not only reduce the unemployment burden in the
country but will also increase remittances and
thereby help to improve the economy of Pakistan.
In this regard, MoUs have been signed with several
labour importing countries like Malaysia, Kuwait,
and Qatar. The number of emigrants was 0.43
million in 2008 which increased to 0.46 million in
2011, as shown in Table 12.18
2009 2010 2011
140889 113312 156353
1542 153 173
2435 3287 2092
34089 37878 53525
4061 3039 5121
201816 189888 222247
556 430 308
Emirate (UAE), Oman and Kuwait. The number of
emigrants in Saudi Arabia has increased from 0.14
million in 2008 to 0.22 million in 2011. Presently
Pakistan is exporting skilled, semi-skilled and
unskilled labour. Table 12.18 presents labour
export statistics during the 2008-2011 period.
 Population, Labour Force and Employment

Table 12.18: Workers Registered For Overseas Employment

Year Highly Qualified Highly Skilled Skilled Semi-Skilled Un-Skilled Total
2008 9713 33173 177791 4209 205428 430314
2009 4954 3260 182657 2465 210192 403528
2010 7081 31650 165726 5181 153266 362904
2011 6974 3018 171672 73247 201982 456893
Total 28722 71101 697846 85102 770868 1653639
Source: Bureau of Emigration and Overseas Employment

of Population Welfare have contributed to a

Conclusion
Historically, high population growth rate has been
a major factor in Pakistan’s overall economic
development. The government is committed to
allocating funds and developing innovative policy
measures to address the issue of managing
population growth and the labour force.
Improvements in health facilities and promotion of
population welfare activities through the Ministry
significant decline in the crude birth and fertility
rates, thereby leading to a reduction in the average
growth rate of the population. This has been
accompanied by an increased labor participation
rate. Despite these improvements Pakistan is still
lagging behind neighboring countries. Therefore, it
is imperative to put further efforts for development
of better human resources.

175
 Chapter 13

Transport and Communications

Introduction tool in the fight against poverty. The sector is also

a major contributor to government’s revenue
The technological advances in global
through taxes and duties on its production and
communications and transportation have
imports, fees on ownership and operation of
significantly catalysed the emergence of the global
vehicles and licensing of modern communications
economy leading to integration of fragmented
facilities.
national markets of goods and services into a
single global market. With these rapid
Sustainable economic development is dependent
developments, regions with adequate means of
on a robust and low cost transport system.
communications and transportation have grown
Enhanced export competitiveness is also
economically and those lacking in these fields have
contingent upon the efficient performance of the
lagged behind. The availability of an efficient
sector. The government is committed to
transport and communications network is a pre-
implementing a comprehensive and modernizing
requisite for a meaningful economic cooperation
transport and logistic sector through continuous
amongst nations, particularly in the areas of trade
reforms in all of its sub sectors. The transport
and tourism for attracting foreign investment and
system consists broadly of roads, railways, air
realizing the potential gains from an outward
transport and ports shipping services.
oriented trade strategy.
13.1: Road Transport
Besides human capital (skill and education) a
strong efficient and affordable means of transport Roads are the most important segment of
and communications of the country contributes to Pakistan’s transport sector. Roads carry over 96
the national economic growth by lowering percent of inland freight and 92 percent of
domestic production cost, integrating markets, passenger traffic and are undoubtedly the backbone
promoting economic opportunities and establishing of the economy. The current road network is about
links among the people. The transport and 260,000 kms catering to eleven million vehicles of
communications sector generates a large number of all types. The Province wise distribution of roads is
employment opportunities, and acts as a significant given in the following Table:
Table 13.1: Estimated Length of Roads in Provinces (kms)
GB &
Years Category Punjab Sindh KPK Balochistan TOTAL
AJK
2007-08 Total 104115 80863 42369 29451 1552 258350
Low Type 33864 26301 13781 9579 505 84030
High Type 70251 54562 28588 19872 1047 174320
2008-09 Total 104114 80863 42369 29452 1552 258350
Low Type 32949 25591 13409 9321 491 81761
High Type 71165 55272 28960 20131 1061 176589
2009-10 Total 105085 81618 42765 29727 1565 260760
Low Type 32179 24993 13095 9103 480 79850

177
Pakistan Economic Survey 2011-12

Table 13.1: Estimated Length of Roads in Provinces (kms)

GB &
Years Category Punjab Sindh KPK Balochistan TOTAL
AJK
High Type 72906 56625 29670 20624 1085 180910
2010-11 Total 105253 80625 42550 29500 1535 259463
Low Type 32147 24000 13000 9000 450 78597
High Type 73106 56625 29550 20500 1085 180866
2011-12 Total 106455 80960 42975 29625 1580 261595
Low Type 32590 24335 13140 9125 465 79655
High Type 73865 56625 29835 20500 1115 181940
Source: National Transport Research Centre (NTRC)

bridges, interchanges and road up gradation during

13.1-a: National Highway Authority
The NHA road network is around 12,000 kms,
which is merely 4.6 percent of the overall road
network but it takes 80 percent of Pakistan’s
commercial traffic. Despite overall budgetary
constraints during the fiscal year, and the effects of
heavy floods in 2010 and law and order challenges
NHA performed well. This performance in terms,
of NHA projects is summarized below:
a. Completed Projects
NHA has completed 12 projects of flyovers,
the last one year at a cost of Rs 19.6 billion.
b. Ongoing Projects
At present, 46 development projects on roads
covering 2,985 kms are ongoing at a cost Rs 245
billion in different sections/packages. These
projects include construction of roads, river
bridges, tunnels, flyovers, interchanges. Province
wise break up of these projects is given below:

Table 13.2: Province wise break up of NHA Projects

Province Projects Road length (Km) Cost (Rs. Billion)
1 Punjab 14 315 48.2
2 Sindh 13 714 59.5
3 KPK, GB & AJK 12 738 73.1
4 Balochistan 7 1218 64.5
Total 46 2985 245.3
Source: NHA

c. New Development Projects a number of bridges, flyovers and interchanges

costing Rs. 70,951 million. NHA is simultaneously
During the financial year, NHA has launched/ constructing 12 bridges across the rivers. These
awarded 16 new development projects covering a are; on river Chenab 4, on rivers Sutlej 2, on river
length of above 500 kms including construction of Swan 1 and on river Indus 5.

Box–1
2011 Pakistan Floods Preliminary Damages and Needs Assessment Survey.
Report Jointly Prepared by the Asian Development Bank and the World Bank.
Pakistan experienced severe flooding after torrential monsoon rains hit southern Sindh and the adjoining areas of
Punjab and north-eastern Balochistan in August 2011. Floods caused severe damage to infrastructure in the affected
areas, coupled with the damages of 2010 floods that were still in the recovery phase, the losses in transport and
communication sector are estimated at Rs. 26,468 million.

Transport and Communications

The damages in the transport and communications sector involve various categories of roads, railways, bridges, and

178
 Transport and Communications

telecommunications infrastructure. Preliminary estimates indicate that approximately 8,385 km of the road network
and 190 km of railway lines were damaged by the flood including bridges and allied structures. Most of the damages
are on provincial highways and district roads in Sindh. Out of the estimated total damage and losses, the road
subsector sustained the highest damage and losses of $299 million, followed by the railway subsector losses
amounting to $3 million. The floods have impaired the road conditions which will continue to deteriorate faster if
repairs, rehabilitation and restoration works remain deferred for a longer period. The indirect losses due to damage
in the road sector would cause an increase in the road user cost during a phased recovery period.

The telecommunication infrastructure losses includes damages to cellular sites, exchange centers, equipment, power
system and supporting civil works amounting to $1.9 million.

Recovery and Reconstruction Needs

The reconstruction needs of the sector have been estimated at $ 388 million, including $ 5 million for railways and
excluding $ 2 million required in the telecommunication subsector as these were private assets with insurance
coverage. Most of the reconstruction needs are in the road subsector amounting $ 383 million. The recovery strategy
varies across each subsector based on the nature of the responsible agency and the importance of the infrastructure.
For telecommunications, the private sector operations have mobilized and repairs carried out and telecom services
restored. For roads, diversion routes were created and services restored. Emergency repairs on railway lines have
been undertaken. As a short term measure, the National Highways Authority (NHA) has tasked the regional
maintenance units to undertake the emergent works through pre-qualified contractors and using proceeds of the
annual road maintenance funds. All reconstruction costs for railways and 10 percent of the road reconstruction costs
are included in the short-term recovery phase for works to be completed within 12 months. The remaining road
reconstruction will require careful prioritization to ensure efficient utilization of available resources since most of
the restoration works are not complex and thinly spread across wider geographic area.

Carriage Factory Islamabad, and four Concrete

13.2 Pakistan Railways
Sleeper Factories in Kohat, Khanewal, Sukkur and
An effective railway system of the country Kotri, are being corporatized for eventual
facilitates commerce and trade, reduces privatization subject to approval of the
transportation cost and promotes rural government.
development and national integration. Pakistan
Railways has entered into the Public-Private Restructuring of Pakistan Railways
Partnership business in; Passenger Trains,
The Cabinet Committee of Restructuring (CCOR)
Rehabilitation of Locomotives, Management
has approved a restructuring framework for
Operation of Terminal Facilities including Dry
Pakistan Railways. New Board of Directors of PR
Ports. The Ministry of Railways has also adopted a
has been constituted by including academia,
“Track Access Policy” for private sector
management professionals, rail experts and
participation to operate freight and passenger trains
executive functionaries. The process for
on Pakistan Railways infrastructure. The Ministry
recruitment of a professional Chief Executive
of Railways is also in process of allowing private
Officer and other technocrats is being undertaken.
sector to operate on Pakistan Railways network
Repair of locomotives has been given a priority for
under Public Private Partnership (PPP) frame
restoration of Railway services and freight
work.
operations are also being prioritized for revenue
generation. Financial viability is being ensured
The Ministry of Railways has also created a “Real
through improving revenue and support by GOP. It
Estate Development and Marketing Company” as
has been decided that adjustment of fares and
subsidiary of Ministry of Railways. The company
freight pricing will be determined according to
will manage to commercialize the surplus lands of
market conditions and cost of doing business. An
Pakistan Railways in order to overcome its
asset management company is being established
financial challenges. In addition to the above, six
for optimum utilization of PR’s assets. Private
factories including Locomotive Factory Risalpur,
Sector involvement is the focus moving forward,

179
Pakistan Economic Survey 2011-12

Chamber of Commerce and Industries, Lahore has rail operations and outsourcing of noncore
been engaged for their freight transportation from functions is being initiated with an aim to improve
Karachi to Lahore. Commercial management of efficiency of rail operations.
Table 13.3: Railways Passenger Traffic and Freight
S. No. Subject 2009-2010 2010-2011 July-Feb 2012
1. Number of Passenger carried 74.9 64.9 25.0
(Million)
2. Passenger Traffic KM (Rs. Million) 23522.5 20618.8 16810.2
3. Freight carried Tones (Rs. Million) 5.8 2.6 0.9
4. Freight Tones Km (Rs. Million) 4846.9 1757.3 279.3
5. Route Km 7791.0 7791.0 7791.0
6. Freight Wagons 16499.0 18464.0 17698.0
7. Gross Earning (Rs. Million) 21,886.9 18,739.9 9359.0
Source: Ministry of Railways

Achievements during the Fiscal Year
Track: During the last financial year, 16 kms of
track was rehabilitated on the Pakistan Railways
network besides doubling of more than 15 kms of
track.
Service Buildings: Construction of D Class
railway station at new Multan city was carried out
at a cost of Rs. 39.8 million which has facilitated
the local population to a large extent. Renovation
of Khudian Khas, Usmanwala, Raiwind and
Kanganpur railway stations was carried out at a
cost of Rs. 24.0 million to improve facilities for the
passengers.
Signaling: Signaling system of four railway
stations damaged during the riots of 2007 was
rehabilitated during the period.
Rolling Stock: During February of the current
fiscal year, 52 new design passenger coaches were
imported from China at a cost of Rs. 4.1 billion.
Remaining 150 passenger coaches will be
manufactured at Pakistan Railway Carriage
Factory Islamabad by June 30, 2013. In addition,
22 passenger coaches have been rehabilitated at the
Pakistan Railway Carriage Factory Islamabad
during last year.
Establishment of new Dry Port: A new dry port
was set up at Prem Nagar near Raiwind industrial
area, Lahore through Public Private Partnership at
a cost of Rs. 494.0 million.
Table 13.4: Earning of Pakistan Railways
(Rs. Million)
Fiscal Year Earning % Change
2007-08 19,973 -
2008-09 23,160 16.0
2009-10 21,886 -5.5
2010-11 18,612 -15.0
2011-12 9359.0 -
(July-Feb)
Source: Ministry of Railways
13.3 Pakistan International Airlines (PIA)
A restructuring plan of PIA has been finalized
which addresses corporate governance, human
resource rationalization, financial and operational
restructuring, engineering improvement,
procurement and logistics, marketing and fleet,
airport services and dispatch reliability among
others. Increased fuel cost has been a major
downside risk to the financial strength of PIA; and,
effective measures have been put in place to
mitigate the effect. Various other cost
minimization and revenue enhancement measures
have been put in place to reduce the revenue-
expenditure gap in the medium term. Fleet renewal
and addition is being planned. Route
rationalization, code sharing and alliances are
being pursued for moving to a new business
model. Dispatch reliability will be improved
through various initiatives including expansion of
reliability system, use of reliability tools and
standardized data exchange on maintenance.
Strategic Business Units (SBUs) are being
established for outsourcing of non-core functions
of PIA. Rationalization of employment in PIA is
being addressed through attrition and no new

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 Transport and Communications

hiring is being undertaken except for operational Table 13.5: PIA Performance
staff. A financial restructuring plan has been Description 2011*
finalized which includes equity injection, rollover Revenue Hours Flown 141,727
of loan and government guaranteed loans among Route KMS 460,719
others. A holistic view needs to be developed for Revenue KMS Flown (000) 84,898
revitalization of PIA entailing industry dynamics, Revenue Passenger carried (000) 5,953
aviation policy and strategic needs. This is the Revenue Passenger Kms (mil) 15,664
focus of the government. Available Seats Kms (mil) 21,725
Passenger Load Factor % 72.10
Pakistan International Airlines Corporation earned Revenue Tonne Kms (mil) 1,678
Available Tonne Kms (mil) 2,972
increased revenue amounting to Rs. 116.02 billion
Revenue Load Factor (%) 56.45
in year 2011 as compared to 107 billion last year.
Operating Revenue (mil) 117,356
Passenger revenue increased upto Rs. 7.76 million.
Operating Expense (mil) 132,970
New destinations including Zahedan and Madina PIA Fleet (No. of Planes) 39
also added in increasing the revenue. Passenger Revenue (Rs. bn) 104.41
Passenger Yield (2010: 6.12) 6.67
A purchase agreement of five Boeings 777 has Source: PIA
been signed. Chairman PIAC inaugurated the state * : PIA Data is on calendar year basis
of the art PIA Boeing-777 Flight Simulator
installed at the PIA Training Centre, Karachi on 13.4 Ports and Shipping
October 30, 2011. The acquisition of this full flight 13.4 (a) Karachi Port Trust (KPT)
simulator has resulted in improved training The Karachi Port Trust (KPT) came into being
standards, better coordinated crew scheduling and under the 1886 Act. With a 11.5 kilometers long
planning. approach channel, a depth of 12 meters and a
turning basin of 600 meters, the Karachi Port
Following new destinations have been introduced provides safe navigation for vessels up to 75,000
during the year 2011: metric tones deadweight. The KPT consists of two
wharves; the East and West Wharf. The East wharf
Karachi – Madina has 17 multipurpose berths and the West Wharf
(Twice weekly with B747/A310 w.e.f July 2011) has 13 berths. Each of the Wharves has two
Quetta – Zahedan dedicated container terminals and oil piers to
(Twice weekly with ATR w.e.f Jan 2011) handle liquid cargo. The KPT handled 27.8 million
tones of cargo during the first 9 months of the
Following new routes were introduced during the current fiscal year. The data on cargo handled
year 2011. during the last five years is given in the following
Peshawar - Kuala Lumpur table:
Sialkot – Riyadh & Sialkot - Dammam.

Table 13.6: Cargo Handled at Karachi Port (000 M/Tones)

Period Imports Exports Total
2007-08 25,517 11,676 37,193
2008-09 25,367 13,365 38,732
2009-10 27,892 13,528 41,420
2010-11 28,589 12,843 41,432
2011-12 19,196 8,586 27,782
(Jul-Mar)
Source: Karachi Port Trust

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Pakistan Economic Survey 2011-12

13.4 (b) Pakistan National Shipping

The Corporation intends to acquire four vessels on
Corporation
commercial loan / joint venture-basis. Acquisition
Shipping is a highly competitive market driven of two vessels is in process, while two more will
industry; its profitability is dependent on optimum be acquired in next financial year.
utilization of vessels, strict cost controls and
maximization in cargo lifting. The economic 13.4 (c) Gwadar Port
downturn has affected every sector of the maritime The Gwadar Port was inaugurated on the 20th of
industry and the PNSC was no exception. Despite March, 2007 and started commercial operations
this PNSC remained profitable during the period from March 2008. The government has decided to
under review. The Commercial performance of the import all bulk cargo comprising of Urea, Wheat
PNSC translated into financial gains. The PNSC and Coal through Gwadar Port. The total cargo
remained profitable during the first nine months of handled at the port up till now is 4.1 million tones.
fiscal year 2011-12. Gwadar Port has earned total revenue since its start
The consolidated revenue of the PNSC Group of operation amounting to Rs. 53.4 million.
during July-March 2011-12 were Rs. 6640 million.
13.4 (d) Port Qasim Authority
One dry Combi vessel was sold for demolition as it
had completed its useful commercial life. The Port Qasim Authority was established in 1973 as a
Commercial and Financial performance of the second deep sea port of Pakistan. Port Qasim
PNSC (un-audited) from July-March 2011-12 is caters around 40 percent shipping requirements of
given in the following tables. the country. PQA handled a cargo volume of 19.7
million tones during July-March 2011-12. The
Table 13.7: Commercial Performance
volume of import cargo during July-March 2011-
(In Metric Tons)
12 stood at 14.7 million tones, while the exports
Cargo Lifted Jul-Mar 2011-12
handled during the same period was 4.9 million
Liquid Cargo 5,804,294
Dry Cargo 205,379 tones.
Total (Dry + Liquid) 6,009,673
Table 13.10: Cargo Handled at Gwadar Port
Source: PNSC
(000 Tones)
Year Imports Exports Total
Table 13.8: Financial Performance (Rs. in 000)
2008 231.6 - 231.6
Jul-Mar 2011-12 2009 1218.1 - 1218.1
Revenue 6,639,971 2010 705.9 - 705.9
Fleet Expenses 5,173,907 2011 462.5 - 462.5
Gross Profit 1,466,064 2012 541.2 - 541.2
Other Income 327,412
Source: Gwadar Port Authority
Expenses 1,541,464
Profit before tax 252,012
Source: PNSC
Table- 13.11: Cargo Handled at Port Qasim
(00 Tones)
Table 13.9: PNSC-Fleet Deadweight Tonnage
Period Import Export Total
(In MT)
2007-08 21,502 4,922 26,424
Year No. of ships Total DWT 2008-09 19,445 5,584 25,030
2007 14 536,821 2009-10 19,226 6,380 25,626
2008 14 536,821 2010-11 19.511 6,657 26,168
2009 11 477,238 2011-12 14,722 4,942 19,664
2010 10 633,273 (Jul-Mar)
2011 11 646,666
Source: Port Qasim Authority
2012 10 628,409
Source: PNSC

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 Transport and Communications

Box Item–2
Draft National Transport Policy (NTP)
To address the Transport Sector issues and implement government’s policies and strategies for sustainable growth,
Ministry of Communications has prepared a draft National Transport Policy in consultation with all stakeholders. It
covers all modes of transport sectors i.e. (i) Roads, (ii) Railways, (iii) Ports & Shipping and (iv) Aviation, NTP also
includes the National Transport Corridor Improvement Program (NTCIP) to make it more productive and
environment friendly. The broad objective of the draft National Transport Policy are:

To Provide safe, reliable, effective, efficient, affordable, accessible, sustainable and fully
integrated transport system that will best meet the needs of freight & passenger access and
mobility requirements and will be aimed at improving levels of service and cost effectiveness in a
fashion that supports governments goal of increasing public welfare through economic growth,
and social improvement, poverty reduction and infrastructure and development while being
environmentally and economically sustainable and energy efficient.

National Trade Corridor Improvement Programme

“National Trade Corridor Improvement Programme (NTCIP)” has been launched in the country to revamp the
whole transport sector including ports, roads, railway, aviation etc. and a frame work to develop and improve the
North South corridor has been formulated. The framework takes a holistic and integrated approach to reduce the cost
of doing business in Pakistan by improving the trade and transport logistics chain and bringing it up to key
standards. The strategy also takes into account the regional and domestic scenarios, particularly with respect to rail,
road and shipping sub-sectors, enhancing regional connectivity to improve links with the Central Asian States,
China, Iran, Afghanistan and India. With the development of the North-South and East West trade links, energy and
industrial corridors with these states would also be developed.

Progress on Studies in 2011-12

` Study on Aviation Safety Audit by Civil Aviation Authority/Ministry of Defence has been completed
` Work is underway for preparing a Ports Master Plan by the Ministry of Ports & Shipping with the help of
international consultants.
` Study on Financial Restructuring of Pakistan Railways is ongoing while consultancy firm is being hired for
preparation of Pre-Feasibility of Peshawar-Jalalabad Railway Link
` Pakistan Railways Revitalization Strategy (PRRS) has been prepared for the approval of Cabinet
` The Trucking Policy approved in October 2007 is being updated
` Procurement of consultants is on fast track for preparing an “Implementation Strategy” for the Trucking Policy.

Rapid development of Information and

13.5 Communications
The 21st century can safely be named the IT
Century as no institution can run without the help
of IT in the future. The advancement of IT has
brought enormous benefits to individuals,
businesses and organization. The world has
developed into an information economy and the
application of new technologies has become the
centerpiece of activities.
Communication Technology (ICT) infrastructure
and its adoption is now a prerequisite for making
national progress in the economy and in daily life
as well. Modernization and development of
telecom infrastructure has been correlated with
increase in economic activities. The Information
Technology (IT) revolution is probably the most
important force shaping communities today.

183
Pakistan Economic
E Surrvey 2011-122

13.5-a Teelecom Sectorr

Fiig-13.2: Cellullar Subscriberrs 32
118.3
At the endd of fiscal yeaar 2011-12, teeledensity in the
t 1220.0 108.89
country sttood at 68.3 percent show wing 6.7 perceent 9
99.2
94.3
growth ass compared to o the previouss year. Since the
t 1000.0 88.0
mobile seector contribu utes over 95 percent to the t 8
80.0
63.22
total teledensity of th he country, an increase in

Million
6
60.0
mobile peenetration from m 60.4 percennt in 2010-111 to
33.9
64.9 perccent in 2011-12 resulted in i improvemeent 4
40.0
of 4.3 perrcentage poin nts in total telledensity. Fixxed 2
20.0
Local Looop teledensity y has been deeclining over thet
-
years due to mobile su ubstitution andd today it stannds
at 1.93 percent
p in 20011-12 as coompared to 2.1 2
percent last
l year sho owing a deccrease of 0..17
Source: P
PTA
percent. Wireless
W Local Loop suubscribers haave
been increasing but the proporttionate rise in Cellulaar Market Sh
hare
populationn keeps the teledensity
t off WLL servicces
at 1.6 perccent over the last three connsecutive yearrs. The mobile
m markeet over the years
y has beecome
more stable
s due too intense competition. Market
M
shares are now morem balancedd among thee five
Fig-13.1: Teledensitty operatoors with almmost insignificcant changess over
(71.66)
Local Loop
L
the yeaar. At the endd of March 20012, Mobilinnk had
80.00 C
Cellular Mobile (64.110) (68.3)
70.00
W
Wireless Local Loopp
(58.80)
(61.99)
1.93
1.81 a markket share off 30.25 perccent followeed by
60.00 2.70
2.17 2.1 Telenoor with 24.80 percent and Ufone with 19.54
(45.02) percentt.
50.00
Percentage

3.04
40.00 (26.23) 68.20
64.7
54.70 58.22 60.4 Fig-113.3: Cellular Subscribers
S Marrket Share
30.00
3.37 M
March 12
40.90
20.00
22.20 Zong
10.00 Mobilink
13.24%
0.66 1.08 1.4
40 1.60 1.6 1.6 1.65 30.25%
0.00 Warid
20005-06 2006-07 2007--08 2008-09 2009-10 2010-11 Mar-12 12.17%
Source: PTA

Cellular Mobile
M Secto
or
Pakistan’ss cellular secctor faced a tough
t econom mic Telenor
and businness environm ment during the last fiscal 80%
24.8
year due to taxes, pow wer crisis, seccurity situatioon, Ufo
one
19.5
54%
extensive subscriber and naturral calamitiies.
Source: PTA
Despite all
a these facctors, the ceellular indusstry
managed to double its growth rate from the t Network Coveragee
previous fiscal year. According to the Woorld
Economicc Forum’ss Global Informatiion One of the key inndicators of a successful and
Technologgy Report 20 010-11, Pakisstan ranks noo. 1 advancced cellular market is the geograpphical
in the Intternet and Telephony
T Coompetition. The
T coveragge of land area by thee cellular mobile m
total of mobile
m subscrib bers reached 118.3 millionn at operatoors in the coountry. Pakisstan has a unique
u
the end off March 2012 2. topograaphy ranging from steep mountains
m to raging
r
desertss. Despite such difficult terrrain, more thhan 92
percentt of the landd area is undeer the umbreella of
cellularr mobile servvices – a lauddable effort byb the

184
 Transport andd Communicaations

mobile coompanies. At A the end of o March 2012, Long Distance

D Inteernational
there are 33,027
3 cell siites across Pakkistan.
Long Distance
D and International (LDI) is annother
pillar of
o Pakistan telecom
t sectoor, responsiblle for
Fig-13.4: Total Celll Sites carryinng internationnal traffic to and
a from Pakkistan.
31,303
33,027 LDI licensees
l arre responsible for receeiving
35,000 30,126
28,159
internaational trafficc from othher countriess and
30,000 handinng these overr to their resppective LL/m mobile
25,000 21,518 operatoor for nation-wide lonng distance and
20,000
internaational telephhony service. PTA awardeed 14
13,725 licensees for Longg Distance and Internaational
15,000
servicees and currenntly 13 of theem are operattional.
10,000 PTCL is the largest LDI operatoor in the counntry as
5,000 it also owns the inteernational bacckhaul of Pakkistan.
0
The other
o major players incllude Link Direct,D
2
2006-07 2007-08 2008-09
2 2009-10 2010-11 Mar-12
Wateenn, WorldCalll and Telecaard. Internaational
Source: PT
TA
traffic in Pakistan iss increasing evvery year owing to
lower tariffs and availability of internaational
connecctivity throughh fiber optic and satellite links.
Basic Serrvices Duringg 2011 total innternational traffic
t (Incom
ming +
Basic Serrvices comprrising of Loccal Loop (fixxed Outgoiing) stood at 5,126
5 millionn minutes.
and wireeless) and Long
L Distancce Internationnal
services form the basis
b of teleecommunicatiion Fig-113.6: LDI Intern
national Incoming and
Outgoinng Traffic
infrastructture of Paakistan. The technological 6000 Internation
nal incoming  Traffic 
(5,126))
revolutionn, mainly wirreless servicees, had a maj ajor
nal Outgoing Traffic  (4,323)
Internation
impact on o Fixed Lo ocal Loop business sinnce 5000
(3,751)
mobility, coverage, quality
q of seervice and loow 4000 (2
2,871)
maintenannce requiremment shifted consumer
c foccus
Million Minutes

(2,409) 3,934
from fixed to wireless services. Thhe figure beloow 3000 3,092
2,628
shows thee declining treend in local looop subscribeers, 872
1,8
2000 1,609
especiallyy FLL servicees over the yeears. By the end
e
of Dec, 2011, Local Loop (F FLL & WL LL) 1000 1,231 1,192
800 999 1,123
subscriberrs reached 5.93 million alll over Pakistan.
Out of tootal 5.93 million subscribeers 3.10 milliion 0
Oct-Dec 10 Jan-Marr 11 Apr-Jun 11 Jul--Sep 11 Oct - Dec 11
belong to FLL and 2.83 3million to WLL.
W
Source:: PTA

Fig-13.55: Local Loop Subscribers WLL FLL Broadb

band
(6.14) (6.08) (5.93) The grrowth of Brooadband subbscribers has been
7.00 (5.60) (5.72
5 )
more thhan 150 perccent on averagge for the lasst four
6.00 years. Such an astoounding grow wth rate highhlights
Million

1.16 2.62
2 2.66
5.00 2.83 the tremmendous pottential in Pakkistan’s broaddband
2..70
4.00 markett. Broadbandd subscribers have crosseed the
3.00 one million
m mark in 2011 witth the highesst net
4.44
2.00 3.53 3.42 3..02 3.10
additioons in a year. According too the latest market
m
1.00
data, Broadband
B subbscribers reacched 1.9 million at
the endd of Februaryy 2012 with thet penetratioon 1.1
0.00
percentt.
2007-08 2008-09 2009-10 2010-11 Dec - 11
Source: PTA

185
Pakistan Economic
E Surrvey 2011-122

Fig-13.7: Broadbandd Subscribe Telecoom Revenue

Penetration
n
2,200,000 1.10 1.200 Revenuue of the teleecom sector reached
r an alll time
Subsccribers
2,000,000 high duuring the 20112, standing at Rs. 363 biillion.
Penettration 0..88 1.000
1,800,000 Telecom revenue showed an increase off 5.4
1,600,000
1,400,000 0.800 percentt as compareed to the prevvious year. Inn line
Subscribers

1,200,000 0.55 1,912,152 with thhe teledensity, the cellular sector also has the
0.600
1,000,000 highestt share in teelecom revennue. During 2011,
800,000 0.400 cellularr revenue inccreased by 11 percent to reach
0.25
600,000 900,648 1,4911,491
45,153
Rs. 262,761 millionn as compareed to Rs. 236,047
400,000 0.11 0.200
200,000 0.03 168,082
413,809
4
millionn in the preevious year. The rise in total
- - telecomm revenue is mainly attributed too the
increasse in revenuee of mobile services
s only since
2006-07

2007-08

2008-09

2009-10

2010 11
2010-11

Feb-12
Source: PTA
A
the rest of the serviices except WLL
W have repported
decreasse in their tottal revenue. During
D the firsst two
quarterrs of 2012, Rs. R 197,686 million worrth of
Telecom Economy revenuue has been geenerated by thhe telecom secctor.

Telecom Contribution
n to Exchequ
uer
Fig
g-13.9: Telecom
m Revenue (Rss. Million)
The Telecom sector is an importtant contribuutor 3
344,212 362,935
400,0000 333,809
depositingg over Rs. 100 billion onn average eaach
350,0000 278,550
year to the
t Nationall Exchequer. The Telecoom 235,613
sector maade its higheest ever conttribution to the
t 300,0000

194,562
national exchequer in n 2011 as almost
a Rs. 117
1 250,0000
Rs. Million

197,6686

billion weere depositedd by the teleccom compannies 200,0000

showing 7 percent growth during 2011. During the t 150,0000

first two quarters of 2012,
2 Rs. 588.1 billion haave 100,0000
been depoosited to the national
n excheequer. 50,0000

-
2005-06 2006-07 2007-08 2008-09 20099-10 2010-11 Jul-Dec
Fig-13.88: Telecom Contribution to Exchequer 2012

Source: PTA
Others PTA Deposits
D Activaation Tax GST
(117.
(111.6)) (112.1) (109.1))
0)
Telecoom Investmen
nt
120.0 (100.1)
Advanccement in technology andd new innovaations
100.0
37.0 39.3 45.2 requiree a continued investment stream into the
44.9 (58.1) telecomm sector. Althhough compaanies have invvested
80.0 37.0
10.9 9.2 over US$
U 12 billioon in buildingg of infrastruucture
Rs. billion

12.0
60.0 9.7 14.2 13.6 7.2 and othher projects ini the last sixx years, there is no
19.2
17.6 6.6 27.9 denyinng the fact thaat there are unntouched landds and
40.0
2.2 grey areas that need new w or improved
49.4 52.6 3.9 infrastrructure. Mostt of the telecoom companiess have
20.0 44.6 44.0
36.3
24.1 establisshed their innfrastructure and expandded to
0.0 every nook
n and corner of the country.
c Howwever,
2006-07 2007-08 2008-09 2009-10 2010-11 Jul - Dec
11
due to the terrain/seecurity situatiion, companiees are
Source: PTA reluctant to invest further. PTA A recognizingg this
fact has worked out with booth operatorss and
Note: PTA's contributions comprrise of all its receipts including Initial and
a Univerrsal Servicee Fund (U USF) to make
Annual Licen nse Fee, Annual Specttrum Administrative Fee,
F USF and R&D Fu und
Contributionns, Numbering Ch harges, License Application
A Fee, etc. investmments in areaas where theere is no tellecom
Others includ
de custom duties, WHH Tax and other taxes.
servicee. In 2011, thhe telecom seector investedd US$
495.8 million;
m with the cellular mobile
m sector being

186
 Transport and Communications

the major contributor. In addition USF invested Rs. improved economic condition of the country will
3.5 billion during the 2011. further encourage investors to bring capital into
Pakistan.
Foreign Direct Investment by the telecom
companies is more than 30 percent of the total FDI Fig-13.10: Foreign Direct Investment
in the country during the last six years. As in the
6,000 FDI in Telecom
investment scenario explained above, telecom 5140
5410
Total FDI
companies reduced FDI because they have already 5,000
laid down the required infrastructure. In 2011,
4,000 3720
telecom sector attracted over US$ 79 million FDI 3521

US$ Million
in the country which is about 5 percent of the total 3,000
FDI in Pakistan in 2011. 1,905
2199
1,824
2,000 1,439 1574
Analysis of investment and FDI clearly reveals that 1,000
815
the telecom sector of Pakistan needs an influx of 374
79
new investment in the near future to boost these 0
figures. The auction of 3G licenses is expected, 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
that will bring more FDI into the country. An Source: PTA

Table 13.12: Telecom Investment US$ (Million)

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Cellular 1,420.9 2,584.5 2,337.7 1,229.75 908.8 358.6
LDI 50.5 602.8 403.9 276.75 183.1 108.8
LL 0.3 40.6 342.1 57.37 22.5 18.2
WLL 259.4 747.0 52.8 82.11 23.0 10.2
Total 1,731.1 3,974.8 3,136.4 1,645.9 1,137.5 495.8
Source: PTA

Regulatory Intervention by PTA • WLL Spectrum Auction in 1.9 GHz and 3.5
GHz Frequency Band
• Spectrum Auction for 3G & Defunct
Instaphone License During the de-regulation of the telecom sector in
2004-05, significant portion of the frequency
The Government of Pakistan announced spectrum
spectrum in 1.9 GHz and 3.5 GHz bands was
auction for 3G and Instaphone license on 24th
auctioned for WLL licensees. However, with
November 2011. The Ministry of Information
unprecedented growth of wireless broadband
Technology issued a policy directive to PTA with
services and introduction of new players in the
the objective of redefining the policy framework
market, it became imperative for the government to
and setting guiding principles for the auction of 3G
allocate more spectrum resources to WLL
frequency leading to introduction of relevant
operators. In this regard, PTA has been entrusted
services. It was announced by the Federal
with the task of carrying out the auction of the
government that the auction would be transparent
WLL spectrum as per guidelines provided in the
and competitive; the allocation will be neutral; and,
Policy Directive issued by Ministry of IT on 16th
usable for any available or upcoming technology.
December 2011 for spectrum auction of available
Similarly the auction of three blocks of 10 Mhz
frequency in 1.9 GHz and 3.5 GHz. The
each, out of currently available 3G spectrum (1.9
Information Memorandum for WLL auction is
GHz/2.1Ghz band), shall be announced by PTA.
available on the PTA website. The base price for
The license of defunct Instaphone along with
3.5 GHz band is set at USD 28.2 million (covering
allocated frequency will also be auctioned.
all telecom regions) and the base price for 1.9 GHz

187
Pakistan Economic Survey 2011-12
band is set at USD 88.75 million (covering all
telecom regions).
• Mobile Banking
Introduction of efficient mobile banking services in
the country can utilize the strengths of mobile
networks to provide financial services to the large
unbanked (rural, poor) population as well as
increase the overall efficiency of the banking
sector in Pakistan. The State Bank of Pakistan
introduced the Branchless Banking Regulations in
March 2008. Subsequently, the Ministry of IT
issued the Policy Directive (May 2008) to support
the technical implementation of mobile banking in
the country. The government under the Policy
Directive states that a relevant telecom sector
policy framework is required to complement SBP
Branchless Banking Regulations. For
implementation of this Policy Directive, PTA
drafted the Third Party Service Providers
(Branchless Banking) Regulations 2011.
In order to provide an enabling regulatory
environment and develop cooperation for a
simplified mobile banking framework that can
allow license holders to take on branchless banking
activity and harness the full potential of such
services, the Pakistan Telecommunication
Authority and the State Bank of Pakistan (SBP)
signed a Memorandum of Understanding (MoU)
on 11th January, 2012. With this MoU, both the
institutions have shown their interest and
Table 13.13: Pakistan Telecommunication – Subscribers Category
Years FLL Subscribers WLL Subscribers
2007-08 4,548,350
2008-09 3,526,634
2009-10 3,419,271
2010-11 3,016,852
Jul-March 3,098,117
2011-12
Source: PTA
13.6 Electronic Media
13.6 (a) Pakistan Electronic Media Regulatory
Authority
The electronic media in Pakistan, remained
dominated, since independence, by the state-run
Pakistan Broadcasting Corporation and Pakistan
188
commitment in stimulating the mobile banking
services in the country. The SBP and PTA would
act as facilitators for third party service providers
for mobile banking in Pakistan.
• Cellular Mobile Network Quality of
Services Regulations, 2011
To ensure that mobile operators maintain quality of
service the PTA has prepared the Cellular Mobile
Network Quality of Services (QoS) Regulations,
2011. These regulations apply to all cellular mobile
operators and identify the minimum quality of
service standards and associated measurement,
reporting and record keeping tasks (except packet
switched or GPRS/EDGE services). The
Regulations have been gazette notified.
• GPRS/EDGE Service Quality of Service
Regulations, 2010
In order to maintain Mobile cellular Quality of
Service, Pakistan Telecom Authority prepared
GPRS/EDGE Key Performance Indicators (KPIs)
following the international standards and
consulting the industry. Further these KPI’s have
been incorporated in the regulations. These
regulations are applicable to all cellular mobile
communication service licensees for the purpose of
laying down quality of service parameters for
GPRS/EDGE services, to ensure consumer
satisfaction in line with the criterion determined by
the Authority from time to time.
(Nos.)
Mobile Phones Broadband
Subscribers
1,155,188 88,019,812 168,082
2,617,616 94,342,030 413,809
2,659,824 99,185,843 688,373
2,704,873 108,894,518 1,491,491
2,968,813 118,316,916 1,912,152
Television. Pakistan Television was launched in
November 1964. As access to diverse sources of
information was limited and people could not keep
abreast of the rapidly growing developments
around them, the government in 2002 opened up
the electronic media to the private sector in the
country. Pakistan Electronic Media Regulatory

Authority (PEMRA) as a statutory body was set up
with a view to facilitate through licensing and to
regulate the growth of the electronic media in the
private sector. PEMRA is mandated for regulating
the establishment and operation of all broadcast
media that is satellite TV, FM radio and
distribution services like Cable TV, DTH (Direct
To Home), IPTV (Internet Protocol TV), Mobile
TV etc. in the country.
Economic Contribution
Investment friendly policies of the government
have been conducive to the development of the
electronic media industry in the private sector.
According to estimates there has been a cumulative
investment of approximately U.S. dollar 2.5 billion
in the electronic media industry in Pakistan. New
jobs to more than 200,000 people of diversified
skills and qualifications have been provided. In
addition, over 7 million people have been
accommodated through indirect employment. With
the current growth rate of more than seven percent
per annum, it is estimated that the cumulative
Table 13.14: PEMRA Performance
Sr.No. Category
i. Satellite TV Channels
ii. Landing Rights Permission to TV Channels
iii. FM Radio licenses
iv. Cable TV Licenses
v. Multimedia, Multi Channels
Distribution System (MMDS)
vi. Internet Protocol Television (IPTV)
vii. Mobile TV license
viii. Mobile Audio Licenses
Source: PEMRA
13.6-(b) Pakistan Television Corporation
Limited (PTV)
PTV has launched Sports Channel on 11-01-2012.
To eliminate the disparity and uplift the socio-
economic conditions PTV is gradually extending
its signals in remote and economically backward
areas. Prime Minister inaugurated the Rebroadcast
Station at Bhimber on 12-03-2012 RBS in Neela-
But, Jura, Athmaqam, Karan, Dhudhnial, Sharda ,
Kel and Mirpur, Palandri are in progress. RBS at
Badin is in progress and National News Bureau at
Larkana is almost completed. Prime Minister
Transport and Communications
investment in the electronic media industry will
reach above $ 3.0 billion by the end of the current
financial year. This expansion in investment would
in turn have a multiplier effect on increasing job
opportunities for skilled media personnel and
journalists, expanding work of media production
houses, advertising agencies and proliferation of
the performing arts.
Present Status of Private Electronic Media
During the last decade the country has witnessed a
massive spurt in the number of TV channels and
FM Radio stations in the private sector which is
unmatched in the South Asian region. The
unprecedented growth of TV channels, Cable TV
and FM Radio stations has indeed contributed
remarkably in raising the standards of public
awareness and literacy. The massive growth which
has taken place in the electronic media in the
private sector in the last one decade is as follow:
Licenses Issued in
Total Licenses Issued
2011-12
06 89
10 26
06 157
600 3,000
-- 6
-- 01
04 04
02 02
inaugurated TV Centre at Multan on 30-12-2011.
RBS at Besham and Kohat are ready for
inauguration; RBCs at Buneer, Kund Bangla and
Pooran are in progress. RBCs at Kharan, and Bar
Khan are in progress. RBS Chilas, Gahkuch,
Khaplu, Shigar are ready for inauguration and RBS
at Aliabad/Karimabad, Jaglot/Bunji and Astore are
in progress. PTV will launch English channel
shortly. In fiscal year 2011-12 TV sets were 12,252
million in the country.
189
Pakistan Economic Survey 2011-12
13.6-(c) Pakistan Broadcasting Corporation
Pakistan Broadcasting Corporation is the largest
radio network in the country with a listenership
larger than all private radio channels in the
country. Its mission is to entertain and educate
people through music programmes, features and
plays.
Following are the prominent services of PBC:-
` National Broadcasting Services was launched
on 28th August, 2008. NBS has seventeen
hours daily transmission from 7 am to 12
midnight. The programmes are originated from
Islamabad and provincial capitals.
` PBC World Service broadcasts daily Urdu
programmes of 8 hours and 30 minutes
duration for the audience living abroad.
` PBC External Services, broadcast programmes
for 8 hrs daily in 11 foreign languages
covering Afghanistan, Iran, China, India,
Bangladesh, Nepal and Sri Lanka.
` Central Production Units (CPU) produce
music, drama, features, documentaries and
programmes for special occasions. CPU has
over 2 million minutes recording in its archives
which are being digitized.
` Pakistan Broadcasting Corporation has
established different FM Stations to cater to
the infotainment and educational needs of
listeners in their respective languages all over
the country.
` These stations are broadcasting programmes in
their respective local/regional languages and in
Urdu with a ratio of 70/30 respectively. Total
broadcast hours of these FM Stations are 260
hours daily.
` PBC News is putting on air 117 News bulletins
daily. These include National, Regional,
External and Local News bulletins besides
resume of National Assembly and Senate. In
addition PBC news launched the broadcast of
FATA News, special news bulletins from PBC
Hyderabad on rain/ flood situation and
ongoing rescue and relief activities in Urdu
and Sindhi languages.
190
` PBC has nine approved development projects
in hand for which an amount of Rs. 217.7
million has been allocated in 2012. The details
of these projects are given below:-
1 Balancing and Modernization of
equipment.
2 2 X 100 KW SW transmitters and HF
aerial system Landhi Karachi.
3 Up-gradation of PBC Larkana from 10
KW Medium Wave to 100 KW MW
transmitter.
4 Replacement of 100 KW MW transmitters
at Multan, Hyderabad & Muzaffarabad.
5 Establishment of PBA and IT Centre at
Lehtrar Road, Islamabad.
6 100 KW MW transmitter at Gwadar.
7 Establishment of 47 FM Radio Stations all
over Pakistan.
8 Replacement of 100 KW MW with 400
KW Medium Wave transmitter Peshawar
under USAID programme.
9 Replacement of 10 KW MW with 100 KW
MW transmitters D.I. Khan under USAID
programme and shifting of Broadcasting
House.
10 Installation of 100 KW MW transmitter
and BH at Turbat.
13.7 The Pakistan Post
To provide trust worthy, efficient and time
sensitive services to the customers, Pakistan Post
has offered full blend of Express Mail and
Financial Services. It provides services through a
network of 12,035 (1,797 urban and 10,238 rural)
post offices across the country. Some salient
achievements of the Post Office department are
given below:
Benazir Income Support Programme (BISP)
Complete web-based tracking and monitoring
system for disbursement of funds for Benazir
Income Support Programme (BISP) has evolved
that includes continuous processing, monitoring
and reconciliation of the specialized money orders
scheme. During the 1st nine months of the current

fiscal year (July-March) total 8,621,193 BISP
Money Orders along with required funds for
Rs.17,242.4 million were received from BISP
authorities, out of which 97 percent Money Orders
amounting to Rs.16,642.0 million have been paid
within prescribed period of time.
Western Union Money Remittances Business
During the first nine months of current fiscal year
(July-March), Pakistan Post has received the
foreign remittances amounting of Rs. 9,247.9
million.
Establishment of “Small & Smart” Express
Centers
To provide quality services to the customers, 55
Small and Smart Express Centers have been set up
in the urban areas. These Express Centers are fully
computerized and automated and cater the
requirements of the public. These canters facilitate
the customers, particularly in trade, commerce and
business. The services offer in these centers
include: Urgent Mail Service, urgent Money Order
Service, Expedited Mail Service, Fax Mail, Fax
Money orders, Payment of incoming foreign
remittances through Western Union, Acceptance of
Utility Bills, Traditional Services, Booking of
Inland and Foreign Parcels.
Achievements of Saving Bank
Pakistan Post has been doing Saving Bank work as
an agency function on behalf of the Ministry of
Finance under the government Savings Bank Act-
1873 on commission basis. During the period July-
March 2011-12 an amount of Rs. 160,266.9
million has been collected through National
Savings Schemes and earned commission
amounting to Rs. 801.3 million during this period.
Postal Life Insurance
Total Policies are 382,019, for a sum assured Rs.
49,507.9 million and a Premium Income is Rs.
1,993.8 million.
Transport and Communications
Computerization
Counter Automations System
Over one hundred General Post Offices including
renovated post offices through out Pakistan have
been provided with counter computerization
facilities for the better service quality to the
customers through a LAN based system.
Computerized Pension Payment System
Over 1.4 million Civil and Military pensioners are
being served by Pakistan Post about 1.3 million
pensioners has been disbursing pension from
Pakistan Post. The pensioners are receiving the
pension in a hassle free environment. Pakistan Post
is also disbursing pension to over 40,000 PTCL
pensioners. Pakistan Post has also developed a
separate system for PTCL pension disbursement.
Conclusion
With the continuing expansion of the
transportation and communication sector
throughout the country, Pakistan is preparing for
the future in various areas from creating vast
transport networks to building up a sustainable
information technology infrastructure with the
objective of setting the foundations for continued
growth and success. Despite such challenges in
areas of natural disaster recovery and difficult
terrain to develop upon, transportation
developments have continued, and expect to
expand. Communications infrastructure has
widened despite challenges with security, power
outages and rough terrain in which to build upon.
The cellular mobile sector has been a major
contributor to the expanding market for
telecommunication and the various technologies
that come with it, bringing the country to high
standards of telecommunication structures on par
with the rest of the world. This area is expected to
grow at an accelerated pace due to demand,
however it is important that capital and
investments come with it. Overall, the
transportation and communication arena remains
strong, is changing, expanding and seeking to meet
with the needs of Pakistan’s citizen.
191
 Chapter 14

Energy

Energy is considered to be the lifeline of economic
development. For a developing economy with a
high population growth rate, it is important to keep
a balance between energy supply and emerging
needs. If corrective measures are not effectively
anticipated significant constraints start emerging
for development activities.
The rise in global energy demand has raised
questions regarding energy security and increased
the focus on diversification, generation and
efficient allocation. The answer lies in the
attainment of optimal energy mix through fuel
substitution by promoting energy efficiency and
renewable energy and interregional co-operation.
However, oil and natural gas will continue to be
the world’s top two energy sources through 2040;
accounting for about 60 percent of global demand.
Gas being the fastest growing major fuel source
over this period is expected to grow at 1.6 percent
per year from 2010 to 2040 as estimated by “The
Outlook for Energy: A View to 2040” is given in
Figure-14.1.

Figure 14.1: Global energy demand by fuel type (Quadrillion BTUs)

250
2040 From its peak in 2025, coal Latin America and
Quadrillions British Thermal Units

2010 will decline by more than 10 China are the biggest

200 2040 users of hydro
percent of total Hydro/Geo
2010 power, which makes up
2010 over 80 percent of total
150 2040 Hydro/Geo supplies

100
2040 2010 2040
50 2010 2040
2010 2040 2010

0
Nuclear

Renewable
Biomass
Oil

Coal
Gas

Hydro
/Waste

Other

Source: The Outlook for Energy: Aview to 2040

Pakistan’s economy has been growing at an between economic growth and energy demand, the
average growth rate of almost 3 percent for the last government is making all possible efforts to
four years and demand of energy both at address the challenges of rising energy demand
production and consumer end is increasing rapidly. (Box-1).
Knowing that there is a strong relationship

193
Pakistan Economic Survey 2011-12

Box- 1
Reforms of Present Government addressing Energy Crises
Oil Sector Reforms

The Federal Government, in pursuance of its deregulation policy, has deregulated prices of Motor Spirit (MS), High
Octane Blending Component (HOBC), Light Diesel Oil (LDO), Jet Propellant 1 (JP1), Jet Propellant 4(JP4) and Jet
Propellant 8 (JP8) w.e.f. June 1st, 2011. Refineries and Oil Marketing Companies (OMCs) are allowed to fix and
announce their ex-refinery price and ex-depot prices of above mentioned products on monthly basis. Under the
deregulation framework POL prices have been linked with Pakistan State Oil (PSO) actual import price. In case of
non availability of PSO import prices, the refineries will fix their ex-refinery price as per existing Import Parity
Pricing (IPP) formula.

Gas Sector Reforms

To mitigate the gas shortage, government has designed different policies not only for exploration of new local gas
reserves but also for import of gas like Liquefied Natural Gas (LNG) most mentionable are Liquefied Petroleum
Gas (LPG) Policy 2011 and Liquefied Natural Gas (LNG) Policy 2011.

Coal Sector Reforms

Federal and Provincial Governments are endeavoring to harness the huge coal resources of Thar by utilizing it as a
source of energy for power generation through international investment.

As part of promotional activity to increase the share of coal, the Government of Sindh has leased out a coal block for
an integrated mining project to many companies like M/s Engro Powergen (Pvt.) Limited, M/s Cougar Energy UK
limited, M/s Oracle Coalfield Plc, UK, M/s Bin Daen Group, UAE and M/s China National Machinery Import &
Export Corporation of China (CMC) for coal mining and installing coal-fired power plant

Power Sector Reforms

Government of Pakistan (GoP) initiated structural reforms in the power sector under the Power Sector Reform Plan
(2010) finalized by Cabinet Committee on Restructuring (CCOR). Implementation of Power Sector Reform Plan
2010 has been expedited and upgraded under the Power Sector Recovery Plan 2011. The plans are based on the
following key pillars: Improved governance structure: b) Supportive legal framework c) Financial sustainability;
(d) Supply side management; (e) Demand side management and f) Promote private sector participation in the sector.

Power Sector Subsidy

The timely payment of tariff differential subsidy (TDS) is being ensured along with subsidies for KESC and FATA
on monthly basis. All subsidy claims till December 2011 (Rs.56 billion) have been disbursed. GoP started 2012 with
no outstanding claims of TDS against any power sector company. For 2012, overall subsidy is estimated to be Rs.91
– 125 billion. Monthly financial planning is being implemented for smooth financial flow. General Sales Tax (GST)
exemption withdrawn for lifeline and agriculture consumers (Rs. 10 billion budgeted by GoP for 2012). GoP aims to
phase out subsidies to power sector which have cost rupees one trillion in last 4 years.

Resolution of Circular Debt

Circular debt refers to the unpaid bills by Pakistan Electric Power Company (PEPCO) to key players especially Oil
companies, Gas companies, Independent Power Producers (IPPs) and Water and Power Development Authority
(WAPDA).

194

Stock Issue
• Recovery of receivables of Distribution
Companies (DISCOs) of Rs. 354 billion (Feb
2012) is essential to clear the circular debt
against payables of Rs. 398 billion (April 2012).
• Unpaid power tariff differential subsidy (Rs.
301billon) until 30 June 2009 picked up by GoP
through Power Holding Private Limited (PHPL)
company. Stock of Rs.120bn of outstanding
tariff differential subsidy (TDS) for FY10 was
picked up by the Federal Government in May
2011.
• Debt swap of Rs. 150 billion has been done
which covers sizeable proportion of circular
debt.
Supply Side Management
• 3,400 MW has been added since 2008.
• Most efficient plants are being dispatched to
maintain to conserve fuel.
• Economic dispatch to conserve fuel is being
implemented.
• Gas Supply to Karachi Electric Supply
Corporation (KESC) has been increased to
improve fuel mix and ensure maximum supply.
• Change Combined Cycle plants to coal (24
months).
• Mangla raising project is completed and the
project is also inaugurated.
• Diamer Bhasha Dam of 4,500MW generation
capacity inaugurated
• 1400MW Tarbela 4th extension initiated.
During 2011-12, energy outages in Pakistan
continued to be the dominant constraint in its growth.
Yet, traces of energy supply shortages can be traced
to the independence of the country. Till the 1980s
less than two-third of the energy requirements were
met through its own domestic resources. In the 1990s
Pakistan was still engaged in various efforts to bridge
the wide gap between increasing demand and limited
energy supply. Further in the early 2000s, the energy
sector (especially its sub sector electricity) received
greater attention because of the faster rate of growth
in its demand. By 2011-12, electricity and gas
shortages are considered to be the primary cause of
constrained production activities in a number of
industries. Energy intensive industries (Petroleum,
Iron and Steel, Engineering Industries and Electrical)
shaved off 0.2 percentage points from real GDP
growth in 2010-11 and in 2011-12. Also, the
estimated cost of power crises to the economy is
Energy
Flow Issue
• Efforts for 100 percent recovery of current bills are
underway along with disconnection of defaulters
after 45 days (reduced from 90 days) without any
exemption/discrimination. A total of 210,301
disconnections carried out during July-Feb 2012.
• Two months security deposit shall be paid by new
and defaulting consumers to get a reconnection.
• Refund of General Sales Tax (GST) on uncollected
bills of more than 180 days has been approved
Demand Side Management
• Lines losses reduced from 20.4 percent (FY10) to
19.6 percent (FY11). Loss mapping in each
Distribution Companies (DISCOs) is in progress to
exactly pin-point the losses and their sources to
achieve the target of 18.7 percent losses in FY12.
• Load Management conservation measures to save
about 1000MW put in place.
• Promote Private Sector Participation in the Sector
• Expression of Interest (EOI) for private bidders
issued for O&M contracting for Generation
Companies (GENCOs).
• GoP in the process of finalizing Operations and
maintenance (O&M) contracting wherever required
for Distribution Companies (DISCOs).
• Work on coal fired plants has been expedited.
approximately Rs.380 billion per year, around 2
percent of GDP, while the cost of subsidies given to
the power sector to the exchequer in the last four
years (2008-2012) is almost 2.5 percent of GDP, (Rs.
1100 billion). The liquidity crunch in the power
sector has resulted in under utilization of installed
capacity of up to 4000MW. It has also affected
investment in power sector.
Flood was one of the factors which caused electricity
and gas shortage as it damaged the distribution
network (i.e., 90 percent of distribution transformers
to the petroleum and gas fields). “The total damage to
the energy sector was of Rs 1.2 billion (US$ 14.2
million) according to Asian Development Bank
Report, “2011 Pakistan Floods; Preliminary Damage
and Needs Assessment”. Lower accumulation of
water reserves in dams along with high international
prices of oil has compounded the pressure on
195
Pakistan Economic Survey 2011-12
electricity as there is still significant share of oil
(furnace) in electricity generation (about 35.1
percent) which is vulnerable to the international
prices. Further the oil refineries have also been
running below capacity, thus constraining the supply
of oil and other fuels. Likewise, in the gas sector,
Pakistan faced severe shortages that exceeded
approximately 2 billion cubic feet per day as local
production was unable to keep pace with the
requirements of the country. This was due mainly to
the depletion of existing resources, unfavorable law
and order situation and lukewarm interest of
exploration and production companies etc. However,
the geographical location of the country makes it a
favourable potential market for the import of natural
gas from its neighboring countries like Iran, India and
Turkmenistan. The government has, therefore, taken
the initiative to import gas from these countries. The
initial projects in this regard are Iran-Pakistan
Pipeline and Turkmenistan-Afghanistan-Pakistan-
India gas pipeline. To mitigate the energy crisis, the
government has notified the Liquefied Natural Gas
(LNG) Policy 2011 which encourages private parties
to develop LNG projects and sets them free to
participate in any segment of the LNG value chain. In
order to solve issues in power sector, the government
has decided to construct five multi-purpose water
Pakistan’s Energy Sector1
Figure 14.2: Pakistan’s Energy Sector Consumption and Supply 2010-112
Oil Products
(29 %)
Energy Consumption (38.8
million TOE) by Share of
Sectors
Transformation (−17.8 million TOE)
Diversions (−7.4 million TOE)
Statistical Differ (−0.5 million TOE)
Energy Supply (64.5
million TOE) by Share of
Sources
Natural Gas
(47.6%)
1
Data on variables of energy is given on calendar year instead of fiscal year
2
TOE (tonne of oil equivalent) is a unit of energy. It is considered as an amount of energy released by burning one tonne of crude
oil approximately equal to 42 GJ. [1 TOE = 41.868 GJ = 11, 630 Kilowatt Hours =39.683 million Btu]
196
storages in the country during the next 10 -12 years.
The Diamer Basha Dam Project - the world's highest
Roller Compacted Concrete Dam - is the most
mentionable achievement. Also Pakistan is one of the
beneficiaries of Tetra-partner power import project
under the head of Central Asia-South Asia (CASA-
1000) electricity trade.
To ensure energy security and sustainable
development in the country, the government is also
taking all possible measures to diversify its energy
mix. In this the regard government has given due
attention to fast track the development of Alternative
/ Renewable Energy (ARE) resources in the country.
The Alternative Energy Development Board (AEDB)
has updated the Renewable Energy (RE) Policy,
2006, in consultation with the provinces and other
stakeholders. The policy includes all (Alternative
Renewable Energy (ARE) technologies including
Wind, Solar, Hydro, Biogas, Cogeneration, Waste-to-
Energy, and Geothermal; providing extremely
attractive financial and fiscal incentives to both local
and foreign investors while offering them a level
playing field. It is expected that with the approval of
the policy and government’s keen interest in energy
sector, the situation will improve significantly in near
future.
Energy Consumption (38.8 million TOE) by Share of Sources
Gas LPG Electricity Coal
(43.2 %) (1.3%) (16.2 %) (10.4 %)
LPG Oil Coal Electricity
(0.5%) (32.0%) (6.7%) (13.1%)
Crude Oil Petroleum
(15.7%) Products (16.3%)
 Energy

followed by oil (29.0 percent). As shown in Fig-

14.1 Energy Consumption
14.3, the major consumption source of natural gas
Pakistan’s total energy consumption stood at 38.8 witnessed an increase in share by almost 4
million tonnes of oil equivalent in 2010-11. The percentage points during 2010-11 compared to
relative importance of the various sources of 2005-06. This is due to the substitution effect to a
energy consumption of Liquid Petroleum Gas cheaper source from an expensive source. Since oil
(LPG), electricity and coal has been broadly is the more expensive fuel because of Pakistan’s
similar since 2005-06. The share of gas imports at the high international prices the share of
consumption stood at the highest equal to 43.2 oil consumption declined by 3.0 percentage points
percent of the total energy mix of the country, during the period under review.
Figure 14.3: Energy Consumption by Sources in %: A Comparison between
2005-06, 2008-09 & 20010-11
50.0
45.0 43.2
39.3
40.0
35.0 32.0
29.0
30.0
Share in percentage

25.0
20.0 16.2 16.2
15.0
10.6 10.4
10.0
5.0 1.8 1.3
0.0
Oil Gas LPG Electricity Coal
2005-06 32.0 39.3 1.8 16.2 10.6
2008-09 29.0 43.7 1.5 15.3 10.4
2010-11 29.0 43.2 1.3 16.2 10.4
Source: Hydrocarbon Development Institute of Pakistan

The consumption of petroleum products showed a annual energy consumption is shifting from
continuous declining trend since 2001-02. petroleum products to other energy sources due to
However due to positive changes in years 2004-05, volatile prices of oil. Thus consumption of gas,
2007-08 and 2009-10, the overall average for last electricity and coal has increased at an average of
ten years became positive 1.1 percent per annum. 5.1 percent, 4.8 percent and 7.7 percent per annum
The longer term trend suggests that composition of for last ten years as shown in Table 14.1.
Table:14.1: Annual Energy Consumption
Petroleum Products Gas Electricity Coal
Fiscal
Year Tonnes M.T*
Change (%) (mmcft) Change (%) (Gwh) Change (%) Change (%)
(000) (000)
2001-02 16,960 -3.9 824,604 7.4 50,622 4.2 4,409 9.0
2002-03 16,452 -3.0 872,264 5.8 52,656 4.0 4,890 10.9
2003-04 13,421 -18.4 1,051,418 20.5 57,491 9.2 6,065 24.0
2004-05 14,671 9.3 1,161,043 10.4 61,327 6.7 7,894 30.2
2005-06 14,627 -0.3 1,223,385 5.4 67,603 10.2 7,714 -2.3
2006-07 16,847 15.2 1,221,994 -0.1 72,712 7.6 7,894 2.3
2007-08 18,080 7.3 1,275,212 4.4 73,400 0.9 10,111 28.1
2008-09 17,911 -0.9 1,269,433 -0.5 70,371 -4.1 8,390 -17.0
2009-10 19,132 6.8 1,277,821 0.66 74,348 5.7 8,139 -3.0

197
Pakistan Economic Survey 2011-12

Table:14.1: Annual Energy Consumption

Petroleum Products Gas Electricity Coal
Fiscal
Year Tonnes M.T*
Change (%) (mmcft) Change (%) (Gwh) Change (%) Change (%)
(000) (000)
2010-11 18,887 -1.3 1,240,671 -2.91 77,099 3.7 7,717 -5.2
Avg. 10 1.1 5.1 4.8 7.7
years
July-Mar
2010-11(e) 13,802 − 939,950 − 56,194 − 5,850 −
2011-12** 13,879 0.6 957,275 1.8 54,595 -2.8 4,730(e) -19.1
Source: Hydrocarbon Development Institute of Pakistan
*: Million Ton −: Not Available
e: Estimated **: Consumption of electricity for AJK and KESC for the months Jan to Mar 2012 is not available

considered as necessary inputs of the power sector,

14.2-a Petroleum Product
During the first three quarters of current fiscal year
the overall consumption of petroleum products
increased to 13,879 million tonnes in the period
July-March 2011-12 compared to 13,802 million
tonnes in corresponding period of 2010-11 thus
posting a positive growth of 0.6 percent. The major
decline was in the agriculture sector (40.8 percent)
followed by the government sector (20.3 percent).
Similarly the power sector and household sector
had also shown negative growth in the
consumption of petroleum products for the period
under discussion posting -5.2 percent and -8.0
percent respectively. Although petroleum products
yet the negative growth in power as well as
household sector can be attributed to changes in
demand behavior toward relatively cheaper
alternatives. The industry sector had shown
positive growth of 24.2 percent in the consumption
of petroleum products during the period of July-
March 2011-12 when compared with July-March
2010-11, mainly due to recovery in economic
activity. The transport sector usually consumes
high quantity of petroleum products but
surprisingly this sector showed a relative small
growth of 3.5 percent during the period under
consideration.

Table 14.2: Consumption of Petroleum Products (000 tones)

Year House Change Industry Change Agriculture Change Transport Change Power Change Other Change Total
holds (%) (000 (%) (000 (%) (000 (%) (000 (%) Govt (%) 000
(000 tonnes) tonnes) (a) tonnes) tonnes) (000 tonnes)
tonnes) tonnes)
2001-02 335 -25.7 1,612 -16.2 226 -11.4 8,019 -1.7 6,305 -2.8 464 24.7 16,960
2002-03 283 -15.5 1,604 -0.5 197 -12.8 8,082 0.8 6,020 -4.5 266 -42.7 16,452
2003-04 231 -18.4 1,493 -6.9 184 -6.6 8,464 4.7 2,740 -54.5 309 16.2 13,421
2004-05 193 -16.5 1,542 3.3 142 -22.8 9,025 6.6 3,452 26 317 2.6 14,671
2005-06 129 -33.2 1,682 9.1 82 -42.3 8,157 -9.6 4,219 22.2 359 13.2 14,627
2006-07 106 -17.8 1,596 -5.1 97 18.3 7,982 -2.1 6,741 59.8 325 -9.5 16,847
2007-08 121 14.1 1,071 -32.9 109 12.7 9,384 17.6 7,084 5.1 311 -4.5 18,080
2008-09 97 -19.5 969 -9.5 70 -36.2 8,837 -5.8 7,750 6.9 367 18.2 17,911
2009-10 90 -7.5 985 1.6 58 -16.9 8,861 0.3 8,814 16.4 323 -12.0 19,131
2010-11 85 -5.6 1,355 37.6 41 -29.3 8,892 0.3 8,139 -7.7 374 15.8 18,887
Avg. 10
-14.6 -2.0 -14.7 1.1 6.7 2.2
years
July-Mar
2010-11 67.3 - 919.2 - 35.8 - 6,599.1 - 5,913.4 - 267.4 - 13,802
2011-12* 61.9 -8.0 1,141 24.2 21.2 -40.8 6,832.9 3.5 5,608.8 -5.2 213.1 -20.3 13,879
Source: Hydrocarbon Development Institute of Pakistan
(a) High Speed Diesel (HSD) consumption in agriculture is not available separately and is included under transport sector. Agriculture sector
represents only Light Diesel Oil (LDO)
*: Oil/POL product consumption for the month March 2012 is missing

The share of Punjab in consumption has declined percent in 2010-11. There was an increase in the
from 59.3 percent during the last fiscal year to 57 share of Sindh to 24 percent this year as compared

198
 Energy

to 21.4 percent last year. The share of Balochistan relatively higher share than KPK in the
and Khyberpakhtunkhwa (KPK) remained constant consumption of petroleum products as is evident
over the last four years with Balochistan having a from the figure below

Figure 14.4: Share of Provinces in Consumption of Petroleum Products

70.0
Percentage Share in Total Consumption

Punjab
60.0

50.0

40.0

30.0
Sindh

20.0
Balochistan
10.0
KPK A.J. Kashmir
0.0
2008 2009 2010 2011

Source: Directorate General of Petroleum Concessions (DGPC) Years

14.2-b Natural Gas decline in consumption of gas and posted a

negative growth of 12.5 percent during 2010-11.
The consumption pattern of gas by different users
This sector also showed negative growth of 6.8
since 2001-02 is presented in Table 14.3. The
percent during July-March 2011-12 when
analysis of the sectoral consumption of gas
compared to the same period during 2010-11. The
indicates that during July-March 2011-12, the
transport sectors is the most significant sector;
consumption of gas in the cement sector was 1.4
posting a positive growth in gas consumption of
billion cubic feet compared to 0.6 billion in the
14.2 percent during 2010-11 as compared with
corresponding period during 2010-11 thus posting
2009-10 and a positive growth of 10.8 percent
a positive growth of 133 percent during the period
during July-March 2011-12 as compared with the
under review. The industrial sector experienced a
same period during 2010-11.

Table 14.3: Consumption of Gas (Billion Cft)

Year Commercia Change Change Change Change Change Transport Change
Household Change (%) Cement Fertilizer Power Industrial Total
l (%) (%) (%) (%) (%) (CNG) (%)
2001-02 144 2.1 22 4.8 7 0.0 178 1.7 315 12.1 151 8.6 7 66.6 825
2002-03 154 6.9 23 4.5 3 -57.1 181 1.7 336 6.7 165 9.3 11 53.6 872
2003-04 155 0.6 24 4.3 8 166.7 185 2.2 470 39.9 193 17.0 16 40.1 1,051
2004-05 172 11.0 27 12.5 13 62.5 190 2.7 507 7.9 226 17.1 24 54.1 1,161
2005-06 171 -0.6 29 7.4 15 15.4 198 4.2 492 -3.0 279 23.5 39 59.1 1,223
2006-07 186 8.8 31 6.9 15 0.0 194 -2.0 434 -11.8 307 10.0 56 45.2 1,222
2007-08 204 9.7 34 9.4 13 -15.1 200 3.1 430 -1.0 323 5.1 72 27.6 1,275
2008-09 214 4.9 36 4.8 7 -42.6 201 0.5 404 -6.0 319 -1.1 88 22.5 1,269
2009-10 219 2.4 37 4.1 2 -73.4 220 9.4 367 -9.2 334 4.5 99 12.2 1,278
2010-11 232 5.9 36 -1.3 1 -27.8 228 3.6 337 -8.0 292 -12.5 113 14.2 1,241
Avg. 10
5.2 5.7 2.9 2.7 2.8 8.1 39.5
years
July-Mar
2010-
185.9 - 27.2 - 0.6 - 166.9 - 254.4 - 223.6 - 81.4 - 940.0
11(P)
2011-12
205.4 10.5 29.4 8.1 1.4 133.3 159.0 -4.8 263.5 3.6 208.5 -6.8 90.2 10.8 957.3
(P)
Source: Hydrocarbon Development Institute of Pakistan
P: Provisional

199
Pakistan Economic
E Surrvey 2011-122

Figuree 14.5: Share off Provinces in

Like petrooleum productts, the share of
o Punjab in the
Connsumption of Natural Gas
consumptiion of natural gas in 2010-11 is higher (53.2
%) follow
wed by Sindh (35.3%). Balocchistan and KP PK
respectively have smaller shares of 7.1 percent anda KPPK's Balochistan's
4.4 percennt. Sinndh's Sharre, 4.4 Share, 7.1
Sharee, 35.3

14.2-c Eleectricity
The electtricity consum mption duringg 2010-11 wasw
77,099 GW Wh as compaared to 74,3488 GWh in 20009-
Punjab'ss
10, howevver during thee period July-March 2011--12 Share, 53..2
its consum
mption decreaased to 54,5955 GWh from 56,
194 GWh in correspond ding period 20010-11 posting a
Souurce: Directorate General of Petrooleum Concessionns
decrease of almost 3 percent. Durring July-Marrch (DG
GPC)
2011-12 agriculture, commercial, industrial and a
householdd sector also sh
how negative growth of -133.6,
-11.9, -100.1 and -7.0 percent resppectively (Taable
14.4).
Table 14.4: Coonsumption of Electtricity by Sectors
Year T
Traction Househ hold Commeercial Indu ustrial Agrriculture Street Light Other Govt. Total
GWh ChangeC GWh Change GWh Change GWh Change GWWh Change GWh
G Change ((GWh)
(000) (%) (000) (%) (000) (%) (000) (%) (%) (0000) (%)
2001-02 11 23.2 1.8 3.0 7.1 15.1 5.6 5.6 14.3 212 -0.5 3.5 0.0 50622
2002-03 10 23.6 1.7 3.2 8.5 16.2 7.3 6
6.0 7.1 244 15.1 3.4 -2.9 52656
2003-04 9 25.8 9.3 3.7 15.6 17.4 7.4 6
6.7 11.7 262 7.4 3.7 8.8 57491
2004-05 12 27.6 7.0 4.1 10.8 18.6 6.9 7
7.0 4.5 305 16.4 3.8 2.7 61327
2005-06 13 30.7 11.2 4.7 14.6 19.8 6.5 7
7.9 12.9 353 15.7 4.0 5.3 67603
2006-07 12 33.3 8.5 5.4 14.9 21.1 6.6 8
8.2 3.8 387 9.6 4.4 10.0 72712
2007-08 8 33.7 1.2 5.6 3.7 20.7 -1.9 8
8.5 3.7 415 7.2 4.5 2.3 73400
2008-09 5 32.3 -4.2 5.3 -5.4 19.3 -6.8 8
8.8 3.5 430 3.6 4.3 -4.4 70371
2009-10 2 34.2 5.9 5.6 5.7 19.8 2.6 9
9.7 10.2 458 6.5 4.5 4.7 74348
2010-11 1 35.9 5.0 5.8 3.6 21.2 7.1 9
9.0 -7.2 456 -0.4 4.8 6.7 77099
Avg. 10 years 4.7 7.9 4.1 6.4 8.1 3.3
July-March
2010-11 (e) − 25.8 - 4.2 - 15.8 - 6
6.6 - 321 - 3.5 - 56,194
2011-12* 1 24.0 -7.0 3.7 -11.9 14.2 -10.1 5.7 -13.6 323 0.6 6.7 91.4 54,595
Source: Hydroccarbon Development Institute of Pakistann
(e): Estimated *:
* The electricity con
nsumption data of AJJK and KESC for thee month January to March
M 2012 is not avaailable

almost constant in all provinces over timee. On

The shaare of the provinces in electriccity
averagee Punjab has 62 percent, Sindh
S 20.2 peercent,
consumpttion for the laast four year is shown in the
t
KPK 11.4
1 percent and Balochhistan 5.5 peercent
figure bellow. It shows that this sharre has remainned
share inn electricity consumption.
c

Figure 14.6: Share of Provvinces in Conssumption of E

Electricity
Percentage Share in Total Consumption

70.0 Puunjab
60.0
50.0
40.0
30.0 S
Sindh
20.0
K'
KPK
10.0
A.J. Kashmiir' Balochisstan'
0.0
006
20 2
2007 2008 2009 2010 2011
S
Source: Directoratee General of Petrolleum Concessionss (DGPC) Years

200
 Energy

was consumed by the brick kiln industry during the

14.2-d Coal
period 2010-11. The longer term trend analysis
Pakistan has huge coal resources estimated at over shows that for the last ten years, on average, the
185 billion tonnes; including 175 billion tonnes, cement sector and brick kilns have been the highest
identified at Thar coalfields in the Sindh province. consumers of coal. The reason for the high share of
Pakistan’s coal generally ranks from lignite to sub- consumption of coal in the cement industry is due
bituminous. The major user of coal are the cement to switching over to coal from furnace oil which
sector and brick kilns; about 60 percent of total has increased the utilization of indigenous as well
coal was consumed by cement while 39 percent as imported coal (Table 14.5).
Table 14.5: Consumption of Coal by Sectors
Year Household Power Brick Kilns Cement Total (000
(000 metric Share (%) (000 metric Share (%) (000 metric Share (%) (000 metric Share (%) metric
tonnes) tonnes) tonnes) tonnes) tonnes)
2001-02 1 0.0 249 5.7 2,578 58.5 1,581 35.9 4,409
2002-03 1 0.0 204 4.2 2,607 53.3 2,078 42.5 4,890
2003-04 1 0.0 185 3.0 2,589 42.7 3,289 54.2 6,065
2004-05 − − 180 2.3 3,907 49.5 3,807 48.2 7,894
2005-06 − − 149 1.9 4,222 54.7 3,343 43.3 7,714
2006-07 1 0.0 164 2.1 3,278 41.5 4,451 56.4 7,894
2007-08 1 0.0 162 1.6 3,761 37.2 6,187 61.2 10,111
2008-09 1 0.0 113 1.3 3,275 39.0 5,002 59.6 8,390
2009-10 − − 126 1.5 3,005 36.9 5,008 61.5 8,139
2010-11(P) − − 97 1.3 3,004 38.9 4,617 59.8 7,717
Avg. 10 0.0 2.5 45.2 52.3
years
Jul-Mar
2010-11 − − 44.6 3,305.5 2,500.0 5,850.0
2011-12(P) − − 56.0 25.6 2,274.0 -31.2 2,400.0 -4.0 4,730.0
Source: Ministry of Petroleum Natural Resource & Hydrocarbon Development Institute of Pakistan
−: Not available P: Provisional

14.3 Supply of Energy 2011 remained 0.372 TOE compared to 0.371 TOE
in 2010 posting a positive growth rate of 0.16
Primary energy supply has increased by 2.3
percent (Table 14.6). Due to population growth
percent during current year when compared with
rate of almost 2 percent, the balance between
last year. The availability of energy per capita in
energy supply and emerging needs was outset.
Table 14.6: Primary Energy Supply and Per Capita Availability
Year Energy Supply Per Capita
Million TOE Change (%) Availability (TOE) Change (%)
2001-02 45.07 1.5 0.32 -1.25
2002-03 47.06 4.4 0.32 0.00
2003-04 50.85 8.1 0.34 6.25
2004-05 55.58 9.3 0.36 5.88
2005-06 58.06 4.5 0.37 2.78
2006-07 60.62 4.4 0.38 2.70
2007-08 62.92 3.8 0.39 2.63
2008-09 62.55 -0.6 0.38 -2.56
2009-10 63.09 0.9 0.36 -5.26
2010-11 64.52 2.3 0.36 0.00
Source: Hydrocarbon Development Institute of Pakistan.
−: Not Available estimated

201
Pakistan Economic Survey 2011-12

Analysis of the composition of final energy petroleum products and crude oil with average
supplies in the country suggests that the supply of growth rates of 5.7 percent, 3.4 percent, 2.1
coal during last ten years grew at an average rate of percent and 0.4 percent, respectively.
7.5 percent per annum followed by gas, electricity,

Table 14.7: Composition of Final Energy Supplies

Year Crude Oil Petroleum Gas Electricity Coal
Products
Million Change (Mln.T.) Change (bcf)(a) Change (000Gwh) Change (Million Change
Barrels (%) (%) (%) (b) (%) Tonnes) (%)
2001-02 75.2 2.1 18.1 1.6 923.8 7.7 72.4 6.3 4.4 7.3
2002-03 76.0 1.1 17.5 -2.9 992.6 7.4 75.7 4.6 4.9 11.4
2003-04 80.3 5.7 14.9 -14.9 1,202.7 21.2 80.9 6.9 6 22.4
2004-05 85.3 6.2 16.2 8.3 1,344.9 11.8 85.7 5.9 7.9 31.7
2005-06 87.5 2.6 16.5 2.2 1,400.0 4.1 93.8 9.5 7.7 -2.5
2006-07 85.3 -2.5 18.6 12.9 1,413.6 1.0 98.4 4.9 7.9 2.6
2007-08 90.5 6.1 19.8 6.1 1,454.2 2.9 95.9 -2.5 10.1 27.8
2008-09 86.1 -4.8 19.8 0.1 1,460.7 0.4 91.8 -4.3 8.4 -16.8
2009-10 76.8 -10.9 20.2 1.9 1,482.8 1.5 95.6 4.1 8.2 -2.4
2010-11 75.3 -1.9 21.3 5.5 1,471.6 -0.8 94.7 -0.9 7.7 -6.1
Avg. 10
0.4 2.1 5.7 3.4 7.5
Year
July-Mar
2010-11(e) 56.6 - 16.0 - 1,110.0 - 69.0 - 5.9 -
2011-12 (e) 53.9 -4.9 14.8 -7.8 1,164.9 4.9 64.8 -6.1 4.7 -20.3
Source: Hydrocarbon Development Institute of Pakistan (HDIP)
(a): Billion cubic feet, (b): Giga Watt hour , (e): Estimated
*: Coal and electricity data is estimated on the basis of six months
**: Hydel generation for the month of March 2012 is missing. Thermal Generation from WAPDA for the months of
Feb to Mar 2012 is missing

The main hurdle in the supply of energy was
accumulation of the massive circular debt. The
major problems which cause accumulation of
circular debt were the partial transfer of tariff as
determined by National Electric Power Regulatory
Authority (NEPRA), heavy line losses (present
level of line losses are almost 20 percent),
incomplete corporatization, weak governance and
costly fuel mix putting an extra financial burden on
meeting the cost of fuel oil due to constant increase
in the oil prices, etc. The government has made all
possible attempts to address this issue. The
government has transferred bank loan liabilities of
Rs 216.0 billion (as of 30-06-2009) and Rs. 85.114
billion from the books of power companies and
placed these amounts with the Power Holding
(Pvt) Ltd (PHPL) in November, 2011. The
government has repaid these loans to the bank
along with markup.
` During 2010-11 the Finance Division released
Rs. 65 billion as well as Rs. 120 billion as
tariff subsidy to Pakistan Electric Power
Company (Pvt) Ltd (PEPCO) over and above
the budgetary allocation to overcome its
operational shortfall and relax the Circular
Debt.
` With the approval of the Cabinet, funds
amounting to Rs. 142.0 billion have been
raised from the banks in March 2012 and paid
to Independent Power Producers (IPPs) by
PEPCO. Another transaction for raising funds
to the tune of Rs. 20 billion is in process for
payment of overdue of Independent Power
Producers (IPPs) / Gas Companies/ Pakistan
State Oil (PSO) etc to overcome/reduce the
Circular Debt.
` The power sector was allowed to transfer the
cost of power to the consumers through the

202
 Energy

tariff increases of 6%, 12% and 6% at the start ` To enable the Power Sector to meet its cash
of the three quarters on 1st Jan, 1st April and 1st shortfall, the following Tariff Differential
October 2010. Subsidies have been released during the
period:

Table 14.8: Tariff Differential Subsidies (Rs. in billion)

2008-09 2009-10 2010-11 2011-12 (upto Mar-12)
109.173 178,841 346.096 93.250
Source: Corporate Finance Wing

Because of the policy implementation by the declining trend over the period July-Mar 2011-12
government the inter circular debt has shown a as shown in figure below:

Figure 14.7: Inter Corporate Circular Debt for period July-March 2011-12

350,000

300,000
Intercircular Debt
250,000
Rs in Million

200,000

150,000

100,000

50,000

0
Jul Aug Sept Oct Nov Dec Jan Feb Mar
Source: Corporate Finance Wing
July-March 2011-12

14.3-a Crude Oil produced in northern region and 26364 (40

percent) barrels per day in southern region, as
The total supply of crude oil for the fiscal year
against 34762.28 (53 percent) barrels and 31234.22
2010-11 was 75.3 million barrels, equal to 10.1
(47.33 percent) barrels produced per day
million TOE, out of which 68.1 percent was
respectively in the same period last year. During
imported and 31.9 percent was locally extracted.
July 2011 to March 2012, production of crude oil
The balance recoverable reserves of crude oil in
has increased by 14.11 percent from northern
the country as on December 31st, 2011 have been
region whereas production decreased in southern
estimated at 247.53 million barrels in the country.
region by 16 percent, as compared to same period
The average crude oil production during July 2011
last year overalls 0.05 percent oil production
to Mar 2012 remained 66032 barrels per day as
increased in the country. The company wise detail
against 65997 barrels per day during the
of production of crude oil during July-March 2011-
corresponding period of last year, showing an
12 and corresponding period of the last fiscal year
increase of 0.05 percent. During the period under
is as given below:
review, 39669 (60 percent) barrels per day were

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Pakistan Economic Survey 2011-12

Table 14.9: Production of Crude Oil (BOPD)

Region 2010-11 July-Mar July-Mar Change (%)
2010-11 2011-12
Northern Region 35,367.74 34,762.28 39,668.59 -1.71
Dewan Petroleum (Pvt) Ltd 207.38 211.21 193.48 1.85
Oil & Gas Development Company Limited (OGDCL) 18,526.47 18,236.27 21,036.58 -1.57
Orient Petroleum International Inc (Opii) 680.38 658.18 886.16 -3.26
Pakistan Oilfields Limited (POL) 3,327.12 3,401.00 2,844.97 2.22
Pakistan Petroleum Limited (PPL) 5,138.52 4,925.16 6,130.21 -4.15
MOL Pakistan Oil & Gas Co 7,487.87 7,330.47 8,411.34 -2.10
Mari Gas Company Limited (MGCL) − − 165.84 −
Southern Region 30,498.44 31,234.22 26,363.50 2.41
Oil & Gas Development Company Limited (OGDCL) 18,315.59 18,615.34 16,498.27 1.64
BP Pakistan Exploration & Production Inc (BP) 8,362.90 8,625.89 6,646.82 3.14
Pakistan Petroleum Limited (PPL) 1,140.31 1,233.66 402.24 8.19
BHP Petroleum Pakistan (BHP) 2,169.09 2,228.26 2,306.30 2.73
OMV (Pakistan) Exploration (OMV) 52.16 54.28 49.23 4.06
eni Pakistan Limited (eni) 332.98 355.34 327.89 6.72
Mari Gas Company Limited (MGCL) 17.55 7.30 63.46 -58.40
Petroliam Nasional Berhad (PETRONAS) 107.86 114.15 69.29 5.83
Total: 65,866.18 65,996.50 66,032.09 0.20
Source: Ministry of Petroleum & Natural Resources

The share of Sindh in the total production was 46 from 5.3 percent in 2005-06 to 32.6 percent which
percent during 2010-11 with a declining trend seen is the second highest amongst the provinces in
over the last four years. Initially the share of 2010-11. Balochistan’s share remained very small
Punjab in the production of crude oil declined in and constant at around 0.1 percent during the last
2009 after which it has became almost static. The four years as shown in the figure below:
share of KPK in crude oil production increased

Figure 14.8: Share of Provinces in Production of Crude Oil

70
Percentage Share in Total Production

60 Sindh

50

40
Punjab
KPK
30

20

10
Balochistan
0
2006 2007 2008 2009 2010 2011
Years
Source: Directorate General of Petroleum Concessions (DGPC)

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 Energy

total production of petroleum products (energy and

14.3-b Petroleum Products
non-energy) remained 9.40 million tonnes
Petroleum products are produced from the compared to 9.53 million tonnes during 2009-10;
processing of crude oil at petroleum refineries and thus posting a negative growth of 1.36 percent. Out
the extraction of liquid hydrocarbons at natural gas of 9.40 million tonnes 8.91 million tonnes are
processing plants. These products are further energy products while 0.49 million tonnes are non-
classified into Energy and Non-Energy products. energy products. In these products diesel has the
Energy products include Motor Spirit, Kerosene, highest share of 34.9 percent followed by Furnace
High Octane Blending Component (HOBC), High Oil (FO) having 25.9 percent. Motor Spirit and
Speed Diesel Oil (HSD), Light Diesel Oil (LDO), High Octane Blending Component (HOBC)
Furnace Oil (FO), Aviation Fuels, Naphtha and together have 13.3 percent while Aviation Fuels,
Liquefied Petroleum Gas (LPG), while Non- Naphtha and Liquefied Petroleum Gas (LPG) hold
Energy products include Lube Oil, Solvent Oil, 8.8 percent, 8.6 percent and 1.9 percent
Mineral Turpentine (MTT), Jute Batch Oil (JBO), respectively. Non-Energy products together have
Asphalt, Process Oil, Benzyne Toulene Xylene 5.3 percent share in the total production of
(BTX), Wax and Sulphur etc. During 2011 the petroleum products.

Fig-14.9: Share of Refineries in Petroleum Products Productions during 2011

3.19
3.50
3.00
2.50 1.70 1.92
2.00 1.58
1.50
1.00 0.42 0.39
0.50 0.07 0.02 0.01 0.00 0.02 0.00 0.10 0.00
0.00
Percentage Share

Energy Products

Non-Energy Products

Energy Products

Non-Energy Products

Energy Products

Non-Energy Products

Energy Products

Non-Energy Products

Energy Products

Non-Energy Products

Energy Products

Non-Energy Products

Energy Products

Non-Energy Products
Attock Refinery BYCO Petroleum Dhodak Refinery National Refinery Pak-Arab Pakistan Refinery ENAR Petroleum
Refineries Ltd Pakistan Ltd Ltd Ltd Refinery Ltd Ltd Refining Facility
(EPRF)
Source: Oil Refineries, Directorate General of Petroleum Concession, Directorate General of Oil and Directorate General of Gas

The total import of petroleum products were 12.37 March 2011-12 there was a negative growth of 27
million tonnes while total export of petroleum percent in the export of petroleum products and a
products were 1.57 million tonnes in 2010-11. This positive growth of 37.7 percent in the import of
is shown in Table 14.10. During the period July- petroleum products.
Table 14.10: Imports and Exports of Petroleum Products (Million Tonnes)
Imports Exports
Quantity in Quantity in
Products Products
million Tones million Tones
100 Octane Aviation Fuel (100LL) 0.80 Naphtha 0.79
High Speed Deisel (HSD) 3.78 High Speed Deisel (HSD) 0.12
High Sulphur Furnance Oil 5.60 Jet Propellant (Aviation Fuel) JP-1 0.64
Low Sulphur Furnance Oil 1.06 Furnance Oil 0.004
Motor Spirit 1.13 Motor Spirit 0.02
Total 12.37 Total 1.57
Source: Hydrocarbon Development Institute of Pakistan

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Pakistan Economic Survey 2011-12

14.3-c Natural Gas increase of 4.57 percent. Natural gas is used in

general industry to prepare consumer items, to
The consumption of increasing natural gas is
produce cement and to generate electricity. In the
rapidly. As on December 31st 2011, the balance
form of CNG, it is used in transport sector and
recoverable natural gas reserves have been
most importantly to manufacture fertilizer to boost
estimated at 24.001 Trillion Cubic Feet. The
the agricultural sector. Currently 27 private and
average production of natural gas during July-
public sector companies are engaged in oil and gas
March 2011-12 was 4236.06 million cubic feet per
exploration & production activities. Company wise
day (Mmcfd) as against 4050.64 (Mmcfd) during
total natural gas production is as under:
the corresponding period of last year, showing an

Table- 14.11: Production of Natural Gas (Mmcfd)

July-Mar July-Mar Change
Company 2010-11 (%)
2010-11 2011-12
BHP Petroleum Pakistan (BHP) 392.13 399.77 446.08 11.58
eni Pakistan Limited (eni) 478.24 486.89 468.88 -3.70
Dewan Petroleum (Pvt) Ltd 28.56 28.88 27.09 -6.20
Hycarbex-American Energy, Inc − − 6.36 −
Mari Gas Company Limited (MGCL) 509.86 502.02 552.68 10.09
Oil & Gas Development Company Limited (OGDCL) 862.12 853.74 1,026.18 20.20
OMV (Pakistan) Exploration (OMV) 443.52 446.43 402.32 -9.88
Orient Petroleum International Inc (Opii) 13.38 13.01 17.44 34.05
Pakistan Oilfields Limited (POL) 21.23 21.46 20.59 -4.05
Pakistan Petroleum Limited (PPL) 760.36 765.58 786.33 2.71
Tullow Oil Plc (Tullow) 0.38 0.50 − −
Petroleum Exploration (Pvt) Limited (PEL) 26.87 27.57 24.43 -11.39
BP Pakistan Exploration & Production Inc (BP) 176.83 189.61 130.50 -31.17
Petroliam Nasional Berhad (PETRONAS) 13.24 13.52 12.94 -4.29
MOL Pakistan Oil & Gas Co 305.04 301.85 313.78 3.95
Total: 4,031.76 4,050.83 4,235.60 4.56
Source: Ministry of Petroleum & Natural Resources

the allocation of natural gas for the power sector

Historically, indigenous natural gas is one of the
types of fuel used by thermal power plants while
the other type of fuel being imported is furnace oil.
With the significant increase in international prices
of furnace oil, initially the power sector retained
the lion's share in the allocation of natural gas.
However, the gas companies did not sign long-
term agreements with the public sector utilities and
subsequently, the allocation of gas to the public
sector plants were allocated on as-and-when-
available basis. This pattern continued for a
considerable period up to the mid eighties.
However, with the passage of time, natural gas
became a scarce resource because of major use in
the domestic, fertilizer and transport sectors. Thus
has declined significantly.
(i). Liquefied Petroleum Gas (LPG):
LPG currently contributes only 0.5 percent to the
total primary energy supply in the country.
However, 87 percent of its demand is met through
local production. The rest is imported. This lower
share is mainly due to local supply constraints and
the higher price of LPG in relation to competing
fuels like fuel wood, dung etc. Currently, in
Pakistan, out of 27 million households,
approximately 6 million are connected to the
natural gas network while the rest are relying on
LPG and conventional fuels such as coal,
firewood, kerosene, biomass etc. LPG has thus

206
 Energy

become a popular domestic fuel for those who live is produced in the private sector while 54 percent
in areas where the natural gas infrastructure does is produced in the public sector. The three main
not exist. The annual total supply of LPG sources of LPG are; refineries 32 percent, gas
remained 467,476 tonnes; 1, 281 tonnes were producing fields 55 percents and imports 13
produced daily during 2012, out of this 46 percent percent. The details are given in the figure below:

Fig-14.10: LPG Supplies by Source during 2011

140
117.4
120

100 90.2
Annual (000 Tonnes)

80
60.1
60 45.6
38.3
40
20.3 20.7
9.6 10.6 14.4
20 9.3 5.7 6.1 7.3 5.7 5.9
0.4
0

JJVL
POL
National Refinery Ltd

BPP (Naimat Basal)

OPL (Ratana)

PPL (Adhi)

PPL (Hala)
Attock Refinery Ltd

OGDC (Kunnar)

OGDC (Chanda)

Imports
BYCO Petroleum Pakistan Ltd

OGDC (Bobi)

OGDC (Dakhni)

OGDC (Dhodak)
Pakistan Refinery Ltd

Pak-Arab Refinery Ltd

Sector Fields Imports

Sources of LPG

Source: Oil Refineries, Directorate General of Petroleum Concessions (DGPC), Directorate General of Oil (DGO) and Directorate General of
Gas (DGG)

(ii).Compressed Natural Gas (CNG): In this regard OGRA has issued provisional
CNG as an alternative fuel for automobiles was licenses for construction of a LNG terminal,
introduced in 1992 to reduce the dependency on operation, sales and marketing of Regassified
expensive imported fuel and to protect the liquid natural gas (RLNG) / Liquid natural gas
environment. During the past few years, a LNG. It is expected that RLNG volume of 1400
tremendous growth in this sector was witnessed on MMsfcd will be added to the system. In Pakistan
account of the price differential between CNG and import of LNG is considered to be beneficial for
petrol which led to increase in conversion of power companies as these companies are importing
vehicles into CNG. As a result to meet the growing considerably more expensive furnace oil as input
demand a significant increase in CNG stations was for power. In this context, the government has
witnessed. According to an estimate presently signed a Memorandum of Understanding (MoU)
there are 3,331 CNG stations operating in the with Qatar for the import of 500 mmcfd and is
country. exploring other avenues with Algeria and Malaysia
which are prospective suppliers of LNG.
(iii).Liquefied Natural Gas (LNG):
14.3-d Electricity
Realizing the widening gap between demand and
supply of natural gas the government is During 2010-11, electricity generation was 94,653
encouraging LNG import through the private GWh. The contribution of Hydel in electricity
sector. Various investors have shown an interest. generation increased to 33.6 percent in 2010-11 as

207
Pakistan Economic
E Surrvey 2011-122

comparedd to 29.4 perrcent in 2009-10. Since oil Power Company (K KAPCO) andd the Hub Power
P
became an expensive input, its shaare in electriccity Compaany (HUBCO O) have 8.3, 3.6, 6.2 annd 9.1
generationn declined to 35.1 percent as comparedd to percentt, respectively. Indeependent P
Power
almost 388 percent last year. The sam
me was the caase Produccers (IPPs) have contributed almosst 25
for gas. Itts share was 27.3 percent as comparedd to percentt as shown in the figure beelow:
29.4 perccent of last year. The share of cooal
remained stagnant at 0.1 percent. The electriccity Fig-14.12: Electricity
E Gen
neration By
generationn by sourcee and comppany is show wn Companies
below:
Liberty,
Rouch, 3.2 1.4% O Other IPPs
Figure 14.11:
1 Electricty Generation
G by So
ource % 15.0%
Uch, 4.5
5%
mported, 
Im
Nuclear, 3. 0.3% HUBCCO,
6% 1%
Coal, 0.1 9.1%
%
Hydel, 33.6
6
% KAPCCO,
Gas, 27.3% 6.2%
%
PAEC, KESC,
K
3.6% 8.3% WAPDA A,
48.7%%
Sou
urce: Hydrocarbon
n Development Insstitute of Pakistan

Oil, 35.1%
%
Accordding to National Transmisssion and Disspatch
Source:: Hydrocarbon Dev
velopment Institutte of Pakistan
Compaany Ltd, during d July--March 20111-12,
demandd was 18,8660 MW and supply rem mained
12,755 MW thus creeating a deficcit of almost 6,
6 000
Power geeneration is provided byy three sourcces MW. TheT solution to o power crisis can
t electricity or
thermal, hydel and nuclear. There T are 13 be addrressed in shorrt-term, mediuum-term and long-
hydroelecctric facilitiees with insttalled capaccity term. In short-teerm variouss technical and
6,481 MW W are owned d and operateed by the Waater adminiistrative meassures must be b implementted to
and Devvelopment Authority
A (WWAPDA) whhile improvve operational and manageerial efficienccy. In
this coontext for reccoveries and theft controol, the
thermal power plants are
a owned by both public and a
governnment has adopted
a stricct measures like
private coompanies. Th he public secctor operates 13
legislattion of high penalties onn electricity theft,
thermal plants
p with installed cappacity of 4,9900
requisitioning of raangers/ frontiers corps to assist
MW. Aboout one third of power geeneration (5,9987 in theft
ft control andd recoveries, prepaid
p meteers for
MW) is provided by y private secctor compannies governnment departm ments, curbingg of bogus biills by
(Independdent Power Producers IPPs). Also, KESC Distribbution Comppanies (DISCOs) audit and
operates plants
p with tootal capacity of 1,955 MW W. vigilannce and monnitoring of load manageement
Out of thet total 19,252 MW of o the nationnal activityy. Likewise, in order to better utilize u
installed n
generation capacity,, dependabble hydroppower resourcces in the coountry, Wateer and
generationn is about 17,,523 MW in thet summer anda Power Developmeent Authoritty (Wapda) has
about 14,640 in the winter, deppending on the t awardeed a Rs164 million conttract to consuulting
annual hyydrology. firms MWH
M (USA) and Nespak (Pakistan) to carry
out a feasibility
f stuudy to upgraade the 1,0000-MW
During 2010-11, the t Water and Pow wer (megaw watts) Manglla Power Staation. Besidees up-
Developm ment Authoritty (WAPDA A) remained the t gradatiion of Manglaa Power Housse, 22-MW Jaabban
main conttributor to eleectricity generration with 488.7 Power House is alsoo being rehabbilitated at a cost
c of
percent coming fro om this soource. Karacchi Rs. 3..7 billion. In I addition, the contracct for
Electricityy Supply Coorporation (K KESC), Pakisttan rehabillitation and up-gradatioon of 2433-MW
Atomic Energy
E Comm mission (PAE EC), Kot Adddu Warsakk Power Housse will also be finalized shhortly.

208

Also Laraib Energy Limited (“Laraib”) is the
owner and developer of 84 MW hydroelectric
powers generating complex known as the New
Bong Escape Hydroelectric Power Complex (the
“Project”) on the Jhelum River in Azad Jammu and
Kashmir (AJ&K). The Project has the distinction
of being Pakistan and AJ&K’s first hydropower
IPP. By developing a bankable framework this
trendsetting project has paved the way for rapid
and full scale development of Pakistan and
AJ&K’s hydropower potential. Finally, the United
States and Pakistan signed implementation
agreements to upgrade three Pakistani thermal
power stations at Jamshoro, Muzaffargarh, and
Guddu. The rehabilitation, commissioned by the
Pakistani companies, will restore approximately
305 MW of lost power generation capacity and
bring a measure of relief to the people of Pakistan
over the course of the next 12 months.
14.3-e Nuclear Energy
Pakistan Atomic Energy Commission (PAEC) is
responsible for planning, construction and
operation of nuclear power plants in the country.
PAEC is currently operating three nuclear power
plants i.e. Karachi Nuclear Power Plant
(KANUPP) and Chashma Nuclear Power Plant
Unit-1 and 2 (C-1 & C-2). The construction of two
more units C-3 and C-4 of being 340 MW each is
in progress.
Table 14.12: Performance of the Operating Nuclear Power Plants in Pakistan
Gross Capacity
Plants Grid Data
(MW)
KANUPP 137* 18-Oct-71
C-1 325 13-Jun-00
C-2 325 14-Mar-11
Source: Pakistan Atomic Energy Commission
* KANUPP re-licensed at 98 MW (gross) after completing design life
14.3-f Coal
Pakistan has huge coal reserves which are
estimated at over 185 billion tonnes; including 175
billion tonnes identified at Thar coalfields in Sindh
province. Pakistan’s coal generally ranks from
lignite to sub-bituminous. The total production of
coal during 2010-11 was 7.7 million tonnes as
Energy
KANUPP, located at Karachi, completed its design
life of 30 years in 2002. After refurbishments and
safety retrofits, it is now operating on extended
life. C-1 located at Chashma is performing very
well since its commercial operation. Third nuclear
power plant that is also located at Chashma being
an improved version of C-1 had also started
commercial operation on 18 May 2011, three
months ahead of its schedule. Performance of the
operating nuclear power plants of Pakistan is
shown in the Table 14.12:
The under construction nuclear power plants C-3
and C-4 are of 340 MWe each. The first concrete
of these plants has been poured and commercial
operation of C-3 and C-4 is expected in 2016 and
2017, respectively.
The government has mandated to Pakistan Atomic
Energy Commission (PAEC) for the installation of
8,800 MW nuclear power capacities by the year
2030. Technical and engineering infrastructure is
in place to provide technical support to existing,
under construction and future nuclear power
plants. It also has a network of in-house
educational and training institutions that
encompass all major facets of nuclear science and
technology.
Electricity sent to Grid
Commercial
July-March 2012 Lifetime (billion
Data
(million KWh) KWh)
7-Dec-72 329.1 12.07
15-Sep-00 1477.3 22.17
18-May-11 1790.7 2.22
compared to 8.1 million tonnes in 2009-10;
showing a negative growth of 5.1 percent. In 2010-
11 the import of coal was 4,267 million tonnes
compared to 4,658 million tonnes in 2009-10; a
decline of 8.4 percent. The long trend shows that
there was an increase of production of coal; an
average 7.7 percent change occurred in last ten
years.
209
Pakistan Economic Survey 2011-12

Table 14.13: Production of Coal, Share and Percentage Change

Imports Domestic Production Total
Fiscal Year
Tones (000) % Share Tones (000) % Share Tones (000) % Change
2001-02 1,081 24.5 3,328 75.48 4,409 9.0
2002-03 1,578 32.3 3,312 67.73 4,890 10.9
2003-04 2,789 46.0 3,275 54.01 6,064 24.0
2004-05 3,307 41.9 4,587 58.11 7,894 30.2
2005-06 2,843 36.9 4,871 63.14 7,714 -2.3
2006-07 4,251 53.9 3,643 46.15 7,894 2.3
2007-08 5,987 59.2 4,124 40.79 10,111 28.1
2008-09 4,652 55.4 3,738 44.55 8,390 -17.0
2009-10 4,658 57.2 3,481 42.77 8,139 -3.0
2010-11 4,267 55.3 3,450 44.71 7,717 -5.2
Avg. 10 years 46.3 53.7 7.7
July-Mar
2010-11 3,500e 59.8 2,350e 40.2 5,850e −
2011-12 2,700c 57.1 2,030c 42.9 4,730c -19.15
Source: Hydrocarbon Development Institute of Pakistan
e: Coal data is estimated on the basis of six months
c: Coal import is estimated on the bais of six months data while the production from FATA is not available

The Federal and Provincial governments are 50 MW based on Underground Coal

endeavoring to harness the huge coal resources of Gasification Project in Block-V
Thar by utilizing these as a source of energy for
5. M/s Oracle Coalfield Plc, UK has been
power generation through international investment.
allocated Block-VI in Thar coalfield for
As part of the promotional activity to increase the
developing coal mine and installing power
share of coal, the Government of Sindh has leased
plant of 300 MW extendable up to 1000 MW
out a coal block for an integrated mining project.
The details are as under:- 6. M/s China National Machinery Import and
Export Corporation of China (CMC)
1. Government of Sindh has entered into a joint conducted a feasibility study for 400 MW
venture with M/s Engro Powergen (Pvt.) integrated coal mining and coal fired power
Limited for Coal Mining in Block-II and plant at Sonda-Jerrick in district Thatta
established a Company under Companies Act,
7. The Government of Sindh is entering into a
1984 viz. “ Sindh Engro Coal Mining
Joint Venture with M/s Al-Abbas Group
Company” for development of coal mines and
company and allocated an area in Badin
installing 600-1000 MW Power Plant
coalfield for developing coal mine and
2. M/s Cougar Energy UK limited has been installing Coal-fired Power Plant of 300-600
allocated Block-III in Thar coalfield for MW
extraction of under ground Coal Gasification
14.4 Performance of Major Oil and Gas
and establishing a 400 MW power plant
Companies
3. M/s Bin Daen Group, UAE has been allocated
` During 1st July 2011 to 31st March 2012, so
Block-IV in Thar coalfield for coal mine and
far eight (8) oil and gas discoveries have been
installing 1000 MW Power Plant
made in the country. Details are as under:
4. One block has been allocated to Planning
Commission of Pakistan for a Pilot Project of

210
 Energy

Table 14.14: Oil and Gas Discoveries during July-March 2011-12

Discovery Discovery Date Status Company Total Depth Current Production
in Meters Oil Gas (Mmcfd)
(BOPD)
Mulaki-1 July-11 Oil & Gas United Energy 2,080.0 92.26 14.68
Pakistan (UEP)
Maru South-1 August-11 Gas Oil and Gas 720.0 − −
Development
Company Limited
(OGDCL)
Halini-1 October-11 Oil Mari Gas Company 5,350.0 649.29 −
Limited (MGCL)
Zin X-1 December-11 Gas Oil and Gas 2,300.0 − −
Development
Company Limited
(OGDCL)
Gharo-1 February-12 Oil United Energy 1,334.7 501.74 0.04
Pakistan (UEP)
Mohano-1 February-12 Oil United Energy 1,727 187.65 0.07
Pakistan (UEP)
Suleman-1 March-12 Gas Oil and Gas 4,575 − −
Development
Company Limited
(OGDCL)
Pir Apan-1 March-12 Gas United Energy 2,155 327.28 10.6
Pakistan (UEP)
Total 1758.22 25.39
Source: Ministry of Petroleum & Natural Resources

` The Councils of Common Interest (CCI)
approved Tight Gas (Exploration &
Production) Policy, 2011 that offers 40 percent
higher price than the price announced in
Exploration & Production Policy, 2009, with
an incentive of additional 10 percent price if
the discoveries are made within a period of 2
years to attract exploration companies to invest
in tight gas fields. Tight gas reserves are
estimated at 24 trillion cubic feet. Initially 100-
150 Mmcfd would be added depending on its
success rate.
` Economic Coordination Committee (ECC) has
approved Low BTU Gas Pricing Policy, 2012.
` Petroleum Policy 2009 is reviewed and
Petroleum (Exploration & Production) Policy,
2012 is being promulgated shortly.
` The Ministry of Petroleum & Natural
Resources is also working on Shale Gas Policy
to encourage the investors to exploit these
reservoirs.
14.4-a Oil and Gas Development Company
Limited (OGDCL):
OGDCL is the local market leader in terms of
reserves, production and acreage. It is the first
Pakistani Exploration and Production Company to
list its shares on the London Stock Exchange.
Equipped with a forward looking professionally
developed Business and Strategic Plan, competent
professionals to implement the same and robust
balance sheet OGDCL is ready to take on the
challenges of an internationally listed company.
OGDCL had spaded 7 wells (1 Exploratory /
Appraisal & 6 Development wells) during the
period July to December 2011. In the previous year
during the corresponding period 7 wells (2
Exploratory / Appraisal & 5 Development wells)
were spaded. The details of the Oil, Gas, LPG and
sulphur’s production is given below:

211
Pakistan Economic Survey 2011-12

Table 14.15: Physical Performance of OGDCL

S. # Name of Activity July-Dec July-Dec Change (%)
2010 2011
1 Total 7 7 −
i Exploratory Wells 2 1
ii Development / Appraisal Wells 5 6
2 Production
i Oil (Barrels) 6,656,408 (36,176) 6,611,728 (35,933) -0.7
ii Gas (MMcft) 152,934 (831) 158,933 (864) 3.8
iii LPG (MT) 21,646 (118) 17,613 (96) -22.9
iv Sulphur (MT) 12,435 (67.5) 12,750 (69.2) 2.5
Source: Ministry of Petroleum &Natural Resources (MP&NR), Oil & Gas Development Company Ltd (OGDCL)
Figures in braces show daily average production

14.4-b Oil & Gas Regulatory Authority by Oil Marketing Companies (OMCs)/refineries
(OGRA): along with analysis/findings and suggestions, if
any, on regular basis to ECC.
The Oil and Gas Regulatory Authority (OGRA) is
mandated by the government to regulate the oil and
14.4-c Sui Northern Gas Pipelines Limited
gas sector to promote competition and attract
(SNGPL):
investment. In March 2006, it was also given the
task to compute and notify prices of petroleum During 2010-11 SNGPL earned a profit after tax of
products as per the Federal Government approved Rs. 2,361 million and paid an amount of Rs. 1,228
formula. OGRA computes and notifies ex-refinery million in corporate taxes. During the current year
price of High Speed Diesel (HSD) and Superior SNGPL extended its transmission network to a
Kerosene Oil (SKO) including ex-depot prices of length of 7,613 Km.
SKO and IFEM (In land Freight Equalization
Margin) on monthly basis. Furthermore, OGRA 14.4-d Sui Southern Gas Company Limited
has been assigned to monitor the pricing of (SSGCL):
petroleum products. OGRA has also been assigned SSGCL earned a profit after tax of Rs. 4,795
to submit quarterly reports on pricing of petroleum million during 2010-11. During the current year
products indicating the trend in international SSGCL extended its transmission network to a
markets and petroleum products pricing announced length of 3,337 Km.
Table 14.16: Physical Performance of SNGPL and SSGCL
S. No Name of Activity 2010-11 2010-11
SNGPL SSGCL
1 Sector-Wise Gas Consumption (mmcf)
Power 321 218
Fertilizer 116 66
Cement 2 2
CNG/Transport 231 80
General Industry 302 202
Commercial 72 28
Domestic 416 231
Total 1,460 827
2 New Connections (Nos.)
Domestic 256,172 120,159
Industrial 231 179
Commercial 1,246 844
Total 257,649 121,182
Source: Sui Northern Gas Pipeline Ltd (SNGPL), Sui Southern Gas Pipeline Ltd (SSGC)

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14.5 Performance of Power Sector Authorities
14.5-a National Electric Power Regulatory
Authority (NEPRA)
The National Electric Power Regulatory Authority
is exclusively responsible for regulating the
electric power services and safeguarding the
interests of investors and consumers. NEPRA
grants licenses for generation, transmission and
distribution of electric power; determines tariff
rates, charges and other terms and conditions for
supply of electric power; prescribes and enforces
performance standards and addresses the
complaints of electricity consumers. As a regulator
NEPRA extends advice/recommendations to the
concerned entities, including the government, to
make the power more efficient and sustainable.
During the period July-December 2011, NEPRA
announced the Upfront Tariff for Wind Power
Producers. Upfront tariff for coal based
technologies is also in the pipeline and will be
announced after consultations with the Private
Power and Infrastructure Board (PPIB). NEPRA
processed 25 applications for grant of generation
licenses for power plants with a cumulative
capacity of approximately 600 MW; out of which
15 were granted generation licenses while the
others were at an advanced stage of processing and
expected to be finalized soon. Besides these, one
distribution license was also granted. Since
NEPRA determines electricity tariffs in accordance
with the Tariff Standards and Procedure Rules,
1998 during the period July-December 2011, 13
tariff determinations and 149 tariff adjustments
were issued relating to different Generation
Distribution Companies.
Pursuant to amendment in Section 31 of NEPRA
Act (XL of 1997), through promulgation of
Ordinance No.XVIII of 2009 dated July 31, 2009,
Ordinance No.XXIX of 2009 dated November 26,
2009 and Ordinance No.XIV of 2010 dated April
20,2010, NEPRA was mandated to determine the
overall electricity tariff on a quarterly basis and
intimate the same to the Federal Government for
notification in the official Gazette. The ordinance
lapsed in August 2010. Thereafter, tariff
determination on an annual basis and adjustment
on account of variation in fuel cost component of
consumer-end-tariff is being determined by
NEPRA on a monthly basis in pursuance of the
Finance Bill 2008. The status of complaints during
July-December 2011 has been summarized below:

Table 14.17: Physical Performance of NEPRA (July – December 2011)

DISCOS Complaint Redressed by Under Consumer advised to Total Disposed Total
Sent to DISCOS Process approach DISCOS off Complaints
DISCOS
(1) (2) (3) (4) (5) = (2) + (4) (6) = (1) + (4)
PESCO 80 64 16 31 95 111
IESCO 29 29 0 29 58 58
GEPCO 11 10 1 6 16 17
FESCO 24 23 1 22 45 46
LESCO 37 34 3 62 96 99
MEPCO 167 162 5 116 278 283
HESCO 105 103 2 56 159 161
QESCO 1 1 0 3 4 4
KESCO 59 59 0 52 111 111
SEPCO 15 14 1 69 83 84
Total 528 499 29 446 945 974
Source: National Electric Power Regulatory Authority (NEPRA)

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14.5-b Water and Power Development projects, to cope with the increasing demand of
Authority (WAPDA) power. Almost 96 percent work on the main dam at
Mangla, spillway and allied facilities had been
The installed capacity in the PEPCO system is
completed and resettlement work is in progress.
20,986 MW as of June 2011; with hydro 6627 MW
Likewise 99.7 percent work on Satpara and 72.1
and thermal 14,359 MW. The hydropower capacity
percent on Gomal Zam dam had been completed.
accounts for 31.6 percent, thermal 65.3 percent and
Nuclear 3.1 percent. Of this 4829 MW is owned by
In an attempt to reduce the energy crises, Prime
ex-WAPDA GENCOs, 448 MW by rental, 650 by
Minister Yousaf Raza Gilani laid the foundation
PAEC and rest by IPPs. There is 55-MW of
stone of the Diamer Bhasha Dam in Gilgit-
isolated generation capacity in Pasni and Punjgoor
Baltistan on October 18, 2011. The dam is being
areas. WAPDA is executing, on priority basis, the
built about 40 kilometres from Chilas on the Indus
projects such as 969 MW-Neelum Jhelum, 1410
River and will have a capacity of producing 4,500
MW-Tarbela 4th Extension, 7100 MW-Bunji, 4320
megawatts of electricity. Some salient features of
MW-Dasu, 740-MW Munda Dam and most
the dam are given in Box-2:
mentionable 4500 MW-Diamer Bhasha Dam
Box-2
(Diamer Basha Dam Project)
Project
The project is located on Indus River, about 315 km
upstream of Tarbela Dam, 165 km downstream of
Gilgit and 40 km downstream of Chilas. The
proposed dam would have a maximum height of 270
m, and impound a reservoir of about 7,500,000 acre
feet (9.25×109 m3), with live storage of more than
6,400,000 acre feet (7.89×109 m3). Mean annual
discharge of Indus River at the site is 50,000,000
acre feet (6.2×1010 m3).
Salient Features
• Total installed capacity 4500 MW
• Availability of about 6,400,000 acre feet
(7.89×109 m3) annual surface face water
storage for supplementing irrigation supplies
during low flow periods.
• Reduction of dependence on thermal power,
thus saving foreign exchange.
• Creation of massive infrastructure leading to
overall socio-economic uplift of the area and
standard of living of people.
• Minimum operation level having expected
length equal to 1060 m.

potential has not been utilized fully. The hydro

i). Electricity Generation & Power
Transmission
Due to alarming increase in fuel prices, the need
for cheaper hydro power has gained more
importance. Unfortunately the composition of
electricity generation shows that the hydro
potential which is located in the north is still
largely untapped. The hydro generation accounted
for 31.9 percent during July-March 2011-12
accounted 33 percent in total electricity generation
while during 2011-11 it came up to 35.6 percent
compared to 31.9 percent during 2009-10. The

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trend of hydro-thermal energy generation for the last five years is given in the following table.
Table 14.18: Electricty Generation
Year Hydro (Gwh) % age Thermal (Gwh) % age Total (Gwh) % Change
2006-07 31,942 36.4 55,895 63.6 87,837 6.8
2007-08 28,667 33.2 57,602 66.8 86,269 -1.8
2008-09 27,763 32.9 56,614 67.1 84,377 -2.2
2009-10 28,492 31.9 60,746 68.1 89,238 5.8
2010-11 32,259 35.6 58,316 64.4 90,575 1.5
July-Mar
2010-11 24,105 36.0 42,823 64.0 66,928 −
2011-12 22,411 33.0 45,534 67.0 67,945 1.5
Source: Pakistan Electric Power Company (Pvt) Limited (PEPCO), National Transmission & Distribution Company
Limited (NTDC)
Total energy includes import from Iran, Gwh : Giga watt hours

showing an increase of 1177 MVA over June

To carry power from power generation station to
2011. Similarly, the 132 kV transformation
the consumers’ network, the role of transmission
capacity which was 26569 in June 2010 has gone
and primary lines network is very essential. Not
up to 30137 MVA by June 2011 and up to 31016
only the length of network-lines is important but
MVA by the end of December 2011 thus showing
the transformation capacity of the grid-stations is
an appreciable increase of 4447 MVA over June
also of equal value. The length of transmission
2010 figures.
lines was 7367 KM for 220kV and 23995 KM for
132-kV level at the end of June 2010. This has
ii). Growth in Consumers.
gone up to 7427 KM for 220 kV and 26321 KM
for 132 level at the end of June 2011, showing a The number of consumers has been increasing due
combined increase of 2386 KM. to rapid expansion of electric network to villages
and other un-electrified areas. During July-March
The transformation capacity of 220 kV substations 2011-12 the number of consumers has been
was 15014 MVA3 at the end of June 2010, which increased to 20.85 million as compared to 20.12
as 16494 MVA by the end of June 2011 showing million in the comparable period of last year. The
an increase of 1480 MVA. It has further gone up trend of increase in number of consumers during
17671 MVA by the end of December 2011 the last five years is given in the following table:
Table 14.19: Number of Consumers
Year Domestic Commercial Industrial Agriculture Others Total
2006-07 14,354,368 2,151,971 233,162 236,255 10,798 16,986,554
2007-08 15,226,711 2,229,403 242,401 245,640 11,211 17,955,366
2008-09 15,481,734 2,256,837 250,593 254,891 11,504 18,255,559
2009-10 16,673,015 2,362,312 263,507 271,268 12,122 19,582,224
2010-11 17,322,140 2,421,221 273,067 280,603 12,452 20,309,483
July-March
2010-11 17,157,541 2,404,136 270,445 279,021 12,354 20,123,497
2011-12 17,808,962 2,466,049 284,049 282,639 12,745 20,854,444
Source: National Transmission & Dispatch Company Ltd, Water & Power Development Authority

3
MVA is MegaVolt Ampere. To convert it into MW one should know the power factor of the system because MVA = PF x MW. However, if the
PF is unity then MVA = MW. A PF of UNITY suggests that the load is purely resistive with neither capacitive nor inductive components in the
load or source. Of course this can mean such components have been balanced artificially.

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Pakistan Economic Survey 2011-12

iii). Village Electrification

Between the period 30th June 2011 to March 2012,
The village electrification program is an integral 6,558 was the progressive number of electrified
part of the total power sector development program villages. The trend of village electrification during
in order to provide basic necessity of life to all the past 05-years period is provided in Table 14.20:
people of Pakistan, raise the productive capacity
and socio-economic standards of the population iv). Electricity Consumption by Economic
living in rural areas. Group
The consumption of electricity by economic group
Table 14.20: Village Electrification
identifies the domestic sector as the largest user for
Year Addition Progressive Growth
the past many years. Even during the current year
During the Total (%)
Year 2011-12, the consumption pattern, more or less,
2006-07 14,203 117,456 - remained the same with domestic share of 43
2007-08 10,441 127,897 8.9 percent, industrial 26 percent and agricultural
2008-09 9,868 137,765 7.7 about 12 percent. During July-March 2011-12,
2009-10 15,062 152,827 10.9 consumption of electricity has increased in every
2010-11 11,705 164,532 7.7 economic group including domestic, commercial,
July-Mar industrial and public lighting which is a positive
2010-11 7,283 160,110 - indication. The consumption trend of electricity by
2011-12 6,558 171,090 6.9 economic group for the past 05-years is given
Source: Water and Power Development Authority below:

Table 14.21: Consumption of Electricity by Economic Group (Million Kwh)

Year Domestic Comm- Industrial Agri- Public Bulk Traction Supply Total
ercial culture Lighting Supply to KESC
2006-07 28,990 4,290 17,603 8,097 316 3,267 12.0 4,905 67,480
2007-08 28,751 4,358 17,299 8,380 340 3,332 8.0 4,072 66,540
2008-09 27,787 4,203 16,035 8,695 347 3,198 5.0 5,014 65,284
2009-10 29,507 4,466 16,371 9,585 372 3,367 2.3 5,208 68,878
2010-11 30,973 4,683 17,700 8,847 3,644 3,644 2.0 5,449 74,942
July-Mar
2010-11 22,691 3,450 13,255 6,485 261 2,680 0.5 3,976 52,799
2011-12 23,137 3,483 14,023 6,298 280 2,716 0.5 4,319 54,257
Source: National Transmission & Dispatch Company Ltd, Water & Power Development Authority

v). Power Losses below which indicate steady trend of efficiency

increase:
The National Transmission & Dispatch Company
Limited (NTDC) and Distribution Companies Table 14.22: Transmission & Distribution Losses
(DISCOs) have invoked various technical and of Net System Energy
administrative measures to improve operational Year Transmission & Distribution
and managerial efficiency to reduce power losses. (T & D) Losses (%)
The measures have given positive signs resulting 2006-07 21.5
in the reduction of power losses and increase in 2007-08 21.3
revenue. Certain measures such as renovation, 2008-09 21.1
rehabilitation, capacitor installation and 2009-10 20.9
2010-11 20.8
strengthening the distribution system network are a
July-Mar
continuous process for controlling/reducing
2010-11 19.8
wastage of power/energy. The Transmission and 2011-12 19.5
Distribution losses for the past five years are given Source: National Transmission & Dispatch Company Ltd,
Water & Power Development Authority

216

14.5-c Private Power and Infrastructure Board
(PPIB)
The Private Power and infrastructure Board (PPIB)
is a ‘One Window” facilitator to the private
investors in the fields of power generation on
behalf of the Government of Pakistan (GoP). PPIB
is currently processing thirty eight (38) multiple
fuel (Oil, Coal, Gas, Cogeneration and Hydel)
Independent Power Producer (IPP) projects with a
cumulative capacity of around 10,457 MW. Out of
these thirty eight projects, a total of twelve (12)
new IPPs having a cumulative capacity of over
2400 MW have been commissioned since March
2009; while other companies are aggressively
working to achieve the financial close/
commissioning of their respective projects.
The year wise actual/expected capacity additions
of IPPs upto year 2019 are as follows:
Table 15.23 Actual/expected capacity additions of
IPPs upto year 2019
Year (MW)
Project already 2,409
commissioned
2013 459
2014 126
2015 529
2016 552
2017 1,682
2018 4,152
2019 548
Total 10,457
Source: Private Power and Infrastructure Board
14.5-d Karachi Electric Supply Company
Limited (KESC)
The Karachi Electric Supply Company Power
Utility has posted earnings before Interest, Tax,
Depreciation and Amortization (EBITDA) of Rs.
5.0 billion compared to Rs. 2.7 billion during the
same period last year. This growth has largely been
driven by the improvement in Transmission and
Distribution (T&D) losses; which have come down
to 29.6 percent - a reduction of 1.6 percent Year on
Year and 2.9 percent on Quarter on Quarter basis.
This was also made possible with the improvement
in efficiency of the generation fleet through
investment in state of the art new plants. During
the 3rd Quarter of 2012, all the three Gas Turbines
each of 116 MW of the Bin Qasim Power Station-
Energy
II (BQPS-II) 560 MW combined cycle plant have
been successfully commissioned and the steam
turbine will be successfully operative shortly
which will further boost up the profitability of the
Company and take the overall KESC generation
fleet efficiency to 40 percent.
14.6 Alternative Sources of Energy
The government in its bid to diversify its energy
mix, has been giving due attention to fast track the
development of Alternative / Renewable Energy
(ARE) resources in the country. With this very
objective in view the Government of Pakistan in
May 2010 gave the Alternative Energy
Development Board (AEDB) the mandate to
implement Alternative / Renewable Energy (ARE)
commercial projects on its own or through joint
venture or partnership with public or private sector
entities in addition to its mandates under the
ordinance. Along with the AEDB, the Pakistan
Council of Renewable Energy Technologies
(PCRET) has also been acquiring and updating
know how for the promotion and mass propagation
of Renewable Energy Technologies in the field of
Solar, Micro-hydel, Wind etc. The main function
of PCRET is to develop, acquire, adapt, promote
and disseminate Renewable Energy Technologies
in the country.
Measures taken by AEDB during this fiscal
year
AEDB initiated a number of supportive measures
that were required to be taken for laying a strong
foundations of the ARE sector in Pakistan. In this
regard:
` New wind corridors in areas outside Sindh
have also been identified. Resource assessment
of these corridors is underway and a number of
wind measuring masts are being installed in all
four provinces.
` National Grid Code for wind power projects
has been amended. Grid Integration Plan 2010
-2015 for wind power projects is developed by
AEDB to support National Transmission and
Dispatch Company (NTDC).
` Regional Environmental Study has been
conducted by AEDB to support wind power
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Pakistan Economic Survey 2011-12

projects. Guidelines for environmental Exporting Countries (OPIC) and Economic

assessment have also been developed.
` Asian Development Bank has been taken on-
board to provide guarantee to the wind power
project developers in order to mitigate the
country risk.
` Local manufacturing of micro wind turbine has
been started. Manufacturing for large wind
turbines is also being initiated. The turbine
towers for the first project are being
manufactured in Pakistan.
` Issues related to financing of projects have
been resolved and now leading financing
agencies like International Finance
Corporation (IFC), Asian Development Bank
(ADB), Organization of the Petroleum
Cooperation Organization (ECO) Trade Bank
etc. are offering financing to wind power
projects in Pakistan.
Measures taken by Pakistan Council of
Renewable Energy Technologies (PCERT)
during this fiscal year
The Council had also strived to strengthen its
developmental efforts by introducing various
projects in the public sector for the development
and promotion of suitable technologies to produce
materials and devices in the field of Renewable
Energy despite the number of hurdles in the
development and promotion of renewable energy
technologies. Some of the notable projects and
their status are as under:

Table 15.24: Projects by Pakistan Council of Renewable Energy Technologies (PCERT)

No. Type Present Status Target 2011-15 Target 2016-20
1. Micro-hydel Plants (MHP) in Gilgit 485 units generating 8 MW (electrifying 70,000 5 MW (electrifying 20 MW (electrifying
Baltistan, AJK & Khyber Pakhtonkhwa houses) 25000 houses) 100,000 Houses)
and Canal-falls
2. Biogas Plants Cooking, lighting 4000 units. Producing 18000 M3/day 50,000 units. 50,000 units.
Irrigation and power generation Producing 0.300 Producing 0.300
3
million M /day million M3/day
3. Solar Water Heaters Manufacturing Designed & developed 05 different models of 10,000 units (125-260 25000 units 125-260
through private sector with PCRET SWH for commercialization. liters each) liters/day
Technical services
Solar Dryers Manufacturing through Designed & Developed 03 different models of 50,000 units 100,000 units
private sector with PCRET Technical 20,100 & 500 Kg capacities
services
Solar Cooker Manufacturing through Designed & developed box and dish type solar 100,000 units 200,000 units
private sector with PCRET Technical cookers for commercialization
services
4. PV Modules Production Manufacturing Developed Solar Cell production capacities up 5 MW 20 MW
through private sector with PCRET to pilot scale.
Technical services
5. Wind Turbines 100% subsidy 155 units of 0.5-10 KW capacity electrifying 1000 units 10 MW 1000 Nos. 10 MW
1600 houses. electrifying 50,000 electrifying 50,000
houses houses
Source: Pakistan Council of Renewable Energy Technology (PCERT)

(i) Mega Wind Power Projects
In addition to the above mentioned projects, AEDB
also issued Letters of Intent (LoIs) to 43 IPPs
pursuing development of wind power projects.
Land was allocated to 19 IPPs for 50 MW wind
power projects each in Gharo Keti Bander Wind
Corridor. Projects with a cumulative capacity of
approx. 950 MW are at various stages of
development on these lands.
(ii) Biodiesel
Main achievements in this fiscal year are:
` Pilot Energy plantations for Biodiesel
cultivated on 650 acres under study;
` Biodiesel production initiated with PSO;
` First Biodiesel refinery with the capacity of
18,000 Tons / annum Capacity has been set up
at Karachi.
` SRO 474(1)12008 exempts custom duties and
sales tax on Biodiesel production equipment
and material.
` Amendments in OGRA Ordinance for Bio
fuels pricing approved.

218

` Proposal for undertaking a feasibility study to
set up 10,000 tons per annum Biodiesel
production facility is in search of funding.
` Barriers to implementing Biodiesel Policy
identified at the National Stakeholders
Conference. Task force for barrier removal
established.
` Registration of Jatropha seeds under process
(iii) Biogas Projects
Pakistan produces a huge amount of municipal
waste (up to 50,000 tons / day) and agricultural
waste in the form of Biogas, Cotton Sticks, and
Rice Husk etc. Converting this waste into energy
can generate up to 5,000MW of power. Pakistan
offers lucrative opportunities in this sector in
which a number of projects are already being
implemented.
So far Pakistan Council of Renewable Energy
Technologies (PRET) has installed 4015 biogas
plants (with net generation capacity of 17980
M3/day) on cost sharing basis throughout the
country. During the period in reference, 234 biogas
plants have been installed. PCRET has installed
1000 biogas plants of 5 cubic meters each with
annual production of 1.941 Million cubic meter
gas, 1.567 Million kg of manure and 4.7 Million kg
of carbon dioxide abatement. In addition the
Council has installed 30 commercial size biogas
plants ranging from 50-250 M3 by executing
technological support for irrigation and power
generation.
A World Bank funded project for carrying out a
detailed study for Biomass / Waste-to-Energy
projects in 20 cities of Pakistan has been initiated.
Another Waste to Energy Study, funded by U.S
Trade and Development Agency (USTDA) is
being carried out for Karachi to generate 5-10MW
power.
AEDB has issued a LoI to set up a 12MW Biomass
to Energy power project in Sindh, based
exclusively on Biogas / Agricultural Waste. The
project is jointly sponsored by investors from US
and local entrepreneurs, the SSJD Bio Energy.
Another LoI has been issued to M/s Lumen
Energia Pvt Ltd. to set up a 12MW power plant at
Jhang based on agricultural waste like cotton stalk,
Energy
rice husk, sugarcane trash, biogas, wheat chaff and
other crops as multi-fuel sources. AEDB has issued
a letter of intent to M/s Pak Ethanol (Pvt) Ltd. to
set up a 9 MW biogas power project at Pak Ethanol
(Pvt) Ltd, Matli, and Sindh.
(iv) Small Hydro
Productive Use of Renewable Energy (PURE)
Project is being implemented to install 103 hydro
power plants in Khyber Pakhtonkhwa (KPK) and
Gilgit Baltistan (GB), with the total cost of US$
19.5 million. Another project for 250 plants is
under preparation for the same areas. Eight hydro
projects have been initiated under the Renewable
Energy Development Sector Investment Program
(REDSIP) with the support of the Asian
Development Bank (ADB). These projects are
being implemented in KPK and Punjab with an
estimated cost of US $ 290 million. Another 2
small hydro power projects have been initiated
under REDSIP. The Government of Punjab has
issued LOIs to private investors for establishment
of 10 small hydro projects with a cumulative
capacity of 142MW at different locations in
Punjab. AEDB has initiated a program with the
assistance of Deutsche Gesellschaft für
Internationale Zusammenarbeit (GIZ) support to
assist the provinces to solicit private investments in
small hydro sector; under this program pre-
feasibility study for 25 hydro sites in AJK, Sindh,
Punjab and KPK with the cumulative capacity of
284.14MW has been completed. Public sector
Hydro power projects are initiated in (a) KPK
(worth U$ 150.99 Million, of 17.0MW, 36.6MW
and 2.6 MW), (b) Punjab (worth U$ 138.74
Million, of 5.38MW, 4.04MW, 2.82MW, 4.16
MW and 7.64MW) and (c) Gilgit Baltistan (worth
U$ 71.12 Million, of 26MW and 4MW
(v) Solar
In Solar Energy, 6 LOIs for cumulative capacity of
148 MW On-Grid Solar PV power plants have
been issued by AEDB. Additionally 3 LoIs of 70
MW capacities have been issued by Punjab Power
Development Board (PPDB). The sponsors are
preparing feasibility studies. Solar Village
Electrification Program was initiated under the
Prime Minister’s directive. Three thousand Solar
Home Systems have been installed in 49 villages
of district Tharparkar, Sindh. Another 51 villages
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Pakistan Economic Survey 2011-12
in Sindh and 300 villages in Balochistan have been
approved for electrification using solar energy and
will be implemented shortly. AEDB is also doing
the Parliamentarian Sponsored Village
Electrification Program and has so far prepared
and submitted 27 feasibilities for approval. Funds
for three schemes have so far been released under
People Work Programs-II PWP-II and the schemes
are being implemented.
These government’s policies aim to meet the
demand fully with an emphasis on exploration of
indigenous resources including hydel, coal,
domestic gas and renewable and imported energy
in a timely manner. Sectoral deficiencies are being
improved. Institutions are strengthened and private
sectors’ involvement is being enhanced to promote
the culture of public private partnership leading to
lessen the burden on public resources. In this
context the government held two National Energy
Conferences in 2011 and 2012. To address the
present energy crises the following
recommendations were made:
` Equitable load shedding among all provinces.
` Reduction in number of working days for
government offices along with implementation
of street-light conservation plan as
recommended by the Ministry of Water and
Power.
` Closing down of all commercial centers
throughout the country at 8pm except for
weekends. For saving energy the government
has decided to have different office hours
during winter and summer time.
` Allocation of additional gas to the power
sector (ideally 207mmcfd giving 1000MW)
` Subsidy for solar agri tube wells through easy
financing
220
` The government will also cut power supply to
advertisement billboards and would replace all
the regular bulbs with energy-savers.
` To ensure the smooth supply of power the
government will allocate additional gas to
power companies.
` To limit the use of energy by government
offices, prepaid meters in all federal and
provincial government buildings will be
installed. Also cases related to power thefts
will be registered and immediate action against
the culprits will be taken. Provinces to help in
prompt registration of FIRs, designating
special magistrates and nominating focal
persons. e.g., Home Secretary at the provincial
and the District Coordination Officer (DCO) at
the district level for expeditious disposal of
electricity theft cases.
` Upfront tariff for all types of fuels by NEPRA
and tariff increase of 12 percent
` Expedite conversion of steam based
IPPs/GENCOs to coal
Conclusion
Energy needs are indelibly linked to Pakistan’s
economic and sustainable growth capabilities.
Pakistanis have been in increasing in demand
across the various areas of energy sources. With a
growing economy and the desire for vast
production and consumption across the country,
the energy demands remain high. With energy
shortages as a main challenge, the government is
working tirelessly to ensure such problems are
remedied. Given the need for energy, the
Government of Pakistan is doing the utmost to
promote renewable energies, various energy
sources and energy efficiency. There are various
projects that speak to the endless possibilities of
building up Pakistan’s renewable energy sources.
These hope to continue and expand in coming
years
 Chapter 15
Social Safety Nets
Background
Since 2007-08 the economy has been under
considerable pressure due to both domestic and
external developments. The global financial crisis
hit the country hard when it was already facing a
balance of payments crisis stemming from high
food and fuel prices in the world markets. The
combined effects of the global food and fuel crises
adversely affected the economy resulting in
unsustainable current account and fiscal deficits
and unprecedented high inflation. Moreover, the
unstable law and order situation in the country and
struggle against extremism put severe strains on
the government’s finances. These adverse
developments led to the signing of an IMF Standby
Arrangement Programme. The catastrophic floods
of 2010 and 2011 further exacerbated the situation.
The floods led to a huge loss of life in 2010,
affecting approximately 20 million people directly
and a much larger proportion indirectly. Moreover,
the huge damage to crops and infrastructure also
severely affected the economy at large, which
disrupted the supply chain and business activities
in the affected areas. This supply shock resulted in
high inflation. The floods of 2010 were followed
by the rains of 2011, which though of lower
intensity compounded the negative impact on the
economy and added to the pressures on prices and
the welfare of the people.
This chapter describes the impact of prices on
household expenditures and welfare of the people
in Pakistan and the steps taken by the government
to mitigate some of the adverse effects through the
series of safety nets that have been put in place to
protect the poor and vulnerable.
The Effect of Prices on the Welfare of the Poor
The inflationary pressure on the economy has
increased during the last four years due to a
combination of the external and domestic shocks
described above. Inflation which had increased
rapidly during 2007-08 by 17.0 percent for the
consumer price index overall and 23.7 percent for
food items respectively has started to come down.
According to Pakistan Bureau of Statistics during
the period July-March 2011-12 it was 10.8 percent
for the consumer Price Index overall and 11.2
percent for food. The rise in price indices was
mainly driven by food inflation, which rose rapidly
during this period. Prices of basic food
commodities like wheat, wheat flour, eggs, fresh
fruits, chicken, potatoes, rice, vegetable and
cooking oil rose sharply during 2008-10. While a
sharp increase in world food prices and
international oil prices since 2007 were mainly
responsible for the escalation of prices, a number
of domestic factors also contributed to the price
hike.
The government has brought down inflation in the
current fiscal year due to a stringent demand
management policy, better supply chain
arrangements, tight monetary policy and regularly
monitoring of the price and supply position of all
essential items by taking all the provincial
governments on board.
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Pakistan Economic Survey 2011-12

Fig-15.1: Consumer Price Index and Food Inflation CPI Food

30

23.7 
27
24

18.3 
17.6 

17.0 
21

13.7 
18

12.6 
12.5 

12.0 

11.2 
10.8 
15

10.3 

10.1 
9.3 
12

7.9 

7.8 
6.9 
6.0 
9
3.6 

4.6 
4.4 

3.5 

3.1 
2.9 
2.4 

6
3
0

(Jul‐ Mar)
2000‐01

2001‐02

2002‐03

2003‐04

2004‐05

2005‐06

2006‐07

2007‐08

2008‐09

2009‐10

2010‐11

2011‐12
Source: Pakistan Bureau of Statistics

It has been observed that South Asia’s poor are
particularly vulnerable to food price rises while its
economies suffer from higher than average overall
inflation when compared to the remainder of
developing Asia. ADB estimated the price
elasticity of poverty with respect to food prices,
which measures the percentage increase in poverty
when food prices increased by 1 percent using the
latest POVACL (World Bank) database. The
analysis simulates the effect of rising food prices
by 10 percent, 20 percent and 30 percent on the
change in percentage of poor and the total
headcounts of poor in South Asia. Table 15.1
shows the impact of the food prices on poverty for
South Asian countries vs. Developing Asia

Table 15.1: Impact of food price increases on Poverty for South Asia vs. Developing Asia ($1.25-a-day
Poverty Line)
Change in percentage of poor Change in number of poor
(in percentage points) with an (in millions) with an increase in food
increase in food prices by: prices by:
10% 20% 30% 10% 20% 30%
Bangladesh 2.5 5.0 7.5 3.8 7.7 11.5
Bhutan 1.8 3.5 5.3 0.01 0.02 0.03
India 2.7 5.4 8.1 29.5 59.0 88.5
Nepal 2.0 4.1 6.1 0.6 1.1 1.7
Pakistan 2.2 4.5 6.7 3.47 6.9 10.4
Sri Lanka 1.2 2.4 3.6 0.24 0.47 0.71
South Asia average 2.1 4.1 6.2 37.6 75.2 112.8
Percentage of increase in total - - - 58.4% 58.4% 58.4%
poor in developing Asia by
South Asia
Developing Asia 1.9 3.9 5.8 64.4 128.8 193.2
Source: Food price escalation in south Asia - A serious and growing concerns, Asian Development Bank, February
2012

The progress on poverty alleviations its correlates and Millennium Development Goals is presented in
Box-1

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 Social Safety Nets

Box-1
Poverty Alleviation and Millennium Development Goals
The UNDP’s Human Development Report, 2011 ranks Pakistan at 145th with HDI value of 0.504. The report shows
gradual increase in the value of HDI from 0.503 in 2010 and 0.499 in 2009, through Pakistan’s rank has slipped a
little during 2011. Other composite indices place Pakistan at a lower rank. The Inequality Adjusted Poverty Index is
0.346 and multi-dimensional poverty index for Pakistan is 0.264. These indices weight inequality and non-income
dimensions of poverty more.

Pakistan Social and Living Standards Measurement Survey 2010-11 shows mixed results in terms of the education
enrolment indicators. Literacy rate (10+) has improved from 57 percent in 2008-09 to 58 percent and adult literacy
improved from 54 percent to 55 percent in the same period, while Primary and Middle school Gross Enrollment
Rate also registered a one percentage point improvement. However, slippage on the primary and secondary Net
Enrollment Rate is an area of concern for policy makers, particularly after devolution of the subject to the provinces.

Immunization of children also improved during 2011. The PSLM also reported trends in terms of the water supply
and sanitation indicators. Whereas the sanitation situation at household level has registered an improvement (in
terms of 66 percent of population using flush toilets compared to 63 percent in 2008-09), the access to drinking
water to urban and rural population of Pakistan is 94 percent and 84 percent respectively, with an average of 87
percent in 2011.

A committee of poverty experts has been constituted in Planning and Development Division to estimate Poverty
Headcount as well as poverty correlates. The committee is working on its task in a professional ways considering all
dimensions of poverty and report of the committee will be available shortly.

Source: Planning & Development Division

Profile of Consumption Expenditure of the poor class. Analysis along similar lines for
rural areas indicates that these averages are more
The trends in household consumption expenditure
than three and half times those of the poor class.
provide an effective insight into understanding the
The average per capita expenditure is almost the
dynamics of poverty in the country. Table-15.2
same for poor in rural and urban areas whereas for
reveals the per capita consumption expenditure in
the rich class it is higher in urban areas than in the
urban/rural areas and by quintiles. The average per
rural areas, indicating that more wealth is
capita expenditures for the richest class in the
concentrated in urban areas compared to rural
urban areas are more than four and half times those
areas.
Table-15.2 Per Capita Monthly Household Consumption Expenditure by Quintiles & Region
Per Capita Monthly Household Consumption Expenditure
Quintiles 2007-08 2010-11
Urban Rural Total Urban Rural Total
1st 906 868 874 1441 1426 1428
2nd 1216 1208 1210 1985 1966 1970
3rd 1547 1522 1529 2469 2468 2468
4th 2032 1998 2011 3217 3195 3203
5th 4334 3566 3984 6679 5312 6073
Ratio of highest to lowest 4.78 4.11 4.56 4.63 3.73 4.25
quintiles
Source: Federal Bureau of Statistics

Table 15.3 compares the percentage of monthly commodity groups shows consistent trend from
consumption expenditure by commodity groups. 2007-08 to 2010-11. The share of food expenditure
The consumption expenditure pattern for different is relatively higher compared to the other

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Pakistan Economic Survey 2011-12

commodity groups. It had increased from 43.05 shown a decreasing trend since 2007-08 while
percent in 2005-06 to 44.22 percent in 2007-08. consumption expenditure on fuel and lighting,
Since the international food price hike of 2008 and cleaning and laundry has shown a slightly
the domestic shocks following the floods it increasing trend as compared to 2007-08.
increased further to 48.91 percent in 2010-11.
Food price inflation and slow growth over a
Further analysis reveals that consumption number of years resulting from the combination of
expenditure in apparel, textile, and footwear, international and domestic shocks has led to a
housing, education, transport, communication and greater share of expenditures going to the essential
recreation and entertainment has, as expected, food, fuel, lighting etc.
Table 15.3: Percentage of Monthly Consumption Expenditure by Commodity Groups
Commodity Groups 2005-06 2007-08 2010-11
Urban Rural Total Urban Rural Total Urban Rural Total
Food, drinks & 35.17 49.56 43.05 37.85 48.87 44.22 41.08 54.71 48.91
tobacco
Apparel, textile, foot- 4.90 6.42 5.73 4.71 6.06 5.49 4.66 5.45 5.11
wear
Transport & 7.12 5.39 6.17 6.55 5.92 6.18 6.69 5.51 6.01
communication
Cleaning & laundry 3.54 3.61 3.58 3.77 3.49 3.60 3.55 3.83 3.71
Recreation & 1.04 0.32 0.65 1.09 0.42 0.70 0.77 0.19 0.44
entertainment
Education 5.20 2.41 3.67 5.26 2.94 3.92 4.82 2.51 3.49
Housing (rent & 22.74 8.94 15.19 22.11 9.99 15.10 21.04 8.67 13.93
other costs)
Fuel & lighting 7.39 8.41 7.95 6.82 8.09 7.55 7.06 8.01 7.60
Miscellaneous 12.91 14.94 14.02 11.85 14.23 13.23 10.32 11.13 10.78
Source: Federal Bureau of Statistics

Table 15.4 shows the percentage share of areas. For food items the major share of
expenditure on major food items. Out of the total consumption expenditure is incurred on wheat,
food expenditure 17 food items contributed 82.52 milk, vegetable ghee, vegetables and sugar
percent. These items contribute 84.61 percent in comprising 58 percent out of 82.52 percent. Wheat
rural areas and 78.80 percent in urban areas. continues to be the major expenditure item in both
Comparison of the same 17 food items with the rural and urban areas and its percentage share in
year 2007-08 shows that the overall expenditure aggregate has increased between 2007-08 and
level has slightly increased in both urban and rural 2010-11.
Table 15.4: Percentage of Monthly Expenditure on 17 major Food Items, 2010-11
2007-08 2010-11
Food Items
Urban Rural Total Urban Rural Total
Wheat 12.07 16.55 14.93 12.82 16.25 15.02
Rice 4.21 4.28 4.25 3.56 3.74 3.67
Pulses 2.25 2.41 2.35 2.53 2.60 2.57
Vegetable ghee 6.76 9.81 8.71 5.75 8.59 7.58
Tea 1.87 2.04 1.98 2.06 2.17 2.13
Milk (fresh) 19.87 20.58 20.33 19.33 19.47 19.42
Butter 0.39 1.49 1.09 0.32 1.22 0.90
Mutton 2.55 1.12 1.64 3.80 3.10 3.35
Beef 3.73 2.90 3.20 2.29 1.12 1.54
Chicken 4.47 3.45 3.82 4.48 3.32 3.74
Fish 0.95 0.54 0.69 0.62 0.44 0.51
Fruits 4.71 3.27 3.79 4.30 3.01 3.47
Vegetable 7.81 7.95 7.90 8.10 8.91 8.62

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Table 15.4: Percentage of Monthly Expenditure on 17 major Food Items, 2010-11

2007-08 2010-11
Food Items
Urban Rural Total Urban Rural Total
Salt 0.22 0.20 0.20 0.16 0.16 0.15
Spices 2.07 1.76 1.88 2.63 2.20 2.35
Sugar 4.09 5.14 4.76 5.91 7.74 7.09
Gur 0.09 0.43 0.31 0.13 0.57 0.41
Total 78.11 83.92 81.83 78.80 84.61 82.52
Source: Federal Bureau of Statistics

sectors in 2007-08 stood at 5.57 percent of GDP.

Pro-Poor Expenditures
The government’s commitment to follow a
sustained poverty reduction strategy and a
minimum of 4.5 percent of GDP to social and
poverty related expenditures is clearly reflected in
the allocations to the pro-poor sectors shown in
Table 15.5. The government prioritized 17 pro-
poor sectors through the Medium Term
Expenditure Framework (MTEF) in the PRSP-II,
which provides a link between the policy priorities
and the budget realties. Expenditure on pro-poor
In 2008-09, these were 7.46 percent of GDP and in
2009-10, 7.57 percent of GDP. These expenditures
were well above the requirement under the law.
During 2010-11, total expenditures for these
sectors were increased further and amounted to Rs
1245.541 billion, which is 6.9 percent of GDP.
Already Rs. 919.564 billion expenditures have
been made in these sectors during July-December
of the current fiscal year. Box-2 present an
overview of social protections programs in
Pakistan.

Table 15.5: Budgetary Poverty Related Expenditures by Sectors (Rs. Million)

Sectors 2007-08 2008/09 2009-10 2010-11 2011-12*
Roads, Highways & Bridges 84,825 99,613 98,456 99,567 30,367
Water Supply and Sanitation 19,817 22,204 25,459 28,506 11,788
Education 182,646 240,378 259,525 322,334 156,990
Health 61,127 83,714 94,399 106,017 46,842
Population Planning 13,322 5,345 7,048 4,861 2,247
Social Security & Welfare 18,942 29,129 54,571 55,171 24,934
Natural Calamities 7,728 10,083 12,548 49,115 27,510
Agriculture 83,493 88,912 104,815 115,511 41,732
Land Reclamation 3,130 2,738 1,990 3,669 1,616
Rural Development 23,334 16,362 20,391 19,109 12,724
Subsidies 54,872 220,567 234,926 230,945 463,091
Food Support Programme 4,370 12,420 0 0 0
People’s Works Programme-I 1,420 3,329 8,417 5,049 2,222
People’s Works Programme-II 2,748 28,000 31,754 21,300 2,902
Low Cost Housing 597 583 1,828 373 101
Justice Administration 7820 9,193 10,996 14,223 7,151
Law and Order 2,429 104,658 143,639 169,791 87,347
Total 572,620 977,228 1,110,762 1,245,541 919,564
Total as % age of GDP 5.57 7.46 7.57 6.9 -
Source: Ministry of Finance
* July-December

An overview of social protection programmes of indicates targeted group of beneficiaries and

the country is presented in Box-2, which also financing arrangements for these programmes.

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Pakistan Economic Survey 2011-12

Box-2
Social Protection Programs in Pakistan

S. Geographical
Program Financing Type of Benefit Target Group Managed By
No. Coverage
Benazir Income Support Public Funds Cash as Income Support Married females belonging to ultra Nationwide Federal
1.
Program (BISP) poor households Government
Microfinance Donor Funded Cash as loan for establishing Provide financial services, credit to Nationwide RSPs/MFIs
2. business the poor for self employment and
move them out of poverty
Pakistan Bait-ul-Mal Public Funds Cash as income support grant for Disabled persons, invalids, widows, Nationwide Federal
3. daughters’ weddings, food orphans and household living below Government
supplement in education the poverty line
People’s Works Program Public Funds Cash for Work Provision of electricity, gas, farm to Nationwide Federal
4. market roads, good, water supply Government
and other facilities to the rural poor
People’s Rozgar Scheme Commercial Bank Financing for Selected businesses* Unemployed educated persons Nationwide National Bank of
5.
Financed Pakistan
Subsidy on Wheat, Sugar & Public Funds In kind as social welfare Poor people of the country Nationwide Federal
6.
Fertilizer Government
Utility Stores Public Funds In kind as social welfare Poor people of the country Nationwide Federal
7.
Government
Zakat & Ushr Special levy on Cash “Deserving/ Nationwide Government &
8 bank balances & Needy” among Muslims Zakat & Ushr
agricultural output Committees
Child Labour and Children Public Funds Protection survival development Working children facing abuse and Nationwide Federal &
in Bondage and rehabilitation services exploitation Provincial
9. Government,
FATA, GB
Employees Old-Age Contributory Cash Formal Sector Employees Nationwide Federal
10.
Benefit Scheme (Employers) Government
Social Health Insurance Contributory Cash General Population Nationwide Federal
11.
(individuals) Government
Workers Welfare Fund Contributory Housing, schools, health facilities Formal Sector employees Nationwide Federal
12.
(Employers) Government
*: Community Transport, Community Utility Sores, Community Mobile Utility Stores and PCO/Tele-Centers with a maximum of Rs 200,000/- three new products
including Commercial Vehicle, Shopkeepers and Primary Healthcare Equipments to Medical Graduates, Science Graduates and B-Pharmacy qualified individuals. The
maximum limit ranges from Rs 500,000/- to Rs 700,000/-

Social Safety Programmes and capacity building institutional assistance for

Recognizing the need to protect the poor and the
vulnerable, the government has launched several
safety net programs. The following social safety
net programs in particular minimize the adverse
effects of poverty on the targeted population of the
country.
I. Pakistan Poverty Alleviation Fund
The Pakistan Poverty Alleviation Fund (PPAF) is a
flagship element of country’s poverty reduction
strategy. It is sponsored and supported by the
government with an endowment of Rs. 1,000
million and funded by the multilateral and bilateral
donors like World Bank, International Fund for
Agricultural Development, KfW Financial
Cooperation Germany, US Department of
Agriculture, Italian Government etc. The funding
provided to PPAF is dedicated for micro credit,
enterprise development, community based
infrastructure and energy projects, livelihood
enhancement and protection, social mobilization,
the partner organizations of PPAF.
The overall operational and financial outreach
during the half year ended December 2011
remained satisfactory. Total disbursements for core
operations during the period were Rs. 8,490
million. Loan (micro credit and enterprise
development facility) disbursements were Rs.
6,766 million; water and infrastructure
disbursements were Rs. 365 million; disbursements
for education and health were Rs. 361 million;
capacity building disbursements were Rs. 438
million; social mobilization disbursement were Rs.
220 million; and disbursements for livelihood
enhancement and protection were Rs. 339 million.
In addition to disbursement for core operations, Rs.
576 million (Rs. 273 million from donors' funding
and Rs. 203 million from PPAF's own resources)
was disbursed for project and flood relief activities.
By the end of December 2011, the total cumulative
disbursements were Rs. 100 billion. Credit and

226

enterprise development accounted for 59 percent of
total disbursements followed by relief,
rehabilitation and reconstruction activities (20
percent); community physical infrastructure (10
percent); human and institutional development
(including social mobilization) (7 percent);
livelihood enhancement and protection (1 percent);
and health & education (3 percent). PPAF
interventions are being carried out nationwide with
50% of the resources deployed in Punjab, 19
percent in Sindh, 16 percent in Khyber
Pakhtunkhwa, 4 percent in Balochistan; 9 percent
in Azad Jammu and Kashmir; 1 percent each in
Gilgit Baltistan and Islamabad Capital Territory.
By the end of December 31, 2011, PPAF funding
had been disbursed in urban and rural areas of 129
districts of the country (about 297,000 community
organizations / groups) through 114 partner
organizations of which 12 were focusing
exclusively or predominantly on women. On
cumulative basis, PPAF has financed 5,352,838
micro credit loans. More than 27,417
infrastructure, health and education projects were
initiated and a total of 488,249 staff and
community members were trained. In earthquake
affected areas, PPAF provided financing to
122,000 households to build earthquake resistant
homes and trained over 108,000 individuals in
seismic construction and related skills.
II. Pakistan Bait-ul-Mal
Pakistan Bait-ul-Mal (PBM) is making a
significant contribution towards poverty reduction
through its various poorest of the poor focused
services such as providing assistance to destitute,
widows, orphans, invalid, infirm and other needy
irrespective of their gender, caste, creed and
religion. The following are the ongoing core
projects/schemes:
a. Individual Financial Assistance (IFA): It is
one of its major social dispensation programme to
provide financial assistance to destitute and needy
widows, orphans, invalid, infirm and other needy
persons, to provide for free medical treatment for
indigent sick persons, to provide stipend and
financial assistance to brilliant but poor students.
Under this head PBM has provided financial
assistance of Rs. 734.901 million up to February
Social Safety Nets
2012 and 13,171 beneficiaries from all over the
country have benefitted from this scheme.
b. Child Support Programme (CSP): This is a
cash transfer programme, in which cash incentive
is provided to the parents for sending their children
to schools. Rs. 300 per month is paid to the
families with one child and Rs.600 per month to
the families with two or more children of school
age. Currently the programme is running in 12
districts. An amount of Rs. 66.754 million has
been disbursed up to February 2012.
c. National Centres for Rehabilitation of Child
Labour (NCsRCL): PBM has a proactive child
labour rehabilitation policy and number of
initiatives has been taken for the better`ment of
working children. Efforts have been made to
withdraw them from work places with a view to
their mainstreaming into education by undertaking
programmes for non-formal education. 159 centres
have been established throughout the country on
which Rs. 248.681 million has been spent up till
February 2012.
d. Vocational / Diversified Vocational Dastkari
Schools (V/DVDS): PBM has established
Vocational / Diversified Vocational Dastkari
Schools (VDS/DVDS) where poor widows,
orphans and needy girls are given training in a
variety of skills to make them self-sufficient to
earn their livelihoods in a respectable manner.
PBM has established 144 VDS and 15 DVDS
throughout the country on which Rs. 93.876
million has been spent up till February 2012.
e. Pakistan Sweet Homes (PSHs): PBM has
established Sweet Homes for Orphans having
accommodation for 100 children in each home. A
total of 28 Pakistan Sweet Homes (Orphanages)
have been established so far on which Rs. 133.475
million has been spent up till February 2012.
f. Langer Programme: PBM is also working for
provision of assistance to needy persons. It
provided ration bags to those affected by natural
disasters such as the floods of of Sindh and of
KPK. In this regard an amount of Rs. 185.306
million expenditures were incurred up to February
2012.
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Pakistan Economic Survey 2011-12

g. Institutional Rehabilitation through NGOs: established by the Government of Pakistan in July

It provides grant-in-aid to registered non-
governmental organization (NGOs) for their
projects aimed at institutional rehabilitation of the
poor and deserving persons of the society. PBM
has disbursed an amount of Rs. 24.383 million in
this regard up to February 2012.
h. Jinnah Burn and Reconstructive Surgery
Centre, Lahore: On 21st May, 2004, Pakistan
Bait-ul-Mal, Health Department, Government of
Punjab and Jinnah Hospital, Lahore signed a
memorandum of understanding for construction of
single purpose state-of-the-art burn and
reconstructive surgery centre in Lahore. Pakistan
Bait-ul-Mal has so far released Rs. 610 million for
construction of the centre out of which Rs. 350
million have been released up to February 2012.
III. Benazir Income Support Programme
Benazir Income Support Programme (BISP) was
2008 with the primary objective of providing
immediate relief to the poor enabling them to
absorb the shock of rising prices of food and fuel.
BISP has evolved over the past few years into the
country’s main social safety net. It is committed to
the fulfillment of the dream of making Pakistan a
welfare state through poverty alleviation and
women empowerment. It has made remarkable
progress by providing much needed relief to over 4
million recipients including flood and bomb blast
victims all across Pakistan. An amount of over Rs
122 billion up to March, 2012 has been disbursed
to its recipients. The number of recipients is
expected to increase to 7 million once the on-going
processing of data collected during the nation-wide
poverty scorecard targeting survey is completed.
The BISP has launched the following pro-poor
activities. Box-3 describes the eligibility criteria
for BISP.

Box-3
Eligibility for BISP
Eligible households are identified through a targeting process, which consists of household surveys and the
application of a Proxy Means Test Formula (PMT) that determines welfare status of a family on a scale between 0-
100. Based on PMT, Nationwide Poverty Scorecard Survey was undertaken in 2010 with following features:

` Resulted in the creation of the largest and most reliable data bank of socio-economic conditions of the country
(details at family level) for planning social sector policies and strategies
` First ever census of its kind in South Asia
` Covered almost 27 million households in the country
` Use of GPS devices to map the data of the entire country for informed decision making (to cope with natural
disasters and other emergencies)
Families meeting the BISP eligibility criteria listed below are selected for monthly cash transfers:

Proxy Means Test (pmt) Score of 16.17 or below anywhere in Pakistan

` One woman beneficiary per family

` Woman is CNIC holder

Source: Benazir Income Support Programme

targeting was aimed at a much higher degree of

Nation-wide Poverty Scorecard Targeting
objectivity, using international best practices, to
Survey: This survey was launched in October
minimize inclusion and exclusion errors. The use
2010 in all districts of the country, including AJK
of Global Positioning System (GPS) devices was
and Gilgit-Baltistan, with an initial target to cover
also made mandatory in this phase to uphold the
almost 25 million households. The new system of

228
 Social Safety Nets

dignity of households by conducting the survey at
their doorsteps. The survey will be completed by
June 30, 2012 and over 27 million households will
be covered nationwide during this exercise. The
task for data entry is entrusted to NADRA and data
entry of all collected survey forms has been
completed. During 2011-12, over 6.43 million
eligible families have been identified through
poverty scorecard census. It is expected that this
figure will reach almost 7 million families by June
30, 2012.
Payment to Recipients: During the 2011-12, Rs
24.1 billion has been distributed among
approximately 3.5 million - recipients up to March
2012. This included over Rs. 3.95 billion paid
through Smart Cards to 182,789 recipients and Rs.
826.38 million paid to about 1.3 million recipients
through mobile phone banking. The rest of the
cash transfers were made through the Pakistan Post
money orders. In order to further improve the
efficiency of the payment delivery mechanisms,
BISP has signed agreements with several
commercial banks during the current fiscal year to
launch the Benazir Debit Cards in over 100
districts of Pakistan by June 30, 2012. So far
92,000 Debit Cards have been distributed and an
amount of Rs.1.02 billion has been disbursed to the
beneficiaries. A total of 4,803,126 Debt Cards are
planned to be distributed by June 30, 2012. Box-4
contains the innovative payment mechanism used
by BISP.

Box-4
Innovative Payment Mechanisms used by BISP
BISP is using alternate payment mechanisms including Benazir Debit Card, Smart Card and Mobile banking to
efficiently make payments of the cash grants to its beneficiaries.
1. Benazir Debit Cards: In order to improve the efficiency of the payment delivery mechanisms and to provide
multiple payment mechanism to its beneficiaries for more timely and efficient services, BISP has signed
agreements with several commercial banks during the current fiscal year to introduce Benazir Debit Cards for
cash transfers in over 122 districts in Pakistan by June 30, 2012. Launched in Feb 2012 (in phases), 650,000
Debit Cards have been distributed and through these cards Rs. 1.95 billion have been transferred to the
beneficiaries. BISP has planned to distribute Benazir Debit Cards to over 3.5 million beneficiaries by June 30,
2012. Beneficiaries are able to collect their cash benefits from ATM machines and/or bank designated
franchises
2. Smart Card: BISP had signed a contract in early 2010 with United Bank Ltd. (UBL) for making payments to
beneficiaries through smart cards in four of the test phase districts (Mianwali, Mirpurkhas, Multan and
Sanghar). The beneficiaries were issued Smart Cards, and they collect their cash benefits through bank
designated franchises. Over 183,000 beneficiaries are benefiting from this payment mechanism
3. Phone-to-Phone Banking: Another Alternate Payment Mechanism already in place is the Phone-to-Phone
Banking (P-to-P Banking). It has been implemented in 7 districts. Beneficiaries are provided free mobile phones
and SIM’s. An amount of Rs. 1.7 billion has been disbursed under this payment mechanism to around 137,000
beneficiaries in the piloted districts.

Source: Benazir Income Support Programme

up to Rs. 300,000 are provided to recipients,

Graduation Initiatives: Besides cash transfers,
selected through a monthly computerized random
BISP has also launched various graduation
draw, for setting up small businesses. During the
programmes for its recipients to enable them to
reporting period, 29 draws were held and a total of
exit from the poverty trap. During 2011-12, the
34,807 recipients were pre-qualified. An amount of
following progress has been made by these
Rs. 943 million was disbursed to 6,281 recipients
programmes:
while 2,680 new recipients started their own
Waseela-e-Haq: Under this programme, businesses. It is planned to hold another 5 draws by
microfinance in the form of returnable soft loans

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Pakistan Economic Survey 2011-12
June 30, 2012 to pre-qualify 10,000 additional
recipients.
Waseela-e-Rozgar: Under this programme, BISP
provides technical and vocational training to one
member per recipient family to help them to secure
their livelihood. BISP signed MOUs with several
public sector training organizations and initiated
training for the recipients and their nominees. On
the other hand, a large number of private sector
training institutions were also selected all across
Pakistan through a competitive process. Training
has commenced in the first quarter of 2012 in most
of these institutions and so far 964 persons have
been trained while 4,044 persons are currently
enrolled. It is expected that by June 30, 2012 the
total number of trained persons will be
approximately 20,000. In addition, BISP organized
vocational trainings for a batch of 173 recipients
from Rawalpindi division during the 1st quarter of
2012 through the funds provided by a Chinese civil
society organization.
Waseela-e-Sehat: Life insurance cover of Rs.
100,000 for the bread winners of BISP beneficiary
families was launched from January 1, 2011. Over
3.5 million beneficiary families now have their
bread earners covered under life insurance scheme
launched by BISP in collaboration with State Life
Insurance Corporation of Pakistan (SLIC). Over
900 cases have already been processed by SLIC
during 2011-12. A comprehensive Health
Insurance Scheme covering entire family of BISP
beneficiary has also been piloted in District
Faisalabad in April 2012. The same is planned to
be extended in other districts of Pakistan in coming
years.
Waseela-e-Taleem: BISP designed a co-
responsibility cash transfer programme titled
“Waseela-e-Taleem” for the primary education of
the children of its recipients whereby 3 million
children will be imparted education during 2012-
2016. The programme is scheduled to be launched
in 5 districts during the current fiscal year.
230
IV. Zakat
Zakat plays an important role in poverty
alleviation. Zakat funds are utilized for assistance
to the needy, indigent, poor, orphans, widows,
handicapped and disabled for their subsistence or
rehabilitation. These poor segments of society are
provided Zakat funds either directly through
respective local Zakat Committee or indirectly
through institutions i.e. educational, vocational,
social institutions and hospitals, etc. As a
consequence of the 18th constitutional amendment,
the subject of Zakat has been devolved to the
Provinces/Federal Areas. Up to February, 2012 a
total amount of Rs.3,668.794 million was
distributed in bulk amongst the provinces and other
administrative areas. In addition to this, an amount
of Rs.4,131.474 million has also been released in
March 2012 as a reserve fund available within the
Central Zakat Fund to Provinces/Federal Areas to
provide financial assistance to mustahequeen.
After devolution of the subject of Zakat the
Provinces/Federal Areas are directly managing the
distribution of Zakat and the beneficiaries.
V. Peoples Works Program-I & II:
Peoples Works programme (PWP) I & II are the
welfare programmes comprising of small
development schemes for provision of electricity,
gas, farm to market roads, telephone, education,
health, water supply, and sanitation facilities to the
rural poor. PWP-I & II incurred expenditures of Rs
8.4 billion and Rs 31.8 billion during 2009-10 and
Rs. 5.049 billion and Rs 21.30 billion during 2010-
11 where as Rs 2.222 billion expenditure have
been incurred between July-December 2011-12 on
PWP-I and Rs 2.902 billion expenditures on PWP-
II.
VI. Employees Old Age Benefits Institutions
Employees Old Age Benefits Institution (EOBI)
provides monetary benefits to old age workers
through various programmes such as Old Age
Pension, Invalidity Pension, Survivors pension and
Old Age Grants. During the period of July, 2011 to
March 2012, Rs.7,961.208 million has been
utilized for 350,485 beneficiaries, which is 17.8
percent higher compared to the corresponding

period of last year. Furthermore, it is planned that
331,513 more beneficiaries will take benefit from
the EOBI up to June 2012, an additional amount of
Rs. 3,791.792 million is allocated for these
beneficiaries.
VII. Workers Welfare Fund
Workers Welfare Fund (WWF) is also providing
assistance to poor labourers all over the country. It
provides funds for housing facilities for industrial
workers and for other welfare programmes such as
the Marriage Grant, Death Grant and scholarships
etc. During the current fiscal year from July to
March Rs. 77.021 million in expenditures has been
incurred for scholarships. There are 1,456
beneficiaries of this program, who are children of
poor workers. Another Rs. 636.930 million have
been disbursed as Marriage Grants from which
9,138 families of the workers have benefited.
WWF has also disbursed Rs. 341.200 million for
Death Grants for 1,079 cases of mishaps of
workers all over the country. Further, Rs 2,539.900
million expenditures have been incurred during
July-April 2012 for 46 housing schemes which will
benefit 15,000 families of workers.
VIII. Microfinance Initiatives
Microfinance has been widely recognized as an
effective strategy to combat poverty by providing
Table-15.6: Active Borrowers, Active Savers and Active Policy holders by Peer Group
Micro-credit
Active Value (PKR
Details
Borrowers Million)
(Million)
2009-10 1.98 25.1
2010-11 2.03 27.5
Increase/
0.05 2.40
decrease (Net)
Increase/
2.53 9.56
decrease (%)
Source: Pakistan Microfinance Network (PMN).
The objective of the microfinance initiative is to
provide liquidity to the microfinance providers in
response to tighter liquidity conditions and spikes
in inflation. It is provided as a package through
microfinance banks (MFBs), microfinance
institutions (MFIs), Rural Support Programmes
Social Safety Nets
financial services, especially credit, to the poor, to
allow them to become economically active. The
credit programs offer a small loan to the
beneficiaries for self-employment purposes that
can start or enhance their income streams, and
eventually making them self-reliant and move out
of poverty. Although micro credit has been the
main thrust in the past, today microfinance is seen
as encompassing a wide range of financial services
such as credit, savings and insurance.
Microfinance services help the poor in
accumulating assets and building income
generating capacities that can provide better access
to social services such as health and education,
food security, and access to basic necessities of
life. In addition, savings help them to manage their
resources over time and to enable them to plan and
finance their investments. Insurance becomes
useful in order to mitigate the effects of
unexpected shocks such as natural disasters. This
has been very evident in 2010 and 2011, in the
wake of floods and rains, crop failures, hike in
prices, terrorism and macroeconomic shocks.
The microfinance industry provides services in
three broad categories namely, micro-credit,
micro-savings and micro-insurance. Details of the
industry are provided in Table-15.6 below:
Micro-Savings Micro-Insurance
Active Value (PKR Policy Sum insured
Savers Million) Holders (PKR Million)
2.8 9.6 3.81 53.7
3.6 12.7 2.7 33.6
0.80 3.10 -1.11 -20.10
28.57 32.29 -29.13 -37.43
(RSPs), and others including Commercial
Financial Institutions (CFIs) and Non-government
Organizations (NGOs). Table 15.7 presents the
number of Micro-credit beneficiaries with
Outstanding Loans Portfolio (OLP) and
Disbursements by loan providers.
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Pakistan Economic Survey 2011-12

Table 15.7:
Active Outstanding Loans Number of Disbursements
MFP Borrowers portfolio (PKR) Loans (PKR) Million
Million disbursed
Total for Pakistan MF sector 1969,236 26,741.14 1800,262 36.72
(year ended December 31, 2011)
MFBs
First Microfinance Bank Limited 139,435 2,625.52 152,683 3,601.61
Khushhali Bank 440,461 4,823.72 374,633 5,279.69
Kashf Microfinance Bank 19,912 694.67 20,942 626.21
Pak Oman Micofinance Bank 11,917 128.23 6601 150.08
Tameer Bank 132,728 5,070.42 150,747 6,881.06
Total for MFBS 744,453 13,342.56 705,606 16,538.64
MFIs
AKHUWAT 42,069 355.16 43,307 569.43
ASA – Pakistan 142,814 1,580.14 149,224 2,809.73
ASASAH 14,975 170.81 10,080 184.73
Community Support Concern 13,184 160.47 12,862 315.14
Centre for Women’s Cooperative 7,214 127.51 4,107 214.08
Development
DAMEN 21,036 459.31 24,591 605.31
Kashf Foundation 265,825 2,645.16 150,555 3,306.42
Orangi Charitable Trust 39,289 482.49 25,595 439.52
SAFWCO 31,117 309.07 28,219 467.45
Total for MFIs 587,523 6,290.42 448,540 8,911.82
RSPs
National Rural Support programme 329,975 3,704.93 326,718 5,674.51
Punjab Rural Support programme 61,446 675.55 53,895 916.40
Sindh Rural Suport Organization 38,236 521.85 62,369 979.41
Sarhad Rural Support Programme 2802 19.44 3020 43.51
Thardeep Rural Support programme 44,317 407.08 46,725 669.60
Total for RSPs 476,776 5,328.85 492,727 8,283.43
Others
BRAC 97,547 979.86 96,186 1,653.09
Jinnah Welfare Society 15,825 231.02 15,735 380.87
Narowal Rural Development 2443 26.67 1949 137.89
programme
Orix Leasing 16,022 179.18 12,010 260.03
Organization for Participatory 20,907 301.98 799 17.29
Development
Rural Community Development 7049 47.95 19,982 446.54
society

Sungi Development Foundation 672 11.68 6641 86.37

Swabi WWS 19 0.96 87 6.95
Total for Other 160,484 1,779.30 153,383 2,989.03

Conclusion which to build a thriving economy. No single

policy can completely address the needs of poverty
Sustained growth on a consistent basis is needed to
reduction. Food-based interventions may play a
reduce poverty in the country. Macroeconomic
supplementary and short term role in eliminating
stability is, of course, a pre-requisite for the
poverty. A multi-pronged approach is needed,
sustained economic growth but it is not sufficient
which includes interventions to enhance incomes
to reduce poverty. Rather, it is the foundation on

232

and ensure growth combined with safety nets
programs to cater to the marginalized and those
that cannot be included directly. This requires
interventions in the production system, transfer of
resources and employment programmes as well as
effective safety net programs. The new growth
strategy introduced by the Planning Commission
focuses on enhanced growth through increase in
productivity in a regulatory environment that
enhances competition and promotes innovation. It
focuses on markets, competition and youth and on
vibrant cities that maximize the efficiency of
Social Safety Nets
production and commerce by taking advantage of
all growth linkages. Furthermore, successfully
targeted social safety net programs, fair and broad
based fiscal regimes, efficient labour markets that
promote job creation, and high quality education
opportunities for the youth are also interventions
undertaken by the government to reduce poverty
on a permanent basis. Government at all level is
highly committed to poverty alleviation programs
and all efforts are being made to ensure continuity
of these programmes.
233
 Chapter 16
Environment
Pakistan continued to face challenges in achieving
environmentally sound development. This has
become increasingly difficult in the backdrop of
the consecutive floods and rains across the country
as well as other exogenous and endogenous
factors.
The quality of the natural environment is not only
an extremely important issue from the point of
view of individual survival but it will also emerge
as one of the principal human security issues in
Pakistan. The environmental challenges include
climate change impacts, loss of biological
diversity, deforestation and degradation of air and
water quality. The fast growing population poses a
significant challenge for Pakistan. The existing
environment management capacity cannot sustain
such a large population with a good quality of life.
This chapter discusses the various environment
related issues and challenges faced by Pakistan,
and the initiatives taken by the government to
address and combat those challenges. The first
section provides a review of government policies
and programs intended to put a focus on
environmental issues in Pakistan and actively
combat the adverse impacts of climate change. The
second section describes the state of the
environment in Pakistan, and identifies key
challenges and shortcomings in terms of air and
water pollution and forestlands. Mangrove
ecosystems and coastal resources are discussed
next, followed by an overview of the 2011 floods
and institutional responses to the disaster. The final
section concludes the chapter.
Climate Change: The Evolution of Policies and
Programmes
As a result of concerted efforts of the government,
the word “environment” has been gradually
achieving a greater and wider audience and
acceptance in the country. Awareness about
environmental issues has been rising and
institutions have been built to address these issues.
Civil society institutions working on
environmental issues are strengthening and their
influence has increased. The government,
therefore, has effectively engaged to arrest the
processes of environmental degradation through
various programmes during the last three years.
Some highlights of the government’s efforts to
combat the adverse effects of climate change are
listed below.
` The National Climate Change Policy 2011 has
been developed which provides a framework
for addressing the issues that Pakistan face or
will face in future due to the changing climate.
` With the devolution of Ministry of
Environment, Provinces now have more
powers in policy formulation and
implementation.
` Improvements in weather forecasting which
helps in sound and timely decision making in
agricultural practices and better management
of natural resources and disaster response.
` The National Marine Disaster contingency
plan was implemented by the Maritime
Security Agency (MSA) by carrying out
Barracuda-I and Barracuda-II exercises.
` EURO - II standards for vehicle emissions
were adopted for new manufacturing vehicles
235
Pakistan Economic Survey 2011-12
industries. Drinking water quality standards,
Ambient air quality standards and Noise
standards were also adopted..
` 17 Laboratories have been adopted with
Provincial Agencies/Departments under
Pakistan Environmental Protection Agency,
(Certification of laboratories) Regulation 2000
for carrying out analysis of the industrial
effluents, waste waters and other analytical
research requiring Lab facilities in the country.
` The Cartagena Protocol on bio safety was
ratified.
` Swiss Model of Vertical Shaft Brick Kiln
(VSBK) was identified as an environment
friendly and energy efficient brick
manufacturing technology. Demonstrations for
the model were held in collaboration with
Bricks Manufacturing Associations.
` Pakistan Clean Air Programme (PCAP) has
been approved.
A National Impact Assessment Program (NIAP) is
being jointly implemented by the Planning
Commission/Planning and Development Division
(Environment Section), Ministry of Disaster
Management (Pakistan Agency and Environment
Wing), Provincial EPAs and IUCN Pakistan. The
Netherlands Commission for Environmental
Assessment is providing technical support for
NIAP and it is funded by the Embassy of the
Kingdom of Netherlands. The objective of the
program is to contribute to sustainable
development in Pakistan through strengthening of
the Environmental Impact Assessment (EIA)
process and introducing Strategic Environmental
Assessment (SEA) in the national development
planning. The NIAP is housed in the Planning
Commission of Pakistan since the Program
Coordination Unit is primarily responsible for
creating ownership for the program within the
public sector, coordinating amongst the Program
partners and ensuring post-program sustainability
of the efforts.
The NIAP has achieved the following targets for
SEA and EIA:
` Formulation of SEA task force where SEA
pilots are under consideration.
236
` Awareness raising workshops for the policy
and decision makers in order to make grounds
for SEA Comment [MM1]: Please verify this rephrasing
is reflecting the reality in Pakistan
` Capacity building through trainings on SEA.
` Case studies on SEA from Pakistan were
presented at international forums.
` EIA regulation were reviewed and revised.
` Extensive training programmes were held to
build capacity; seminars and workshops were
organized to raise awareness.
In response to the environmental and climate
change related policies, a number of projects have
been funded by the government to improve the
capacity of relevant institutions to deal with
increasing environmental degradation. In addition,
there are number of projects funded by the donors
in which the government is a partner. These are
being currently implemented to improve overall
environment of the country. These projects include
the National Environmental Information
Management System, National Impact Assessment
Program and the Pakistan Wetlands Program.
After, the devolution of the Ministry of Comment [MM2]: should this be "dissolution" or
Environment on 28th June, 2011 the Ministry of "dismantling"?
Disaster Management took over the responsibilities
of the environment sector at the federal level. Due
to the limited resources at its disposal, government
efforts alone are not sufficient to address
challenges resulting from climate change. A much
larger participation and support from other
stakeholders including industry, civil society, and
the public at large as well as the donors is needed
to effectively respond to climate issues.
Pakistan is a signatory to major environmental
conventions and protocols. As signatory to the
United Nations Framework Convention on Climate
Change (UNFCCC) and a member state of the
World Bank, Pakistan qualifies for financial and
technological assistance. At the UNFCCC Cancun
conference the developed countries have
committed to create a sizable “Green Climate
Fund” with fast start finance. In order to benefit
from international financial mechanisms, the
Government of Pakistan expects to take the
following measures:
 Environment

` Continue to assess how best to position ` Continue to push for transparent delivery of
Pakistan vis-a-vis other groups of developing new and additional fast start funding by
countries in order to secure adaptation funding; developed countries;
` Ensure the access and effective use of the ` Develop public-corporate-civil society
opportunities available internationally for partnership for financing and implementation
adaptation and mitigation efforts e.g. through of climate change adaptation and mitigation
Global Climate Fund (GCF), Clean projects;
Development Mechanism (CDM), Adaptation
` Create domestic carbon market opportunities
Fund (AF), Global Environment Facility
by introducing appropriate investment
(GEF),World Bank’s Forest Carbon
framework linked with regional banking
Partnership Fund (FCPF), etc.;
institutions.
` Establish a Pakistan Climate Change Trust
The Millennium Development Goals (MDGs) are
Fund for financing climate change related
the centerpiece of development efforts of the
projects;
Government of Pakistan. The status of the MDGs
with reference to environment sector indicators is
presented below, (Table 16.1).
Table 16.1—The MDG targets and achievements
Year
Name of Sector/Sub-Sector MDG Targets 2015
2004-05 2010-11
Forests cover including State and private forests/farmlands 4.9 5.17 6.0
(%)
Area protected for conservation of wildlife (%) 11.3 11.3 12.0
No. of petrol & diesel vehicles using CNG fuel (000) 380 2740 920
Access to sanitation (national)% 42 48@ 90
Access to clean water (national)% 65 92@ 93
Number of continuous air pollution monitoring stations. 0 10 --
Number of regional offices of Environmental Protection 0 4 --
Agencies
Functional Environmental Tribunals 2 3 --
Source: Environment Section, P&D Division, @ = Source (WHO/UNICEF)

Box­1 
Climate Change 
Climate change is an area that has become increasingly important in recent years and raises issues of global justice
and equity. Whereas the richer industrialized countries are primarily responsible for greenhouse gas emissions, it is
the poorer developing countries who would most heavily bear the costs of climate change. It is major concern for
Pakistan because of its large population and economic dependence on primary natural resources. Pakistan’s agrarian
economy is heavily dependent on river water provided by melting glaciers

Pakistani cities are facing problems of urban congestion, deteriorating air and water quality and waste management
while the rural areas are witnessing rapid deforestation, biodiversity and habitat loss, crop failure, desertification and
land degradation. In this regard, the National Climate Change Policy 2011 provides a framework for addressing the
issues that Pakistan faces or will face in future due to the changing climate. The policy provides a comprehensive
framework for the development of an action plan for national efforts on adaptation and mitigation. The goal of the
policy is to ensure that climate change is mainstreamed in the economically and socially vulnerable sectors of the
economy and to steer Pakistan towards climate resilient development

The main objectives of Pakistan’s climate change policy 2011 include

` To pursue the sustained economic growth by appropriately addressing the challenges of climate change

237
Pakistan Economic Survey 2011-12

` To integrate climate change policy with other related national policies

` To facilitate and strengthen Pakistan’s role as a responsible member of the international community in
addressing climate change challenges
` To focus on pro-poor gender sensitive adaptation while also promoting mitigation to the extent possible in a
cost effective manner
` To ensure water, food, and energy security of the country in the face of challenges posed by climate change
` To minimize the risks arising from expected increase in frequency and intensity of extreme events: floods,
droughts, tropical storms, etc.
` To strengthen inter-ministerial and inter-provincial decision making and coordination mechanism on climate
change
` To facilitate effective use of the opportunities, particularly financial, available both nationally and
internationally
` To foster the development of appropriate economic incentives to encourage public and private sector investment
in both adaptation and mitigation measures
` To enhance the awareness, skill and institutional capacity of relevant stakeholders
` To promote conservation of natural resources and long term sustainability

The climate change threats to Pakistan are:

` Considerable increase in frequency and intensity of extreme weather events, coupled with erratic monsoon rains
causing frequent and intense floods and droughts
` Projected recession of Hindu Kush-Karakoram-Himalayan (HKH) glaciers due to global warming and carbon
soot deposits from trans-boundary pollution sources, threatening water inflows into Indus River System (IRS)
` Increased siltation of major dams caused by more frequent and intense floods
` Increased temperature resulting in enhanced heat- and water-stressed conditions, particularly in arid and semi-
arid regions, leading to reduced agricultural productivity
` Further decrease in the already scanty forest cover from too rapid change in climatic conditions to allow natural
migration of adversely affected plant species
` Increased intrusion of saline water in the Indus delta, adversely affecting coastal agriculture, mangroves and
breeding grounds of fish
` Threat to coastal areas due to projected sea level rise and increased cyclonic activity due to higher sea surface
temperatures
` Increased stress between upper riparian and lower riparian regions on sharing the water resources
` Increased health risks and climate change induced migration
` The above threats are the cause of major survival concerns for Pakistan, particularly in terms of the country’s
water, food, and energy security considerations

concentrations of suspended particulate matter

State of the Environment
adversely affect human health; prolong a wide
Air range of respiratory diseases and increases the
With an estimated 37 percent of its population probability of heart ailments.
living in cities, Pakistan is the most urbanized
The higher concentration of Suspended Particulate
country in South Asia. Rapid urbanization has been Comment [MM3]: chapter on labor
Matter (SPM) in the air is a major issue in force/population mentions that urban unemployment
accompanied by environmental problems such as
Pakistan. The main sources of SPM are vehicular higher than rural.
pollution, waste management, congestion and the
emission, industrial emissions, burning of solid
destruction of fragile ecosystems. Urban air
waste, pollens, brick kilns and natural dust.
pollution remains one of the most significant
environmental problems facing cities. A substantial
SPM can originate through natural phenomenon,
body of research demonstrates that high
such as unpaved roads and places uncovered by

238
 Environment

green grasses or trees. Fine sized particles of soil
may be raised in the form of dust cloud by driven
motor vehicles and by strong wind. Another origin
of fine particles is anthropological activities. These
include emissions from the motor vehicle and
industrial activity. Climatic and geographical
conditions also affect the level of SPM in ambient
air. These include the type of soil, temperature,
wind speed, relative humidity and quantity of
precipitations.
Several studies of air, water and noise pollution
have been carried out by the Pakistan
Environmental Protection Agency (Pak-EPA). In
June 2011, Pak-EPA conducted a study to monitor
the vehicular emissions in Islamabad. Vehicles
were examined at 13 different locations of
Islamabad. A total of 576 diesel, petrol and CNG
driven vehicles were tested in 13 days. Nearly 43.5
percent of the total vehicles tested were found non-
compliant of National Environmental Quality
Table 16.2: Annual Mean Value of Suspended Particulate Matter (PM 2.5) from June 2011-March 2012
Sr. No. City
1. Islamabad
2. Lahore
3. Karachi
4. Peshawar
5. Quetta
Source: Pakistan Environment Protection Agency.
* µg = µg stands for microgram
The level of other pollutants in the ambient air like
carbon monoxide (CO), Sulphur dioxide (SO2),
Oxides of nitrogen (NOx), Ozone (O3) and
Hydrocarbons (HC) are within safe limits
according to National Environmental Quality
Standards (NEQS). During this study, noise level
was also monitored and found within safe limit
except at two places where the noise level was
recorded to be over the safe limit for a short period
of time.
Ambient air quality data recorded by real time
automatic monitoring stations in the five capital
cities confirmed the presence of high concentration
of suspended particulate matter. The level of PM
(Particulate Matter size below 2.5 micron), which
is mainly due to the combustion source, was
reported to have reached an alarming level (2-6
times higher than the safe limit). The National
Environmental Quality Standards (NEQS) for PM
2.5 is 25 micron/m3 annual average. The table and
figure below show annual mean value of PM 2.5 in
five capital cities.
Level (µg */m3) Comment [MM4]: if i'm not mistaken, this
87.05 should be the greek letter mu and not a u. please
verify.
153.5
52.91
74.53
63.92
Standards (NEQS) for ambient air. Sometimes the
concentration of NOx and SO2 goes higher than the
safe limit at Lahore and Peshawar, but this happens
for short periods of time and represents a short
time exposure to the public.

Fig-16.1: PM 2.5
180.00
153.50
160.00
140.00
Concentration

120.00
100.00 87.05
74.53
80.00 63.62
52.91
60.00
40.00
20.00
0.00
Islamabad Lahore Karachi Peshawar Quetta
Cities

239
Pakistan Economic Survey 2011-12

Motorcycles and rickshaws, due to their two stroke industry is fast growing in Pakistan and has
(2-strokes) engines, are the most inefficient in increased by 117 percent in 2010-11 when
burning fuel and contribute most to emissions. 2- compared with the year 2001-02. Rickshaws have
stroke vehicles are responsible for emission of very grown by more than 11.1 percent while
fine inhalable particles that settle in lungs and motorcycles and scooters have posted a growth of
cause respiratory diseases. The 2-stroke vehicles 120.4 percent over 2001-02, (Table 16.3).
Table 16.3—Motor Vehicles on the Road (000 Nos.)
Year Total Motorcycles/Scooter Rickshaws
2001-02 2561.9 2481.1 80.8
2002-03 2737.1 2656.2 80.9
2003-04 2963.5 2882.5 81.0
2004-05 3146.4 3064.9 81.5
2005-06 3868.8 3791.0 77.8
2006-07 4542.9 4463.9 79.0
2007-08 5126.3 5037.0 89.3
2008-09 5456.4 5368.0 88.4
2009-10 5501.2 5412.1 89.1
2010-11 5558.6 5468.8 89.8
Source: National Transport Research Centre

another source of pollution in many areas. Use of

The use of coal in the power sector has been
low-grade coal and old tyres in bricks kilns
decreasing. This may be due to the fact that a
generate dense black smoke (soot) and other kind
number of plants have now been converted to
of emissions. The use of coal has increased by 64.2
natural gas. Likewise, there has been a reduction in
percent for bricks kilns in 2010-11 when compared
coal usage for domestic purposes. Bricks kilns are
with year 2001-02 (Table 16.4).
Table 16.4: Consumption of Coal (000 M/Tons)
Year Power Brick Kilns Household
2001-02 249.4 2577.5 1.1
2002-03 203.6 2607.0 1.1
2003-04 184.9 2589.4 1.0
2004-05 179.9 3906.7 -
2005-06 149.3 4221.8 -
2006-07 164.4 3277.4 1.0
2007-08 162.2 3760.7 1.0
2008-09 112.5 3274.8 0.8
2009-10 125.5 3035.2 -
2010-11 96.5 4231.5 -
Source: Hydrocarbon Development Institute of Pakistan
- : Not Available

extent including reduction of suspended particulate

In the past few years, the CNG Sector has seen
matter (SPM) emitted from the public transport as
tremendous growth. 3,331 CNG stations are
well as private vehicles. Since the country is facing
currently operational making Pakistan one of the
a shortage of CNG, other alternative sources such
largest users of CNG in the world. The use of CNG
as LNG are being considered as a part of
as an alternate fuel in the transport sector has
environment friendly component.
helped to reduce air pollution to a considerable

240

Table 15.5—Growth in CNG Sector
As on CNG Stations (No.)
December 2000
December 2001
December 2002
December 2003
December 2004
December 2005
December 2006
16th May, 2007
February 2008
December 2009
June 2011
Source: OGRA, Ministry of Petroleum & Natural Resources
Water and Sanitation
Although 70.9 percent of earth’s surface is covered
with water nearly 97 percent of this is saltwater.
Most of the remaining 3 percent are in the polar ice
caps, glaciers, atmosphere or underground
reservoirs and hard to reach. Only 0.4 percent is
available for direct use. Freshwater is a precious
natural resource and fundamental to the survival of
humans and most other land-based life forms.
Water Pollution
Water pollution has been a serious concern
affecting not only humans but also plants and
animals. The ecosystem of rivers, lakes, streams,
and seas are deteriorating due to contamination of
water from various sources. This situation is
leading to many health problems including serious
illnesses transmitted by polluted drinking water
such as cholera, typhoid fever, hepatitis A and B,
dysentery, etc. Dumping of solid and liquid
industrial waste, improper disposal of human and
animal waste, and residues of agriculture practices
like fertilizer and pesticides are all major
contaminants of drinking water. These pollutants
are discharged directly into rivers and irrigation
canals and also transmitted by rain water runoff
and get mixed with ground water aquifer.
Drinking Water and Sanitation
Globally, access to drinking water was at 87
percent in 2011. In order to meet the MDG target,
an additional 2 percent is needed by 2015. In
Pakistan, statistics on access to drinking water is
Environment
Converted Vehicles (No.)
150 120,000
218 210,000
360 330,000
475 450,000
633 660,000
835 1,050,000
1,190 1,300,000
1,450 1,400,000
2,063 1,700,000
3,051 2,000,000
3,331 2,740,000
impressive; according to the Pakistan Bureau of
Statistics (PBS) report Pakistan Standard Living
Measurement (PSLM) 2010-11, access to drinking
water to urban and rural population of Pakistan is
94 and 84 percent respectively, with an average of
87 percent in 2011.Hence access to the source of
drinking water is satisfactory. Comment [MM5]: the subsequent paragraphs are
suggesting that manys ources are polluted? if those
paragraphs are true, then we need to add this
According to Pakistan Council of Research in sentence to the claim that access to drinking water is
Water Resources (PCRWR), the majority of the excellent.
population in the country is exposed to the hazards
of drinking unsafe and polluted water from both
surface and ground water sources. As derived from
the National Water Quality Monitoring Programme
carried out by the PCRWR, the 4 major
contaminants in drinking water sources of Pakistan
were bacteriological (68 percent), arsenic (24
percent), nitrate (13 percent) and fluoride (5
percent). Similarly, the five years trend analysis
has revealed that out of a total 357, only 45 water
sources (13 percent) were found “safe” and the
remaining 312 (87 percent) were “unsafe” for
drinking purpose. In Pakistan about 68 percent of
the drinking water consumption is from
groundwater for both urban and rural areas.
Pak-EPA has conducted a 4 month study to
monitor the water quality of Rawal Lake and its
tributary. Samples were collected on monthly basis
and analyzed at the Central Laboratory for
Environmental Analysis and Networking
(CLEAN). Parameters like biological oxygen
demand (BOD), conductivity and total suspended
solid were found to be higher than surface water
standards. BOD was found to be 2 to 8 times and
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Pakistan Economic Survey 2011-12
TSS 1.2 to 6.2 times higher than surface water
guidelines.
Globally, improved sanitation coverage was just
above the 60 percent mark in 2008, up from 54
percent in 1990, with over 2,500 million people
still without access. Half of the people living in
developing regions have no access to improved
sanitation1.
Municipal sewage is a major source of surface
water pollution. About 2 million wet tons of
human excreta are annually produced in the urban
sector of which around 50 percent go onto pollute
water bodies. The National Conservation Strategy
states that almost 40 percent of all disease related
deaths are connected to water borne diseases.
Other sources of water pollution are industrial
effluents, solid waste, hospital waste, chemical
fertilizers and pesticides.
In Pakistan sanitation facilities are improving.
However, much improvement is needed for rural
areas sanitation facilities. According to PBS
Pakistan Standard Living Measurement 2008-09,
14 percent of all garbage collection facilities
provided to the population are executed through
municipalities, 7 percent through privately
managed collection systems, and the remaining 79
percent have no system.
The most basic requirement for proper sanitation is
safe disposal of excreta away from a dwelling unit,
by using a sanitary latrine. There is a great
variation in latrine coverage between provinces.
Urban Sindh has the best coverage followed by
urban Khyber Pakhtukhwa.
In most of the urban and rural population water is
supplied from the ground water except for the
cities of Karachi, Hyderabad, and part of
Islamabad, which mainly uses surface water.
Therefore, deteriorating ground water quality in
Pakistan has serious implications for the
environment and health of Pakistan’s population.
Different national and international reports have
identified Pakistan as one of the most ‘water
stressed’ countries in the world, facing lack of
1
UN-2011
242
water availability for irrigation, industry and
human consumption. According to a World Bank
report, water supply in Pakistan fell from 5000
cubic meters to 1000 cubic meters in 2010, and is
likely to further reduce to 800 cubic meters per
capita by 2020 due to growing population pressure,
rapid urbanization and industrialization. Comment [MM9]: How did access to water
remain at 90-95% with this precipitous drop in
availability?
The government is committed to provide safe
drinking water through clean drinking water
initiatives and installation of water filtration plants. Comment [MM10]: don't capitalize unless that's
However, the execution and monitoring of the name of the initiative.
government efforts are being hindered by limited Comment [MM6]: tonnes, right?
resources, increasing population, fast growing
urban development, industrialization, high
operational and maintenance and poor cost Comment [MM7]: 40 percent of disease related
deaths, right?
recovery, lack of private sector participation, and
low institutional capacities.
Strategy and Action Plans (Water & Sanitation)
` Develop legal and policy frameworks
Comment [MM8]: This heading also talks about
regarding promotion of safe drinking water in drinking water, while the previous section also talks
Pakistan. This promotion would include about sanitation. Makes sense to combine into one
sub-heading?
desalinization of sea water.
` Develop a water quality database to assist in
decision making.
` Establish a water quality monitoring and
surveillance system based on enforceable
water quality guidelines and standards.
Conduct cyclic 4 seasonal water quality
monitoring for major rivers and water
reservoirs.
` Address arsenic pollution of groundwater in
Sindh and Punjab through specific initiatives
including investigative studies and awareness
raising programmes.
` Develop legal and policy frameworks
regarding promotion of safe drinking water in
Pakistan.
` Make installation of water treatment plants an
integral component of drinking water supply
schemes.
` Develop an integrated approach that will guide
the allocation of water, allocation of
investment and pricing of water services, both
in rural and urban areas.

` Promote and devise methods for harvesting
rain water using low-cost structures.
` Clarify national sanitation policy in order to
make it explicit and consistent.
` Encourage and promote public toilets in all
urban centres.
` Develop systems for safe sewage disposal.
` Awareness raising and bringing an attitudinal
change.
` Generate resources (locally and nationally) and
ensure participation of stakeholders.
` Guide appropriate technical choices.
` Establish public-private-civil society
collaborative arrangements.
According to a report released by the
WHO/UNICEF Joint Monitoring Program (JMP)
2012, in Pakistan 92 percent people had gained
access to source of drinking water by 2010 while
this ratio was 85 percent and 89 percent in 1990
and 2000 respectively. The MDG target is to
achieve the ratio of 93 percent by 2015. Moreover,
48 percent people have been using improved
sanitation by 2010 while this ratio was 27 percent
and 37 percent in 1990 and 2000 respectively. The
MDG target for access to sanitation is 90 percent
by 2015.
Forest
Currently Pakistan has only 5.17 percent of total
land area covered with forest placing Pakistan
among countries with low forest cover. The
country’s forest area is divided into state-owned
forests, communal forests and privately owned
forests. Major forest types existing in Pakistan are
temperate and subtropical conifer forests, scrub
forests, riverine forests (irrigated plantations), liner
plantation (roadside, canal-side) and mangrove
forests. The existing forest resources in the country
are under severe pressure to meet the fuel-wood
and timber needs of a rapidly growing population.
In addition to this, the wood based industries
including housing, sports, matches and furniture
are continuously growing.
Environment
Forests and REDD+
(Reducing Emissions from Deforestation and
Degradation plus)
Increasing GHG emissions are contributing to
global warming and leading to accelerated climate
Comment [MM11]: toilets, surely?
change. The REDD+ initiative facilitates trade
between developed countries who are net emitters
of GHG and the developing countries who are net Comment [MM12]: right?
non-emitters, since they do not have heavy
industry that produce carbon but have forests that
can stock excess carbon in the air. Under REDD+
mechanism, the emitters may trade their carbon to
be consumed/stocked by forests in developing
countries at a per ton cost to be calculated as per
Certified Emission Reduction (CER). This process
builds a nexus between climate change and forest
carbon credits. Therefore, the concept of REDD+
was developed as an incentive based mitigation
response from the Montreal Climate Change
Negotiations (COP 11) in 2005 to address 17-25
percent reported global share from deforestation Comment [MM13]: first paragraph on page 10
and forests degradation. This will involve put the global access to water at 87 percent in 2011.
enhancing existing forests and increasing forest It droped 5% in a year?
cover. This concept has three important phases: Comment [MM14]: on page 12, the MDG target
for 2015 is stated to be 87+2= 89 percent? these
` Readiness phase (2010-2012): enacting reports need to be consistent.
national strategies supported by appropriate
capacity building
` Pilot phase or Investments phase: ‘learning
by doing’ through pilot projects. This is
underway in some countries, before the
enactment of international rules.
` Implementation or Operations phase (2013-
2020): performance-based payments are made,
either by direct funding or via links to the
global carbon market, leading to the global
implementation of REDD+.
REDD+ Potential and Pakistan:
Pakistan has a low forest cover with diversified
forest types from coastal mangrove and riverine
ecosystem to alpine Chir Pine forests within placed
diversified community. There is a decline in
overall forest cover in Pakistan, with the amount of
forests declining by just under 2 percent in the
1990s, but by more than 2 percent in just five
years, from 2000 to 2005. This decline needs to be
taken into account to get maximum benefits from
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Pakistan Economic Survey 2011-12
REDD+. The government is striving to reverse
these negative trends and aiming to increase
Pakistan’s forest cover to 6 percent by 2015.
The total carbon stock of conifer forests could be
estimated as 58 mega tons on the basis of biomass
estimations by Asia Least cost Greenhouse Gas
Abatement Strategy (ALGAS). On the bases of
FAO Deforestation data 1990-2005 and ALGAS,
389 mega tons of carbon potential could be
estimated for all types of forests in Pakistan with
an estimated annual return of US$ 54 million at a
rate of US$ 15 per tonne of carbon credits2. Other
estimates by Leadership for Environment and
Development (LEAD) 2010 3 points to potential
earnings of between $94.74 million and $315.8
million per year if deforestation is halted
completely. This estimate reflects the limited data
available and provides only an indicative estimate.
The actual potential could be far greater,
depending on the carbon price and the sectors
included under REDD+.
Pakistan’s efforts with regard to the REDD+
initiative need to be significantly enhanced on a
priority basis in order to achieve the global target
and meet the basic requirements of REDD+
readiness phase. As Pakistan faces a high rate of
deforestation and aims to reverse this trend, the
active engagement in REDD+ is a unique
opportunity to support this national priority.
However, this needs to be driven by a focused
strategic plan and supported by a scaling up of
national technical and institutional capacity to deal
with REDD+ mechanism.
Mangroves Ecosystem and Coastal Resources
The coastal belt of Pakistan extends up to 1,050
km along Sindh and Balochistan provinces. The
total population in and around mangrove forests on
the coast of Pakistan is estimated to be around 1.2
million people, nearly 900,000 of whom reside in
the Indus Delta 4 . At least three quarters of the
Delta’s rural population depend, directly or
2
Iqbal. K.M.J., and Ahmad. M., (2011) SDPI, Policy
Paper Series # 38 September 2011
3
LEAD (2010) REDD+ Policy Brief 4. LEAD-Pakistan
4
(Salman 2002), and Sindh Forest Department 2012.
244
indirectly on fishing as their main source of
income.
Pakistan’s commercial marine fisheries operate in
and around the mangrove creeks on the coast of
Sindh province. The annual value of fish caught
from mangrove dependent fish species in the Indus
Delta is estimated at around $20 million. Shrimps
are also particularly important, with a domestic
value of $70 million and an export value of about
one and a half times this figure, and the export of
mud crabs contributes an additional $3 million to
the regional economy. Comment [MM15]: what's this? per tonne?
Beside these economic benefits, the mangrove
forest benefits the ecosystem by providing
nurseries for many species of fish and shrimp,
stabilize shorelines and reduce coastal erosion, and
protect coastal habitations from storm damage. It
provides grazing grounds to at least 8,000 camels,
5,000 buffaloes and over 1,000 goats, in addition
to providing other forest products like fuel wood,
honey, and medicinal plants to local communities.
It is estimated that one hectare of properly
managed mangroves can yield 100 kg of fish, 25
kg of shrimp, and 15kg of crab meat annually.
Mangrove Forest Degradation
The most prominent and most sensitive ecosystem
of the region is characterized by mangroves forest
that form a number of direct and indirect linkages
with the socioeconomic status and occupations
adopted by the community. The figures from Sindh
Forest Department (SFD) and IUCN-Pakistan
estimated that 196,000 ha of mangrove forest in
Pakistan has been lost up to 2007. According to the
change analysis done by WWF-Pakistan at Keti
Bunder site through satellite imaging, the
mangrove cover has experienced a drastic decline
of 20 percent, from 1992 to 2007.
Moreover, the creeks are also perceived to widen
in future due to exacerbation of soil erosion along
the Arabian Sea, which forces the mangrove forest
towards instability and this instability trend has
been continuous from 1992 to 2007, with a very
nominal percentage of dense mangrove forests
remaining stable during this time period. Similarly
WWF-Pakistan also reported that the 0.5 million

hectares of fertile land in Thatta district alone is
affected by sea intrusion.
The other major threats to mangrove ecosystem
includes shortage of fresh water and resultant silt
depositions, industrial and municipal pollution,
dumping of waste, oil spills and leakages, and
encroachment of settlements around mangrove
forests. The Government of Pakistan has taken
steps to halt the deforestation of mangroves by
establishing protected areas and new plantations by
forest department with the help of non-
governmental organizations like WWF-Pakistan
and IUCN.
Floods of 2011 and Policy Responses
In a Damage and Need Assessment Report jointly
prepared by the Asian Development Bank and the
World Bank, it has also been pointed out that in
addition to causing loss of life, displacement of
millions, and huge losses to the economy, the
floods in 2011 have resulted in environmental
damages, heightened environmental health risks
and affected forests, wetlands and other natural
systems. The floods have also caused
contamination of drinking water, proliferation of
disease vectors caused by stagnant water ponds,
and accumulation of solid wastes – factors that
would further exacerbate health risks for the
affected population, particularly women and
children. Environmental degradation and its effects
on human health was already a significant
development challenge in Pakistan, which has
some of the highest prevalence rates in all of South
Asia for child mortality, diarrhea and acute
respiratory illnesses associated with environmental
factors. The conditions created by the floods could
result in a significant increase of these and other
illnesses. No estimates are available for damages to
other environmental resources such as wetlands
and mangroves at this stage. To fill such damage
data gaps, follow-up environmental studies have
been proposed to address safe disposal of debris,
leakage/spillage of hazardous and/or toxic
substances and assess damage to cultural heritage
sites.
The floods were initiated by a natural
phenomenon; however, anthropogenic
interventions exacerbated them, particularly as
Environment
destruction and degradation of natural ecosystems
reduced their capacity to protect from flood. Also,
development of settlements and croplands in
floodplains as well as blocking of natural drainage
routes created the conditions for the current human
tragedy. To avoid such disasters in the future,
strengthening the resilience of the Indus Watershed
is urgently needed, involving an approach that
combines structural and non-structural measures
that are strategic, feasible, and affordable to
minimize vulnerability to extreme weather events.
Such an approach also calls for improved
management of the Indus Basin’s major natural
resources through strengthened coordination of
flood-related actions within and among the
provinces. Towards this end, the following priority
actions are proposed to be undertaken:
` Addressing environmental health priorities,
including drinking water, sanitation, hygiene
and indoor air quality
` Reviewing/updating the flood protection
strategy and master plan, and preparing a
storm water drainage master plan; and
` Preparing land use plans and building Comment [MM16]: this sentence is not adding
regulation, and strengthening legal and anything new
institutional frameworks.
The environmental damage caused by floods
has been estimated at Rs. 2,762.7 million (US $
31.8 million) and environmental recovery /
reconstruction needs has been estimated at Rs.
2,873.6 million (US $ 33.02 million).
Environmental Considerations in Policy
Response
The 2011 floods have caused wide-ranging damage
to different sectors of the economy. The
reconstruction and recovery needs are diverse and
multi-faceted and work has to be undertaken on an
urgent basis. However, these interventions,
particularly those related to irrigation, agriculture,
transport, health, education, housing, and water
supply and sanitation are likely to cause negative
environmental impacts. In order to ensure the Comment [MM17]: I don't know if I understand
sustainability of the reconstruction and recovery the message here: reconsutruction efforts are going
to create a carbon footprint. Is that the negative
process, these negative environmental impacts environmental impact being referred to here? Even if
ought to be addressed as an integral part of all it is, it's hard to see the "social" impact here.
sectoral plans.
245
Pakistan Economic Survey 2011-12
The national environmental legislation (Pakistan
Environment Protection Agency 1997), as well as
the international financial institutions’ (IFIs)
safeguards require that environmental and social
assessments are carried out and management
plans/frameworks are prepared prior to
undertaking the interventions such as those
recommended in the floods Damage and Need
Assessment. However, details of the specific
activities associated with the individual
reconstruction and recovery plans in the majority
of sectors are not currently known, hence the
potentially adverse environmental and social
impacts of these activities cannot be identified.
Instead, it is proposed that a broad Environmental
and Social Screening and Assessment Framework
(ESSAF) be prepared for the overall reconstruction
and recovery needs.
The ESSAF will define the environmental and
social screening and assessment requirements of
individual projects or interventions, and will guide
the implementing agencies in identifying the
appropriate type and level of environmental and
social assessment to be carried out prior to
undertaking each project or intervention in
compliance with national as well as IFI’s safeguard
requirements. The ESSAF will also define the
246
requirements for preparing appropriate
environmental and social documents, and obtaining
approvals/clearances of these documents from the
relevant agencies. To ensure implementation of
ESSAF, it is further proposed that each line agency
(Provincial Disaster Management Authority /
District Disaster Management Authority) appoints
an environmental and social focal person within
the department.
Conclusion
The Government of Pakistan has undertaken
various steps to combat the negative impacts of
climate change. This chapter provided an account
of institutional change, including raising
awareness, developing strategy and policies, and
implementing programmes to actively address and
reverse adversities faced due to global warming
and the resultant climate change. The state of
Pakistan’s atmosphere, including air and water
quality, state of forestry, and coastal resources
were described, identifying the key challenges that
remain in these areas as well as new strategies that
have been adopted (REDD+) by the government.
The chapter identifies that it will be crucial to
carefully evaluate disaster response and rebuilding
strategies to make sure that they are
environmentally sustainable.
 Special Section
Pakistan: Flood Impact Assessment
Severe monsoon rains triggered floods in southern
Pakistan of an unprecedented scale, both in terms
of volume and amount of land flooded. Despite
forecasts of below-average rainfall, heavy
downpours began in mid-August, engulfing all 23
districts of Sindh province1 and adjoining areas of
northern Balochistan province causing damage to
crops, infrastructure and human settlements, thus
affecting the national economy. The maximum
rainfall during the year was from 1st July to 30th
September, 2011.The peak rainfall was received in
Mithi, Sindh. Being sandy area the rate of soil
infiltration was very high and rate of runoff water
was minimal.2
In Balochistan, flash flooding as well as
overflowing local rivers and irrigation and
drainage channels caused damages in 14 districts,
the worst of which (5 districts) were confined in
the southern and northern parts of the province
According to the World Bank and Asian
Development Bank (ADB) Damage and Needs
Assessment (DNA) report, approximately, 9.6
million people have been affected in Sindh and
Balochistan as a result of the floods; 520 people
were killed and more than 1,180 people were
injured. The impact of the flooding in 2011 cannot
be seen in isolation. In 2010, 20 million people
1
where cumulative rain fall varied from 400mm to
around 1300mm [Source: Rapid Crop Damage
Assessment,FAOand Supparco]
2
The other areas that received excessive rainfall were
Mirpur Khas (866mm), Badin (647mm), Shaheed
Benazir Abad (650mm), Umerkot (552mm), Dadu
(485mm) and Padidan (423mm).
were affected by the largest floods in living
memory3, many of the victims of the 2010 floods
were still in the recovery phase when the 2011
floods struck. The 2011 floods compounded the
damage of the previous disaster.
In severely affected areas, food insecurity and
malnutrition were already at critical levels before
this year‘s new wave of rains and flooding.
Continuing rains and damaged infrastructure
impeded the delivery of aid. Essential
infrastructure including roads, bridges and markets
had been severely damaged and many remained
impassable. A large number of farmers lost their
livestock on way to safe havens and through non-
availability of fodder and exertion. There was
hardly a place in the severely affected area that
was free of standing water.
The sector wise breakdown of flood damages and
respective reconstruction cost estimates are given
in Table-1. These indicate that the agriculture
sector received a major blow followed by housing,
education, and financial, private sector and
industries; economic growth is likely to decline.
The minimum reconstruction cost amounts to a
total of Rs. 239 billion (US$ 2747 million).
3
In comparison, the 2011 floods were driven by high
intensity unprecedented rainfall on the eastern side of
the Indus River. Both events demonstrate changing
climate and weather pattern in the region and their
intensity of recurrence.
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Pakistan Economic Survey 2011-12

Table 1: Flood Damages and Reconstruction Cost by Sectors

Sectors Damages Reconstruction Cost
Rs. million US$ million Rs. million US$ million
Irrigation and Flood Management 4,763 55 9,526 109.5
Housing 85,465 982.4 91,510 1051.8
Agriculture, Livestock & Fisheries 160,107 1840 26,590 305.6
Transport & Communication 26,468 304 33,902 388
Energy 1,240 14 292 3.4
Social & Gender 44 1 65 0.7
Financial, Private Sector and Industries 27,254 313 8,178 94
Education 12,014 138.1 22,589 259.7
Health 1,258 14 864 9.9
Water Supply & Sanitation 1,204 14 1,900 22
Governance 1,953 22 4,768 54.8
Environment 2,763 32 2,874 33
Disaster Risk Management - - 1,827 21
Social Protection - - 34,126 392.3
Total 324,533 3730 239,011 2747
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011.

As mentioned above, despite being substantially the remaining 3,876 houses have been partially
lower in intensity, because of their location and destroyed.
timing, the 2011 floods had a significant negative
effect on the economy with lingering long term In general, pucca houses have withstood the floods
impact. better but have still been vulnerable to collapsing
of roofs, undermining of foundations, and
Summary of Damage and Needs by Sector scouring/erosion at the base of walls and corners.
Housing Furthermore, standing water has subjected
submerged portions of walls to hydraulic pressure,
The floods caused total or partial damage
often causing walls to overturn or tilt laterally. At
to an estimated 998,376 housing units in Sindh and
places subsidence of the ground under water-
Balochistan. An estimated 514,283 houses have
logged foundations has resulted in cracking and
been completely destroyed 4 and another 484,093
collapse of walls. For kacha buildings, the impact
partially damaged 5 . Sindh province has suffered
has often been extreme and irreversible.
the overwhelming majority of damage to housing
stock with 99 percent of the total affected housing
The damage to housing structures is estimated at
stock in this province. Out of the 992,679 houses
Rs. 85,465 million (US$ 982.4 million) for
affected in Sindh, 512,462 houses [493,606 kacha
completely destroyed and partially damaged
houses and 18,856 pucca houses] have been
houses. The reconstruction cost (completely
completely destroyed and the remaining 480,217
destroyed and partially damaged houses) is
houses [403,790 kacha houses and 76,427 pucca
estimated at Rs. 91,510 million (US$ 1051.8
houses] have been partially destroyed. In
million).6
Balochistan, the total number of houses damaged is
estimated to be 5,697 kacha houses, out of which
1,827 houses have been completely destroyed and

4 6
This primarily includes washed away, fully collapsed, These estimates are based on replacement of a
or structurally damaged houses with foundation failure destroyed house with a core unit of 500 sq. ft covered
or erosion of supporting walls. area, calculated on the basis of currently prevailing
5
This mostly includes cases of repairable damage. prices of materials and labour.

248

Health
The floods caused by heavy rains in 2011 resulted
in damage to the public health infrastructure in
Sindh and Balochistan provinces. Basic health
units and rural health centers suffered the most
damage; accounting for 74 (52 percent) of the total
141 damaged facilities. In Sindh, of the total of
708 health facilities of various categories in the 11
districts where health sector facilities were
affected, 113 (16 percent) were damaged out of
which 28 (4 percent) were fully damaged, and 85
(12 percent) were partially damaged. In
Balochistan, of the total of 193 health facilities in
the 3 affected districts, 28 (15 percent) were
damaged out of which 13 (7 percent) were fully
damaged and 15 (8 percent) were partially
damaged. The damage caused to the health sector
in Sindh province constitutes 7 percent of its total
health facilities (1,486). In Balochistan; 1 percent
of the total health facilities (2,075) were damaged.
The total damage to this sector is estimated at
Rs.1,258 million (US $ 14.3 million). Out of
which, the direct losses for all health facilities was
calculated as Rs. 431.85 million (US$4.9 million)
[Sindh: Rs. 404.85 million (US$4.6 million) and
Balochistan Rs. 27 million (US$0.3 million).On
the other hand, there is no data available for
calculating the indirect losses. However, the
estimated amount required to meet short-term
needs has been taken as proxy of indirect losses
i.e., Rs. 826 million (US$9.4 million). The total
cost of reconstruction for this sector is estimated at
Rs. 863.7 million (US $ 9.8 million) for the fully
and partially damaged health facilities.
Education
The total number of educational institutions
affected by the floods is 4,096 (Sindh: 3,892;
Balochistan: 204). The damaged institutions are
6.7 percent of the total institutions in the affected
districts in the two provinces. In Sindh, 1,032
schools for females are damaged (385 are fully
damaged and 647 are partially damaged) or 26.5
percent of the total of 3,892 damaged schools, and
a total of 2,860 schools for males are damaged
(1,022 are fully damaged and 1,838 are partially
damaged). This means that 73.5 percent of the total
of 3,892 damaged are male schools. In
Balochistan, 51 damaged schools are females
Pakistan: Flood Impact Assessment
schools (3 are fully damaged and 48 are partially
damaged).These make up 25 percent of the total of
204 damaged schools, while the 153 damaged
schools for males (17 are fully damaged and 136
are partially damaged) make up 75 percent of the
total of 204 damaged schools.
The total damage and loss in both the provinces is
estimated at Rs. 12,013 million including indirect
loss of Rs. 1,856 million and direct loss of
Rs.10,157 million. In Sindh, total damage and loss
is estimated at Rs. 11,751 million including
indirect loss of Rs 1,771 million and direct loss of
Rs. 9,980 million. In Balochistan, indirect and
direct losses are Rs. 85.1 million and Rs. 177.1
million respectively. The total cost of
reconstruction to this sector for all the damaged
institutions in Sindh and Balochistan is estimated
at Rs.22,589 million.
Agriculture, Livestock, and Fisheries
Agriculture is a key sector of Pakistan‘s economy
and accounts for 21 percent of GDP, 45 percent of
employment and 60 percent of exports. Sindh has
30 percent and Balochistan 8 percent share in the
national agricultural GDP. The livelihood of more
than 60 percent of the total population is directly or
indirectly dependent on agriculture sector.
Furthermore, the agriculture sector has strong
backward and forward linkages and as a result has
a large impact on the overall economic
performance. The sector’s performance has been
weak over the last few years recording a growth of
around 2 percent per year, mainly due to poor
performance of the crop subsector. The
performance of the livestock subsector has
remained healthy and its share in agriculture GDP
has surpassed the crop sector standing at around 55
percent. Due to limited rainfall, less than 240 mm
in an average year, crop production is dependent
on irrigation and more than 80 percent of land is
irrigated. There are two main cropping seasons,
namely, Kharif (summer) and Rabi (winter). The
Kharif season starts in April and ends in October,
and the main crops during this season are cotton,
rice, sugarcane, maize, pulses, fruits and
vegetables. The Rabi season, which starts in
October and ends in April, is dominated by wheat
production which is the main staple food in
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Pakistan Economic Survey 2011-12
Pakistan. Other Rabi crops include fodder,
vegetable, and fruits. Commercial production of
fruit and vegetable, particularly for the main urban
markets has increased rapidly in recent years,
particularly close to major cities or where agro-
climatic conditions are favorable. Important fruits
include mangoes, citrus, dates and banana in the
tropical and subtropical areas like Sindh, as well as
a range of semi-temperate fruits like grapes,
peaches, apples in Balochistan. Important
vegetables include potato, tomato, chilies and
onions.
Livestock is an integral part of the farming system
and is the main asset for many farmers. Buffalo
and cattle are mainly kept for milk, with draft
power, meat and hides being other important
products. Most households also have sheep, goat
and poultry for domestic consumption as well as
for sale. Fodder, wheat straw, maize thinnings and
Stover are used for livestock. Animals are also
grazed on rangelands (particularly in Balochistan),
pastures and crop stubble. Concentrate feed is
widely used in commercial poultry farms and for
lactating cattle. In addition to the settled
agricultural population, there are also a significant
number of transhumants (Gujars) who move within
the country as well as in the region and specialize
in the rearing of sheep and goat. Their animals are
mostly for sale to the large urban centers
particularly during Eid times when it is traditional
to sacrifice sheep or goats.
Pakistan has a significant fisheries sector
producing about 1.00 million tons of fish products
annually. About two thirds of this are from marine
sources (70 percent from Sindh) and mostly
comprise prawn and demersal species. The rest is
from inland sources. Inland fisheries were largely
restricted to the main rivers and canals. However,
in recent years there has been a rapid increase in
aquaculture with many farmers using small ponds
and other water bodies. Supplies of fingerlings
come from a few large government hatcheries but
there has been a rapid increase in private sector
activity in the area particularly in Sindh.
The heavy monsoon rains during this year caused
renewed and devastating flooding in southern
250
Sindh and northern parts of Balochistan provinces.
The subsequent breaches in the drainage canal
[Left Bank Outfall Drain (LBOD)] at several
locations resulted in submerging of vast areas.
While it was mostly the right side of the river
Indus hit by floods last year, this time it was
mostly the left side. In Sindh, the central and
southern districts of Badin, Dadu, Hyderabad,
Kamber Shahdadkot, Khairpur, Larkana, Matiari,
Mirpurkhas, Neushero Feroze, Sangar, Shaheed
Benazirabad, Tando Allahyar, Tando Mohammad
Khan, Thatta, Tharparkar, Umerkot have been the
worst affected. The Provincial Disaster
Management Authority (PDMA) and the Sindh
Department of Agriculture Extension estimate that
standing crops of cotton, rice, sugar cane,
sorghum, vegetables and pulses have been
destroyed on about 0.84 million hectares of land.
Similarly the livestock sub sector also suffered
heavy losses. The Directorate of Animal
Husbandry, Sindh has reported that approximately
115,500 livestock have perished and about 5
million surviving livestock have been directly
affected.
The floods have heavily impacted the agriculture
sector, with damages to crops, livestock, fisheries,
poultry and on-farm water distribution
infrastructure. The total loss estimated is US$
1,840.3 million, of which 89 percent is in the form
of direct damage and 11 percent is in the form of
indirect losses. Sindh suffered most with 94
percent of total damage and Balochistan with 6
percent. The losses were largest in the crops
subsector, which accounted for 91.5 percent,
including estimates of damages to Kharif crops;
food and seed stocks; on-farm irrigation water
facilities; and support services for crops, as well as
indirect damages to the forthcoming Rabi 2011-12
and Kharif 2012 crops. The most affected crops are
cotton with 74 percent damages to the overall
planted area in the affected districts. In terms of the
damage to different crops it is estimated that land
area under rice 33 percent, sugarcane 34 percent,
vegetables 79 percent and fruits 32 percent was
affected adversely.
 Pakistan: Flood Impact Assessment

Table-2: 2011 Kharif Area Affected by Flood

Province Crop Area Area Damaged (000’Ha)
Damaged Cotton Rice Sugarcane Maize Vegetables Fruit Other
(000’ ha)
Balochistan 21.42 1.29 14.30 - - 1.78 0.17 3.88
Sindh 859.62 494.94 163.85 88.40 - 99.24 13.19 -
Total 881.04 496.23 178.15 88.40 - 101.02 13.36 3.88
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011.

shortage of feed, these livestock were left stranded.

The flood also substantially affected the livestock
The productivity of milking animals dropped from
population causing death and loss in productivity
an average of 7 or above litres to 2-3 litres (50-70
mainly in Sindh. The deaths were mainly in small
percent), and many young calves died due to the
ruminants and productivity losses were mainly in
reduction of the milk in their mothers. The loss in
large ruminants. Animals standing in mud and
productivity accounts for more than 50 percent of
stagnant water for extended periods contracted
the total loss. Fisheries losses are estimated at
various diseases. The losses in productivity
around $3.4 million (0.2 percent) that accounts for
occurred due to acute fodder shortage, debilitation
private fish farms/ponds and hatcheries. A total of
and emaciation. Sources of livestock feed were
about 881 thousand ha or 53 percent of the
fully inundated and the availability of fodder in
fisheries areas was affected.
local markets was very low. Facing an acute
Table-3: Livestock, Poultry and Fisheries Damages in Flooded Areas
Province Large Animals Small Animals Poultry Perished Fishery/Pond
(000head) (000heads) (Million Nos.) Damaged
Balochistan 0.10 0.20 0.0 n/a
Sindh 33.8 81.2 1.14 393
Total 33.87 81.4 1.14 393
Source: World Bank and Asian Development Bank (ADB) Damage and Needs Assessment Report 2011

well as indirect damages due to reduced milk

The summaries of preliminary loss estimates are
production, accounts for 8.3 percent of total losses.
shown in Table 4. Livestock damages, which
Fisheries losses are estimated at around $ 3.36
include loss of animals, distress sales, and
million (0.2 percent of the total losses).
destruction of animal health support services, as
Table-4: Estimated Direct and Indirect Losses (US$ million)
Province Livestock Crop Fisheries/ Total
Direct Indirect Sub- Direct Indirect Sub-Total Pond
Total
Balochistan 0.41 7.94 8.35 87.84 7.58 95.42 n/a 103.77
Sindh 45.51 99.28 144.79 1499.19 89.20 1,588.39 3.36 1,736.54
Total 45.92 107.22 153.14 1,587.03 96.78 1,683.31 3.36 1,840.31
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011

The total reconstruction cost to this sector is
estimated at Rs.26,590 million (US$ 306 million)
which focused on the restoration of normalcy in
the agriculture sector; to support small and
medium farmers through provision of seeds,
fertilizers, tools and implements along with
support for land preparation, livestock based
assistance package, partial subsidies for fishing
communities as well as the partial rehabilitation of
on-farm water management infrastructure.

251
Pakistan Economic Survey 2011-12

Energy Damage to the energy sector was modest,

estimated at Rs. 1.2 billion (US$ 14.2 million).
Power generation is provided by thermal plants,
This comprised of direct damage of Rs. 456.5
hydroelectric facilities and a small nuclear facility
million (US$ 5.2 million) and Rs. 783 million
(300 MW). The 13 hydroelectric facilities
(US$ 9 million) of indirect damage. In the power
(installed capacity 6,481 MW) are owned and
sector the total damage was Rs. 281.5 (US$ 3.2
operated by the Water and Power Development
million) whereas in the petroleum sector total
Authority (WAPDA), a public sector entity.
damage was Rs. 958 million (US$ 11 million):- out
Thermal power plants are owned by public and
of which Rs. 783 million (US$ 9 million) relates to
private companies. The public sector operates 13
indirect losses as shown in table below. In the
thermal power plants (installed capacity 4,900
power sector the majority of the direct damage is
MW). About a third of Pakistan’s generation
in distribution network with about 90 percent of
(5,987 MW) is provided by private sector
the damages being to distribution transformers.
companies (independent power producers or IPPs).
Damages to the petroleum sector are also very
Also, KESC operates plants with a total capacity of
heavy, effecting only two upstream public owned
1,955 MW. Out of the total 19,252 MW of the
(70 percent shares) gas fields.
national installed generation capacity, dependable
generation is about 17,523 MW in the summer and
about 14,640 MW in the winter, depending on the
annual hydrology.
Table-5: Damage and Losses in Energy Sector
Entity Direct Damage Indirect Damage Total Damage Total Damage
(Rs. million) (Rs.million) (Rs.million) (US$ million)
Transmission 19.7 - 19.7 0.226
Distribution 261.8 - 261.8 3.0
Total Power 281.5 - 281.5 3.226
Upstream Oil and Gas 175 783 958 11.0
Total Damage 456.5 783 1,239.5 14.226
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011

are only Rs. 10 million (US$ 0.115 million) as

The immediate need for the power sector is Rs.
shown in Table 6 for damages not covered by
281.5 million (US$ 3.226 million) covering the
insurance. Insurance cover for public sector
direct damages suffered by the Public Sector
companies has not been factored into the needs
Powers (PSPs). The needs for the petroleum sector
assessments.
Table-6: Recovery and Reconstruction Needs Assessment Summary
Sector Reconstruction and Total Total
rehabilitation/repair cost (Rs. million) (US$ million)
(Rs. million)
Power 281.5 281.5 3.226
Petroleum 10.0 10.0 0.115
Total 291.5 291.5 3.341
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011

Transport & Communication telecommunication lines and other infrastructure.

The 11,800 km long national highways and
The 796,095-square kilometer area of Pakistan and
motorways network is the spine of the primary
its almost 180 million inhabitants are connected
transport corridor. This is supported by the
through a transport and communications (T&C)
provincial highways network of 37,400 km that
network of 259,618 km of roads; 7,791 km of
fans out to the districts through 161,000 km of
railways; 42 airports; and 34,950 km of

252

district roads (including farm-to-market and access
roads) in rural areas and 54,000 km of municipal
roads in urban areas.
In the two flood-affected provinces, the national
highway system traverses 1,975 km in Sindh and
4,630 km in Balochistan. About 13,700 km of
provincial highways and 31,900 km of district
roads are located in Sindh and 11,800 km of
provincial highways and 20,200 km of district
roads are in Balochistan. The railway network of
7,791 km railway lines and 1,100 stations serve the
long-distance main north south corridor and
connections to other regions including Balochistan.
Approximately 1,899 km of railway lines are in
Sindh while 1,202 km are in Balochistan. Six
international airports in major cities serve as hubs
connecting to 19 regular and 17 feeder and other
airports. The telecommunication infrastructure
consists of 3,155 exchanges; 34,950 km of optical
fiber transmission lines for the landline networks;
and 25,554 transmission towers for the cellular
telephone networks.
The rains and floods during August and September
2011 damaged the Transport and Communications
(T&C) infrastructure in the province of Sindh and
Balochistan. Based on the data received on the
damages to the T&C Sector, a total of 5 districts in
Balochistan and 18 in Sindh have been affected by
the floods and the longer than usual spell and
higher intensity of rains. It affected the network of
national and provincial highways, district and
Table-7: Transport and Communication Damage and Loss Figures.
Province Direct Damages
(Rs. million)
Roads
Sindh 14,850
Balochistan 1,095
Subtotal 15,945
Railways
Sindh 277
Balochistan - -
Subtotal 277
Telecommunication 165
Total 16,386
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011
Pakistan: Flood Impact Assessment
municipal roads. Damages to the road
infrastructure were caused by submergence, high
surface runoffs and ingress of water in roadway
formation; floods have caused damages to railway
tracks, bridges, stations and residential buildings
under the administrative control of Pakistan
Railways. There were no reports of damages by
Civil Aviation Authority in the aviation sub-sector.
In the communication sector, damages were
reported to the buildings, equipments and
transmission network of cellular and landline
operators.
The reported damage is classified into two broad
categories: Completely Destroyed (CD) and
Partially Damaged (PD). For roads and railways,
the data is segregated into lengths of roads, railway
lines and number of affected structures. For
telecommunication infrastructure, the reported
damage is more specific. Four national highways
were affected at various places; three in Sindh and
one in Balochistan. On these highways, seven
bridges were also reported to be partially damaged;
all located in Sindh. About 1,955 km of provincial
highways in Sindh, representing 15 percent of the
provincial highway assets and 5,773 km of district
roads were affected (including municipal and
urban roads). On the contrary, damages in
Balochistan are lower and comprised about 426 km
provincial highways and district roads (about 1
percent of this road stock). A summary of loss and
damage in Transport and Communication is given
below:-
Indirect Losses Total
(Rs. million) (Rs.million)
9,974 24,824
108 1,203
10,082 26,027
- 277
-
- 277
- 165
10,082 26,468
253
Pakistan Economic Survey 2011-12

drinking water; ii) contamination of water

The total reconstruction cost to this sector is
estimated at Rs.33,902 million (US$ 388 million)
including US$5 million for railways and US$ 2
million for telecommunication sub-sector and
remaining US$ 383 million for the roads subsector.
Environment
Pakistan suffers a loss of 8.84 percent of its GDP
each year from environment-related disease.
Almost half of this cost is caused by mortality
(4.13 percent of GDP) while the rest stems from
the malnutrition caused by environment-related
disease (4.71 percent of GDP). Approximately 90
percent of typhoid and diarrheal illness in Pakistan
is attributable to inadequate drinking water,
sanitation and hygiene. Up to 83,500 deaths a year
are linked to these causes. Morbidity linked with
waterborne diseases amounts to 74.5 million cases
per year.
The environmental damages caused by the 2011
floods included: i) contamination of resources for
resources that are used for other domestic usage;
iii) stagnant water ponds resulting in proliferation
of disease vectors such as mosquitoes; iv) solid
waste and debris accumulation; v) agricultural
lands affected by pollution and salt; vi) damage to
soil through erosion; vii) damages to wetlands and
mangroves; and viii) damages to protected areas
and cultural assets.
The floods that recently affected Sindh and
Balochistan have already impacted millions of
people and are likely to have economic, social and
environmental consequences for years to come.
The 2011 floods have caused damages to the
forests, plantation, nurseries, department
infrastructure, and cultural heritage sites. These
damages have been estimated to be Rs. 2,762.66
million (US$ 31.75 million). The reconstruction
and restoration costs of the damages estimated at
Rs. 2,873.59 million (US$ 32.79 million) are
shown in table below.

Table-8: Total Cost to Address Environmental Needs Associated with the Floods
S.No Description Rs. in million US $ million
1 Field investigations to determine damage to agriculture land caused by 20.0 0.23
pollution and salts

2 Study to estimate debris quantity and disposal arrangements 5.00 0.06

3 Rehabilitation of forests and plantation 589.18 6.77
4 Study to estimate damage to wetlands and mangroves 5.00 0.06
5 Rehabilitation of cultural sites 16.41 0.19
6 Study to estimate damage to cultural heritage sites 2.00 0.02
7 Storm water drainage master plan 714.00 8.20
8 Land use plans and building regulations in urban areas 604.00 6.94
9 Monitoring and evaluation, and information databases 442.00 4.85
10 Strengthening the Legal and Institutional Framework 476.00 5.47
Total 2873.59 32.79
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011

Social and Gender Impact Balochistan, 18,403 people were reported affected
with no damage to social welfare infrastructure.
Barely one year has passed since the floods of
2010 devastated the lives of an estimated 20
According to the report, 9.6 million people were
million people nationwide. The flooding in 2011
affected including 744,000 displaced in the
was relatively localized; the impact on people and
aftermath of the 2011 flood. Total deaths are
livelihoods was severe, but infrastructure damages
reported as 520. The direct damage estimated costs
were less so. In Sindh, 19 social welfare
are Rs. 39 million. Indirect costs are assessed as
infrastructure units serving a population of 37,006
Rs. 4.6 million. According to the United Nation
people were partially or fully damaged. In
office for the Coordination of Humanitarian

254

Affairs (UN OCHA), the situation remains
alarming with poor coverage of all essential
sectors. Failure to meet Rabi cultivation will have
severe consequences on farm dependent
households.
The UN reported that 2.5 million children and 1.2
million women were affected by the floods in
2011, while 744,000 people were displaced. With
46 percent of health facilities damaged, the
vulnerability of women and children have
increased in the affected areas. The children who
are pushed out of schools are estimated at over
733,000. 60 percent schools were damaged in
Sindh alone. Acute Respiratory Infections (ARI)
and skin infections represent major health risks in
flood affected areas. Women are at high risk due to
disruption in the provision of pre and post natal
care. Migration has taken place largely due to non-
availability of fodder in flood affected areas.
Approximately, 10-15 percent of the affected
population is engaged in non-farm livelihoods,
including fisheries, which are severely affected by
the rains.
Water Supply and Sanitation
The government of Sindh had indentified
seventeen (17) districts as flood affected where
damages needed to be assessed. However, flood
damage data was forthcoming only from thirteen
(13) districts. From the Balochistan province flood
damages were reported from Kalat, Lasbela,
Nasirabad and Jaffarabad districts, and that too for
the water supply sector only. The most obvious
result from the data compilation is the finding
regarding the relative damage distribution amongst
the districts and talukas. In the Sindh province that
has been largely affected in the 2011 floods the
Shaheed Benazirabad (Nawabshah) district by far
shows the most extensive damages both in the
public water supply and sanitation sectors. Badin,
Sanghar and Mirpurkhas districts also show
significant damages to the water supply related
infrastructure and facilities. More damages are
reported in the sanitation sector as compared to the
water supply sector. Shaheed Benazirabad
(Nawabshah) district is the worst hit accounting for
42 percent of the overall damage cost in the public
sanitation sector.
Pakistan: Flood Impact Assessment
Total damages (both direct and indirect) for water
supply and sanitation are estimated at Rs.1,160
million and Rs. 43.6 million in Sindh and
Balochistan, respectively. Direct damages in Sindh
are Rs. 456.6 million in 378 reported schemes in
the flood affected districts. These damages include
Rs. 147.6 million for public water supply and Rs.
253 million for public sanitation. An amount of Rs
56 million for community infrastructure damage is
also included. In Balochistan, water supply and
sanitation damages have been assessed at Rs. 43.6
million, in a total of 80 schemes. Indirect losses for
Sindh have been calculated to at Rs 703.6 million.
No such loss is calculated for Balochistan due to
lack of data. Indirect losses which is derived from
higher expenditures related to (i) supplying potable
water (tankers, cost of hand pumps, water tanks,
purification and disinfection processes), and (ii)
cleaning, wells, sewers and pipes; and for the loss
of revenue from interrupted water supply services.
The total reconstruction cost for water supply and
sanitation is estimated at Rs.1,831.7 million and
Rs.68.5 million for Sindh and Balochistan
respectively.
Governance Infrastructure
Governance related institutions in the flood-hit
districts of Sindh have suffered damage to their
assets, which in turn eroded their already limited
capacities. In Balochistan, reported damage to the
governance sector was limited. Flooding caused by
rains led to disruption of social and economic life
and created a crisis. Demand of governance and
related services in a crisis is much higher and ever
more challenging to respond to effectively and
promptly. Governance sector institutions in
Pakistan, even before the disaster, faced many
challenges.
Governance institutions in the 17 affected districts
of Sindh have reported damage to 648 facilities
including offices and residences. Aggregate
covered area damaged or destroyed has been
estimated to be slightly below 3 million square
feet. In Balochistan, the 5 affected districts have
reported damage to 18 buildings. The worst hit
district in Sindh is Mirpurkhas where estimate of
aggregate affected covered area is 845,000 sq feet,
followed by Sanghar (299,000), Tharparkar
255
Pakistan Economic Survey 2011-12
(246,000), Shaheed Benazirabad (201,000), Dadu
(186,000), Umerkot (171, 000), Khairpur
(161,000), and Hyderabad (140,000).
The civil administration in Sindh suffered heaviest
damage to its facilities. A total of 257 buildings
were reported to have been partially damaged and
86 as completely destroyed. Partial damage to 11
Prison and 71 Police facilities and complete
Table-9: Government infrastructure, Damage and Loss
Provinces Direct damage
Sindh 1,555.83
Balochistan 15.61
Total 1,571.44
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011
In case of governance institutions service and
productivity losses create complex issues.
Disruption of services or functions and inability to
respond to much bigger demand can and do
impede relief and reconstruction. States of rule of
law, justice, security, property and citizenship
records and management capacities of public
accounting and local level public management
become exposed to risk of deterioration because of
damage and serious inadequacy in the face of
much higher volume of work demanded by
recovery and reconstruction needs. Disruption of
governance services and functions affect the
condition of the population already suffering from
the direct effects of the disaster. The economic loss
to the population is complex to estimate as it
would involve estimating economic value of
security, justice and protection. Indirect loss to
Table-10: Recovery and Reconstruction Needs Assessment Summary
Reconstruction and
Province
Rehabilitation/Repair costs
Sindh 4,716.113
Balochistan 36.572
Total 4,752.685
Source: World Bank and Asian Development Bank (ADB) Damage and Needs Assessment Report 2011
Irrigation and Flood Management
Sindh’s agriculture accounts for 17.4 percent of the
provincial GDP and 50 percent of the employment.
The Sindh irrigation system consists of Guddu,
Sukkur and Kotri Barrages on the Indus River.
These barrages divert water into fifteen canals -
256
damage to 3 Prison and 66 Police buildings have
been reported. Additionally, 14 court buildings
have been partially damaged and 10 have been
reported as completely destroyed along with 21
Auqaf buildings which are reported as completely
damaged and 10 as partially damaged. NADRA,
Post Offices and other governance institutions
shared the remaining disaster damage.
(Rs. in million)
Indirect Damage Total
369.23 1,925.06
12.65 28.26
381.88 1,953.32
governance institutions is estimated on notional
costs of continued services and functions despite
loss to their facilities, records and reduced staff
productivity/availability in the damage
quantification.
The value of reconstruction needs is based on the
current government notified rates for contractors. It
was challenging to gather information in precise
categories on the types of construction required,
pre-flood condition and the nature of damages.
Consequently, suitable assumptions and broad
classifications had to be used. In order to improve
accuracy of the estimates- statistically and
factually- sound assumptions have been used.
Computations have been made in spreadsheet with
stated assumptions, criteria and parameters clearly
identified.
(Rs. in Million)
Capacity Building Total
12.580 4,728.693
3.700 40.272
16.280 4,768.965
four at Guddu, seven at Sukkur and four at Kotri
Barrage commanding 2.5 million ha. A total of
2,240 km of drains and 5,835 tube wells
complement the irrigation system. In Balochistan
only about 767,120 ha land in 3 out of the 26
districts is irrigated by Indus Basin Irrigation
 Pakistan: Flood Impact Assessment

System. The main canals are the Pat Feeder,
Kirther and Uch canals. In remaining parts of the
province there are many small basins where spate
irrigation, karezes, small irrigation schemes, small
dams and tube wells are the main sources of
irrigation.
The damages reported are in 38 irrigation divisions
of Sindh province (Rs. 3,936 million or US$ 45.2
million), and 14 irrigation divisions of Balochistan
province (Rs. 827 million or US$ 9.5 million). In
Sindh, fifteen divisions suffered damages
exceeding US$ 2.5 million each. In Balochistan,
three divisions have reported damages exceeding
US$ 1.0 million. The damage estimates reflect the
reconstruction requirement at depreciated value as
most of the infrastructure is more than 15 years
old. Indirect losses such as damage to crops due to
flooding and disruption of irrigation supplies,
siltation and water-logging of agricultural land are
not covered in irrigation and flood sector.
The reconstruction cost estimated for Sindh
province is Rs. 7,872 million (US$ 90.5 million)
and for Balochistan it is Rs. 1,654 million (US$ 19
Table-11: Summary Estimates of Cash Grants to Severely Affected Poor Households
Provinces No. of Severely Affected House Holds
(HHs)
Sindh
Balochistan
Total
Source: World Bank and Asian Development Bank (ADB) Damages and Needs Assessment Report 2011
million). The proposed irrigation, drainage and
flood protection sector reconstruction strategy is to
restore all damaged infrastructures, and strengthen
vulnerable and damaged sections before 2012
monsoon.
Social Protection and Livelihoods
The total affected population in flood hit districts
of Sindh and Balochistan are based on the total
affected area. Pakistan Social and Living Standards
Measurement Survey (PSLM) data was used to
calculate post-flood poverty levels; this was
combined with damage to housing and agriculture
to estimate the number of severely affected poor
and vulnerable households who require assistance
to cope with the negative impact of the floods. The
total is in the range of 801,897 to 851,439,
representing 52-54 percent of the total affected
population. The majority of these are in Sindh
(786,917 to 836,311) and the rest in Balochistan.
Districts with over 50 percent, or more, severely
affected households are Badin, Dadu, Khairpur,
Matiari, Mirpurkhas, Sanghar, Tando Allah Yar,
Tando Muhammad Khan, and Thatta in Sindh, and
Kalat, Jaffarabad, and Lasbela in Balochistan.
(Rs. in Million)
Cash Grant of Rs. 6,680 per
month for 6 months
836,311 33,519.35
15,127 606.31
851,439 34,125.66

Government Response further damage and loss of lives. During peak of

this humanitarian crisis, almost 700,000 people
In the immediate aftermath of the floods, the
were being housed in approximately 3,500 relief
government responded through the mobilization of
camp managed by the government, international
national, provincial and district resources including
partners, NGOs and civil society organizations. In
the deployment of civil and armed forces
January 2012, NDMA reported to World Bank and
personnel. Several infantry platoons of the army as
Asian Development Bank Damage and Needs
well as medical and engineering teams were
Assessment, a report regarding the distribution of
deployed in disaster affected areas to carry out
over 316,000 tents in the affected areas and 3.7
search and rescue operations, which were further
million ration packs, out of which 48,000 ration
supported by helicopters and dozens of navy and
packs were distributed in Balochistan. To provide
coast guard personnel and boats. To support the
immediate cash assistance to the flood affected
national and provincial Disaster Risk Management
population in Sindh, the provincial government,
(DRM) institutions, the Prime Minister‘s Flood
with the support from the federal government, has
Relief Committee was also formed to monitor
disbursed approximately Rs. 10.3 billion through
rescue and relief activities. Small-scale
the Pakistan Card-based cash transfer scheme (Rs.
engineering works were also undertaken to
10,000 per family).
strengthen flood mitigation infrastructure to avoid

257
Pakistan Economic Survey 2011-12
The Government continued to mobilize shelter
materials, non-food items (NFIs), bottled water and
food rations. Provision of temporary shelter in
public buildings had been arranged for those
uprooted by the floods in 13 districts out of 23 in
Sindh, which accommodated 194,969 people.
Initially the federal and provincial governments
responded to the disaster through own resources,
which however, were overwhelmed in the wake of
the growing humanitarian crisis. Despite providing
assistance during the unprecedented floods of
2010, the international community immediately
responded to the appeal by the Government of
Pakistan for international support for rescue and
relief activities following 2011 floods. In
December 2011, forty-six countries pledged a
commitment of approximately US$ 260 million
including support in cash and in-kind.
258
Furthermore, an emergency flood relief cell,
established at the Ministry of Foreign Affairs,
closely liaised with the members of the diplomatic
community and international organizations to
coordinate international assistance.
The United Nations (UN) undertook an Initial
Rapid Needs Assessment to focus on the
immediate relief phase for the following clusters:
(i) emergency shelter; (ii) food security; (iii) health
and; (iv) water sanitation and hygiene. Based on
these cluster assessments, the UN launched a US$
356 million Rapid Response Plan in September
2011. As of April 2012, approximately, US$ 171
million or 48 percent were received in response to
the UN‘s appeal. In January 2012, the UN
launched the Early Recovery Framework seeking a
further US$ 439 million to continue flood response
until September 2012.
 Annex 1

Contingent Liabilities

Introduction Sector Enterprises (PSEs) and unfunded losses of

State Owned Entities. Total outstanding stock of
Contingent liabilities are possible obligation that government guarantees as of March 2012 stood at
arises from past events and whose existence will be Rs. 487 billion.
confirmed only by the occurrence or non-
occurrence of one or more uncertain future events The Fiscal Responsibility and Debt Limitation
not wholly within the control of the government. (FRDL) Act 2005 stipulates that the issuance of
Contingent liabilities should be examined in the guarantees, including those for Rupee lending,
same manner as a proposal for a loan, taking into bonds, rates of return, output purchase agreements
account, inter alia, the credit-worthiness of the and all other claims and commitments that may be
borrower, the amount and risks sought to be prescribed from time to time as well as renewal of
covered by a sovereign guarantee, the terms of the existing guarantees, should not exceed 2.0 percent
borrowing, justification and public purpose to be of the estimated gross domestic product in any
served, probabilities that various commitments will financial year. As of March 2011, Government of
become due and possible costs of such liabilities. Pakistan issued new guarantees aggregating to Rs.
Hence, such off balance sheet transactions cannot 146.6 billion or 0.7 percent of GDP [as shown in
be overlooked in order to gain a holistic view of a Table 2].
country’s fiscal position and unveil the hidden
risks associated with the obligations made by the Table 2: Guarantees Issued Details
government outside the budget. Similarly, reported Issuance As % of
Fiscal Year
debt levels of a sovereign may be understated (Rs. Billion) GDP
owing to the non-inclusion of contingent liabilities, 2007 140.7 1.6
explicit or implicit, which may materialize in 2008 138.8 1.4
future. 2009 276.3 2.2
2010 224.0 1.5
Table 1 Guarantees Outstanding as of March 31, 2011 62.4 0.3
2012 (Rs. Billion)
2012* 146.6 0.7
Outstanding Guarantees extended 487
to PSEs Source: Budget Wing & Debt Policy Coordination Office
-Domestic Currency 256 * : July - March 2012

-Foreign Currency 231

Memo: The outstanding contingent liabilities as of March
Foreign Currency (US$ Million) 2,544 31, 2011 stood at Rs.487 billion against the end-
June 2011 position of Rs. 559 billion (Table 3).
Source: Debt Policy Coordination Office
In the case of Pakistan, these include, for instance,
explicit and implicit guarantees issued to Public

259
Pakistan Economic Survey 2011-12

Table 3: Guarantees Stock

Guarantees 2010 2011 2012*
Outstanding Guarantees (1+2) 603 559 487
1- Domestic Currency (Rs. Billion) 329 301 256
2- Foreign Currency (Rs. Billion) 274 258 231
Foreign Currency (US$ Million) 3,246 2,999 2,544
Source: Debt Policy Coordination Office
* July-March 2012

objectives, volume procured, and domestic and

Guarantees issued against commodity operations
international prices. The guarantees were issued
are not included in the stipulated limit of 2 percent
against the commodity financing operations
of GDP as the loans are secured against the
undertaken by TCP, PASSCO, and provincial
underlying commodity and are essentially self
governments. As of April 2012, the outstanding
liquidating and thus should not create a long term
stock of Rs. 303.9 billion against the end-June
liability for the government. The quantum of these
2011 position of Rs. 397.5 billion indicates a
guarantees depends on the supply-demand gap of
retirement of Rs. 93.6 billion on behalf of
various commodities, their price stabilization
commodity financing operations.

260
 Annex 2

Tax Expenditure

A Note on Tax Expenditure 2011-12
Estimates of tax expenditures are being prepared
by FBR and reported in the Pakistan Economic
Survey since last few years as part of the budget
process. The Tax Expenditure for the year 2011-12
works out to Rs. 185.496 billion. Details of Direct
Taxes have been indicated first in the report,
followed by Sales Tax and Customs Duty. Federal
Excise Duty has not been included due to very
restrictive base and exemptions. Detailed are as
follows:
Income Tax
The cost of exemptions, exclusions, substractions,
deductions, rebates and credit etc that cause loss of
Direct Taxes revenue comes to Rs. 69.608 (billion)
has been reflected in Table -1 below:

Table-1: Income Tax Expenditure for 2010-11 and 2011-12 (Rs. in billion)
Estimated Revenue Loss
S. No Tax Expenditure Items
2010-11 2011-12
1. Pensions & Gratuity 0.087 0.171
2. Income from Funds, Boards of Education, Universities and 0.979 6.077
Computer Training Institutes etc.
3. Donations and Contributions to Charitable Organizations 0.649 0.624
4. Independent Power Producers 0.870 46.939
5. Income from certain Trusts, Welfare and Charitable Institutions 1.360 0.205
and Non-Profit Organizations
6. Profits on Debt/interest from government securities and certain 0.049 1.461
foreign currency accounts/books, profit on debt earned by certain
non-resident individuals and institutions
7. Export of Information Technology 0.724 0.822
8. Capital Gains 21.840 2.108
9. Other Sectors/enterprise specific exemptions 19.950 11.201
Total 46.508 69.608

Sales Tax chargeable to Sales Tax, resulting in reduction in

the cost of exemptions.
Sales Tax exemptions are provided at the import
stage and on domestic supply of goods and
Tax Expenditure in respect of Sales Tax is
services. Previously, Sales Tax exemptions were
estimated at Rs. 24.300 billion for fiscal year 2011-
available on certain items including tractors,
12. Details have been worked out and are indicated
fertilizers & pesticides etc. However, the Federal
in Table-2 below:
government rationalized these exemptions during
last year. From 15-03-2011 onwards, tractors,
pesticides and fertilizers have been made

261
Pakistan Economic Survey 2011-12

Table-2: Tax Expenditure of Sales Tax for 2010-11 and 2011-12 (Rs. in billion)
S. No Sectors Estimated Revenue Loss
2010-11 2011-12
1. Fertilizer 9.138 0
2. Tractors 6.489 4.280
3. Pharmaceutical Products 5.505 5.800
4. Others 12.630 14.220
Total: 33.762 24.300

Customs Duty through specific rate of tariff. On the basis of these

provisions, the tax expenditure in respect of
Under the Customs law, exemptions or
Customs Duty has been estimated at Rs. 91.588
concessions are granted to goods that are imported
(billion) for 2011-12. The details are given in the
into Pakistan through SROs, special classification
following Table-3:
in Chapter 99 of Pakistan Customs Tariff, and/or

Table-3: Tax Expenditure of Customs Duty for 2010-11 and 2011-12 (Rs. in billion)
Estimated Revenue Loss
SRO. No & date Tax Expenditure Items
2010-11 2011-12
558(I)/2004 Concession of Customs Duty on goods imported from SAARC
0.073 0.055
01-07-2004 and ECO countries.
570(I)/2005 Exemption from Customs Duty on imports from Sri Lanka
0.148 0.196
06-06-2005
1296(I)/2006 Exemption from Customs Duty on imports from China
0.031 0.0002
31-12-2005
894(I)/2006 Exemption from Customs Duty on imports from Iran under Pak-
0.004 0.0009
31-08-2006 Iran PTA
1274(I)/2006 Exemption from Customs Duty on imports under SAFTA
0.116 0.151
29-12-2006 agreement
659(I)/2007 Exemption from Customs Duty on imports from China
10.867 13.762
30-06-2007
1261(I)/2007 Exemption from Customs Duty on imports from Malaysia
2.895 2.750
31-12-2007
565(I)/2006 Conditional exemption of Customs Duty on import of raw
05-06-2006 materials and components etc. for manufacturers of different 4.653 7.391
sectors.
567(I)/2006 General and conditional exemption of Customs Duty.
30.277 21.830
05-06-2006
678(I)/2004 Exemption of Customs Duty and Sales Tax to Oil Exploration
12-06-2004 and Production (E&P) companies on import of machinery 2.581 2.810
equipment & vehicles
575(I)/2006 Exemption of Customs Duty and Sales Tax on import of
13.712 9.833
05-06-2006 machinery, equipment, apparatus and other items
655(I)/2006 Exemption from Customs Duty for vendors of Automotive
9.315 12.851
22-06-2006 Sector
656(I)/2006 Exemption from Customs Duty for OEMs of Automotive Sector
19.073 19.196
22-06-2006
809(I)/2009 Exemption from Customs Duty on import of machinery &
19-09-2009 equipment by Industrial units registered with Ministry of Textile 1.196 0.756
Industry
Total 94.941 91.588

262
 Tax Expenditure

Consolidated Summary 2011-12 has been estimated to be around Rs.

185.496 billion. The consolidated summary of the
Based on the aforementioned estimates for
tax expenditure for fiscal year 2011-12 is given in
individual taxes, the overall tax expenditure for
Table-4:
Table-4: Tax Expenditure of Federal Taxes for 2010-11 and 2011-12 (Rs. in billion)
S. No. Type of Tax Tax Expenditure
2010-11 2011-12
1 Income Tax 46.508 69.608
2 Sales Tax 33.762 24.300
3 Customs Duty 94.941 91.588
Total 175.211 185.496
Note: The estimates for 2010-11 are for the full year while for the year 2011-12, they pertain to 10 months i.e.
1.7.2011 to 30.4.2012.

263
 

Pakistan
Economic Survey
2011-12

Economic Adviser’s Wing, Finance Division, Government of Pakistan, Islamabad.

 Contents

1. Growth and Stabilization ..................................................................................................... 1

2. Agriculture ........................................................................................................................... 2

3. Large Scale Manufacturing .................................................................................................. 3

4. Fiscal Development ............................................................................................................. 4

5. Money and Credit ................................................................................................................ 5

6. Capital Markets .................................................................................................................... 6

7. Inflation ................................................................................................................................ 7

8. Trade and Payments ............................................................................................................. 7

9. Public Debt .......................................................................................................................... 8

10. Education ............................................................................................................................. 8

11. Health and Nutrition ............................................................................................................ 9

12. Population, Labour Force and Employment ....................................................................... 10

13. Transport and Communications .......................................................................................... 11

14. Energy ................................................................................................................................. 14

15. Social Safety Nets ............................................................................................................... 15

16. Environment........................................................................................................................ 16

17. Flood Impact Assessment ................................................................................................... 17

 HIGHLIGHTS

Growth and Stabilization

` Real GDP growth for 2011-12 has been estimated at 3.7 percent as compared to 3.0 percent
in the previous fiscal year 2011.
` The commodity producing sector has performed much better in outgoing fiscal year as
compared to last year; its growth rate is 3.28 percent against 1.47 percent last year.
` Agriculture registered the growth of 3.13 percent against 2.38 percent last year.
` Major Crops registered an accelerating growth of 3.18 percent compared to a negative
growth of 0.23 percent last year. The major crops including Cotton, Sugarcane and Rice
witnessed growth in production of 18.6 percent, 4.9 percent and 27.7 percent respectively.
However, Wheat registered a negative growth of 6.7 percent mainly due to 2.6 percent
decline in area under cultivation, sowing was also delayed because of late receding rain water
in lower Sindh which resulted in a decline in both the acreage as well as the yields.
` Minor Crops growth declined by 1.26 percent, due to rains affect in Sindh resulted in
destruction of minor crops.
` Livestock witnessed a marginally higher growth of 4.04 percent against the growth of 3.97
percent last year.
` Fisheries sector witnessed a growth of 1.78 percent against the growth of 1.94 percent last
year.
` Forestry recorded growth at 0.95 percent as compared to the contraction of 0.40 percent last
year.
` Industrial sector contains 25.4 percent of GDP having sub sectors: manufacturing,
construction, mining & quarrying and electricity and gas distribution.
` Manufacturing Sector registered growth at 3.56 percent compared to the growth of 3.06
percent last year.
` Small scale manufacturing maintained its growth of last year at 7.51 percent and slaughtering
growth is estimated at 4.46 percent against 4.38 percent last year.
` Large Scale Manufacturing has also witnessed a slight improvement. It has shown a growth
1.05 percent in July-March 2011-12 as against 0.98 percent last year.
` Construction Sector has shown 6.46 percent growth as compared to negative growth of 7.09
percent in last year.
` Mining and Quarrying sector recorded positive growth of 4.38 percent during the year
2011-12 against the negative growth of 1.28 percent last year.
` Electricity and gas distribution witnessed a growth of -1.62 percent against the growth of
-7.25 percent last year.
` The Services sector has registered a growth rate of 4.02 percent in 2011-12 against the
growth of 4.45 percent in the last year. This performance is dominated by Finance and

1
 Highlights of the Pakistan Economic Survey 2011-12
Insurance at 6.53 percent, Social and Community Services 6.77 percent and Wholesale and
Retail Trade 3.58 percent. The contribution of transport, storage and communication is
estimated at 1.25 percent.
` Private consumption expenditure has increased to 75 percent of GDP; whereas public
consumption expenditures is 13 percent of GDP. Total consumption has reached 88.35
percent of GDP in fiscal year 2011-12 as compared to 83 percent in the last fiscal year.
` Real private consumption grew at 11.6 percent in 2011-12 as compared to 3.7 percent last
year. Whereas, real government consumption grew at 8.2 percent in 2011-12 as compared to
5.2 percent last year.
` Per capita real income grew at 2.33 percent in 2011-12 as compared to 1.33 percent growth
in last year. In dollar term it increased from $ 1258 to $ 1372 in 2011-12.
` Total investment has declined from 13.1 percent of GDP to 12.5 percent of GDP in 2011-12
as compared to last year.
` Fixed investment has declined to 10.9 percent of GDP in 2011-12 from 11.5 percent of GDP
as compared to last year.
` Private investment witnessed a contraction of 7.9 percent of GDP in 2011-12 as compared to
8.6 percent of GDP last year.
` Public investment as a percent of GDP increased to 3.0 percent in 2011-12 against the 2.9
percent last year.
` National Savings are 10.7 percent of GDP in 2011-12 as compared to 13.2 percent in
2010-11.
` Foreign Direct Investment in Pakistan stood at $ 666.8 million during July-April 2011-12 as
against $ 1292.9 million last year.
` Worker’s Remittances has increased to $ 10,876.99 million in July-April of 2011-12, as
against $ 9,046.61 million in the comparable period of last year, posted a positive growth of
20.23 percent.

Agriculture
` The agriculture growth this year stood at 3.1 percent as compared to 2.4 percent during
2010-11.
` Cotton production has increased to 13,595 thousand bales in 2011-12 from 11,460 thousand
bales in 2010-11 showing an increase of 18.6 percent.
` Wheat production has decreased to 23,517 thousand tons in 2011-12 from 25,214 thousand
tons in 2010-11 showing a decrease of 6.7 percent.
` Rice production has increased to 6,160 thousand tons in 2011-12 from 4,823 thousand tons in
2010-11 showing an increase of 27.7 percent.
` Sugarcane production has increased by 4.9 percent to 58.0 million tons in 2011-12 from 55.3
million tons last year.

2
 Highlights of the Pakistan Economic Survey 2011-12
` Gram production has decreased to 291 thousand tons in 2011-12, from 496 thousand tons in
2010-11 showing a decrease of 41.3 percent.
` Maize production has increased to 4,271 thousand tons in 2011-12 from 3,707 thousand tons
in 2010-11, showing an increase of 15.2 percent.
` In minor crops, the production of mung and potatoes increased by 22.0 percent and 17.5
percent, respectively. However, the production of chillies, onion and masoor decreased by
78.3 percent, 15.4 percent and 12.8 percent, respectively.
` Agriculture credit disbursement of Rs. 197.4 billion during July-March 2011-12 is higher by
17.0 percent, as compared to Rs. 168.7 billion over the same period last year.
` The total availability of urea during Rabi 2011-12 was 3,526 thousand tonnes comprising of
domestic production 2,160 thousand tonnes and imported supplies of 1,202 thousand
tonnes.The total offtake was 2,710 thousand tonnes, leaving a stock of 800 thousand tonnes
for next season. Likewise the total estimated availability of urea during Kharif 2012 will be
around 3487 thousand tonnes comprising 800 thousand tonnes of opening stock, 2280
thousand tonnes of domestic production and 407 thousand tonnes of imported supplies.The
total offtake is estimated around 3200 thousand tonnes during Kharif 2012 leaving a stock
around 287 thousand tonnes.
` The Rabi 2011-12 started with 224 thousand tonnes of DAP as opening stock. The total
availability of DAP was 758 thousand tonnes including 271 thousand tonnes of imported
supplies and 263 thousand tonnes of domestic production. The offtake of DAP during Rabi
2011-12 was about 572 thousand tonnes leaving behind 177 thousand tonnes of opening
stock for Kharif 2012.Likewise estimated DAP availability during Kharif 2012 will be
around 838 thousand tonnes comprising 177 thousand tonnes of opening stock, 361 thousand
tonnes of domestic production and 300 thousand tonnes of imported supplies. The estimated
demand is around 620 thousand tonnes during Kharif 2012, which reflects comfortable
situation.

Large Scale Manufacturing

` During the first nine months of the current fiscal year 2011-12, Large Scale Manufacturing
(LSM) posted a growth of 1.05 percent as compared to growth of 0.98 percent during the
same period last year.
` The groups wise showing increase included: Pharmaceutical (10.9 percent), Paper and Board
(8.4 percent), Wood Product (7.4 percent), Food Beverages and Tobacco (6.5 percent), Non-
metallic mineral Products (2.9 percent), Leather Product (1.8 percent) and Textile (0.8
percent).
` Items wise contribution in Large Scale Manufacturing indicates growth in Generating Sets
(143.9 percent), Blankets (109.9 percent), Electric Transformer (31.2 percent), Heavy
Machinery & equipments (21.0 percent), Sugarcane Machine (19.2 percent), Sugar (15.3
percent), Liquids/Syrups (14.1 percent), Tea blended (13.3 percent), Tablets (10.7 percent),
Jeeps & Cars (8.8 percent), Footwear (6.2 percent), LPG (3.4 percent), Cement (2.9 percent)
and Sugar (15.3 percent).

3
 Highlights of the Pakistan Economic Survey 2011-12
` Automotive Industry such as Buses, Cars, LCVs and two/three wheelers managed significant
growth at 23 percent, 9.1 percent, 5.7 percent and 3.1 percent respectively as compared to -
24.7 percent, 16.4 percent, 23.3 percent and 12.6 percent during the same period last year.
` Mining and quarrying sector 4.4 percent in 2011-12 as against -1.3 percent last year. The
main contribution to this modest performance came from Chromite, Flourite, Bauxite, Chalk
and Natural gas which posted a positive growth of 591.5 percent, 111.3 percent, 82.2 percent,
82.2 percent and 4.0 percent respectively during the current financial year.

Fiscal Development
` Fiscal deficit is recorded at 5.0 percent during July-March 2011-12 as compared to 5.5
percent last year.
` The government is focused on prudent expenditure management and better resource
mobilization to create fiscal space for providing support to growth. Additional efforts are
being made to manage the fiscal deficit within the acceptable level through austerity
measures and reforms in public sector enterprises.
` The government has also announced various tax policy measures through Presidential
Ordinance to generate additional revenues. Through a combination of Presidential Ordinance
and withdrawal of SRO base exemptions, amendments have been made in the Sales Tax Act
1990, Income Tax Ordinance 2001 and Federal Excise Act 2005.

The following tax measures have been taken through these amendments:-

i. Levy of 15 percent surcharge on income and advance taxes

ii. Increase the rate of special excise duty from 1 percent to 2.5 percent, however Special
excise duty was abolished in 2011-12.
iii. Withdrawal of special regime of assessable price for levy of GST at 8 percent on
actual value of sugar.
iv. Removal of SRO based exemptions from fertilizer, pesticides, tractor and elimination
of zero rating from plants, machinery and equipment.
v. Restriction of zero rating to registered person for export of textile, leather, carpets,
sports goods and surgical goods.
vi. The withdrawal of exemptions and the left over amount of 15 percent flood relief
surcharge contributed an additional amount of around Rs 50 billion during July-
March, 2011-12.

` Tax collection by the FBR was targeted at Rs 1952.3 billion for fiscal year 2011-12. Revenue
collections of FBR stood at Rs 1426.0 billion during July-April 2011-12, thereby reflecting
24.0 percent growth over Rs 1149.8 billion collected during the corresponding period last
year. Among the four federal taxes, the highest growth 33.7 percent has been recorded in
sales tax receipts, followed by customs 17.7 percent, and direct tax 22.6 percent. It does not
include Rs. 19 billion collected by Sindh province on GST on Services.

4
 Highlights of the Pakistan Economic Survey 2011-12
` For July-April, 2012, direct taxes have been a major source of FBR tax revenue collection,
contributing 37.0 percent of total receipts. Net collection was estimated at Rs. 528.9 billion.
` Indirect taxes grew by 24.9 percent during July-April, 2012 and accounted for 62.9 percent
of the total FBR tax revenue. Net collection was estimated at Rs.897.2 billion.
` Total expenditure of Rs. 3721.2 billion was estimated for the full year, comprising of Rs.
2976.3 billion of current expenditure (80% of total), and Rs. 744.9 billion of development
expenditure and net lending (20 % of total).
` During July-March, 2011-12 total expenditures amounted to Rs 2641.9 billion against Rs
2262.6 billion in the same period last year. Current expenditures stood at Rs 2154.1 billion
and development expenditures and net lending recorded at Rs 428 billion during July-March,
2011-12.
` Total revenues reached to Rs 1747.0 billion during July-March, 2011-12 against Rs 1495.3
billion in the same period of last year. Within Revenues tax revenues stood at Rs 1379.2
billion including Rs. 1,321.5 billion of Federal and Rs 57.6 billion of provinces, and non tax
revenues remained at Rs. 367.9 billion during the same period of fiscal year 2011-12.

Money and Credit

` SBP lowered the discount rate by cumulative 200 bps points to 12 percent during first half of
fiscal year 2011-12, to assist in boosting the private sector credit and investment.
` Broad Money (M2) witnessed an expansion of 9.09 percent during July-11th May, 2011-12 as
compared to 11.47 percent during the same period in 2010-11.
` Net Domestic Assets (NDA) during July-11thMay, 2012 stood at Rs 880.9 billion against Rs
481.6 billion during the same period last year, reflecting an increase of 14.89 percent over the
last year.
` On the other hand Net Foreign Assets (NFA) of the banking system during the period under
review declined to Rs 272.2 billion as compared to an increase of Rs 181.1 billion in the
same period of 2010-11.
` The credit to private sector witnessed a net increase of Rs. 234.8 billion during July
2011-11thMay, 2012 as compared to Rs 107.8 billion in the same period last year.
` The weighted average lending rate (including zero mark-up) on outstanding loans stood at
12.80 percent while the weighted average deposit rate (including zero mark-up) stood at 6.98
percent in March 2012.
` Government borrowing from the banking system for budgetary support and commodity
operations stood at Rs 1,003.3 billion during July-11thMay, 2011-12 as compared to Rs.
506.5 billion in the comparable period of the last year. Government has borrowed Rs.442.3
billion from the State Bank of Pakistan, while Rs 642.1 billion borrowed from the scheduled
banks.
` During July 2011-11th May, 2012 loans for commodity finance registered a net retirement of
Rs 81.6 billion against the retirement of Rs 101.1 billion in the same period of fiscal year
2010-11. The retirement was primarily concentrated in the second quarter of fiscal year

5
 Highlights of the Pakistan Economic Survey 2011-12
2011-12 as the government released Rs 78 billion to procurement agencies for the settlement
of accumulated subsidies.
` During July 2011-11thMay, 2012 credit to public sector enterprises registered a sharp decline
from Rs 10.6 billion in 2010-11 to Rs 142.6 billion.

Capital Markets
` The Pakistan Stock Markets remained range bound during first half with predominately
declining trend (9.2 percent). However, the KSE -100 index resumed momentum during the
3rd and 4th quarters of the FY 12.
` The robust performance of Pakistani stock markets during 2nd half of 2011-12 was due to
certain encouraging measures like considerable reduction in discount rate by the central bank
during later period of the first half of CFY and increase in foreign exchange reserves.
Further, the market sentiment was boosted by the promulgation of the Capital Gain Tax
Ordinance.
` Under the CGT Ordinance the National Clearing Company of Pakistan Limited (NCCPL) has
been appointed as an intermediary entity to compute, determine, collect and deposit the CGT
on listed securities. In addition, no question relating to the source/nature of money will be
asked by the tax authorities if the money remain invested in the stock market for a period of
45 days (till June 30, 2012) and 120 days (till June 30, 2014) before and after the
promulgation of CGT Ordinance.
` The investment by foreign investors in the capital markets during the period from July, 2011
to March, 2012 depicted a net outflow of US$ 176.303 million. This reflects that present
bullish sentiments in the equity markets are due to restoration of the confidence of the local
investors.
` The Pakistani Stock markets performed well during the current fiscal year as compared with
the other world indices. This was mainly due to the steps taken by the current government to
boost the confidence of the equity market investors which includes reforms in the Capital
gains tax, etc.
` The Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012, was
promulgated with the signing of the bill by the President of Pakistan on May 7, 2012. The
demutualization bill was approved on March 27, 2012, in a joint session of the Parliament.
` The demutualization law provides a framework for the corporatization, demutualization and
integration of the stock exchanges. The law requires the stock exchanges to be demutualized
within 119 days of its promulgation in line with pre-defined timelines specified for
completion of various milestones involved in the demutualization exercise.
` The government conducted seven auctions of Pakistan Investment Bonds (PIBs) during
2011-12 (Jul-Mar) raising Rs. 159.246 billion.
` During the period July - March, 2012 a total of six debt securities were issued through
private placement including two Sukuk Issues of Rs.108.393 billion by Pakistan Domestic
Sukuk Company Limited.

6
 Highlights of the Pakistan Economic Survey 2011-12
` In one of the major moves towards the development of a vibrant debt market in Pakistan, the
Securities and Exchange Commission of Pakistan has recently approved notification of the
Debt Securities Trustee Regulations (DST Regulations). The main objective of the DST
Regulations is to protect the interests of debenture holders.

Inflation

` The inflation rate as measured by the changes in Consumer Price Index (CPI) stood at 10.8
percent during (July-April) during current fiscal year 2011-12, against 13.8 percent in the
comparable period of last year.
` The food inflation on average basis is estimated at 11.1 percent and non-food 10.7 percent,
against 18.8 percent and 10.8 percent in the corresponding period of last year.
` The rise in non-food inflation has resulted from the upward adjustment in energy, gas,
electricity and fuel prices.
` Core inflation is estimated at 10.4 percent during July-April 2011-12.
` The Wholesale Price Index (WPI) during July-April, 2011-12 on annual average basis has
recorded at 11.2 percent against 21.0 percent last year.
` The Sensitive Price Indicator (SPI) recorded at 8.5 percent during July-April, 2011-12
against 18.1 percent of last year.
` The increase in overall inflation has driven by rise in world commodity and fuel prices,
disruption in domestic supply chain by the floods.
` However, inflation has been contained during current fiscal year as compared to last year due
to tight monetary policy, better supply management and regular monitoring of prices and
supply chain by the Cabinet and National Price Monitoring Committee.

Trade and Payments

` In absolute terms, exports have increased from $20460 million in July-April 2010-11 to $
20474 million in the period thereby witnessing a growth of 0.1 percent during the first ten
months (July-April) of the fiscal year 2011-12.
` Imports during the first ten months (July-April) of the fiscal year 2011-12 increased by 14.5
percent compared with the same period of last year, reaching to $33.15 billion.
` Worker’s Remittances reached to $ 10877 million during July-April 2011-12 as against $
9046 million in the comparable period of last year, depicting an increase of 20.2 percent.
` Current Account Deficit stood to $ 3394 million in July-April 2011-12.
` Services account deficit reached to $ 2,347 million during July-April 2011-12 as compared to
$ 1,225 million during the same period last year.
` Financial Account surplus during July-April 2011-12 stood at $ 1200 million as compared to
$ 690 million in corresponding period last year.
` Exchange rate of Pak Rupee depreciated by 3.4 percent during July-April 2011-12.

7
 Highlights of the Pakistan Economic Survey 2011-12
` Foreign Exchange Reserves stood at $ 16.5 billion at the end of April, 2012. Of which,
reserves held with the State Bank of Pakistan stood at $ 12.04 billion and by banks $ 4.45
billion.

Public Debt
` During first nine months of current fiscal year (2011-12), total public debt registered an
increase of Rs.1,315 billion and stood at Rs.12,024 billion.
` Public debt as a percent of GDP stood at 58.2 percent by end-March 2012 as compared to
55.5 percent of GDP during the same period last year.
` The bulk of the increase in public debt in the first nine months of 2011-12 has been recorded
under domestic debt that accounted for 91 percent of the total increase.
` The total domestic debt is posted at Rs 7,206.9 billion at the end-March 2012; representing
an increase of Rs.1,190.5 billion in the first nine months of the current fiscal year.
` The domestic debt grew by 19.8 percent in first nine months of current fiscal year. The focus
on deficit financing through internal sources owing to lower external receipts has been the
major cause.
` As at the end of March 2012, servicing of the public debt stood at Rs.719 billion against the
budget amount of Rs.1034.2 billion.
` Domestic debt comprises permanent debt, floating debt and unfunded debt having shares of
21.6 percent, 54.5 percent and 23.9 percent respectively in total domestic debt.
` Pakistan External Debt and Liabilities (EDL) stock was recorded at $60.3 billion as of March
2012. During July-March 2012, $179 million was added to the EDL stock.
` As a percentage of GDP in dollar terms, the EDL was down by 200 basis points in July-
March, 2012 compared to fiscal year 2010-11 (28.5 percent) and approximately to 26.5
percent.

Education

` According to the Pakistan Social and Living Standard Measurement (PSLM) Survey 2010-11
and last PSLM 2008-09, the literacy rate for the population (10 years and above) is 58
percent during 2010-11, as compared to 57 percent in 2008-09 . Literacy remains much
higher in urban areas than in rural areas and much higher for men than for women. Province
wise data suggest that Punjab leads with 60 percent literacy followed by Sindh with 59
percent, Khyber Pakhtunkhwa with 50 percent and Balochistan with 41 percent.
` The Gross Enrolment Rates (GER) at the primary level excluding katchi (prep) for the age
group 5-9 years at National level during 2010-11 increased slightly to 92 percent from 91
percent in 2008-09. Amongst the provinces, Punjab shows a marginal increase from 97
percent in 2008-09 to 98 percent in 2010-11. Sindh remained stable with 84 percent, Khyber
Pakhtunkhwa improved from 87 percent to 89 percent and Balochistan declined slightly from
75 percent to 74 percent in 2010-11

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 Highlights of the Pakistan Economic Survey 2011-12
` The Net primary level enrolment rates at the National/Provincial (excluding katchi abadies)
level for the age group 5-9 years. The NER at the National level during 2010-11 slightly
decreased to 56 percent from 57 percent in 2008-09. Punjab shows a decrease from 62
percent in 2008-09 to 61 percent in 2010-11. Sindh also shows decrease from 54 percent to
53 percent in 2010-2011, Khyber Pakhtunkhwa witnessed a decrease from 52 percent to 51
percent and Balochistan improved from 44 percent in 2008-9 to 47 percent in 2010-11
` The overall number of enrolments during 2010-11 were 39900.3 thousands as compared to
38202.0 thousands during the same period last year. This shows an increase of 4.4 percent. It
is estimated to increase to 41596.5 thousands during 2011-12. The number of institutes stood
at 227.8 thousand during 2010-11 as compared to 228.4 thousand during the same period
2009-10. However, the number is estimated to increase to 228.3 thousand during 2011-12.
The number of teachers during 2010-11 were 1409.4 thousand as compared to 1386.1
thousand during the same period 2009-10 showing an increase of 1.7 percent. This number is
estimated to increase further to 1445.0 thousand during the year 2011-12.
` A total of 134,118 youth received vocational and technical training under the President’s
Funni Maharat Programme and Prime Minister’s Hunermand Pakistan Programme.
` HEC is also playing its role in running different scholarship programmes to enhance the
academic qualification at various levels on merit basis in line with requirement. During the
period 2008-12 a number of 3996 scholarships were awarded under different
programmes,3572 scholars proceeded to avail these programmes on merit basis and a number
of 1650 scholars completed their studies.

Health and Nutrition

` At present, there are 972 hospitals, 4,842 dispensaries, 5,374 basic health units and 909
maternity and child health centres in Pakistan.
` With availability of 149,201 doctors, 10,958 dentists, 76,244 nurses and 108,137 hospital
beds in the country during 2011-12 compared to 144,901 doctors, 10,508 dentists, 73,244
nurses and 104,137 hospital beds last year, the population and health facilities ratio worked
out 1,206 persons per doctors, 16,426 persons per dentist and 1,665 persons per hospital bed.
` During 2011-12, 30 basic health units and 7 rural health centres have been constructed, while
15 rural health centres and 35 basic health units have been upgraded.
` 4,300 doctors, 450 dentists, 3,000 nurses and 4,500 paramedics have completed their
academic courses and 4,000 new beds have been added in the hospitals.
` 9,500 Lady Health Workers (LHWs) have been trained and deployed mostly in the rural
areas. Moreover, some 7 million children have been immunized and 20 million packets of
ORS has been distributed.
` In addition to ongoing various health programmes such as cancer treatment, AIDS
prevention, Malaria Control Programme, this year special focus was given by Federal as well
as Provincial Government to “Dengu Epidemic Control Programme”.

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 Highlights of the Pakistan Economic Survey 2011-12
` The total outlay of health sector is budgeted Rs.55.1 billion which included Rs.26.2 billion
for development and Rs. 28.9 billion for current expenditure which is equivalent to 0.27
percent of GDP during 2011-12 as compared to 0.23 percent in 2010-11.

Population, Labour Force and Employment

` Population of Pakistan is estimated 180.71 million during the year 2011-12. Population
Growth Rate is 2.03 percent in 2011-12 while it was 2.05 percent in 2010-11
` Urban population has increased to 67.55 million from 65.3 million in 2010-11 while rural
population has increased to 113.16 million from 111.82 million in 2010-11
` Total Fertility Rate (TFR) reported 3.4 children per women in 2011-12 as compared to 3.5 in
2010-11.
` Contraceptive Prevalence Rate has decreased from 30 percent to 27 percent in 2011.
` Life Expectancy rate has increased from 65.8 years to 66.1 years for female and 63.9 years
to 64.3 years for male in 2011-12
` Crude Birth Rate has improved from 27.5 per thousand to 27.2 per thousand and Crude
Death Rate has decreased from 7.3 per thousand to 7.20 per thousand in 2011-12.
` Infant Mortality Rate decreased to 69.0 per thousand in 2011-12 from 70.5 per thousand in
2010-11.
` The total labour force has increased from 56.33 million in 2009-10 to 57.24 million in 2010-
11.
` The minimum wage of labour has been increased to Rs. 8,000 from Rs. 7,000 as announced
by the Prime Minister of Pakistan on 1st May, 2012.
` The total number of people employed during 2010-11 was 53.84 million, 0.63 million more
than the preceding year.
` Total unemployment rate has increased from 5.6 percent in 2009-10 to 6.0 percent in 2010-
11.
` The number of unemployed people increased from 1.94 million to 2.1 million in Punjab, in
Sindh from 0.57 million to 0.70 million in 2010-11. In KPK the situation is different the
unemployed people decreased from 0.55 million to 0.53 million and in Baluchistan
unemployed people also increased from 0.06 million to 0.07 million in 2010-11.The
unemployment rate is high in Punjab as compared to other provinces while in KPK
unemployment decreased.
` Agriculture sector is the largest provider of employment to 45 percent of total labour force.
The employment share by manufacturing sector has increased from 13.2 percent in 2009-10
to 13.7 percent in 2010-11. The share of wholesale and retail trade has decreased from16.3
percent to 16.2 percent while, the share of community/social and personal service sector
decreased from 11.2 percent to10.8 percent in 2010-11.

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 Highlights of the Pakistan Economic Survey 2011-12
` Informal sector employs 73.8 percent of total labour force in 2010-11as compared to 73.3
percent in 2009-10.The employment ratio in rural informal sector is (76.5 percent) is higher
as compared to that in the urban sector (71.2 percent) in 2010-11.
` The Government of Pakistan is making sincere efforts to boost overseas employment. The
number of emigrant was 0.36 million in 2010 which has increased to 0.45 million in 2011
which include 0.20 million unskilled, 0.17 million skilled, 0.073 million semi skilled, 0.0030
million highly skilled and 0.0069 million highly qualified workers.

Transport and Communications

` The roads in Pakistan carry over 96 percent of inland freight and 92 percent of passenger
traffic and undoubtedly the backbone of Pakistan’s economy.
` Pakistan’s current road network is about 260,000 km which caters services to eleven
million vehicles of all type.
` NHA road network is around 12,000 km, which is merely 4 percent of the overall road
network but takes 80 percent of Pakistan’s commercial traffic.
` NHA has completed 12 projects of flyovers, bridges, interchanges and road up gradation
during the last one year at a cost of Rs 19.6 billion.
` At present, 46 development projects having length of 2,985 km are ongoing at a cost Rs
245 billion in different sections/packages. These projects include construction of roads,
river bridges, tunnels, flyovers, interchanges.
` During the current financial year, NHA has launched/ awarded 16 new development
projects covering a length of above 500 km inclusive construction of a number of bridges,
flyovers and interchanges costing Rs. 70,951 million. NHA is simultaneously constructing
12 Bridges across the rivers. These are; on river Chenab 4, on rivers Sutlej 2, on river Swan
1 and 5 on river Indus.
` Heavy rains and floods severely damaged the Transport and Communication system during
last two years
` Preliminary estimates indicate that road network approximately 8,385 km and 190 km
railway lines were damaged including bridges and allied structures.
` The telecommunication infrastructure includes damages to cellular sites, exchange centres,
equipment, power system and supporting civil works is amounting to $1.9 million.
` Ministry of Railways has also adopted a “Track Access Policy” for private sector
participation to operate freight and passenger trains on Pakistan Railways infrastructure.
` Ministry of Railways has created a “Real Estate Development and Marketing Company” as
subsidiary of Ministry of Railways.
` Six factories including Locomotive Factory Risalpur, Carriage Factory Islamabad, and four
Concrete Sleeper Factories in Kohat, Khanewal, Sukkur and Kotri, are being corporatized
for eventual privatization subject to approval of the government.

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 Highlights of the Pakistan Economic Survey 2011-12
` Cabinet Committee of Restructuring has approved a restructuring framework for Pakistan
Railways.
` During the last financial year, 16 kms of track was rehabilitated on Pakistan Railways
network besides doubling more than 15 kms of track.
` Renovation of Khudian Khas, Usmanwala, Raiwind and Kanganpur railway stations was
carried out at a cost of Rs. 24.0 million to improve facilities for the passengers.
` 52 new design passenger coaches were imported from China at a cost of Rs. 4.1 billion.
Remaining 150 passenger coaches will be manufactured at Pakistan Railway Carriage
Factory Islamabad by June 30, 2013. In addition, 22 passenger coaches have been
rehabilitated at Pakistan Railway Carriage Factory Islamabad during last year.
` A new dry port was set up at Prem Nagar near Raiwind industrial area, Lahore through
Public Private Partnership at a cost of Rs. 494.0 million.
` Pakistan International Airlines Corporation earned increased revenue amounting to Rs.
116.02 billion in year 2011 as compared to 107.0 billion last year. A purchase agreement of
five Boeings 777 has been signed.
` Two new destinations have been introduced during the year 2011: Karachi – Madina and
Quetta – Zahedan
` Three new routes were introduced during the year 2011: Peshawar - Kuala Lumpur,
Sialkot–Riyadh and Sialkot–Dammam.
` Karachi Port Trust handled cargo 27.8 million tones during the first 9 months of the current
fiscal year.
` The consolidated revenues of PNSC group during July-March 2011-12 were Rs. 6,640
million as compared to Rs. 6772 million last year.
` The Corporation intends to acquire four vessels through commercial loan / joint venture-
basis. Acquisition of two vessels is in process, while two more vessels will be acquired in
next financial year.
` Total cargo handled on Gawadar port up till now is 4.1 million tones while Gwadar Port
earned total revenue since its start of operation amounting to Rs. 53.4 million.
` Port Qasim Authority handled a cargo volume 19.7 million tones during July-March 2011-
12.
` The volume of import cargo during July-March 2011-12 stood at 14.7 million tones, and
exports handled 4.9 million tones during July-March 2011-12.
` Ministry of Communications has prepared a draft National Transport Policy which covers
all modes of transport sectors i.e. (i) Roads, (ii) Railways, (iii) Ports & Shipping and (iv)
Aviation. This policy also includes the National Transport Corridor Improvement Program
(NTCIP). This programme has been launched in the country to revamp the whole transport
sector including ports, roads, railway, aviation etc. and provides a frame work to develop
and improve the North South corridor.
` Teledensity of the country has increased by 68.3percent in April 2012, showing 6.7percent
growth as compared to the previous year.

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 Highlights of the Pakistan Economic Survey 2011-12
` Mobile penetration rose 64.9percent in 2011-12 against 60.4percent in 2010-11 which
shows an improvement of 4.3 percentage points in total teledensity.
` Due to mobile substitution, Fixed Local Loop teledensity has been declining over the years
and it stands now at 1.93 percent compared to 2.1 percent last year showing a decrease of
0.17 percent.
` Total mobile subscribers reached 118.3 million by the end of March 2012 as compared to
108.9 million last year.
` Subscribers of Local Loop (FLL + WLL) reached at 5.93 million, out of which 3.10
million belong to FLL and 2.83 million belong to WLL.
` Broadband subscribers reached 1.9 million at the end of February 2012.
` Revenues of the telecom sector during the 2011-12, standing at Rs. 363 billion compared to
the last year 344.2 billion show an increase of 5.4 percent.
` In 2011, telecom sector invested US$ 495.8 million with cellular mobile sector being the
major contributor.
` In 2011, telecom sector attracted over US$ 79 million Foreign Direct Investment (FDI) in
the country which is about 5 percent of the total FDI landed in Pakistan in 2011. Auction of
3G licenses is expected which will bring more FDI in the country.
` The Pakistan Telecommunication Authority and the State Bank of Pakistan have signed a
Memorandum of Understanding (MoU) both the institutions have shown their interest and
commitment in stimulating mobile banking services in the country.
` There has been a cumulative investment of approximately US $ 2.5 billion in the electronic
media industry in Pakistan. New jobs to more than 200,000 people of diversified skills and
qualifications have been provided. In addition, over seven million people have been
accommodated through indirect employment. With the current growth rate of more than
seven percent per annum, it is estimated that the cumulative investment in the electronic
media industry will reach above $ 3.0 billion by the end of the current financial year.
` PBC External Services, broadcast programmes for 08 hrs daily in 11 foreign languages
covering Afghanistan, Iran, China, India, Bangladesh, Nepal and Sri Lanka.
` Central Production Units (CPU) produce music, drama, features, documentaries and
programmes for special occasions. CPU has over 2 million minutes recording in its
archives which are being digitized.
` PBC News is putting on air 117 News bulletins daily. These include National, Regional,
External and Local News bulletins besides resume of National Assembly and Senate. PBC
news launched broadcast FATA News, special news bulletins from PBC Hyderabad on
rain/ flood situation and ongoing rescue and relief activities in Urdu and Sindhi languages.
` Pakistan Post provides services through a network of 12,035 (1,797 urban and 10,238 rural)
post offices across the country.
` Money Orders of Benazir Income Support Programme amounting to Rs.16,642.0 million
have been paid within prescribed period of time.
` 55 Small and Smart Express Centres have been set up in the urban areas.

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 Highlights of the Pakistan Economic Survey 2011-12
` During the period July-March 2011-12 an amount of Rs. 160,266.9 million has been
collected through National Savings Schemes and earned commission amounting to Rs.
801.3 million during this period.

Energy

` Primary energy supply during current year is 64.52 million TOE compared to 63.09 million
TOE last year thus showing an increase of 2.3 percent. The availability of energy per capita
in 2011 remained 0.372 Tone Oil Equivalent TOE compared to 0.371 Tone Oil Equivalent
(TOE) in 2010 posting a positive growth rate of 0.16 percent.
` The average crude oil production during July-March 2011-12 remained 66032 barrels per day
as against 65997 barrels per day during the corresponding period of last year, showing an
increase of 0.05 percent.
` The industrial sector had shown positive growth of 24.2 percent in the consumption of
petroleum products during July-March 2011-12 when compared with last year,.
` Transport sector surprisingly showed a relative small growth of 3.5 percent in the
consumption of petroleum products as consumption of petroleum product in transport sector
remained 6,832.9 million tones during July-March 2011-12 compared to 6,599.1 million
tones during corresponding period last year.
` The consumption of petroleum products in the power sector was 8,139 million tones
compared to 8,814 million tones last year which hampered the growth in this sector, thus
posting negative growth of 5.2 percent in this sector.
` The gas sector supply increased by 4.9 percent in July-March 2011-12 as the average
production of natural gas was 4236.06 million cubic feet per day (mmcfd) during this period
while it was 4,050.83 million cubic feet per day (mmcfd) in corresponding period last year.
` Natural gas in the form of CNG posted a positive growth 10.8 percent during July-March
2011-12.
` The contribution of Hydel in electricity generation increased to 33.6 percent in 2010-11.
Water and Power Development Authority (WAPDA) remained the main contributor to
electricity generation with 48.7 percent coming from this source. Karachi Electricity Supply
Corporation (KESC), Pakistan Atomic Energy Commission (PAEC), Kot Addu Power
Company (KAPCO) and the Hub Power Company (HUBCO) have 8.3, 3.6, 6.2 and 9.1
percent, respectively. Independent Power Producers (IPPs) have contributed almost 25
percent.
` WAPDA is executing, on priority basis, the projects such as 969 MW-Neelum Jhelum, 1410
MW-Tarbela 4th Extension, 7100 MW-Bunji, 4320 MW-Dasu, 740-MW Munda Dam and
most mentionable 4500 MW-Diamer Bhasha Dam projects, to cope with the increasing
demand of power.
` Almost 96 percent work on the main dam at Mangla, spillway and allied facilities had been
completed and resettlement work is in progress. Likewise 99.7 percent work on Satpara and
72.1 percent on Gomal Zam dam has been completed.

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 Highlights of the Pakistan Economic Survey 2011-12
` Pakistan is one of the beneficiaries of Tetra-partner power import project under the head of
Central Asia-South Asia (CASA-1000) electricity trade.
` The household sector consumed 44 percent of the total electricity generated followed by
industrial (26 percent), government (12.3 percent), agriculture (10.4 percent) and commercial
(6.8 percent) during July-March 2011-12.
` The major users of coal are the cement sector and brick kilns; about 60 percent of total coal is
consumed by cement while 39 percent is consumed by the brick kiln industry during current
year as compared to 62 percent consumption of coal in cement industry and 37 percent in
brick kiln industry last year.
Alternative Sources of Energy
• National Grid Code for wind power projects has been amended. Grid Integration Plan
2010 -2015 for wind power projects is developed by AEDB to support National
Transmission and Dispatch Company (NTDC).
• Productive Use of Renewable Energy (PURE) Project is being implemented to install
103 hydro power plants in Khyber Pakhtunkhwa (KPK) and Gilgit Baltistan (GB),
with the total cost of US$ 19.5 million.
• AEDB has initiated a program with the assistance of Deutsche Gesellschaft für
Internationale Zusammenarbeit (GIZ) to assist the provinces to solicit private
investments in small hydro sector; under this program pre-feasibility study for 25
hydro sites in AJK, Sindh, Punjab and KPK with the cumulative capacity of
284.14MW has been completed. Public sector Hydro power projects are initiated in
(a) KPK (worth U$ 150.99 Million, of 17.0MW, 36.6MW and 2.6 MW), (b) Punjab
(worth U$ 138.74 Million, of 5.38MW, 4.04MW, 2.82MW, 4.16 MW and 7.64MW)
and (c) Gilgit Baltistan (worth U$ 71.12 Million, of 26MW and 4MW.
• AEDB has issued a LoI to set up a 12MW Biomass to Energy power project in Sindh,
based exclusively on Biogas / Agricultural Waste. The project is jointly sponsored by
investors from US and local entrepreneurs, the SSJD Bio Energy. Another LoI has
been issued to M/s Lumen Energia Pvt Ltd. to set up a 12MW power plant at Jhang
based on agricultural waste like cotton stalk, rice husk, sugarcane trash, biogas, wheat
chaff and other crops as multi-fuel sources
• Three thousand Solar Home Systems have been installed in 49 villages of district
Tharparkar, Sindh. Another 51 villages in Sindh and 300 villages in Balochistan have
been approved for electrification using solar energy and will be implemented.

Social Safety Nets

` Sanitation situation at household level has registered an improvement, in terms of 66 percent
of population using flush toilets compared to 63 percent in 2008-09.
` Benazir Income Support Programme launched by the government with the primary objective
of providing immediate relief to poor. It has made remarkable progress by providing much
needed relief to over 4 million recipients including Internally Displaced Persons, flood
affectees and bomb blast victims all over Pakistan.

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 Highlights of the Pakistan Economic Survey 2011-12
` Rs 122 billion up to March, 2012 have been disbursed to its beneficiaries. BISP has an
allocation of Rs 50.00 billion for the fiscal year 2011-12.
` BISP recipients are expected to be increased to 7 million once the on-going processing of
data collection during the “nation-wide poverty scorecard targeting survey” is completed.
` BISP has launched a number of programms of society safety including (i) Payment to
Recipients, (ii) Graduation Initiatives, (iii) Waseela-e-Haq, (iv) Waseela-e-Rozgar, (v)
Waseela-e-Sehat and (vi) Waseela-e-Taleem.
` Pakistan Poverty Alleviation Fund is dedicated for micro credit, enterprise development,
community based infrastructure and energy projects, livelihood enhancement and protection,
social mobilization, and capacity building. The overall disbursements for core operations
during the period of July- December 2012 are Rs. 8,490 million.
` Pakistan Bait-ul-Mal is making a significant contribution in poverty reduction by providing
assistance to destitute, Widows, Orphans, and other needy. Rs. 1777.5 million has been
utilised upto February 2012 on various schemes.
` Zakat funds have been utilized for assistance to the needy, indigent, poor, orphans, widows,
handicapped and disabled. Up to March, 2012 Rs. 7800.268 million have been distributed in
bulk amongst the provinces.
` Peoples Works programme (PWP) I & II are providing electricity, gas, farm to market roads
and other services to the rural poor. PWP-I & II incurred expenditures of Rs. 5.0 billion and
Rs 21.3 billion during 2010-11 respectively where as Rs 2.2 billion expenditure have been
incurred between July-December 2011-12 on PWP-I and Rs 2.9 billion expenditures on
PWP-II.
` Employees Old Age Benefits Institution provided benefits to the old age workers through
Old Age Pension, Invalidity Pension, Survivors Pension and Old Age Grants and Rs. 7961.2
million has been utilized during July- March 2011-12.
` Workers Welfare Fund utilised Rs. 2539 millions during July-March 2011-12 for housing
facilities and Marriage Grant, Death Grant and Scholarships etc. for the industrial workers.
` Government has also taken various micro-finance initiatives in collaboration with all
stakeholders to generate employment opportunities and to eliminate poverty.

Environment
` A number of projects have been funded by the government to deal with increasing
environmental degradation. In addition, there are number of projects funded by the donors in
which the government is a partner. These are being currently implemented to improve overall
environment in the country.
` Climate change is an area that has become increasingly important in recent years. In this
regard, the National Climate Change Policy 2011 provides a framework for addressing the
issues that Pakistan faces or will face in future due to the changing climate. The goal of the
policy is to ensure that climate change is mainstreamed in the economically and socially
vulnerable sectors of the economy and to steer Pakistan towards climate resilient
development.

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 Highlights of the Pakistan Economic Survey 2011-12
` Urban air pollution remains one of the most significant environmental problems, facing the
cities. A substantial body of research demonstrates that high concentrations of suspended
particulate matter adversely affect human health; prolong a wide range of respiratory diseases
and increased the probability of heart ailments.
` The higher concentration of suspended particulate matter (SPM) in the air is a major issue in
Pakistan. The main sources of SPM are vehicular emission, industrial emissions, burning of
Solid waste, pollens, brick kilns and natural dust. Motorcycles and rickshaws, due to their
two stroke (2-strokes) engines, are the most inefficient in burning fuel and contribute most to
emissions.
` The situation of access to drinking water is quite impressive in Pakistan. According to
Pakistan Bureau of Statistics report (PBS) Pakistan Social and Living Standards
Measurement (PSLM) Survey 2010-11, access to drinking water to urban and rural
population of Pakistan is 94 and 84 percent, with an average of 87 percent in 2011. In
Pakistan sanitation facilities are improving. However, much improvement is needed for rural
areas sanitation facilities. According to PSLM Survey 2007-08,the garbage collection
facilities to the population is only 14 percent done through municipalities, 7 percent through
privately managed and remaining 79 percent have no system.
` According to a report released by the WHO/UNICEF Joint Monitoring Program (JMP) 2012,
92 percent people had gained access to drinking water in Pakistan by 2010 while this ratio
was 85 percent and 89 percent in 1990 and 2000 respectively. The MDG target is to achieve
the ratio of 93 percent by 2015. Moreover, 48 percent people have been using improved
sanitation by 2010 while this ratio was 27 percent and 37 percent in 1990 and 2000
respectively. The MDG target for access to sanitation is 90 percent by 2015.
` Damage and Need Assessment Report jointly prepared by the Asian Development Bank and
the World Bank regarding floods 2011, it has been pointed out that in addition to causing loss
of life, displacement of millions, and huge losses to the economy, the floods in 2011 have
also resulted in environmental damages, heightened environmental health risks and affected
forests, wetlands and other natural systems.
` The Environmental damage caused by floods has been estimated at Rs. 2762.7
million (US $ 31.8 million) and Environmental recovery/reconstruction needs has been
estimated at Rs. 2873.6 million (US $ 33.02 million).

Flood Impact Assessment

` Severe monsoon rains triggered floods in Southern Pakistan at an unprecedented scale, both
in terms of volume and intensity, engulfing all 23 districts of Sindh Province and adjoining
areas of northern Balochistan Province.
` Approximately, 9.6 million people were affected in Sindh and Balochistan as a result of the
floods; 520 people died and more than 1180 people were injured.
` According to World Bank and Asian Development Bank report, 27,000 sq.Km area damaged
in Sindh province out of the total 27,370 sq. Km.
` The flood caused total or partial damages to an estimated 998,376 housing units in Sindh and
Balochistan.

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 Highlights of the Pakistan Economic Survey 2011-12
` The highest damage occurred in the agriculture, livestock and fisheries sector, has been
estimated at Rs.160 billion (US$ 1.84 billion).
` The total damage caused by 2011 floods has been estimated [direct damage and indirect
losses] amounting to Rs.324.5 billion (US$ 3.7 billion).
` The total cost of recovery and reconstruction needs has been estimated at Rs.239 billion
(US$ 2.7 billion).

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