Analysis Of Economi c Factors of Pakistan from FY 200510

SUBMITTED TO: Mr. Umer Safdar Kayani SUBMITTED BY: Ali Ijaz BBA-Sp08-005

Analysis of Pakistans Economy

Percentage Rates of Some Macro-Economic Factors of Pakistan

05-06
GDP Inflation Rate Poverty Education Investment Exp/Imp Total Revenue Deficit 54 36.1 13.8/31.4 14.2 4.3 5.8 7.9

06-07
6.8 7.8 23.9 55 18.3 4.5/8.1 14.9 4.3

07-08
4.1 12 33.8 56 13.1 16.3/31.6 14.3 7.4

08-09
2.0 20.8 36.1 56 11.5 -5.9/-10.5 14.1 5.2

09-10
4.1 11.5 36.02 57 0.7 2.1/-6.3 14.7 4.9

Analysis FY 06-07
Keeping the base year 05-06 we had seen that in 06-07 as well Pakistan was able to retain its strong growth and saw huge investment coming to country in sector of manufacturing, communication, agriculture and services. On the same side the State Bank was trying to control the inflation in terms of strong monetrary policy. Investments were risen to maximum level of 6.1$ Billions. Investment was majorly done by two giants i.e. America and China. Other reason was the political stability of country from last six years and have attracted many foreign investors. No doubt here the macro-economy was very much stable but with the increased growth rate inflation also rose abit. Govt. tried to increase the imports of certain items in accordance with drop in demand to be fulfilled by these imports. The only reason we analysed for resulting in increase of inflation was rise of prices of food groups that raise inflation index to 10.2% alone, and with it energy and medicine group also contributed to this. Whatever is the

Ali Ijaz (SP08-BBA-005)

Analysis of Pakistans Economy

reason but inflation affects the poor atmost i.e. CPI index for income group upto Rs.3000 was 8.3%. Poverty and literacy rate was held constant and was improving at slow pace. Exports of country specially of food group drop to 3.5% because of adverse weather conditions in country, the price at national level was high therefore it was better to sale at local market than to export. But exports of manufactured items and raw materials had raise. The major industry of Pakistan i.e. the textile, had faced huge loss of exports due to several factors like poor quality, high dumping policy, lack of meeting bulk orders and govt. non-serious behavior to the development of this sector. All of the exports of country are in five major items, therefore govt. should diversify its export items and its exporting markets as well. Similar is the case with imports of country that are concentrated to few commodities like machinery, petroleum etc and that has fallen this year due to inefficient working of plants in country. At last, tax collection had always been a big problem for Pakistan and still that results in low tax revenue and ultimately giving rise to budget deficit which can be fulfilled by pure collection of taxes rather than foreign finincing.

FY 07-08
The economic growth of 07-08 is truly contributed by services sector. Agriculture sector performed very poor and contributed 1.5% to GDP only. Other manufacturing sectors also faced same problem they performed dull due to several problems like electricity shortages, political unrest and social problems at other hand. In 07-08 country faced many major shocks that resulted in disruption in growth of economy like rising inflation, budget deficits and deceleration in GDP. We can see from above table that 07-08 was very hard, tough and challenging year for economy of country but Pakistan performed robust in many of sectors like services sector continued the solid pace, per capita income raised to 1087$, country produced the highest ever sugarcane in history, financial institutions of country also contributed dramatically to economy and also having political instability country was able to attract huge amount of FDI. Similar to the previous years tax revenue was also a drawback in this year as well but countrys deficit increased at shocking level due to political instability country was unable to get foreign financing.

Ali Ijaz (SP08-BBA-005)

Analysis of Pakistans Economy

FY 08-09
Moving from 07-08 to 08-09 country was in big troubles of GDP at 2.0 and lacking the finances to cover its deficits. Moreover economy was going down and investments were dropping back from country. Inflation rate had raised to extreme level of 20.0 causing very very low purchasing power of individuals and ultimately cauing increased poverty level. Other reason of downfall of economy was Pakistans war on terror that has now been part of countrys expenditures. Exports and imports were fallen to extreme level that is negative due to high shortages of electicity and other socio-economic factors. All these factors were caused by assassination of BB. In this situation govt. focused on four targets to be achieved like retention of GDP to level 6, reduced inflation rate, reduction in poverty and cover the deficit weaknesses.

FY 09-10
PPP govt introduced many programs to reduce poverty like Benazir support programs, rehabiliation programs etc and SBP introduced tighter and tighter monetary policy to control the inflation rate prevailing in the country. Govt reforms brought positive impact on economy and GDP were lift to 4.0 from 1.2(revised). All this growth was done due to some reasons like, support to rural areas in terms of crop price policies, higher cotton output from country, specially the increase in demands of Pakistani exports like textiles. Here the economists are saying that Pakistan will be back in position upto 2015 if seccessfully controlling the inflation and poverty rate and demands for exports keep on rising in same manner, then the climate for investment would be suitable once again. But in order to meet the budget deficit it is very much necessary to make the tax system improved rather than depending on IMF support programs.

Ali Ijaz (SP08-BBA-005)