part. 2
Realization on the part of regulators in Pakistan:

* Monetary policy statement and SBP governor speeches
* Fiscal policy statement and fiscal survey results: One year of fiscal indiscipline was enough to cause severe macroeconomic imbalances. Due to lax fiscal policy Pakistan is going to pay a heavy price in terms of growth deceleration, decline in investment rate, rise in unemployment and poverty, higher current account deficit, rising debt burden, a loss of foreign exchange reserves, Higher inflation and rise in interest rate.
* Administrative decay and break down of governance: The situation of public administration is particularly acute in Pakistan.
* Good governance and economy
* Emerging consensus on policy prescription for sustained economic development

Implications of global financial crisis on overall world: A globalized recession

* Systemic Risk
* Credit or Default Risk
* Country Risk
* Foreign-Exchange Risk
* Interest Rate Risk
* Political Risk
* Market Risk

* Central Banks, that continued to invest their exchange reserves in dollar-denominated paper face another dilemma
* Subprime Crisis, Bankruptcy and Layoffs – The Financial Tsunami
* World bank forecast: 14 November 2008: World Bank forecasted falling trade, global recession and rising poverty. In the lead-up to G-20 summit in Washington, the World Bank released global outlook in which it predicted a growth rate of just 1 percent for the world as a whole in 2009 and a contraction of 0.1 percent for the high-income countries.

The World Bank revised its projection of developing countries’ growth for 2009 from 6.4 to 4.5 percent, and growth of trade at minus for the first time since 1982.
The effect on the poor is grave. 20 million will fall below the poverty line if 1 percent point growth is curtailed. This is on top of the 150 million who joined the ranks of the poor because of the recent food and fuel price hikes.
World Bank Group President Robert B. Zoellick,
The World Bank:
· Expects private capital flows into developing countries to almost halve, from $1 trillion last year to around $530 billion in 2009.
· Forecasted a large contraction of 2.5 percent in world trade volumes for 2009.
· Predicts that prices for non-oil commodities will fall by 23.2 percent in 2009.
World Bank President Zoellick pleaded for G-20 leaders not to lose sight of the human crisis being created by the global economic turmoil. “As always, it is the poorest and most vulnerable who are the hardest hit,” he said, it would be “an error of historic proportions” if the developed countries ignored the interests of developing countries. “Many of these lower and middle-income countries don’t have much fiscal space: much of it has been used up trying to buffer the effects of the food price crisis. Malnourishment is expected to afflict nearly 1 billion people by the end of the year. “The FAO estimates that in 2007, 923 million people were undernourished compared with 848 million in 2004. We estimate that by the end of 2008 up to 967 million people (or an additional 44 million people) will be undernourished largely due to the rise in global food prices,” the report commented. The worst affected countries such as Burundi, Madagascar, Niger, Timor Leste and Yemen are those which already have the highest indices of stunting and wasting.
· The Organization for Economic Cooperation and Development (OECD), which covers the world’s major industrialized economies predicted contractions in 2009 of 0.9 percent, 0.1 percent and 0.5 percent for the US, Japan and the euro zone, respectively. OECD economist Jorgen Elmeskov told the Financial Times that the “mess” stemmed from a financial crisis that was engulfing rich and poor countries alike.

* IMF forecast: “With global financial crisis expected to last for "several more quarters", the International Monetary Fund has called for a large and timely fiscal stimulus with targeted tax cuts, increased spending and and even insurance cover from governments. IMF Says Us Crisis is 'largest Financial Shock since Great Depression'. Fund says there is now a one-in-four chance of a full-blown global recession over the next 12 months

The IMF said it expects the US to achieve GDP growth of 0.6% in 2009, with the housing crash getting even worse. Former President George Bush has already signed off a $150bn tax rebate package to kick-start the economy, and the Federal Reserve has backed an emergency buyout of investment bank Bear Stearns, but the IMF said this may still not be enough. IMF calculated that the British housing market is overvalued by up to 30%, and could be destined for a damaging correction.

* The Financial Crisis and Political Risk
* Job Loss number 1 global concern: Massive unemployment
* Financial crises and the meltdown of national economies: Bailout packages, liquidity injections. (Credit crunch to spill over the world)
* Banking Industry Facing Multifaceted Challenges: Bank run
* A systemic collapse of the financial and corporate sectors. A vicious circle of deleveraging, plummeting asset prices, and margin calls is underway.
* Dampening Effect on Global FDI: Capital flows
* Deflation now the biggest risk to world economy
* Continued volatility
* Increase in soaring deficit
* Debt trap
* Galloping poverty
* Dramatic fall in freight prices and volumes.




Major changes in the global scenario in the aftermaths of current financial crisis:
Unfortunately, the multi-lateral system is in a crisis now. The international community has failed to prevent regional wars and other violent conflicts; the inequities of globalisation are manifest in increasing marginalisation and exclusion; the promised support from the rich countries towards the realisation of the Millennium Development Goals has not been realised; a serious attempt to reform the United Nations failed at the World Summit of 2005; the Doha Round has been close to total failure; little has been done to seriously reform the international financial architecture; sufficient preparation for pandemic disease is lacking; and the disagreements on whether and how to tackle climate change continue to remain unresolved.

What is needed is a rebuilding of the international financial architecture imperfectly put-together decades ago, which has become totally dysfunctional.

* epicenter of the quake shifted
* New order: Creating a new multilateralism : A revised outlook for developing country growth
* Financial crisis to create global realignment : Now Brazil, Russia, India and China – the countries generally referred to as the BRICs – may climb up. One thing can be said with certainty, the system that would emerge from the proposed conference will diminish the prominence of the US as a global economic super-power and increase that of the rapidly developing economies in Asia and Latin America. Unfortunately Pakistan will not be one of the countries that will be able to improve their relative position.

The Pakistan Vision 2030 looks for closer cooperation with SAARC and ECO and charts a new direction towards partnership with ASEAN and Shanghai group etc.

* Are we heading for a tripartite financial world?
* The need for new mechanism for global economic management: The beginning of rethinking development strategies started in 1980s WB and IMF commenced their Structural Adjustment Programs. Actually they were supposed to adjust the institutions, Financial, Governance and Civil Service, unfortunately their adjustment cost the social sector spending: education, health, social security etc. That is the reason Poverty Reduction Strategies are focusing social sector specifically now. A former World Bank Economist, William Easterly in his book “The Elusive Quest for Growth” has mentioned all those areas where aid, foreign investment and infrastructure, did not work and aid for development was just a futile exercise. After the failed decade of “aid development” the WB was very vocal for its distributional concerns and to shift from “growth promotion” to pro-poor growth.
* “A Challenge of Economic Statecraft”

* Where does all this leave us? pressing the largest international banks to shrink their balance sheets focus on core activities as the financial supermarket model falls out of favor.

Financial reporting will be enhanced and rating agencies will provide analysis of more aspects of risk more explicitly, while regulatory authorities will have more bite and build up their knowledge of financial product innovation.

Remedial measures on global level:

Need for a Fast, Flexible and Coordinated Response: Responding today, securing tomorrow

* A journey from Monterrey to Doha
* Economic meltdown: time to re-examine global governance systems?
* Struggle for a meaningful change in the existing global economic scenario
* Towards a more equitable financial architecture
* Govt sector and market economy: a balancing act
* World Bank Response: MIGA Tackles Declining FDI Levels and Growth Prospects in Vulnerable Economies
* IMF response: One trillion ……..
* IFC's Response (International finance corporation)
* Bank of international Settlement (BIS) response
* Asian development Bank response
* EU response
* SAARC response
* The prospects of regional cooperation: In this Global financial turmoil

Continued global financial meltdown and lessons for Pakistan:
Lessons learnt from 2007 sub-prime mortgage debacle:

* Lessons from the sub-prime mortgage saga
* Consequences of weak regulatory environments
* Consequences of profit-driven expansion
* Consequences of offering convenient loans and out-sourcing origination
* Unsuspecting players taken for a ride by rating agencies
* Imprudence of the credit rating agencies

__________________
There are extraordinary people in very ordinary look. and
most of the time ordinary people do extra ordinary things.