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Thumbs up Economy of Pakistan in 2009-10 and appraisals

There will be economic facts in this thread.....
because the facts and figures comprehended by Asian Bank, SBP, WORLD BANK and few other authentic organizations are really going to help us in Current affairs and Essay topics like
Energy Crisis, Food Crisis, Economic Crisis, Unemployment,Inflation and economic development......so importance of these facts can not be denied......Have a look


Economic Outlook


The State Bank of Pakistan released its Annual Report 2009-10 on Thursday. Below are the key points of the reports and an overview of Pakistan's economy.
A variety of adversities took a heavy toll on Pakistan's economy during FY09. The previous fiscal year had ended with both, the fiscal and current account deficits at record highs, amid sustained increase in inflationary pressures. This macroeconomic stress worsened in the initial months of FY09. Inflationary pressures continued to mount, reflecting the pass through of rising commodity prices in the international markets, and the excess domestic demand pressures in the economy that were supported by the lagged impact of the monetisation of fiscal deficit. The resulting demand stimulus, also fed the already unsustainable current account deficit, which continued to grow.
The impact of these developments on the domestic economy was compounded by the worsening global financial crises that severely dented global aggregate demand, decimated liquidity in the international capital markets, and reduced investor confidence. Pakistan saw a sharp reversal of the earlier net portfolio investment receipts, and foreign direct investment flows fell sharply, even as the access to international capital markets disappeared. The decline in capital and financial account receipts (net foreign investment declined by 51.1 per cent during FY09 on top of a 35.3 percent decline in the previous year), in the face of a widening current account deficit, led to a substantial depletion of country's foreign exchange reserves, severe reduction in domestic liquidity, and a further impetus to domestic inflation (as the exchange rate depreciated).
The macroeconomic stabilization program in FY09 resulted in considerable fiscal consolidation during the year. Specifically, overall fiscal deficit dropped to Rs680.4 billion during FY09 from Rs 777.2 billion in the preceding year. As a percentage of GDP, the fiscal improvement led to a reduction in the budget deficit by 2.4 percentage points to 5.2 per cent during FY09 (see Table 1.1). The consolidation of fiscal balance largely represents a steep deceleration in the growth of total expenditures.
The decline in fiscal spending in FY09 was mainly evident in the removal of subsidies as well as cut in development expenditures. In particular, government improved the pass-through of international oil price to the domestic economy, and reduced some energy-related subsidies. It also sought to address the circular debt issue that had led to liquidity shortage in energy sector companies, hindering the already constrained power supply and hampering domestic production. The efforts at fiscal consolidation through reduction of development spending were less welcomed, contributing directly to the slowdown in the construction sub-sector.
It is being argued by some analysts that in light of the 14.2 percentage point fall in CPI inflation, from the 25.3 per cent peak in August 2008, to a 19-month low of 11.2 per cent by July 2009, the central bank should have reduced its policy rate more aggressively, particularly in light of the continuing weakness in growth. However, multidimensional risks to the nascent recovery guided the SBP to adopt a more measured monetary response.
Looking Forward
A gradual recovery is underway during FY10, and real GDP growth is likely to be close to the target of 3.3 per cent for the year (see Table 1.2). Signs of recovery include: (a) a rise in imports during July 2009, which points towards a possible pick up in domestic demand; (b) decline in LSM growth was only 4.4 per cent YoY by June 2009 relative to a record 20.7 per cent YoY fall recorded in March 2009; and (c) resolution of circular debt problem would also support production activities in oil and energy sectors.
Executive Summary
Real Sector
Pakistan's economic growth moderated further in FY09 to 2.0 per cent compared with a CAGR of 6.8 per cent during FY02-FY07 and 4.2 per cent in FY08 mainly due to weakened domestic demand caused by high inflation and depressed consumer credit market, reduction in most energy-related subsidies, slowdown in public sector development programs, and energy shortage. Similar to FY08, investment demand was the major contributor to the slowdown in FY09 GDP growth mainly due to unstable security situation and aggravating macroeconomic imbalances in the initial months of FY09. Public consumption also declined, showing that fiscal consolidation efforts have begun to take hold. Some support to the GDP growth came from the agriculture sector that rebounded during FY09 on the back of favorable weather and anticipation of higher prices.
Prices
The underlying inflationary pressures in the domestic economy eased in FY09 as all major price indices, CPI, WPI and SPI depicted a steady declining trend after reaching peaks in August 2008. The downturn in inflation can be attributed to: (a) the impact of declining international commodity prices; (b) weakness in domestic demand amid efforts at fiscal consolidation, constraints on the monetisation of fiscal deficit and the lagged impact of monetary tightening during most of the fiscal year, all of which led to dampening inflationary expectations. A very encouraging development in the latter half of FY09 was that core inflation also began to ease, although it is still quite high.
Money & Banking
The carry-over of macroeconomic stress, such as deterioration in current account deficit and demand stimulus of the extraordinary monetisation of fiscal deficit, from the preceding year had grown considerably by early FY09. In response, central bank aggressively tightened its monetary policy, raising the policy rate twice (i.e., increase of 300 bps) in the first half of the fiscal year.
Public Finance
Successful implementation of the macroeconomic stabilization programme in FY09 resulted in a reduction in budget deficit by 2.4 percentage points of GDP to 5.2 per cent during FY09. The consolidation of fiscal balance during FY09 resulted largely from a steep deceleration in the growth in total expenditures. Total revenues, despite considerable acceleration in growth, as a share of GDP declined to 14.1 per cent in FY09 from 14.6 per cent last year.
Domestic & External Debt
Pakistan's total debt and liabilities stock (TDL) recorded a substantial 27.0 per cent increase in FY09, only slightly lower than the 27.4 per cent growth in FY08. The continued strong growth in the stock of TDL in FY09, despite a small fiscal deficit, reflects the fact that imbalances in the overall fiscal account as well as the country's current account are still large. It also incorporates the lower availability of non-debt creating flows, the impact of the build-up reserves flowing, increased inflow of multilateral assistance as well as the increase in the rupee value of external debt due to adverse exchange rate movements. Consequently, overall debt sustainability indicators of the country remained under pressure for the second successive year in FY09. In particular, while the ratio of total debt to GDP witnessed slight improvement during FY09, it is still significantly higher than the low of 57.2 per cent of GDP recorded in FY07. Also, the ratio of debt servicing to total revenues, which reflects the government's capacity to service the country's debt, rose to 49.1 per cent in FY09 from 45.3 per cent in FY08.
External Sector:
Balance of Payments
After sharp expansion in the last four successive years, the current account deficit contracted considerably to 5.3 percent of GDP during FY09 from 8.4 per cent in FY08. This improvement in current account deficit more than offset the fall in financial account surplus during the period. Consequently, overall external account deficit declined by 40.1 per cent in FY09.
Looking ahead, maintaining improvement in external account would be challenging. On the one hand, further contraction in current account deficit would be difficult in the light of downside risk to remittances inflow and likely increase in imports owing to recovery of commodity prices in international market and revival of domestic economic activity. On the other hand, investment inflow are subjected to large risks as Pakistan's sovereign credit risk is still considerably high and prospects for world investment remain uncertain. Thus, Pakistan would have to rely on loan inflow to finance current account deficit.
Socio-economic Development
A review of socioeconomic indicators of the country shows that there has been a marginal improvement in some of the health, education and employment indicators, while poverty in the country is expected to rise, during FY09. Demographic indicators indicate that the country has the highest population growth rate in the South Asian region. Although the number of people below poverty line is expected to have increased, unemployment level has marginally declined during the year. Despite relative improvement as compared to previous years in health and education sectors, resource allocation in these areas remains the lowest in South Asia.
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Post Monetary Squeeze High Inflationary Expectations Persist

Despite Monetary Squeeze High Inflationary Expectations Persist
A recently conducted survey by the PIDE on inflation expectations reveals that
people are expecting high inflation together with high unemployment, a decline in growth
rate and decreasing currency value. The survey also shows that both demand pull and cost
push factors are responsible for current inflation in Pakistan, the most prominent being global
economic conditions and high food and fuel prices. High cost of living induced by inflation is
now the most important problem in Pakistan. The most hurt are the lower income segments
of the society followed by the middle income group. The survey reveals that the current
monetary policy has not been effective in curbing inflation, highlighting the need for
coordinated monetary and fiscal policies to control inflation.
The respondents indicated a 20% expected rate of inflation for the months of March
and April 2009. Also, the respondents expect that for the coming six months inflation will
remain on average at 21% and the expectation for the next year is even higher.
An overwhelming majority of the respondents (71%) expect that the rate of
unemployment will increase in the next six months and this situation is likely to persist in the
next year. Nearly two-third of the respondents expect that the rate of growth will drop in the
next six months.
Some 44% of the respondents expect the exchange rate to depreciate during the next
six months whereas 35 percent of the respondents say that there will be no change in the
exchange rate. Interestingly, a majority of the respondents (81%) believe that the political
scenario affects inflation expectations. In addition, international inflation, foreign aid and
financial development are also believed to affect inflationary expectations. The current
inflationary pressure in Pakistan, in their opinion, is due to global financial crisis (39%),
followed by food prices (34.9%) and oil prices (31.0%).
About two-thirds of the respondents view that monetary policy is ineffective in
controlling the rate of inflation in Pakistan. A large majority of the respondents (86%)
believe that coordinated move by the authorities implementing monetary and the fiscal
policies will help to control the current spell of inflation in Pakistan.
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Inflation Expectation Survey

The Pakistan Institute of Development Economics (PIDE), a premier research institute of
Pakistan, has led the field in developing quality research in social sciences and informing
public policy. PIDE is an academic institution that coordinates its work plan with the
Planning Division, Government of Pakistan. Granted the degree-awarding status by the
Government of Pakistan since 2006, PIDE functions as a research body with an educational
mission. Through recent restructuring, PIDE has developed several new initiatives such as
the PIDE Working Papers, PIDE Policy Viewpoint, and a weekly PIDE Seminars series. It
has been very active in the area of opinion evolution, breaking new ground in such areas as
urban issues, governance and institutions, and civil service reform.
Inflation expectations have a central role in macroeconomic theory, by providing
direction to consumption, saving and investment decisions of economic agents.
Internationally, there is growing trend to adopt inflation targeting as the primary focus for the
conduct of monetary policy. Inflation targeting framework requires the use of inflation
expectations in monetary policy decisions. Expectations on future price movements not only
help to derive inflation projections but also enable the policymakers to design effective
policies to maintain price stability.
In monetary policy deliberations policymakers require a reliable measure to inflation
expectation to assess the outlook for future inflation and gauge the stance of current
monetary policy. The literature suggests that a survey forecasts are accurate and useful in
predicting future inflation. Moreover, inflation expectations are important in identifying
expected real interest rates that determine the level of real spending in the economy.
To provide estimates of inflation expectations in Pakistan PIDE has decided to start a
quarterly survey on inflation expectations. For this purpose we used data base of the Pakistan
Society Development Economists (PSDE) along with Economics Departments of the
Universities, financial sector employees, government and non government organizations. The
questionnaire was sent to 300 persons all over Pakistan and got 168 responses. These include
doctors (PhD), professors, bankers, bureaucrats, businessmen and young economists. These
results are therefore based on the response of those who understand details of inflation and its
causes.
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Government's optimism about growth obvious of economic indicatorsAt the end of the first half of fiscal year 2009-10, all the economic indicators are showing a declining trend.

Contrary to these hard economic facts, Finance Minister Shaukat Tarin and his finance managers are painting a rosy picture to the Gilani cabinet by arranging easy financing from international donors like the Musharraf regime did by re-scheduling of foreign loans.

All the economic indicators including dwindling exports, declining foreign direct investment (FDI), negative Large Scale Manufacturing (LSM) for the past 16 months, rising foreign and domestic debt, less collection of taxes against the targets and unmanageable inflation seem not to be the priority of the incumbent government.

However, the State Bank of Pakistan and Finance Ministry are still optimistic about achieving the set GDP growth target of 3.3 per cent for FY 2009-10. Achieving the growth target is possible through the manipulation of figures only.

The multilateral donors want to keep the country on ventilator just shy of death throes, they would never want their client country to breathe on its own with independent and autonomous economic policies.

The global moneylenders want their own wish list of increasing taxes and decreasing subsidies fulfilled so as to ensure that debts are serviced, with least concern for the woes of masses.

The country’s trade deficit widened by 52.6 per cent in December as imports rose faster than exports. The total exports may remain between $18.5 billion and $19.0 billion this fiscal year, and imports between $30.5 billion and $31 billion. The fiscal deficit is forecast at between 4.7 per cent and 5.2 per cent and the current account deficit between 3.7 per cent and 4.7 per cent of GDP, predicts SBP report.

But the Federal Bureau of Statistics data reveals the other side of the story, exports during the period of July-Dec 2009-10, was recorded at $9.19 billion and imports at $15.99 billion that stood at $9.47 billion and $19.11 billion respectively during the same period the last year.

The IMF estimates Pakistan’s total external debt stocks to increase by more than 43 per cent over the next five years to $73bn from just below $51bn to meet its financial needs. Total external debt at present is hovering around $57bn.

Similarly, the internal debt payable by the government at present amounts to Rs1,651.17bn as of Nov 30, 2009 in the form of Market Treasury Bills (Rs1,135.19bn), Pakistan Investment Bonds (Rs473.73bn) and Ijara Sukuk Bonds (Rs42.42bn. The government paid Rs403.35bn during 2007-08 and Rs1,588.5bn during 2008-09 in terms of maturing MTBs and PIBs to the banks and other institutions.

The FDI during Jul-Nov 2009 declined to $774 million as compared to $1.620bn for the same period last year. While the tax collection also remained Rs581bn against the target of Rs595 billion for the first two quarters and Rs1,380bn for the whole fiscal year of 2009-10.

Large Scale Manufacturing (LSM) has witnessed a negative growth over past 16 months. The 0.67 per cent marginal growth during the first four months of current fiscal was only due to baseline effect as compared to the same period of last year.

Exports are not likely to grow to achive the $18bn target when there is no acceleration in LSM. This is only adding un-employment and also creating frustration in the business and working class.

The people are accepting whatever the government is passing to them in the form of utility bills and not agitating for they don’t have the strength to protest. Their throats are hoarse from yelling crying and shrieking on roads demanding an end to exploitation in the name of loadsheding of electricity, gas, and price hike of sugar, flour and utility rates.

The Prime Minister should deliver by ensuring good governance in real terms for smooth and affordable supply of daily items.
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Human Development Report 2009
Overcoming barriers: Human mobility and development
Pakistan Rankings and Indices
Human Development Index
The HDI provides a composite measure of three dimensions of human development: living a
long and healthy life (measured by life expectancy), being educated (measured by adult literacy
and gross enrolment in education) and having a decent standard of living (measured by
purchasing power parity, PPP, income).
Of the components of the HDI, only income and gross enrolment are somewhat responsive to
short term policy changes. For that reason, it is important to examine changes in the human
development index over time. The human development index trends tell an important story in
that respect.
• Pakistan’s HDI for this year, which refers to 2007, is 0.572, which gives the country a
rank of 141st out of 182 countries.
• Between 1980 and 2007 Pakistan's HDI rose by 1.30% annually from 0.402 to 0.572
today.
Human Poverty Index (HPI-1)
The Human Poverty Index (HPI-1) focuses on the proportion of people below certain threshold
levels in each of the dimensions of the human development index - living a long and healthy life,
having access to education, and a decent standard of living. By looking beyond income
deprivation, the HPI-1 represents a multi-dimensional alternative to the $1.25 a day (PPP US$)
poverty measure.
• The HPI-1 value of 33.4% for Pakistan, ranks 101st among 135 countries for which the
index has been calculated.
Gender Development Index (GDI)
The gender-related development index (GDI), introduced in Human Development Report 1995,
measures achievements in the same dimensions using the same indicators as the HDI but
captures inequalities in achievement between women and men. It is simply the HDI adjusted
downward for gender inequality. The greater the gender disparity in basic human development,
the lower is a country's GDI relative to its HDI.
�� Pakistan's GDI value, 0.532 should be compared to its HDI value of 0.572. Its GDI value is
93.0% of its HDI value. Out of the 155 countries with both HDI and GDI values, 152 countries
have a better ratio than Pakistan's.
Gender Empowerment Measure (GEM)
The gender empowerment measure (GEM) reveals whether women take an active part in
economic and political life. It tracks the share of seats in parliament held by women; of female
legislators, senior officials and managers; and of female professional and technical workers- and
the gender disparity in earned income, reflecting economic independence. Differing from the
GDI, the GEM exposes inequality in opportunities in selected areas.
Pakistan ranks 99th out of 109 countries in the GEM, with a value of 0.386
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Economy of Pakistan.

Pakistan economic growth faced a serious set back in fiscal year 2009 because of the depressed consumer credit market, slow progress of public sector programres, inflation, reduction in subsidies, security threat, instability in the state and energy crisis. Additionally, no attention was given to the agriculture sector. The exports declined by six percent and imports by 10 percent. The only thing that became a silver linning was the increment in remittances by 22%. Apart from ignorance, agriculture sector has shown credible results because of good weather. Major crops, wheat, rice and maize recorded impressive growth i.e 7.7% against the target of 4.5%. Live stock and poultry also add to GDP as there was no viral disease this year.

Shortages of energy and power donot let the boom entered into the industrial sector. In addition the sanction applied by IMF on different sectors creating a hurdle. This resulted in unemployment and services sector decline. Because of security crisis the graph of investment do not take any surge. The beginning of declining in core inflation is a hopeful factor but the domestic inflation is on peak. There is a marginal improvement in health and educational sectors but the poverty in country rise Pakistan have the highest population growth. The largest population represents a large potential market for goods and services yet the condition are deplorable.

Being an agro based economy Pakistan should focus on the development of agriculture department. Financial sector should be developed. Instead in focusing to much on macro financing, micro financing must be given a chance. Trade deficits should be reduced. This can only be done by eradicating the trust deficit, which will boost our exports as well as imports. It will also bring FDI’s (Foreign Direct Investment) at home. There should be short term as well as long term policies. As Pakistan’s economy is dependent economy so it should be made strong enough to reject the foreign aid or loans on their conditions, which can directly or indirectly bring harm to the economy. Still the Government is unable to differentiate and reorganize the developed and non-developed budget. Solid fiscal policies should be made to give advantage to both, demander and supplier. This would also be beneficial for the skilled workers, who fly away from the land. Despite all these, there must be political, economic and social stability in the state. A proper accountability set up must be introduced to eradicate corruption as it leads to massive human deprecation. And the final solution of this problem is good governance.
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Pakistan Economic Report

Latest Pakistan economic report has confirmed that political stability is required in order for this south Asian country to deal with its economic crises in a more suitable way.



New Pakistani economic report has also suggested that process of political reconciliation should be persisted with if this country is to do away with their economic problems.

As per Pakistan’s economic report terrorism has been a thorn in flesh of Pakistan economy. Shah Mahmood Qureishi, foreign minister of Pakistan, has also reiterated that in order to add to strength of economic institutions in Pakistan it is imperative that central government dealt with these issues with an iron fist so that economic imbalance in this country could be addressed.

According to economic report of Pakistan it has been observed that International Monetary Fund and Pakistan have reached an agreement regarding Pakistan’s budget for fiscal 2009-10. As per this agreement a capital value tax, at rate of 0.2 percent, would be imposed on every Rs. 25,000 that is taken out of foreign currency accounts as specified in budget for 2009-10.

Added information from economic report in Pakistan reveals that in meeting that IMF and Pakistan had in Dubai revisions were made for macro economic goals for fiscals 2009 and 2010. Both these parties have also arrived mutually at macro economic goals for Pakistan economy in 2010.

Economic report at Pakistan states that in case withdrawals from foreign currency accounts are in excess of Rs. 25,000 a withholding tax at rate of 0.3 percent would be exercised in that case.

It has also been suggested in economic report from Pakistan that for account holders who are not recognized by income tax and sales tax departments in Pakistan rate of withholding tax could be increased to 6 percent from 3 percent. This would be levied when they take out money from banks. However, this proposal is still doing rounds in higher circles of Pakistan economy.

According to Pakistan economic report this tax would make account holders go for documenting their financial transactions with checks in place of cash. Ministry of Finance, Pakistan has made it clear that this proposal would be included in budget for fiscal 2009-10.

Pakistan economic report for 2009 also states that some other important matters are at level of discussion in Pakistan. Economic authorities are aiming to take tax to GDP ratio to 12.5 percent within 2009 to 2012 from 10 percent at 2008-09.
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can western economic system deliver for pakistan

The concern for a western style economic system has plagued Pakistan for sometime. The concepts given are theoretical but much more is the fact that the system is based on a cultural premise that does not exist; that all cultures are neutral to economics. If one then considers the human factors that are players in the game, one sees the difficulty.

The human element is at such variance in Pakistan that it is impossible to place a handle on these variances for the purpose of public benefit. Besides the human factors, the shaping of relevant institutions requires many considerations. The institutions of the West are based on a different premise than the ones that we have in Pakistan and that the developing world has in general.

Capitalism and democratic institutions mean different things to different people and policymakers. The policymakers, on the other hand, are at variance with the general public the ultimate ones that have to bear the consequences of these policies; the result, a mismatch between the intended and the unintended consequences of that policy.

Consider some of the objectives that the world order imposes on Pakistan in particular. It imposed during the regime of Musharraf, a new administrative structure that was so ludicrous that the entire system was thrown into turmoil. It was created with the objective that the coterie then in power would be there in perpetuity and that independent thinking was of no concern of the power bloc as the requirement was for them to do their job in accordance with their concerns.

Secretaries were transferred if they did not toe the line. The case of an SADB loan in which the then Secretary of agriculture was transferred because of his refusal to sign the loan at Manila as it did not provide the benefits worth $350 million was, in fact, a non-starter and subsequent events have shown this to be the case. The debt incurred was for the future generations.

Things went so far out of hand that the consultant selected for the job had virtually no experience of the subject matter and had been around as a civil servant first in Pakistan and then in the WB; a recipe for disaster as he had no exponential experience of the country.

The selection was passed on to Pakistan and was not of their taking. How long can such things continue? It happened in other projects also and these supercilious idiots, who formed the coterie of hit men sent to Pakistan, are lounging around in New York or in Washington. The burden of their actions and their conveniences would fall eventually on the future generations.

What moral right has the WB and the ADB to determine how we should, in Pakistan, administer the economy? These were loans and had to be repaid by Pakistan and not grants or charity. Time and again, the game seems to be to take Pakistan on the road to a sure disaster. I recall the total loans when ZAB was in power were of the order of 3 billion dollars.

Zia and his hitmen took it to unbearable levels. Pakistan cannot afford the luxury of non-descript loans and the eventual impossibility of utilising them without the benefit of earning from them. Most of these loans were used for consumption purposes. The liberal policies that were forced on the country were different from the liberal policies that had been debated and worked in their own country.

Let us examine some common threads that are needed in Pakistan s economy. Do you need a common objective in the social order? If so, tell me how and why did you kill Nawab Akbar Bugti and why were there so many decisions by the Musharraf regime in which innocent citizens were butchered or went missing.

Why are the persons responsible for this not being tried? Why this selectivity of actions of Musharraf and why this obvious question that the public is seeking as to the selective use of the actions of the previous regime. If that regime is false in little things, it is false in big things and it is false in everything.

There are no ifs and buts about this. Can you have a common objective about the social order between the provinces or even within the provinces? Can the, and does the Baloch tribes think as the Pathan tribes and can we have a modification of policy if the end question is of getting them to harmonise? There are serious divergences between the Punjabi and the persons of other provinces. So policies have to cater for the needs of the people and their way of living.

Pakistan has not been able to cash in on the initial success of trying to guide society towards specific goals. Independence has lost out and the greed of the few has messed up the many that were the inhabitants of this country. Institutions that have been with excessive physical power have to be handled and made subject to the will of the people as exercised through the Parliament. The greed of the few was so powerful that the ordinary people simply succumbed to the power tactics of the weapon-holders.

The power of sacrifice for the common good was lost. Why should anyone accept the loss of the poor and take up cudgels for them? I can give you umpteen examples of the rule of the powerful where the rule of law has been exterminated systematically. No one questioned the rule of the army, for whatever it was worth.

We are very good at hitting those that have fallen and we forgot simple decency and decided that if some one was to be incarcerated and you did not like him, let him stew in his own juice. Double standards these were not, these were poisonous fangs that hit the simple societal norms. We proudly display our prejudices and we proudly sit on judgement. The evidence they tell me is at the tips of their tongues.

If that is so, then we need to cut those tips and place them as evidence. What nonsense! The rules of evidence have been forgotten just because the media enjoys unfettered liberty. At heart, the scums have got to the decent and the indecent have a field day. The third caveat that I would like to speak on is that knowledge is communicated through and by social institutions and so are the rules of conduct.

What knowledge is communicated? Take agriculture and the obsolete institutions that are supposed to give and disseminate knowledge to the pluralistic society that embodies Pakistan. If the people have such divergences then how is that knowledge going to be assimilated. As it is the simple systems that we have are not conducive to the giving of knowledge.

Obsolete institutions cannot give any new knowledge to the public at large unless this knowledge is self-generated. Since most of the educated have been to the west and imbibed the culture of the west it is necessary to have them adapt that knowledge and make it country-specific.

With different tiers of knowledge, the surprising part is that the people who are the recipients of this information will differently assimilate the same knowledge. How can a PhD talk to the farmer that has not been educated in the system, any system? The tragedy of the system is that we expect the farmer to deliver and he has, so far, but now the difficulty is visible.

The farmer is at the tail-end of education and that seems to be his destiny for the country is not doing anything to liven his life. So the solution lies in having a lot of public servants that do not play to the gallery but understand the nuances of public life. It will take some doing.
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Pakistan Ki Economic Condition
by Atique Laghari



Duniya Is Waqt Shadeed Mali Buhraan Ka Shikar Hay, America, Japan, India, China Aur Pakistan Samait Sari Duniya Mein Stock Markets Crash Kar Gayee Hain Aur Mehegai Aur Berozgari Mein Khatarnak Had Tak Izaafa Ho Gaya Hay. Is Zaman Mein Pakistan Ki Economics Par Bhi Bahut Manfi Asraat Parey Hain. Aj Main Is Article Ke Waseeley Pakistan Ki Maujooda Economic Condition Aur Kiye Gayey Islahat Aur Mustaqbil Qareeb Mein Honey Waley Fawaid Aur Nuqsanat Ka Jaiza Lene Ki Koshish Karoon Ga.

September And October-2008 Mein Pakistan Ke Default Ka Khatra Barh Gaya Aur Govt. Ne Apne Doston Se Madad Ki Appeal Ki Lekin Saudi Arab, UAE, Aur China Jaise Doston Neb Hi Ham Ko IMF Ki Jholi Mein Dhakel Diya Aur Apni Doobti Economics Ko Bachaney Ke Liye Govt Ko Karwi Conditions Bhi Accept Karni Pari, Is Tarah Ab Pakistan Ke Reserves Par Kuch Behter Nataij Ana Start Huwe Hain, Jo Doller 61 Rupees Se 84 Rupees Tak Bari Tezi Se Pahoncha Thaw O Aj Kal Kam Hokar 80 Rupees Taka A Gaya Hay Aur Us Mein Rukaou Bhi Aya Hay, Lekin Is Ko Mazeed Kam Karne Ki Zaroorat Hay, Currency Ke Devaluation Ki Waja Se Pakistan Ka Karza 2000 Billion Barh Gaya Hay.

Pakistan Ki Economics Basically Agriculture Aur Manufacturing Based Hay, Ham Sab Se Ziyada Petrolium Masnooat Mein Dollor Waste Kartey Hain, Oil Ki Demand Pichley 10 Saloon Mein 100 % Tak Barh Gayee Hay Aur Is Saal Petrolium Ki Masnooat Ki Prices Bhi Asman Se Baatien Karne Lagi Thi, Well Prices To International Level Pe Barhi Thi Lekin Past Mein Shaukat Aziz Ki Policies Ki Waja Se Banking Sector Ke Zareeye Leasing Systems Pe Beshumar Gariyan Di Gayee Thi Jo Buniyadi Waja Thi. Agriculture Sector Jo Hamari Economics Ki Backbone Hay Us Mein Ham Ko Wheat Ki Crop Ka Kam Hona , Afghanistan Mein Smugle Hona Aur Start Mein Apni Gandam Sastey Damon Bech Dena Aur Pir Mehenge Damon Khareedne Ki Waja Se 2 Billion Dollors Ka Nuqsan Huwa. Doosri Bari Waja International Market Mein Maujooda Buhran Ki Waja Se Textile Ke Section Mein Maang Kam Hona Bhi Ek Waja Rahi, Kiyoon Ke Pakistan Apni Total Export Ka 50% Textile Ke Section Mein Karta Hay, In Asbab Ki Waja Se Hamara Tijarti Khasara Bahot Barh Gaya, Energy Sector Ke Crises Ki Waja Se Production Bhi Bahot Kam Huwee. Ye To Ho Gaya Thora View Hamari Economics Ka, Ab Dekhtey Hain Hukumat Ne Kiya Fauri Iqdamat Kiyey Hain Is Soorat-E-Hal Se Nimatne Ke Liye.

Maujooda Hukoomat Ne Pehla Qadam Ye Uthaya Ke Qareeb 300 Items Jo Taeesh Ke Liye Use Hote They Un Per Impot Duty 100% Tak Barha Di Ta Ke Import Ki Hausla Shikni Ki Jaey.

Banking Sector Ko Leasing Ki Gariyoon Par Intrest Rate Barhane Ka Hukam Diya Ta Ke Kam Se Kam Gariyan Import Ho Saken Aur Local Level Par Bhi Un Ki Production Kam Ho Sakey Ta Ke Petrolium Masnooat Ki Demand Mein Kami Aa Sakey.

Textile Sector Mein Export Duty 3.79% Kam Kar Di, Mirza Akhtiyar Baig Ko Textile Ka Advisor Banaya Jo Bahot Hi Talented Aur Energetic Hain Aur Round The Clock Textile Section Ki Behtry Aur Taraki Ke Liye Koshan Hain. Is Ke Saath Europe Mein New Markets Tak Reach Karne Ke Liye Bhi Iqdamat Kiye Gaye Hain. Jis Se Yaqeenan Behtri Ki Soorat Hall Behter Honey Ki Tawaqa Hay. Textile Ke Section Ki Behtri Ke Liye Jo Sab Se Bari Rukawat Hay Wo Hay Power Sector Ki Waja Se Aur Us Ki Bahali Ke Liye Bhi Mumkin Had Tak Koshish Ki Ja Rahi Hay, Wind Power Aur Coal Power Se Energy Produce Karne Ke Liye Long Term Mansoobon Pe Tezi Se Kaam Kiya Jar Aha Hay, Aur Maujooda Soorathaal Se Nimatne Ke Liyey Ipps Se Agreement Kiye Ja Rahey Hain, China Aur Itran Se 2100 Megawatt Bijli Rent Pe Lene Ke Liye Bhi Agreament Kiye Gaye Hain, Aur Hydro Power Section Mein Maujood Units Ko Upgrade Kiya Ja Raha Hay Aur Unki Paidawari Salahiyat Bhi Barhai Ja Rahi Hay Aur France Aur China Ki Madad Se 1800 Megawatt Ke Itemic Power Reactyor Bhi Banaye Ja Rahey Hain. In Sare Iqdamat Se Andaza Lagaya Ja Sakta Hay Ke December-2009 Tak Ham Load Shedding Aur Bijli Ka Shortfall Control Kar Len Ge Jis Se Yaqeenan Hamari Industry Ko Faida Hoga Aur Hamari Production Increase Hon Gi. Ab Ham Baat Karen Gey Industries Koraw Material Supply Karne Wale Agricultural Sector Ki.

Dialy Jang Ki Tawasat Se Maine Mirza Akhtiyar Baig Sb Ko Ek E-Mail Kiya Tha, Mujhe Us Ka Koi Jawab Nahi Aya Lekin Jo Sifarshat Maine Di Thi Un Pe Amal Kiya Gaya Hay Jis Se Pakistan Ke Tijarti Kahsarey Ko Kam Karne Mein Kafi Madad Miley Gi. Cotton Sector Mein Rates Ko Barhana Farmers Ko Asan Loans Dena DAP, Aur Urea Chemicals Mein Subsidy Dena Cotton Sector Mein Ahdaf Hasil Karne Ke Liye Madadgar Sabit Huwe. Rice Ki Paidawar Mein 23 Lakh Tons Ka Izaafa Huwa. Sugar Industry Ke Liye Bhi Jo Iqdamat Kiye Gaye Hain Jis Ke Tahet Sugar Industries Ko Hidayat Di Gayee Hai Ke Wo Farmers Ko Beghair Sood, Seed Aur Khaad Faraham Karey Ta Ke Farmer Sugar Cane Ki Ziyada Kasht Karey Aur Sugar Cane Ke Rates 67 Rupees Se Barhakar 100 Rupees Kar Diya Gaya Hay. In Ikdamat Ka Result Yaqeenan Next Year Ham Ko Miley Ga. Sab Se Ziyada Ham Ko Floor Section Mein Takleef Uthni Pari Thi, Jis Ki Waja International Markets Aur Maqami Markets Ki Prices Different Ki Waja Se Huwee Thi, Local Market Mein Wheat 510 Rupees Per 40 Kg Thi Aur International Market Mein Ye Price 1300 Rupees Per 40 Kg Thi, Jis Se Hamari Wheat Afghanistan Smuggle Ho Rahi Thi Aur Farmer Low Price Ki Waja Se Aur Ikhrajat Ziyada Hone Ki Waja Se Wheat Crop Ko Importance Nahi Dete The Aur Jab Bhi Govt Support Price Announce Karti Thi To 50% Se Ziyada Crop Market Mein Chali Jati Thi Aur Is Ka Faida Farmer Ke Bajaey Investors / Brokers Ko Hota Tha, Majooda Govt. Ne Intihai Danishmandana Faisla Kiya Aur Crop Ki Cultivation Se Pehley Supportive Price Announce Ki Aur DAP Khaad Pe Rs.3100 Per Bag Subsidy Di Aur Nateeja Ye Nikla Ke Wheat Ki Kaasht 9% Ziyada Huwee Hay Aur Seed Australia Se Import Kiye Gaye Hain Jis Se Per Hector Average Bhi Ziyada Milne Ki Twaqa Hay, Aur Alhamdullilah Expect Kiya Jar Aha Hay Ke Is Saal Hamari Wheat Production 65 Lakh Millon Matric Ton Hone Ka Imkan Hay Aur Ye Hamari Use Se Bahot Ziyada Hogi Is Se Hamara Import Ka Paisa Bache Ga Aur Export Ka Paisa Bhi Aye Ga Jis Se Tijarti Khasara Kam Karne Mein Madad Mile Gi. Farmers Ko Rates Ziyada Dene Se Double Faida Hoga Jis Se Production Bhi Barh Gayee Aur Afghnisat Smuggle Hone Ka Khidsha Bhi Kam Ho Gaya Hay. Govt. Ko Wheat Ki Support Price International Rates Ke Barabar Karni Chahiyey Jis Se Hamara 70% Pakistani Jo Agriculture Se Wabista Hay Wok Hush Haal Hoga Aur Smuggling Bhi Ruk Jaey Gi. Leki Yahan Ye Amar Zaroori Hay Ke Awam Ko Relief Den Eke Liye Govt Ko Mehengi Gandam Khareed Kar Awam Ko Subsidy Deni Hogi Ta Ke Ghareeb Awam Jo Pehle Hi Mehengai Se Preshan Ho Us Par Mazeed Bojh Nahi Dala Jaey, Jo Wo Bardasht Na Kar Sakey.
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SBP s First Quarterly Report 2009-2010


Executive Summary: Real Sector - Agriculture: Initial estimates suggest that the performance of FY10 kharif crops has been significantly weaker than in the corresponding period last year. This was due to water shortages at sowing times and, more importantly, farmers disappointment with prices received in the previous kharif season.

The latter is particularly evident in the decline in area under rice and sugarcane cultivation. Conversely, the impact of favourable prices is reflected in the higher acreage under cotton during kharif FY10; cotton prices are currently at an all time high.

On the other hand, the announced support price for wheat may help the rabi crop; however, it is less likely that wheat could add significantly to growth given the high base set by the record FY09 crop. Early signals of poor kharif output, saturation in rabi and uncertain livestock due to decline in non-farm agri-credit, raise the risk of an overall weak performance of agriculture during the current fiscal year.

Large Scale Manufacturing: A modest improvement in aggregate demand was seen in July-October FY10 as manufacturing index increased by 0.7 percent compared with a decline of 5.0 percent in July-October FY09. This could be attributed to gradual easing in monetary policy and fiscal support as well as the impact of increase in farm incomes in FY09.

However, plagued by a multitude of structural issues, the recovery remained weak and patchy: a) although ginning numbers were strong, high lint and yarn exports resulted in raw material shortages for high-value added industries, bringing overall textile growth in the negative, b) automobile sales showed promising growth following a decline in both vehicle and fuel prices; but despite this, refinery production declined owing to the unsettled circular debt, c) domestic cement sales are expected to be impressive as modest recovery was seen in construction activities evident in high YoY growth in production of building material items (eg, billets) as well as import of steel in October 2009.

Nonetheless, export prospects are uncertain given capacity augmentations in importing countries as well as slowdown in construction industry in Afghanistan and Gulf. With such unbalanced patterns of domestic recovery, expected upturn in global prices that will push up domestic energy costs, and lower sugarcane harvest coupled with fears of late crushing (which could impede growth in sugar industry), the outlook for industry in FY10 remains uncertain.

Prices: Domestic inflationary pressures eased significantly during the first five months of FY10 compared with the corresponding period of FY09. Inflation measured by consumer price index (CPI) and the sensitive price indicator (SPI) declined, with CPI inflation YoY dropping to 10.5 percent YoY in November 2009, after reaching single digits (8.9 percent) during October 2009, for the first time in the preceding 21 months.

While an uptick in November is largely attributed to higher food prices on account of Eid-ul-Azha, the recent disinflationary process is a result of: a) improvement in supply of most of the key staples (except sugar), b) constraints on the government s magnetisation of the fiscal deficit, c) lagged impact of tight monetary stance, and d) a decline in imported inflation.

However, variability in monthly inflation rates in WPI inflation (YoY) raises concern over the sustainability of the downtrend, particularly in the second half of the fiscal year. The risk of resurgence in inflationary pressures is also evident from strong core inflation. Both indicators, the non-food non-energy (NFNE) and 20 percent trimmed mean, though declining since H2-FY09, remained high.

One of the main reasons for the persistence in both measures of core inflation, is the double-digit increase in house rent index (HRI) despite an easing since June 2009. HRI has around 46 percent weight in NFNE and 29 percent weight in trimmed mean, hence, the pace of decline in core inflation is slow relative to headline inflation.

Moreover, the rising trend in international commodity prices, particularly crude oil, metals and some food items (eg, rice and sugar) is likely to fuel inflationary pressures in the economy. The risk of higher inflation in food commodities also stems from weak monsoons in India, which would likely have negative spillovers on domestic prices.

Money and Banking: SBP continued to gradually ease monetary policy in FY10, reducing the policy rate by 150 bps in two rounds. On cumulative basis, this means a reduction of 250 bps in the policy discount rate since the beginning of current easing cycle in April 2009. These policy measures were supported by substantial moderation in demand pressures.

For instance, a very sharp drop in headline inflation, ie, from 24.7 percent in November 2008 to 10.5 percent in November 2009; persistent YoY fall in import growth (particularly the negative growth in import volumes during July-November FY10) and the low growth in private sector credit expansion.

The scale and speed of the decline in inflation suggest that the tight monetary policy and sharply constrained magnetisation of the fiscal deficit have eased excess demand pressures that had plagued the economy in the previous three years. This disinflationary impact received further support from lower imported inflation1 and improved domestic production of key staples. However, the expansionary fiscal stance in Q1-FY10 (the deficit increased by Rs 223.7 billion compared with a rise of Rs 137.7 billion in the same quarter last year) has had some repercussions.

For example:

1. A part of the growing deficit was financed through an IMF bridge finance loan, the inflationary impact of which is similar to that of deficit magnetisation.

2. The large jump in deficit, and lower recourse to SBP finance, meant that despite higher non-bank financing, government borrowings from commercial banks increased substantially. Net budgetary borrowing from scheduled banks was Rs 166.0 billion during July-5th December FY10 compared with a net retirement of Rs 67.0 billion in the corresponding period last year.

3. Strong government demand for financing, and low deposit growth is now constraining banks ability and willingness to take additional exposure; this means an element of crowding out of private investment. These problems are compounded by a significant increase in quasi-fiscal activities, such as financing of the circular debt, and borrowings by various public sector enterprises (PSEs), and government borrowing for commodity operation.

In terms of monetary aggregates, the YoY growth in M2 after witnessing the lowest level of 8.0 percent in April 2009 during the last eight years, reached 13.4 percent by December 05, 2009. This improvement came entirely from YoY rise in net foreign assets (NFA) of the banking system, as net domestic assets (NDA) of the banking system decelerated markedly by end-November 2009. Deposit mobilisation by banks shows some recovery; on a cumulative basis, deposits recorded a growth of 0.1 percent during July-November FY10 in sharp contrast to previous year, when deposits contracted by 3.8 percent.

Fiscal Developments: The Q1-FY10 fiscal deficit came in at 1.5 percent of projected annual GDP, raising concerns over the government s ability to meet the annual target of 4.9 percent of GDP. A significant part of the slippage owed to an unexpected rise in spending (eg, increase in government wages, anti-militancy operations, etc) and delays in some revenue receipts.

If these factors are excluded, the quarterly fiscal deficit should be below 1.2 percent target for the first quarter of FY10. One concern, however, is the heavier contribution of non-tax revenues within overall revenues during Q1-FY10. This is because jumps in non-tax revenues are unpredictable, and are often not sustainable.

For example, non-tax revenues would have fallen by Rs 47.8 billion, had there not been a Rs 70 billion transfer from SBP profits to the government in Q1-FY10. Despite sharp increase in fiscal deficit, financing from domestic sources has grown only moderately, because of the significant rise in net external financing. Also, quite encouragingly, the government has reduced its reliance on inflationary borrowing from the central bank.

The government faces very difficult choices, with considerable pressure to increase social sector spending and build infrastructure, even as the cost of the anti-militancy campaign continues to mount. At the same time, the weak economy constrains its ability to raise revenues from an unchanged tax base.

This suggests the need to urgently work towards broadening the tax base to provide needed essential services and public goods. A major success in fiscal policy, however, is the recent agreement between the federal and provincial governments on the 7th National Finance Commission (NFC) Award.

External Sector:

Balance of Payments: Pakistan s external accounts improved significantly during Q1-FY10 compared to the same period last year. This improvement owed to both, a marked contraction in the current account deficit and an increase in the financial account surplus.

The major impetus came from a contraction in the trade account deficit, but the services and income account deficits also contracted significantly, reflecting lower economic activity. Current transfers were particularly robust recording 43.9 percent rise on account of increase in both, workers remittances as well as other transfers.

The financing side also recorded marked improvement with the financial account surplus rising by 34.9 percent during July-November FY10. This improvement was primarily driven by increased inflows from the IFIs. Although net foreign investment contracted by 22.4 percent, net portfolio investment returned to positive territory, contributing US $301 million during July-November, against a decline of US $182 million in the corresponding period last year. Foreign direct investment, on the other hand, did not show any signs of recovery and declined by 52.3 percent during the period under review.

As a result of the improvement in the overall external account, Pakistan was able to rebuild its foreign exchange reserves, which reached US $14.5 billion by end November 2009. The foreign exchange market also exhibited relative stability, and exchange rate depreciated by only 2.6 percent during July-November 2009 compared to 13.3 percent in the corresponding period last year.

Trade Account: Pakistan s trade deficit declined significantly by 37.6 percent YoY during July-November FY10, in contrast to a 20.8 percent rise in the same period last year. The decline in the trade deficit was entirely due to 23.0 percent YoY fall in the import bill as exports continued to decline, recording 7.4 percent YoY fall.

The contraction in imports was a result of restrained demand, better domestic production of some commodities (wheat and cotton), as well as fall in international commodity prices. Of these, however, the impact of the fall in the international commodity prices was strongest. Like imports, the fall in exports was also broad-based. Growth in all the main categories, including food, textile, petroleum as well as other manufacturers groups, either extended their decline from the previous year or turned negative.
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