Pakistan's economy and its struggle

1. At:
Emerging Perspectives in Development Cooperation, KDI School
Development Talk (3) Pakistan, KDI School of Public Policy and
Management Korea.
Date : May 15, 2023
PRESENTATION ON
‘PAKISTAN'S ECONOMIC INITIATIVE IN
THE CURRENT ECONOMIC SCENARIO
诺甜
2620210087

2. Outline Of The Presentation
Pakistan’s Economic Prior to Covid-19
Covid – 19 and Pakistan Economy
⎯ Various Government Initiatives
Where Pakistan’s Economy Stand Today?
Going Forward
Concluding Remarks

3. ♦ Pakistan’s Economy was already facing serious challenges owing to
economic mis-governance of the decade (2008-18). During the
decade (2008-18), Pakistan witnessed.
– Its economic growth slowing
– Both public and private sector investment declining
– The pace of job creation slowing, resulting in rising
unemployment
– Fiscal deficit rising
– Public and External Debt growing
– Exports remaining stagnant/declining
– Import rising at a greater pace
– Current account deficit widening
PAKISTAN’S ECONOMY PRIOR TO COVID - 19

4. KEY ECONOMIC INDICATORS
Economic Indicators Unit 2003-07 2008-13 2013-18
Real GDP Growth Percent 6.8 2.8 4.7
Agricultural Growth Percent 4.6 2.4 2.2
Large-scale Manufacturing Percent 12.4 0.3 4.5
Services Percent 6.7 3.6 5.5
Investment as % of GDP Percent 22.5a 15.5* 15.9*
Budget Deficit as % of GDP Percent 3.6 7.0 5.5
Public Debt Billion Rs 4814a 14321b 25545c
Public Debt as % of GDP Percent 52.5a 66.6b 73.8c
Foreign Direct Investment Million $ 5140a 1456b 2780c
Foreign Exchange Reserves Billion $ 14.3a 6.0b 9.8c
External Debt Billion $ 40.3a 60.9b 95.3c
Current Account Deficit Billion $ 6.9a 2.5b 19.2c
Note: a= 2006-07; b=2012-13; c=2017-18;*= definition of investment has been changed, in
2012-13 therefore these numbers are not comparable with the past.

5. ♦ One thing was common in this decade that Pakistan remained
under the IMF Program during most of the period of the decade.
♦ Pakistan also witnessed the adverse impact of 2007/08 global
financial meltdown
♦ Against the backdrop of the decade of 2008-18, the present
government took charge of the state affairs in August 2018. It was
indeed a challenging task for the inexperienced government to
address multi-dimensional challenges.
♦ There is a general consensus among the independent economists
within and outside the country that instead of addressing the
challenges, it further compounded the difficulties. The
government decided to go to the IMF for a third balance of
payment support in a decade.

6. ♦ The government started implementing the four decades old
Stabilization Program that include:
– Tight Monetary Policy (Raising Policy Rate)
– Tight Fiscal Policy (cutting expenditure and raising revenue)
– Market – based exchange rate (devaluation)
– Raising utility Prices (Gas and Electricity)
♦ These policies totally devastated the economy. It suffocated
economic growth, raised cost of production which rendered the
industries non-competitor in international markets.

7. KEY ECONOMIC INDICATORS: POST 2017-18
Economic Indicators 2017-18 2018-19 2019-20 2020-21 Average(2018-21)
Real GDP Growth % 5.5 2.1 -0.5 3.9 1.8
Agriculture% 4.0 0.6 2.7 2.1 1.8
Large–Scale Manufacturing % 5.1 -2.6 -7.8 9.0 -0.5
Services % 6.4 3.8 -0.6 3.6 2.3
As % of GDP
— Total Investment 17.3 15.6 15.3 15.2 15.4
— Public Investment 5.2 3.7 3.8 3.7 3.7
— Private Investment 10.5 10.3 10.0 10.3 10.2
As % of GDP
Total Revenue 15.2 12.7 15.0 14.8 14.2
— FBR Revenue 11.1 10.1 9.6 9.4 9.7
Total Expenditure 21.8 21.6 23.1 23.0 22.6
— Current Expenditure 17.0 18.4 20.4 20.2 19.7
- Interest Payment 4.4 5.4 6.3 6.1 5.9
— Development Expenditure 4.4 3.2 2.9 2.8 3.0
Budget Deficit 6.6 8.9 8.1 8.2 8.4
Public Debt 73.8 90.6 91.2 92.0 91.3
Inflation (%) 4.7 6.8 10.7 8.9 8.8
— Food Inflation (%) 3.8 4.6 14.8 12.5 10.6
Exports (Billion $) 24.8 24.2 22.5 25.6 23.8
Imports (Billion $) 56.6 51.9 43.6 53.8 48.9
Trade Deficit (Billion $) -31.8 -27.7 -21.1 -28.2 -25.1
Remittances (Billion $) 19.9 21.7 23.1 29.4 24.3
Current Account Deficit (Billion $) -19.2 -13.4 -4.4 -1.8 5.9
External Debt and Liabilities 95.2 106.3 113 119.0
Foreign Exchange Reserves 9.8 7.3 12.1 17.3

8. INVESTMENT PICKED UP DURING 2000-07 BUT
DECELERATED THEREAFTER
17.4 17.2
16.8 16.9 16.6
19.1
22.5
22.1 22.1
18.2
15.4
13.4
12.5
15
14.6
15.7 15.7
16.1
17.3
15.6 15.3 15.2 15.2
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2019-20
2020-21
Investment
* Definition of Investment Changed
Source: Various Issues of Economic Survey
As % of GDP

9. 3.9
1.8
3.1
4.7
7.5
9
5.8
5.5
5
0.4
2.6
3.6
3.8 3.7
4.1 4.1
4.6
5.4 5.5
1.9
-0.5
3.9
-2
0
2
4
6
8
10
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
* Highly controversial
Source: Various Issues of Economic Survey
Lower Economic Growth (Percent)

10. ♦ Real GDP growth slowed to 2.1 percent in 2018-19 from 5.5
percent last year, investment rate declined from 17.3 percent of
GDP to 15.6 percent in 2018-19, Revenue witnessed sharp decline
from 15.2 percent of GDP to 12.7 percent in 2018-19, budget
deficit surged from 6.6 percent of GDP to 8.9 percent in 2018-19,
current account deficit improved from $19.2 billion to $13.4
billion, external debt and liabilities surged to over $100 billion
($106.3 billion) and foreign exchange reserved also declined.
♦ IMF Program badly damaged the already weak economy

11. ♦ It is in the midst of the challenging economic time that
the coronavirus struck Pakistan in late February 2020.
Pakistan began to close down small and large
businesses,
institutions,
transport,
markets,
airlines, educational
industries, hotels and
restaurants from March 22, 2020 with a view to
stopping the spread of Virus.
COVID – 19 AND PAKISTAN’S ECONOMY

12. ♦ Government took various fiscal and monetary measures to
minimize the adverse effects of Pandemic on the one hand and
protect the poor and the vulnerable sections of the society on the
other:
– The country’s Central Bank reduced the policy rate from 13.25
percent to 7.0 percent in a short span of time.
– Small and Large businesses were provided subsidized loan so
that they should not fire their workers on the one hand and
prevent the collapse of the businesses and industries on the
other
– The government provided various tax incentives to revive
construction sector activities with a view to promoting
industrial growth and creating employment opportunities
VARIOUS GOVERNMENT INITIATIVES TAKEN

13. – To protect the poor segment of the society, the
Government provided emergency cash to 14.8 million
families amounting Rs. 208 billion ($1.3 billion). Such cash
relief program kept aggregate demand alive and industries
continued to operate to meet the demand.
– World Bank termed Pakistan Cash Emergency Scheme as
top four such initiative in the world.
– Vaccination Program has already been launched in an
aggressive manner since March 2021. So far over 32 million or
15 percent of the population have been vaccinated.

14. ♦ As stated earlier, Pakistan’s Economy took heavy tool on account
of the on going IMF Program. Coronavirus further compounded
the challenges.
♦ Contrary to the general believe, while Coronavirus adversely
affected the economy, the Virus brought many positives for
Pakistan. Let me state the negative first.
– Like all other economies in the World, Pakistan’s economic
growth turned negative (-0.5%) half – a – percent in 2019-20
– first time since 1952-53 (Korean War).
– Industrial production contracted almost 10.1.0% and services
sector which accounts for over 61 percent in GDP, contracted
by 0.6% for the first time in Pakistan’s history.
– Total investment also declined to 15.3% of GDP from 15.6
percent a year ago
– Budget deficit remained at elevated level (-8.1% of GDP)
WHERE PAKISTAN’S ECONOMY STAND TODAY?

15. – Inflation remained in double – digit (10.7%) but most
importantly food inflation jumped to close to 15% in 2019-
20
– Contrary to the general believe remittances registered a
robust growth and stood at $23.1 billion – much more
than the total merchandise exports of Pakistan ($22.5
billion)
– External debt and liabilities also increased substantially to
$113 billion

16. ♦ Positives
—Covid-19 has also positively contributed to improving
in Debt relief from G-20
Pakistan’s balance of payments
—Pakistan received $3.5 billion
countries
—Pakistan received $1.4 billion from the IMF under the Rapid
Financing Instrument to cope with Covid-19 Crisis
—As a result of the collapse of the international price of oil
during the Covid-19, Pakistan saved $4.7 billion in oil import
bill
—Most importantly, as a result of the Covid-19, the IMF Program
got suspended since February 2020 until Jan 2021. and with
suspension of he IMF Program came the suspension of the
hara-kiri that the program brought to the economy.

17. —Pakistan’s economy is now on the path of recovery. Economy
witnessed a V-shaped recovery and grew by 3.9 percent in
2020-21. This growth number when revised, may be in the
range of 4.7-5.0% range.
—Industrial growth also registered a massive recovery to 9.3
percent in 2020-21 but again when it is revised it will be in
the range of 14-15 percent.
—Exports, remittances registered impressive recovery and as a
result, the current account deficit improved further. Pakistan’s
balance of payments are in comfortable position, economic
growth picking up, the pace of external borrowing is slowing,
inflation has come down to single – digit level, tax collection is
improving and there are expectations that budget deficit will
come down further going forward.

18. Economic
Challenges
To
Pakistan!

19. What is Economy?
⚫An economy consists of the economic
system of the country or the area, the
labour, capital and land resources and the
manufacturing, production, trade,
distribution, and consumption of goodsand
services of thatarea.

20. Economic Challenges After the
formation!
Formation of weak Pakistan by British Government
Totally Dependance of Economyon Agriculture
Failureof each fiveyear Plan
Successive Martial Laws

21. Economic Challenges in Present!
⚫Electricity Shortfall
⚫Excessof imports than exports
⚫Dependanceon Loans and Economic Aids
⚫Weak Revenue System
⚫Foreign Exchange Rate

22. Few More Challenges to Economy
In Present!
⚫Governance Issues
⚫Less Education
⚫Civil War
⚫Povertyetc.

23. PRESENETED BY
诺甜
2620210087
:

24. ⦿The economy of Pakistan is the 27th largest economy in
the world in terms of purchasing power, and the 45th
largest in absolute dollar terms.
⦿Pakistan has a semi-industrialized economy, which
mainly encompasses textiles, chemicals, food
processing, agriculture and other industries.

25. ⦿First five decades
⦿Pakistan was a very poor and predominantly agricultural country
when it gained independence in 1947. In the first five decades
(1947–1997) Average annual real GDP growth rates[43] were;
⦿ 6.8% in the 1960s,
⦿4.8% in the 1970s, and
⦿6.5% in the 1980s.
⦿Average annual growth fell to4.6% in the 1990s with
significantly lower growth in the second half of that decade.
⦿Recent decades
⦿This is a chart of trend of gross domestic product of Pakistan at
market prices estimated by the International Monetary Fund
Economic History

26.  We Consume More & Save less
 Import More & Export less
 High Fiscal Deficit & Inflation
 Share in World trade is Shrinking
 Badly lag in Social Indicators
 Energy & Water Shortage
 Governance & implementation Crisis
 Law & Order Situation

27. Year
Gross Domestic
US Dollar Exchange
Inflation Index Per Capita Income
Product (2000=100) (as % of US)
1960 20,058 4.76 Pakistani Rupees 3.37
1965 31,740 4.76 Pakistani Rupees 3.40
1970 51,355 4.76 Pakistani Rupees 3.26
1975 131,330 9.91 Pakistani Rupees 2.36
1978 283,460 9.97 Pakistani Rupees 21 2.83
1985 569,114 16.28 Pakistani Rupees 30 2.07
1990 1,029,093 21.41 Pakistani Rupees 41 1.92
1995 2,268,461 30.62 Pakistani Rupees 68 2.16
2000 3,826,111 51.64 Pakistani Rupees 100 1.54
2005 6,581,103 59.86 Pakistani Rupees 126 1.71
2014 22,032,565 105.95 Pakistani Rupees 260
2016 45,680,351 104.55 Pakistani Rupees 370 2.71

30. ⦿“industry refers to that sector of economy
which is related with manufacturing and
production of products.
⦿Major Industries in Pakistan
Textile IT industry
Mining and
extraction
Cement
Telecom Sports
Surgical
Suger fertalizer

31. Textile Industry
 3rd largest exporter of the world
 8.5% contribution to GDP
Suger industry
 It is 2nd largest industry after textile
 At present 106 suger mills are opreating in pakistan
 15th rank in the world in suger production
 GDP contribution is 0.7%

32. Cement Industry
 Exported last year 700 million USD (47% increaed)
 Cement contribution in GDP is 3.5%
 Pakistan has ranked 5th position in world exporter of
cement
Sports Industry
 Sialkot export 70% of world demand
 Employement more than 200,000
 Exporting goods worth $450 million
Fertalizer industry
 Contribution of fertalizers are 14% in GDP
 Emlpoyment are 4.7 million

33. Power shortage
Lack of trained manpower
Diffeculty in export
Lack of new technology
Changing political and economic
policies
Bad law and order situation resulting in
lower investment
Higher interest rate
Terorisum which reflects forigen inveters
Following are main problems to industrial which make obsticle in the way of growth
in their producton, result in transforing industries to other countries.

34. Forigen investment
Attract foringen cargo
airlines
Micro cridit
Innovative
technology
Substitute of powers
(oil, gas, wind mills)
Decrease interest rate privitization
Traning of labour Research development

35. Why economy matters?
 Economy affects the lives of the people of Pakistan
 Two Pillars of the State
- Strong Economy
- Strong Defense
 A strong economy can ensure strong defense; it will
enhance country’s power and hence make the country’s
defense even more stronger
 Economic Backwardness generates violence, social
conflicts and political turmoil.

36. Food & Fuel Crisis (Common Challenges faced by
every economy)
Intensification of War on Terror
Political Instability
Less than satisfactory security environment
Energy Crisis
Economy Remained out of Radar of the Government
Instability in economic team
Weak economic team
Fiscal Indiscipline
Weak governance
Break down of public–private sector relations

37.  Newly Elected Government must bring a strong
economic team
 Political Leadership must provide full support to
the team
 No Room for Business-as-usual Policy
 Extraordinary situation Demand Extraordinary
Measures
 Financial Discipline is the key to success
 Bring Budget Deficit down to 3.0 – 3.5 percent of
GDP in the next 3-5 years

39. Macroeconomic Development
Objectives
EC 250 3
9
• To increase the availability and widen the
distribution of basic life sustaining goods e.g.
food, shelter, clothing.
• To raise levels of living :more jobs, higher
incomes, better education ,greater attention to
cultural and human values and enhance the
national self esteem.
• Freedom from servitude: to be able to
choose.

40. Assessing Pakistan’s Development
4
0
•
•
•
•
•
•
•
•
•
Basic Indicators
Structural change
Decades wise Performance
Indicators of failure
Effects of Nuclear Blast on the Economy
September11,2001:The day the world
changed.
Recent trends
Policy implications
Conclusion

41. 3
Basic Indicators
• Population:166.5 Million
• GDP growth rate :4.1%
• Contribution to GDP
Agriculture:2.%
Manufacturing:5.2%
Services :4.6%
• Exports:9.2%
• Imports:14.4%
• Trade deficits:5.2%

42. Basic Indicators
4
2
• Life Expectancy (years) :66.2years
• Infant mortality rate (per 1000
person):73.5
• Literacy rate:57%(2008-09)
• Human Development Index:0.572141 out
of 182 countries.

43. Structural change
4
3
• The most striking factor is that Pakistan’s
economic structure has changed from 1947 to
2009-10.
• Agricultural contribution
• Manufacturing contribution
• Services sector
• Labor participation
• Rural urban demography
• Composition of exports and imports

44. 6
Structural change
Manufacturi
ng sector
In 1947
7.6%
In 2009-10
18.5%
Agricultural
sector
53% 21%
Exports
(Primary
products)
99.2 12.4
Labor
participatio
n(sectoral)
65% in
agriculture
45%
Rural
residential
70% lived
in rural
55%

45. Performance in different decades
45
Laying the foundation (1947-58):
• dominant agrarian sector
• Little industry
• Few services
• No infrastructure

46. Laying the foundation
46
Primary task :
• Survival
• Millions of refugees
• Restructuring of economy on strong
footings
Policy & planning:
• State sector build the economic base
• Foundation of industrial sector

47. Decades of development
47
• Growth rates in pakistan
60’s 70’s 80’s 90’s 04
• GDP 6.7 4.8 6.4 4.6 4.3
• Agriculture 5.1 2.4 5.4 4.4 3.7
• Manufacturing 9.9 5.5 8.2 4.8 4.8
• Cmm.producing 6.8 3.8 6.5 4.6 4.2
• Services 6.7 6.3 6.6 4.6 4.5

48. Indicators of failures
48
• Illiterate adults
• Population below poverty line
• Without access to health services
• Without access to safe water
• Malnourished children
• Without access to sanitation

49. Indicators of failure
49
Human Poverty Index : 101. Pakistan (33.4
•
•
•
Probability of not surviving to age 40 :
97. Pakistan (12.6
(%)Adult illiteracy rate: 134.pakistan(45.8)
(%ages 15 and above)
People not using an improved water source:
70.pakistan(10)
• (%)Children underweight for age
(% aged under 5) :125. Pakistan (38)

50. Recent trends
50
• Inflation ;threat for survival
• Risk to growth and stabilization:
tax reforms (GST leading to VAT) ,Corruption
• Inadequate targeting of subsidies
• Larger security related expenditures
• Energy circular debt issue
• Disasters: increasing burdens with low
productivity, lesser job creating investments in
the markets.
• Lessr capital formation

51. Policy Implications
EC 250 51
•
•
•
•
•
Improving competitiveness.
Reduce policy lags
Systematic integrity needs to be promoted. Transparency of
process and ensuring sanctity of contract.
Pro-active role by business community instead of politicized self-
defeating decisions.
The whole framework needs transformation from
6. Fiscal policies to tax administration,
7. To deregulation to privatization,
8. Reform of public sector entities
9. Reduction of non productive expenditures.
10. Ensuring least deterioration of any macroeconomic integral.