Economic Conditions of Pakistan

Adnan Zafar BEM-1047

28-08-11

Economic Conditions of Pakistan

Introduction
The economy of Pakistan is the 47th largest in the world in nominal terms and 27th largest in the world in terms of purchasing power parity (PPP). Pakistan has a semiindustrialized economy,]which mainly encompasses textiles, chemicals, food processing, agriculture and other industries. Growth poles of Pakistan's economy are situated along the Indus River;[13][14] diversified economies of Karachi and Punjab's urban centers coexist with lesser developed areas in other parts of the country. [13] The economy has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies[citation needed], bolstered by foreign investment and renewed access to global markets, have generated solid macroeconomic recovery the last decade. Substantial macroeconomic reforms since 2000, most notably at privatizing the banking sector have helped the economy. GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-06 due to economic reforms in the year 2000 by the Musharraf government.[15] In 2005, the World Bank named Pakistan the top reformer in its region and in the top 10 reformers globally. Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 7.9% in 2006. In 2008, following the surge in global petrol prices inflation in Pakistan reached as high as 25.0%. The central bank is pursuing tighter monetary policy while trying to preserve growth. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit driven by a widening trade gap as import growth outstrips export expansion - could draw down reserves and dampen GDP growth in the medium term.

Discussion
Pakistan economic environment is affected by intensification of war on terror and deepening of the global financial crisis which penetrated into domestic economy through the route of substantial decline in Pakistans exports and a visible slowdown in foreign direct inflows. Pakistan economy continues to remain exposed to the vagaries of international developments as well as internal security environment. The

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intensity of the global financial crisis has further added to Pakistan predicament. Despite support from the IMF and other bilateral and multilateral donors, Pakistan external account remains exposed to a host of uncertainties. The Economy Today
Due to inflation and economic crisis worldwide, Pakistan's economy reached a state of Balance of Payment crisis. During the mid-2000s, Pakistan experienced a period of tremendous growth, averaging 7% yearly GDP growth between 2003-07. Due to its large population of 186 million, it was included in 2005 by the Goldman Sachs Global Economics Group. Since the beginning of 2008, Pakistan's economic outlook has taken stagnation. Security concerns stemming from the nation's role in the War on Terror have created great instability and led to a decline in FDI from a height of approximately $8 bn to $3.5bn for the current fiscal year.

Foreign Exchange Reserves By October 2007, at the end of Prime Minister Shaukat Azizs tenure, Pakistan raised back its Foreign Reserves to $16.4 billion. Pakistan's trade deficit was at $13 billion, exports grew to $18 billion, revenue generation increased to become $13 billion and the country attracted foreign investment of $8.4 billion.[51] On October 11, 2008 State Bank of Pakistan reported that country's foreign exchange reserves had gone down by $571.9 Million to $7749.7 Million.[52] The foreign exchange reserves had declined more by $10 billion to an alarming rate of $6.59 billion. In September 2010 According the State Bank Of Pakistan Pakistan's Foreign Reserves Stood at $16.99 Billion. Investment Foreign direct investment (FDI) in Pakistan soared by 180.6 per cent year-on-year to US$2.22 billion and portfolio investment by 276 per cent to $407.4 million during the first nine months of fiscal year 2006, the State Bank of Pakistan (SBP) reported on April 24. During JulyMarch 2005-06, FDI year-on-year increased to $2.224 billion from only $792.6 million and portfolio investment to $407.4 million, whereas it was $108.1 million in the corresponding period last year, according to the latest statistics released by the State Bank.[87] Pakistan has achieved FDI of almost $8.4 billion in the financial year 06/07, surpassing the government target of $4 billion.[88] Foreign investment had significantly declined by 2010, dropping by 54.6% due to Pakistan's political instability and weak law and order, according to the Bank of Pakistan. Agriculture

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Pakistan's principal natural resources are arable land and water. About 25% of Pakistan's total land area is under cultivation and is watered by one of the largest irrigation systems in the world. Pakistan irrigates three times more acres than Russia. Agriculture accounts for about 23% of GDP and employs about 44% of the labor force. Zarai Taraqiati Bank Limited is the largest financial institution geared towards the development of agriculture sector through provision of financial services and technical know how. Industry Pakistan's industrial sector accounts for about 24% of GDP. Cotton textile production and apparel manufacturing are Pakistan's largest industries, accounting for about 66% of the merchandise exports and almost 40% of the employed labour force.[55] Other major industries include cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals, machinery, and food processing. The government is privatizing large-scale parastatal units, and the public sector accounts for a shrinking proportion of industrial output, while growth in overall industrial output (including the private sector) has accelerated. Government policies aim to diversify the country's industrial base and bolster export industries.

Findings
Pakistan is facing a lot of social problems due to unstable economical conditions, which basically involves - Low literacy rate - Labor force - Hunger - Poverty - Unemployment - Poor law and order situations; and - Population growth - Diseases - Smuggling - Drug abuse - Prostitution - Deviant behavior - Demographic transitions - Discrimination of Sex

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Conclusion & Recommendation

Pakistan is rich on all aspect minerals, seas, cultivated land good climate. Intelligent mind who became the Pakistan 7th atomic power, beloved friends like china who share the technology and JF-17 Thunder become. It is the time to stand up and work hard for the betterment of the country, Allahmdullillah Pakistan have 60 million young people who can change the country. War against terrorism should limited by the govt of Pakistan because it is not the baby of Pakistan and transfer the technology not the finish product. Govt should take decision on merit and favor the Pakistan not there personal interests.

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