2018-2019

The economy of Pakistan has been affected through numerous reasons which
includes: internal economic policies, external economic factors, political instability
etc. Ever since the elections were held around 2018 July, new government was
elected to serve Pakistan but did it bring any changes in the economy of Pakistan?
Favorable or adverse? The manipulation in an economy does not always relate to
the actions of government.
Pakistan's current account deficit remained high during 2018 and the first half of
2019, despite several measures taken by the government to reduce it. The deficit
in 2018 was around $19,897 billion, the trade in goods showed the balance the
balance of $31,824, current account remained deficit. Current account deficit
reached to $11.586 billion in Jul-April 2019. The exports at the end of 2019 were
$20.09 billion while the imports were $56.5 billion. The high CAD was mainly due
to a significant increase in imports in fact there was a major rise in imports
because of importing machineries and equipment from China for the
development of CPEC projects other than that there was a significant rise in
demand for consumer goods and raw materials. The decrease in exports were
weak competitiveness, and a slowdown in global trade. (Finance.govt.pk, 2019)
(sbp.org.pk, 2019)
Pakistan’s debt payments had significant amount of change as well accumulated
public debt around 2018 by the end of June was recorded at RS 24,953 billion
with furthermore an increase of RS 3,544 billion during the year and in in 2019
public debt increased to RS 28,607 billion by the end of March 2019, and by
increase of RS 3,655 billion for the Following current fiscal year. Relating this to
the previous factor due to a current account deficit along with high inflation puts
pressure on the government's finances and reduced its ability to repay loans.
Pakistan’s exchange rate also plays a minor part in the repayment of short term
debts, Pakistani’s currency rupees was devalued significantly against the US dollar
in 2018-2019, which increased the cost of servicing external debt and added to
the public debt burden. 2018-2019 fiscal deficit was high as ever been, even more
than past 5 years in fact it was recorded, fiscal deficit was reached at 6.6% of GDP.
The fiscal deficit usually occurs due to a combination of factors, including a
decline in tax revenue, increased defense spending, and increased borrowing to
finance infrastructure projects. (Finance.govt.pk, 2019) (Finance.govt.pk, 2019)
As mentioned before that elections were held around July-August 2018 they also
led to an adverse impact on the economy. The owner of the party Imran khan
won the general elections and was elected as the prime minister of Pakistan.
However there was a dispute between the opposition parties, protest and rallies
held throughout the whole year, the protest led to political instability and
weakened democracy thus leading to a more destabilized economy. Furthermore
the government of prime minister was assumed to be feeble and failed to achieve
economic growth. (bookings.edu, 2019)

The above graph is extracted from the website (macrotrends.net, 2020) The graph
shows the annual growth rate of Pakistan’s GDP and by the looks of it, the
outcome is disappointing. The annual growth rate in 2018 was 2.50% however in
2019 the annual growth rate of GDP was -1.27%. This was because of the
structural issues in Pakistan such as lack of foreign investment that could have
contributed to ease the growth of GDP. The problem with Pakistan is that it relies
heavily on a single industry, such as oil or tourism, a downturn in that industry
could have a significant impact on overall GDP growth. This is why Pakistan was
facing inflation pressures in the economy as there is less economic activity to
meet the demands of the population. This is why there are higher prices for goods
and services, which reduces the purchasing power of consumers and lead to
decreased economic growth.
The amount of remittances generated in accordance to SBP were $21.841 billion
and rose by 9.8% following the fiscal year around 2018-2019,this is considered a
positive outcome since the money sent by Pakistani living abroad mostly in US
and UK were able to contribute 7% to GDP, making them a vital source of income
for many households. The predicted remittances to be generated were around
$20 billion. Not just the GDP, remittances played a crucial role in Pakistan's
economy in 2018-2019, contributing significantly to foreign exchange reserves
and helping to reduce the current account deficit. (Pakistan Remittance Initiative,
2019)
In general the economy of Pakistan faced hardships around 2018-2019.

2019-2020
The relationship between Pakistan and inflation has always been hostile, Inflation
has always been a longstanding issue in Pakistan. Around 2018-2019 the rate of
inflation rise to 6.21%, this effected a massive decrease in the purchasing power
of household sector. And then from 2019-2020 the rate of inflation increased to
10.74%. The major reason why general prices of goods and services rise in
Pakistan is generally, because Increase in oil prices. As mentioned before Pakistan
relies mostly on imports. Pakistan is heavily dependent on oil imports, and an
increase in global oil prices can lead to an increase in inflation in the country. In
2019-2020, global oil prices increased, which in turn led to an increase in inflation
in Pakistan. (pbs.gov.pk, 2019) (pbs.gov.pk, 2020)
Due to budget deficit in Pakistan, the government has no choice but to take
immense amount of loans from IMF, on July 13 2019 IMF granted $6 billion 39
months EFF for Pakistan in hope for maintaining sustainability in the economy and
so that the country would be able to grow general reserves and to provide a
buffer against external stocks. Mr. David Lipton who was Deputy Managing
Director from IMF stated that one of the conditions of the IMF loan was to reduce
the fiscal deficit, which is the difference between government spending and
revenue. Pakistan had a high fiscal deficit. The impact of IMF helped Pakistan
stabilize its economy, boost foreign reserves, and improve investor confidence.
(IMF, 2019)
Pakistan is a country which has a lot to offer when it comes to tourism, Skardu,
Hunza, Nathiagali and many more, when tourist spending is considered the
amount fluctuates through years from 2018 to 2019 the earning from tourism
increased up to 17.4%, however 2019-2020 the spending of tourism declined by
22.88%. Tourism sort of decreased during this year due to political tensions
between different countries this discouraged tourist to visit the country due to
geopolitical reasons. Lack of developed infrastructure was also an issue during
period. Poor road conditions, limited accommodations, and inadequate
transportation options. This has made it difficult for tourists to access some of the
country's most beautiful and historic sites. The decline in tourism also led to a loss
of revenue for local businesses, including hotels, restaurants, and tour operators.
This has had a ripple effect on the broader economy, as these businesses
contribute to the local supply chains.

The graph above is extracted from (macrotrends.net, 2020) How the fall in
tourism spending from 2019-2020.

The graph below shows the changes in exchange rate for 3 years,
(pride.ord.pk, 2020) In June 2019, the exchange rate adjusted to PKR
$163, that is a 9.8% depreciation of the currency followed by
adjustment in the next few months by 5.2% $155, 5.2 percent
depreciation of rupee occurred against the US Dollar by December
2019. Around this time currency devaluation has caused an increase in
the country's debt burden, as Pakistan's external debt is denominated
in foreign currencies. As the value of the Pakistani rupee decreased, the
amount of debt owed by the country increased, making it more difficult
to repay. The constant fluctuation from the graph means economic
uncertainty, as it can make it difficult for businesses to plan for the
future. The fluctuation in the value of the Pakistani rupee can lead to
volatility in the economy.
 2020-2021
As the stablization efforts responded, the recovery began with IMF bailout
package worth 6 billion usd. The US dollar rate lowered to 153 PKR in january. At
the end of january 2020, 100 Index KSX was recorded at 41,630, increasing by
over 800 points in the first month. The COVID-19 pandemic gripped many
countries by than and eventually made Pakistan its victim too by 27 th february,
2020. The Government was forced to impose lockdown across the country
causing industries, businesses to get shut down and eventually slowing down of
economy. The businesses partialy began to to re-operate with strict SOPs with
opening of Construction sector to help daily wagers. Similarly restaurants,
cinemas and then educational institutions were also put to re-operate.
(dailytimes, n.d.)

As a result of drop in demand, Saudi-Russia disagreements over setting of oil rates

and eventually the disasterous COVID-19 pandemic, the international petrolium
prices fell to -37. This caused reduction in prices of petrol in Pakistan upto 27RS fir
the month of may, rising again in october getting over 100Rs per litre. (Tribune,
2020)

As compared to many developed countries with countless resources

and wealth, Pakistan performed quite well in the pandemic period.
Pakistan was successful in saving its people from deaths as well as
hunger. In march and april, 2020, the then Prime Minister Imran Khan
announced stimulus package, worth 1.2 trillion PKR or 7.9 Billion $
forward by an incentive package for different industries. Following
these events, interest rate was cut to 11% which was further reduced
to 7% in september. Despite such a massive callenge and the global
circumstances, the GDP contracted by only 0.5% in the FY 19-20. Debt
to GDP ratio was 87.6% in FY20.
(sbp.org, 2021) (kpmg.com, 2020)

Steps to protect vulnerable sects of the society were also initiated in form of
EHSAAS cash distribution as well as low-costs essentials giving away. The total
liquid reserves of the state bank in the FY20-21 stood at 24 billion US dollars. The
GDP out of expectation was estimated at 5.74% (dawn.com, 2021)
The service sector boomed. Similarly the agricultural sector also showed great
revival. During the FY 20-21, the exports rose to 26 billion US dollars. (sbp.org,
2021)

The fiscal deficit was stable and under control. Being a consumption based
economy, Pakistan has most of the times being in bugetry deficits. The balance
was in surplus after long in FY20-21. The graphs shows relation fiscal balance and
real gdp Growth.
 2021-2022

The year 2002 was greeted with rise of Pkr Rs 4 in petrolium prices, to Rs 144/per
litre. 2022 was probably the most happening year in 75 years of hstory of the
Islamic Republic of Pakistan. Change in government, leading to massive political
turmoil causing polarisation and instability, massive floods that caused damages
of over 30 Billion US dollars, detoriating security and law and order situation
contributed great to the worsening of an economy that grew at 5.97% in the fiscal
year 2021-2022.

The PTI Government formed in August 2018, ended on 10 th April, 2022 Under PM
Khan administration saw the USD rising from RS130 to 189 (11 rs in last month i.e
march 2022). In april, 2022, the Inflation rate stood at 13.3% with interst rate at
11%. The exports grew from $25 Billion to $32 billion with remittances nearing
$38 billion. FDI stood at $1.3Bn (july-feb). The foreign reserves held with SBP
were $22Bn. During the final years, GDP grew at 5.97% while the tax collection
was over 3 trillion Rupees. In the mean time, the external debt rose to $126Bn.
(economictimes.indiantimes.com, 2022) (globalvillage.com, 2022)

The economic survey for fiscal year 2021-2022 was published in june according to
which Pakistan GDP in FY21-22 grew at 5.97%. The agriculture sector grew at
4,4%, livestock by 3.3%, servic industry at 6.19% etc etc.

The overall GDP rose to 383.3 Billion US dollars with per capita income of 1798
USD.
(brecorder.com, 2022) (tribune.com.pk, 2022)

After change of government, the Pakistani economy took a downturn due to so

many reasons. Political instability, Russia-Ukraine war, security situation inflicted
negative impacts on Pakistani Economy. Growing food and petrolium rates,
damages due to floods contributed too. The SBP reserves started depleting, the
new government immediately went to IMF for revival of the previous deal. The
petrol prices went above 200 for the first time. Similarly $ rates soared up as well.
The monthly inflation rate inAugust 2022 rose to 27.3%.
The foreign exchange reserves held with the SBP kept declining and stood ate just
above 7.5 Billion USD in august. This fall in SBP reserves and failure to reach a deal
with the IMF led to a possibiity of a default. Pakistan was ranked 4 th country with
highest default risk. (sbp.org.pk, n.d.) (tribune.com.pk, 2022)

The post-onsoon floods caused massive damages as well. The losses were
estimated to be between $30Bn-$40Bn as per World Bank. Many international
organizations along with countries helped by donation of supplies as well as
extension of financial aid. (aa.com, 2022) (apnews.com, 2022)

2022-2023
IMF deal hasn’t been reached in 2022-23 as well. The possible for this non-revival
could be politica as well as distrut with the Pakistani state. Pakistan still facing
scarcity of Foreign reserves. The growth has declined due to extraordinary
inflation. The inflation rate for the month of march, 2023 was at 35% while the
petrolium prices were 282/per litre. (reuters.com, 2023) (tribune.com, 2023)

Bibliography
(n.d.). Retrieved from dailytimes: https://dailytimes.com.pk/588567/government-announces-to-open-
construction-sector-from-14th/

(n.d.). Retrieved from sbp.org.pk: https://www.sbp.org.pk/dfmd/ferm.asp

(2019, 11 18). Retrieved from bookings.edu:

https://www.brookings.edu/blog/order-from-chaos/2019/11/18/protests-in-pakistan-could-
shake-prime-ministers-mandate/

(2019). Retrieved from Finance.govt.pk:

https://www.finance.gov.pk/survey/chapters_19/Economic_Survey_2018_19.pdf

(2019). Retrieved from Finance.govt.pk: https://www.finance.gov.pk/publications/DPS_2018_19.pdf

(2019, 3 7). Retrieved from IMF: https://www.imf.org/en/News/Articles/2019/07/03/pr19264-pakistan-

imf-executive-board-approves-39-month-eff-arrangement

(2019). Retrieved from sbp.org.pk: https://www.sbp.org.pk/publications/bop/BOPFY19/Review.pdf

(2019). Retrieved from pbs.gov.pk:

https://www.pbs.gov.pk/sites/default/files/2022-04/cpi_press_release_january_2019.pdf

(2019). Retrieved from Pakistan Remittance Initiative: https://www.pri.gov.pk/pakistani-diaspora-sends-

21-841bln-remittances-back-home-in-fy19/#:~:text=The%20amount%20of%20cash%20sent,of
%20Pakistan%20said%20on%20Wednesday.

(2020). Retrieved from macrotrends.net: https://www.macrotrends.net/countries/PAK/pakistan/gdp-

growth-rate

(2020). Retrieved from pride.ord.pk: https://pide.org.pk/research/exchange-rate-overshoot-readjust-

and-overvalued/

(2020). Retrieved from Tribune: https://tribune.com.pk/story/2210887/govt-reduces-petrol-price-rs15-

per-liter#:~:text=ISLAMABAD%3A%20The%20government%20on%20Thursday,will%20come
%20down%20to%20Rs80.

(2020). Retrieved from kpmg.com: https://kpmg.com/xx/en/home/insights/2020/04/pakistan-

government-and-institution-measures-in-response-to-covid.html

(2020). Retrieved from pbs.gov.pk:

https://www.pbs.gov.pk/sites/default/files/2022-04/spi_press_release_june_2020.pdf
(2021). Retrieved from sbp.org: : https://www.sbp.org.pk/reports/annual/arFY21/Anul-index-eng-
21.htm

(2021). Retrieved from dawn.com: https://www.dawn.com/news/1690400

(2021). Retrieved from sbp.org: https://www.sbp.org.pk/dfmd/ferm.asp

(2022). Retrieved from economictimes.indiantimes.com:

https://economictimes.indiatimes.com/news/international/world-news/pakistan-govt-
economic-survey-posts-gdp-growth-at-5-97-despite-turmoil/articleshow/92113648.cms?
from=mdr

(2022). Retrieved from globalvillage.com: https://www.globalvillagespace.com/pti-lauded-as-fbr-breaks-

tax-collection-record/

(2022). Retrieved from brecorder.com: https://www.brecorder.com/news/40179017

(2022). Retrieved from tribune.com.pk: https://tribune.com.pk/story/2357283/with-6-growth-rate-

pakistans-economic-size-jumps-to-383-billion

(2022). Retrieved from tribune.com.pk: https://tribune.com.pk/story/2370712/sbps-forex-reserves-fall-

555m-to-78-billion

(2022). Retrieved from aa.com: https://www.aa.com.tr/en/asia-pacific/world-bank-to-provide-2b-in-

flood-relief-to-pakistan/2706208

(2022). Retrieved from apnews.com: https://apnews.com/article/floods-pakistan-south-asia-islamabad-

25ee9dc0ec7aee6f4f2ef7b557216ee7

(2023). Retrieved from reuters.com: https://www.reuters.com/world/asia-pacific/pakistan-moves-

toward-deal-or-default-endgame-2023-02-01/

(2023). Retrieved from tribune.com: https://tribune.com.pk/story/2400303/pakistans-foreign-exchange-

reserves-fall-below-3b