Economics Assignment

The Economic Situation of Pakistan

Submitted To: SIR KHALID JAMIL ANSARI

Submitted By: IFFAT QAMAR Roll # 21

Submission Date: 4th feb, 2012

Economic History of Pakistan:

Since independence, Pakistan has gone through many difficult situations including separation from East Pakistan (Bangladesh) and three wars with India. Still Pakistan is in a state of war in North Waziristan. In Pakistan, martial law has been imposed 4 times and military ruled the country for 33 years which destroyed the economy. Apart from political disputes, Pakistan has gone through many natural disasters like severe earthquake and flood etc due to which, the developmental expenditures were spent on rehabilitation of victims.

Major Exports and Imports:

Pakistan is an agricultural country and the major crops of Pakistan are wheat, rice, sugarcane, cotton, seed oil etc. Pakistan earns 21.6% of its GDP from agriculture. Pakistan exports very fine quality of cotton and rice to Europe and other countries. It also exports readymade garments to various countries and earns $18.33 billion from its exports. The major imports of Pakistan are Petroleum, Petroleum products, Machinery, Plastics, Transportation equipment, Edible oils, Paper and paperboard, Iron and steel and Tea. Its total imports are $28.53 billion.

Economic Problems:
1. Deficit Budget:
One of the economic problems of Pakistan is deficit budget. The budget of Pakistan is $22.65 billion and the expenditures are $30.98 billion and this deficit is covered by foreign and national debt.
2.

Foreign Debt:

The government agreed to an International Monetary Fund Standby Arrangement in November 2008 in response to a balance of payments crisis, but during 2009 its current account strengthened and foreign exchange reserves stabilized - largely because of lower oil prices and record remittances from workers abroad. The foreign debt of Pakistan is $53.62 billion.

3. Local Debt:
Government of Pakistan is taking loans from banks or printing new currency notes to fulfill its developmental expenditures which causes inflation. The local debt of Pakistan is $49 billion.
4.

Inflation:
Inflation has badly affected the economy of Pakistan in the past few years. The Prices of some commodities such as wheat, sugar etc tripled since last 3 years. The inflation rate is 13.6%.

5.

Decrease in Industrial Production growth rate:

The industrial production growth rate has decreased in the past few years due to terrorism, less availability of resources, difficulties in transportation, gas and

electricity load-shedding and high cost of production. The rate of industrial growth in Pakistan is -1.9%.

6. Decrease in Investment:
In Pakistan, Investment contributes 17.4% in total GDP but this percentage has decreased in the past few years.

7. Unemployment Rate:
The unemployment rate in Pakistan is very high i.e. 14% and it has increased very rapidly in the past few years.
8.

Corruption:
Pakistan has slipped eight ranks from 42nd most corrupt country in 2009 to 34th most corrupt country in the world in 2010, according to Berlin-based Transparency International's (TI) Corruption Perception Index (CPI). The Transparency International Pakistan (TIP) has claimed that it has identified corruption cases worth Rs 300 billion in different federal government departments during the last one year.

RECOMMENDATIONS:
1. Creating more opportunities for foreign investors. 2. Providing quality education to children and technical education to labor at very low cost. 3. Increasing the budget for development expenditures and reducing nondevelopmental expenditure. 4. Reducing dependence on foreign donors. 5. By importing more machinery instead of luxury and readymade items. 6. Enforcement of Islamic laws regarding business trade and ethics. 7. Reducing corruption through transparency and accountability.