Economy of Pakistan
Written by admin on May 15th, 2011/>Pakistan produces export quality Footballs
Pakistan’s exports increased more than 100% from .5 billion in 1999 to stand at billion in the financial year 2007-2008.
Pakistan exports rice, furniture, cotton fiber, cement, tiles, marble, textiles, clothing, leather goods, sports goods (renowned for footballs/soccer balls), surgical instruments, electrical appliances, software, carpets, and rugs, ice cream, livestock meat, chicken, powdered milk, wheat, seafood (especially shrimp/prawns), vegetables, processed food items, Pakistani assembled Suzukis (to Afghanistan and other countries), defense equipment (submarines, tanks, radars), salt, marble, onyx, engineering goods, and many other items. Pakistan now is being very well recognized for producing and exporting cements in Asia and Mid-East. In August 2007, Pakistan had started exporting cement to India in order to fill in the shortage there caused by the building boom.
Imports
Pakistan’s imports stood at .54 billion in the financial year 2006-2007, up by 8.22 percent from last year’s imports of .58 billion.
Pakistan’s single largest import category is petroleum and petroleum products. Other imports include: industrial machinery, construction machinery, trucks, automobiles, computers, computer parts, medicines, pharmaceutical products, food items, civilian aircraft, defense equipment, iron, steel, toys, electronics, and other consumer items.
Sales tax is levied at 15 percent both on imports and domestically produced products. The income withholding tax is levied at 6 percent on imports and at 3.5 percent on the sales of domestic taxpayers.
External Imbalances
Pakistan suffered a merchandise trade deficit of .528 billion for the financial year 2006-7. The gap has considerably widened since 2002-3 when the deficit was only .06 billion. Services sector deficit for 2006-2007 stood at .125 billion which equals the services export of .125 billion for the same year.
The combined deficit in services and goods stand at .653 billion which is approx 83.5 percent of country’s total export of .136 (Goods and services). The rise in the trade gap has been attributed to high oil import bill, and rise in the prices of food items, machinery and automobiles.
Current account deficit – Current account deficit for 2006-7 reached .016 billion up by 41 percent over previous year’s .490 billion.
Since the beginning of 2008, Pakistan’s economic outlook has taken a dramatic downturn. 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 bn to .5bn for the current fiscal year. Concurrently, the insurgency has forced massive capital flight from Pakistan to the Gulf. Combined with high global commodity prices, the dual impact has shocked Pakistan’s economy, with gaping trade deficits, high inflation and a crash in the value of the Rupee, which has fallen from 60-1 USD to over 80-1 USD in a few months. For the first time in years, it may have to seek external funding as Balance of Payments support. Consequently, S&P lowered Pakistan foreign currency debt rating to CCC-plus from B, just several notches above a level that would indicate default. Pakistan local currency debt rating was lowered to B-minus from BB-minus. Credit agency Moody Investors Service cut its outlook on Pakistan debt to negative from stable due to political uncertainty, though it maintained the country rating at B2.The cost of protection against a default in Pakistan sovereign debt trades at 1,800 basis points, according to its five year credit default swap, a level that indicates investors believe the country is already in or will soon be in default .
The middle term however may be less turbulent, depending on the political environment. The EIU estimates that inflation should drop back to single digits in 2010, and that growth should pick up to over 5% per annum by 2011. Although less than the previous 5 year average of 7%, it would represent a overcoming of the present crisis wherein growth is a mere 3.5-4%.
Economic aid
Pakistan receives economic aid from several sources as loans and grants. The International Monetary Fund (IMF), World Bank (WB), Asian Development Bank (ADB), etc provides long term loans to Pakistan. Pakistan also receives bilateral aid from developed and oil-rich countries.
The Asian Development Bank will provide close to billion development assistance to Pakistan during 2006-9. The World Bank unveiled a lending program of up to .5 billion for Pakistan under a new four-year, 2006-2009, aid strategy showing a significant increase in funding aimed largely at beefing up the country’s infrastructure. Japan will provide 0 million annual economic aid to Pakistan. In November 2008, The International Monetary Fund(IMF) has approved a loan of 7.6 Billion to Pakistan, to help Stabilize and rebuild the country’s economy. More recently the govt of Pakistan received an economic aid of US bn dollars out of which the US pledge of bn was described as a down-payment on the previously announced .5bn already promised to Pakistan for each of the next five years.The European Union promised 0m over four years, while reports said Saudi Arabia had pledged 0m over two years. Overall Friends of Pakistan had pledged .6 billion in aid, which would help Pakistan move forward on its way to self-reliance.
Remittances
The remittances of Pakistanis living abroad has played important role in Pakistan’s economy and foreign exchange reserves. The Pakistanis settled in Western Europe and North America are important sources of remittances to Pakistan. Since 1973 the Pakistani workers in the oil rich Arab states have been sources of billions dollars of remittances.
The 7 million strong Pakistani diaspora, contributed US billion to the economy in 2008. The major source countries of remittances to Pakistan include UAE, USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman),Australia, Canada, Japan, UK and EU countries like Norway, Switzerland, etc .
An IMF research paper has revealed that workers remittances contribute 4% to the GDP of Pakistan and are equivalent to about 22 percent of annual exports of goods and services.
Government finances
Fiscal budget summary
Fiscal year: 1 July – 30 June
Revenues: .8 billion
Expenditures:
Debt – external: .94 billion (2005 est.)
Economic aid – recipient: billion (FY97/98)
Revenues and taxation
This section needs attention from an expert on the subject. See the talk page for details. WikiProject Economics or the Economics Portal may be able to help recruit an expert. (October 2009)
Pakistan has a low tax/GDP ratio, which it is trying to improve.
Expenditures
Government expenditures were billion (2006 est.)
Sovereign bonds
Pakistan is expected to sell a dual-tranche sovereign bond worth 0 million on March 23, 2006 that analysts said should ensure a favorable reception in the bond market. The 10-year tranche would be 0 million and the 30-year portion 0 million. Pricing is expected during New York trading hours on March 23, 2006. The sources said that the 10-year tranche was expected to be priced at around 7.125 percent, while the longer-dated tranche was expected to be sold at around 7.875 percent, the top end of the indicative yield range of 7.75 to 7.875 percent.
The bonds, comprising 10-year and 30-year tranches, had generated .5 billion in orders and a total size of as much as .25 billion had been anticipated for what is Pakistan third foray into the international debt market since 2004.
Government of Pakistan has been raising money from the international debt market from time to time.
Details of amount raised in various issues is as follows:
1999 – 3 million
2004 – 0 million @ 6.75 Percent
2005 – 0 million worth Islamic bonds
2007 – $ 750 million @ 6.875 Percent worth Euro Bonds which were highly over subscribed
Income distribution
Gini Index: 41
Household income or consumption by percentage share:
lowest 10%: 4.1%
highest 10%: 27.7% (1996)
lowest 20% : 27.7% (2006)
See also
Ministry of Commerce (Pakistan)
List of tariffs in Pakistan
Ministry of Finance (Pakistan)
Pakistan Board of Investment
Trading Corporation of Pakistan
Rice Export Association of Pakistan
Economy of the OIC
Further reading
Ahmad, Viqar and Rashid Amjad. 1986. The Management of Pakistan Economy, 1947-82. Karachi: Oxford University Press.
Ali, Imran. 1997. elecommunications Development in Pakistan, in E.M. Noam (ed.), Telecommunications in Western Asia and the Middle East. New York: Oxford University Press.
Ali, Imran. 2001a. he Historical Lineages of Poverty and Exclusion in Pakistan. Paper presented at Conference on Realm, Society and Nation in South Asia. National University of Singapore.
Ali, Imran. 2001b. usiness and Power in Pakistan, in A.M. Weiss and S.Z. Gilani (eds), Power and Civil Society in Pakistan. Karachi: Oxford University Press.
Ali, Imran. 2002. ast and Present: The Making of the State in Pakistan, in Imran Ali, S. Mumtaz and J.L. Racine (eds), Pakistan: The Contours of State and Society. Karachi: Oxford University Press.
Ali, Imran, A. Hussain. 2002. Pakistan National Human Development Report. Islamabad: UNDP.
Ali, Imran, S. Mumtaz and J.L. Racine (eds). 2002. Pakistan: The Contours of State and Society. Karachi: Oxford University Press.
Amjad, Rashid. 1982. Private Industrial Investment in Pakistan, 1960-70. London: Cambridge University Press.
Andrus, J.R. and A.F. Mohammed. 1958. The Economy of
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