Macroeconomic Insights

Performance of Pakistan’s Economy(2007-2012)

Ali Salman ali@primepk.org

Sara Javedsara@primepk.org

Policy Research Institute of Market Economy (PRIME)www.primeinstitute.org

Presidents Chambers Conference 25/02/2013Macro Economic Indicators PRIME Presentation

Presidents Chambers Conference 25/02/2013

Source: State Bank of Pakistan

Macro Economic Indicators PRIME Presentation

* Right Axis: Exchange Rate Left Axis: GDP

• GDP has increased approximately by 2.37 times in 5 years.• Real Exchange rate was substantially higher than the exchange

rate

Presidents Chambers Conference 25/02/2013

Source: State Bank of Pakistan

Macro Economic Indicators PRIME Presentation

* Right Axis: Percentage (M2)/ Index (CPI) Left Axis: M2 (Money Supply)

• Money supply has increased nominally though, it has decreased as a percentage of GDP.

• CPI was increasing till 2009, afterward, it has decreased

substantially.

Presidents Chambers Conference 25/02/2013

Source: State Bank of Pakistan

Presented by: Ali Salman (PRIME)Macro Economic Indicators PRIME Presentation

• Government debt from domestic sources has increased 3 times over the years.

• Debt from IMF stood at PKR 2.7 trillion over the last 5 years.

25/02/2013

Source: State Bank of Pakistan

Presented by: Ali Salman (PRIME)Macro Economic Indicators

• Revenue expenditure has increased by 2 times over the years.• Development expenditure has not increased except slightly for last

year.

PRIME Presentation

Presidents Chambers Conference 25/02/2013

Source: State Bank of Pakistan

Presented by: Ali Salman (PRIME)Macro Economic Indicators

* Right Axis: Tax Revenue and its components Left Axis: Non-tax revenue

• Tax revenue has increased by 2.3 times over the last five years. • The distribution of direct and indirect taxes has remained

constant.

PRIME Presentation

Presidents Chambers Conference 25/02/2013

Source: State Bank of Pakistan

Presented by: Ali Salman (PRIME)Macro Economic Indicators

• The exports over five year have been rising, though it has not helped in improving trade balance.

PRIME Presentation

Presidents Chambers Conference 25/02/2013

Source: State Bank of Pakistan

Presented by: Ali Salman (PRIME)Macro Economic Indicators

• FDI has decreased by 3 times in 4 years.

PRIME Presentation

Presidents Chambers Conference 25/02/2013Macro Economic Indicators

* Right Axis: Total Domestic Debt Left Axis: GDP Source: State Bank of Pakistan

• The national income has increased by 2.37 times whereas, the national debt has increased by 2.5 times.

PRIME Presentation

Presidents Chambers Conference 25/02/2013

Source: State Bank of PakistanPresented by: Ali Salman (PRIME)Macro Economic Indicators

Advances PKR bn.Manufacturing 1,349.30Electricity, Gas and Water Supply

271.9

Agriculture, Hunting and Forestry

199

Commerce and Trade 200.3

Transport, Storage and Communications

110.9

Real Estate, Renting and Business

104

Others 157.7

Total 2,393.10

PRIME Presentation

• Manufacturing Sector has the largest share in private sector advances, constituted 56% of total 2.3 trillion rupees.

Presidents Chambers Conference 25/02/2013Macro Economic Indicators

Source: State Bank of Pakistan, Annual Report 2011-12, page 64

Financing of Fiscal Deficit FY 2011-12

PKR bn,

Fiscal Deficit 1,369.70

Financing of fiscal deficit

A. External Sources 128.7

B Domestic Sources 1,241.10

1. Non-bank 529.4

2. Bank 711.1

3. PIBs issues for PSEs debt 391.0

PRIME Presentation

• 91% of fiscal deficit of PKR 1.3 trillion is financed through domestic sources, out of which, 44% was contributed by banks.

Presidents Chambers Conference 25/02/2013

Source: Ministry of FinancePresented by: Ali Salman (PRIME)Macro Economic Indicators

Total: PKR 1,323.25 bn.

• Total subsidies of PKR 1.3 trillion has been given to power sector PSEs

PRIME Presentation

Presidents Chambers Conference 25/02/2013

2007 2008 2009 2010 2011 20120

100

200

300

400

500

600

Total Debt to PSEs

Billi

on R

upee

s

Macro Economic Indicators

Source: State Bank of Pakistan

Total: PKR 2,233 bn.

• In last five years, the PSEs accumulated total debt of PKR 2.2 trillion

PRIME Presentation

Presidents Chambers Conference

Pakistan has crossed all threshold of debt

entrapment

25/02/2013

Indicators Threshold

Actual values for Pakistan

Fiscal Deficit/GDP 3 8

Public debt servicing/ government revenues

15 37

Public domestic debt/government revenues 200 400

Macro Economic Indicators PRIME Presentation

Authors’ ProfileSara Javed

Research Analystsara@primepk.org

Sara is Research Analyst at Policy Research Institute of Market Economy (PRIME) and specializes in trade policy, competition and private sector development. Sara holds masters in Economics & International Economics from University of Nottingham and in Business Administration (Finance & Risk Management) from the Institute of Business Management. She was awarded Globalization and Economic Policy (GEP) scholarship from School of Economics, University of Nottingham where she wrote thesis on Useful Government Spending Under Fixed Exchange Rate: A study on crowding-out effect. She is a regular contributor in economic policy debate through her articles and has attended several national and international conferences and workshops. Besides her work, Sara has interests in paintings, reading and movies.

Ali Salman Executive Directorali@primepk.org

Ali Salman is the founder and Director of Policy Research Institute of Market Economy (PRIME) based in Islamabad. Earlier, he has worked as a consultant and trainer for major international development organizations, public sector organizations and non-profits. Ali is author of several studies and monographs including the “Liberate to Learn: Review of Education Vouchers Scheme in Lahore”, a critique of price controls Price Controls: Implications for Liberty and Welfare, and “Discord between Economic Freedom and Social Justice in Islam.” He has also published a book ‘Alternative Youth Policy in Pakistan.’ Ali regularly writes columns in Express Tribune and a blog on economic issues. Ali Salman has held Fulbright scholarship, Royal Netherlands Fellowship and Charles Wallace fellowship and has master degrees in Economics, Public Policy and Business Administration. He is an adjunct faculty member at Government College University Lahore and is a visiting fellow at Institute of Economic Affairs, London. Ali is an alumnus of International Academy of Leadership, Germany and Atlas Network Think Tank MBA Program.

PRIME Presentation