Tag Archives: Afreen Baig

PAKISTAN: Why Deficit Financing has not worked and Alternative Strategies

Courtesy: VISION21

By, Afreen Baig

The World financial crisis of 2008 – 2010, exposed the weaknesses in the several of the first world economies, which were earlier considered to be the paradigm of economic success. Failure of the banking system, collapse of sub-prime mortgage business, ascending debt-to-GDP ratio, unpredictable unemployment and bankruptcies declared by several established businesses, raised serious doubts regarding the foundations of those economies.

Pakistan and most of the Middle Eastern economies have remained safe from the domino effect of the world financial crises, both for entirely separate reasons. The problems confronting Pakistan’s economy are due to economic mismanagement, living in quandary regarding policies, misplacement of priorities and corruption – not worldwide recession.

While the first world countries continue to have the resources and finances to deficit finance their economies out of recession, to push start the cycle and to increase the aggregate demand – third world and smaller economies like Pakistan have few viable options to exercise, these options being more functional and realistic. 

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Filed under Pakistan Economy, World Economy

Economic Indicators 1999-2009

Updated June 2010!

 

Compiled by: Mirza Rohail B and Afreen Baig

 

Pak Economy in 1999 was: $ 75 billion (Source)
Pak Economy in 2007 is: $ 160 billion (Source) and (Source)
Pak Economy in 2008 is: $ 170 billion (Source) and (Source)

GDP Growth in 1999: 3.1 % (Source)

GDP Growth in 2005: 8.4 % (Source)

GDP Growth in 2007: 7 % (Source) and (Source)

GDP Growth in 2009: 2 % (Source) and (Source)

 

GDP Purchasing Power Parity (PPP) in 1999: $ 270 billion (Source)
GDP Purchasing Power Parity (PPP) in 2007: $ 475.5 billion (
Source)
GDP Purchasing Power Parity (PPP) in 2008: $ 504.3 billion (
Source)

 

GDP per Capita Income in 1999: $ 450 (Source)
GDP per Capita Income in 2007: $ 926
(Source)

GDP per Capita Income in 2008: $1085 (Source)

 

Pak revenue collection 1999: Rs. 305 billion (Source)
Pak revenue collection 2007: Rs. 708 billion (
Source) and (Source)

Pak revenue collection 2008: Rs. 990 billion (Source)

Pak revenue collection 2009: Rs. 1150 billion (Source) and (Source)

 

Pak Foreign reserves in 1999: $ 1.96 billion (Source)
Pak Foreign reserves in 2007: $ 16.4 billion (
Source) and (Source)

Pak Foreign reserves in 2008: $ 8.89 billion (Source)

Pak Foreign reserves in 2009: $ 14.3 billion (Source)

 

Pak Exports in 1999: $ 8 billion (Source) and (Source)
Pak Exports in 2007: $ 18.5 billion (
Source)

Pak Exports in 2008: $ 19.22 billion (Source) and (Source)

Pak Exports in 2009: $ 17.78 billion (Source) & (Source) & (Source)

 

Textile Exports in 1999: $ 5.5 billion
Textile Exports in 2007: $ 11.2 billion (
Source)

 

KHI stock exchange 1999: $ 5 billion at 700 points
KHI stock exchange 2007: $ 75 billion at 14,000 points (
Source)
KHI stock exchange 2008: $ 46 billion at 9,300 points (
Source) and $ 20 billion at 4,972 points (Source)

KHI stock exchange 2009: $ 26.5 billion (Source) at 9,000 points (Source)

 

Foreign Investment in 1999: $ 301 million (Source)
Foreign Investment in 2007: $ 8.4 billion (
Source)

Foreign Investment in 2008: $ 5.19 billion (Source)

 

Large Scale Manufacturing (LSM) in 1999: 1.5% ( Source)

Large Scale Manufacturing (LSM) in 2005: 19.9% (Source)

Large Scale Manufacturing (LSM) in 2007: 8.6% (Source)

Large Scale Manufacturing (LSM) in 2008: 4.8%  (Source)

Large Scale Manufacturing (LSM) in 2009: (-8.2 %) (Source)

 

Debt (External Debt & Liabilities) in 1988: $ 18 billion

Debt (External Debt & Liabilities) in 1999: $ 39 billion (Source)  (Source)  (Source)

Debt (External Debt & Liabilities) in 2007: $ 40.5 billion (Source) and (Source)

Debt (External Debt & Liabilities) in 2009: $ 52 billion (Source) & (Source)

 

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Filed under Industrial sector, Investment, Musharraf Era, Pakistan Economy, Statistics & Indicators, Textile

The Realistic Prospects for Investment in Pakistan

Courtesy: VISION21

By, Afreen Baig

Budget 2010-11 has come with many promises to reform the economy. The government has set forth few objectives for it to achieve. The 7th objective is a resolve to make the country ‘fertile for investment’, with whatever limited resources available.

If an economy runs towards economic imbalance, stagnation or recession, or if one has to kick start a new economy, there are two main options any government has. First, the government along-with the Central bank pledges to pump in direct money to start the circulation cycle. Recent examples of this are the US government’s pledge for the ‘rescue package’ worth roughly $12 trillion towards the economy. Similarly UK government spent nearly a trillion Pound to bail out and refinance its bank through ‘Quantitative Easing’. Likewise, Japan also launched above $350 billion stimulus packages, to lift its economy out of the recent recession and over the past decade of its economic stagflation it has taken several such smaller initiatives to stimulate the economy. All these measure will fall under what is termed as Keynesian thesis after J M Keynes. Alternatively, one may call these Deficit financing. The idea is that the government uses its resources to increase consumption and liquidity which in turn increases demand and economic activity resulting in increased jobs and employment.

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Filed under Investment, Pakistan Economy

Foreign Reserves Phenomenon: Shaukat Aziz versus PPP

Written By: Afreen Baig

 
 

 

Foreign Reserves – a significant economic indicator and of vital importance to every expanding economy. Foreign Reserves is the first and basic economic indicator that transmits an air of confidence and trust, amongst the potential foreign & local investors and the nation. Foreign Reserves are held in abundance and accumulated – in order to sustain the confidence of a country’s capacity to carry out external trade confidently, to balance the momentum between demand & supply of foreign currencies, and also used as an intervention tool by the State Bank. Reserves also bail out the economy in times of financial crisis.

By October 2007, at the end of Prime Minister Shaukat Aziz’s tenure, Pakistan raised back its Foreign Reserves to a handsome $16.4 billion. His exceptional policies kept our trade deficit controlled at $13 billion, exports boomed to $18 billion, revenue generation increased to become $13 billion and attracted foreign investment of $8.4 billion.

Pakistan recently has seen a drastic drop in its Reserves by 50% and its currency devalued by 40%, which has left ordinary people confused and the usual cynics have started heaping the blame onto the policies of Mr. Shaukat Aziz, without even knowing the basic macro-economic indicators nor understanding the relationship b/w Foreign reserves, Trade deficit and Currency devaluation.

The Trade deficit (Exports minus Imports) is always managed in ratio to Revenue generation, Capital inflows and Reserves. Almost all developing economies face the dread of trade deficit but their abundant foreign reserves gives them the fiscal space to overcome those grievances.

 

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Filed under Investment, Pakistan Economy, Shaukat Aziz