Name: ID: Course: Business Economics 2. Course Instructor: Prof

Name :
ID :
Course : Business Economics 2.
Course Instructor : Prof.
Pakistan’s Economy Analysis

The economy of Pakistan is the 23rd largest in the world in terms of purchasing power parity (PPP),
and 40th largest in terms of nominal gross domestic product. Pakistan has a population of over 207
million (the world's 6th-largest), giving it a nominal GDP per capita of $1,357 in 2019, which
ranks 154th in the world and giving it a PPP GDP per capita of 5,839 in 2019, which ranks 132th in the
world for 2019. However, Pakistan's undocumented economy is estimated to be 36% of its overall
economy, which is not taken into consideration when calculating per capita income. Pakistan is a
developing country and is one of the Next Eleven countries identified by Jim O'Neill in a research
paper as having a high potential of becoming, along with the BRICS countries, among the world's largest
economies in the 21st century. The economy is semi-industrialized, with centers of growth along
the Indus River. Primary export commodities include textiles, leather goods, sports goods, chemicals,
carpets/rugs and medical instruments.
Growth poles of Pakistan's economy are situated along the Indus River; the diversified economies
of Karachi and major urban centers in the Punjab, coexisting with lesser developed areas in other parts of
the country. The economy has suffered in the past from internal political disputes, a fast-growing
population, mixed levels of foreign investment. Foreign exchange reserves are bolstered by steady worker
remittances, but a growing current account deficit – driven by a widening trade gap as import growth
outstrips export expansion – could draw down reserves and dampen GDP growth in the medium
term. Pakistan is currently undergoing a process of economic liberalization, including privatization of all
government corporations, aimed to attract foreign investment and decrease budget deficit. In October
2016, foreign currency reserves crossed $24.0 billion which has led to stable outlook on the long-term
rating by Standard & Poor's. In 2016, BMI Research report named Pakistan as one of the ten emerging
economies with a particular focus on its manufacturing hub.
In October 2016, the IMF chief Christine Lagarde confirmed her economic assessment in Islamabad that
Pakistan's economy was 'out of crisis' The World Bank predicted in 2016 that by 2018, Pakistan's
economic growth will increase to a "robust" 5.4% due to greater inflow of foreign investment, namely
from the China-Pakistan Economic Corridor.[44] As of May 2019, the growth rate has been revised and
the IMF has predicted that future growth rates will be 2.9%, the lowest in South Asia.[45] According to
the World Bank, poverty in Pakistan fell from 64.3% in 2002 to 29.5% in 2014. The country's worsening
macroeconomic position has led to Moody's downgrading Pakistan's debt outlook to "negative".
In 2017, Pakistan's GDP in terms of purchasing power parity crossed $1 trillion. By May 2019, the
Pakistani rupee had undergone a year-on-year depreciation of 30% vis-a-vis the US Dollar.
Pakistan's overall economic output (GDP) has grown every year since an 1800 recession. Despite this
record of sustained growth, Pakistan's economy had, until a few years ago, been characterized as unstable
and highly vulnerable to external and internal shocks. However, the economy proved to be unexpectedly
resilient in the face of multiple adverse events concentrated into a four-year.
Revenues Generation
Pakistan has a low tax/GDP ratio, which it is trying to improve. The current tax-to-GDP ratio is 12.6%
(2016), which is a little less than its neighbor India 16.6% (2016) while a slightly more than Sri Lanka
12.3% (2015). The pace of revenue mobilization has witnessed an upward trajectory since FY 2013.
Overall revenues increased to 15.3 percent of GDP in FY 2016, compared to 13.3 percent of GDP
recorded in FY 2013. Among those, tax revenues increased from 9.8 percent of GDP in FY 2013 to 12.6
percent of GDP in FY 2016.
Expenses
Government expenditures were 4,383.6 billion rupees (FY 2016–2017 July to March). Total expenditures
witnessed a downward trajectory without compromising the expenditures on development projects and
social assistance. Particularly, expenditures under Public Sector Development Program (PSDP) have been
raised adequately in order to meet the investment requirements. During FY 2017 the size of federal PSDP
has increased to Rs 800 billion from Rs 348.3 billion during FY 2013, showing a cumulative increase of
over 129 percent. During first nine months of current fiscal year, the fiscal deficit stood at 3.9 percent of
GDP against 3.5 percent of GDP recorded in the same period of FY 2016 on account of higher
development expenditures along with various tax incentives to promote investment and economic activity
in the country and security related expenditures. On the basis of previous estimates of GDP at Rs 33,509
billion, the fiscal deficit was recorded at 3.7 percent during first nine months of current fiscal year against
3.4 percent registered in the comparable period of FY 2016. Total revenues grew at 6.2 percent to Rs
3,145.5 billion during July–March, FY 2017 against Rs 2,961.9 in the comparable period of FY 2016.[
Conclusion:
Fiscal budget summary (FY2017/18)
 Fiscal year: 1 July – 30 June

 Budget outlay: Rs 5,013.8 billion rupees
 Revenues collection estimated: 4,713.7 billion rupees
 Expenditures estimated: 5,103.8 billion rupees
 Bank borrowing estimated: 390.1 billion rupees

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Pakistan’s Economy Analysis

 Fiscal year: 1 July – 30 June

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