Pep exam 2

Agriculture

The text you provided discusses several key issues and challenges related to agriculture pricing and
poverty alleviation in Pakistan. Let's address these issues and challenges one by one:

1. **Government Intervention in Agricultural Pricing:**

The main issue is whether the government should be involved in administering prices in the agriculture
sector. While neo-classical economics emphasizes the role of market forces in determining prices, the
reality in Pakistan has seen government interventions that have led to distortions and reduced earnings
for farmers. The key questions here include:
- Should the government intervene in agricultural markets or leave them to market forces?
- If intervention is necessary, what should be the basis for fixing prices?
- How to deal with problems arising from fluctuations in world prices?
- How to balance incentives for farmers with affordable food prices for the poor and vulnerable?
- Should farmers who are paid world prices for their products also pay income tax?

2. **Price Fixing of Wheat:**

The example of wheat pricing in Pakistan highlights the complexities of government price
interventions. Fixing wheat prices can impact both farmers and consumers. The government's decision
to raise wheat procurement prices led to increased production but also posed challenges related to
storage, smuggling, and inflation. This raises questions about how to balance the interests of different
stakeholders and the poor.

3. **Distributing State Land Among the Landless:**

Land distribution and land reform are critical issues in Pakistan. Providing land to landless and tenant
farmers can help alleviate poverty. Key points to explore include:
- How to make land accessible to the landless and tenant farmers?
- Evaluating the success of land distribution schemes in improving living standards.
- The role of women in land distribution and its impact on poverty reduction.

4. **Poverty Alleviation through Livestock and Dairy Development:**

Livestock and dairy farming can be significant sources of income for rural households. Key research
areas include:
- Analyzing the role of the livestock sector in poverty alleviation, especially for female-headed
households.
- Identifying ways to improve market access for small farmers and landless livestock owners.
- The impact of selling milk on cash income and nutrition in rural households.

5. **Corporate Farming and Leasing Land:**

The debate on corporate farming and leasing land to foreign companies or governments raises
questions about economic development, labor absorption, and sovereignty. Areas of interest may
include:
- Analyzing the advantages and disadvantages of large-scale corporate farming.
- Identifying conditions under which leasing land to foreign entities benefits the national interest.
- Examining the experiences of countries that have allowed or restricted such arrangements.
6. **Encouraging Quality Research on Agriculture Issues:**
Building research capacity is essential for informed policymaking. Questions to consider include:
- How to organize research that is timely and relevant for policymakers.
- The role of government bodies, independent research organizations, and international organizations
in supporting research initiatives.
- The potential for cross-country knowledge sharing and collaboration on agriculture-related research.

These issues and challenges are complex and multifaceted. Research, data analysis, and informed policy
decisions are essential to address them effectively and create a more equitable and sustainable
agricultural sector in Pakistan.

Resolving issues in agriculture requires a comprehensive approach that addresses various aspects of the
agricultural sector. Here are some policies and strategies that can help improve agriculture:

Investment in Infrastructure:

Improve rural infrastructure such as roads, bridges, and storage facilities to reduce post-harvest losses.
Enhance irrigation systems to ensure a consistent water supply for crops.
Access to Finance:

Provide farmers with access to affordable credit and financial services to invest in their farms.
Promote microfinance institutions and loan facilities tailored to the needs of smallholder farmers.
Research and Development:

Invest in agricultural research to develop high-yielding and disease-resistant crop varieties.

Promote the use of modern agricultural technologies and practices, such as precision farming and
sustainable agriculture.
Extension Services:

Strengthen agricultural extension services to provide farmers with knowledge and training on the latest
farming techniques.
Encourage the adoption of best practices for crop and livestock management.
Market Access and Value Chains:

Develop and maintain efficient marketing and distribution systems to help farmers reach wider markets.
Encourage the establishment of farmer cooperatives and associations to collectively bargain and access
better market opportunities.
Crop Diversification:

Promote diversification in crop selection to reduce risks associated with monoculture and enhance food
security.
Support cash crops and high-value crops that have export potential.
History of political economy
The overview you provided covers various phases in Pakistan's economic history, starting from its early
years of independence in 1947 and extending through different decades. I'll summarize the key points
from each of these eras:

1. **Fifties Era (1947-1958):** This period marked the early years of Pakistan's independence. The
country faced significant political and economic challenges, including the mass migration of people and
economic instability. The main focus during this era was on political survival, and agriculture was the
dominant sector of the economy. Economic growth was modest, with some exceptions, due to factors
like water shortages and partition-related issues.

2. **Growth Era (1958-1969):** Under the leadership of General Ayub Khan, Pakistan's economy
witnessed relatively high growth rates. The industrial sector expanded, driven by policies promoting
private investment and foreign aid. Agriculture was also given more attention. However, regional
disparities between East and West Pakistan became more pronounced during this period.

3. **Nationalization and Command Economy Era (1971-1977):** This era, under Zulfiqar Ali Bhutto, saw
the nationalization of large firms, banks, and manufacturing units, as well as various reforms aimed at
social and economic justice. The separation of East Pakistan (now Bangladesh) severely impacted the
country's economy, leading to trade imbalances and inflation.

4. **The Revivalist Eighties (1978-1988):** General Zia-ul-Haq's rule focused on economic growth and
introduced liberal policies. Pakistan's economy experienced solid growth during this period, driven by
large public investments, a flexible exchange rate policy, and industrial development. However, issues
like the debt burden and the energy crisis emerged.

5. **The Muddling Nineties (1988-1999):** This period witnessed significant political instability, with
frequent changes in government. Economic reforms, guided by international institutions like the IMF
and World Bank, aimed at addressing issues like inflation, fiscal deficits, and foreign reserves. However,
the decade saw mixed economic outcomes, with issues like inflation and unemployment.

6. **The Reforming Era (1999-2007):** Under General Pervez Musharraf's rule, Pakistan's economy saw
robust growth, attracting foreign investment. However, the economic bubble burst due to factors like
energy crises and overreliance on imports. Positive aspects included educational reforms and
improvements in infrastructure.
7. **Privatization Era (2008-2013):** The political situation stabilized under the rule of President Asif Ali
Zardari. Economic policies aimed at reducing fiscal deficits, inflation, and increasing foreign reserves.
Mixed results were achieved due to challenges in revenue collection, energy crises, and other issues.

It's important to note that Pakistan's economic history is complex, with both successes and challenges in
each era. The country's economic trajectory has been influenced by political events, global economic
conditions, and various government policies.

Taxation
The tax to GDP ratio in Pakistan has been relatively low due to various factors, including a large informal
economy, widespread tax evasion, limited tax base, ineffective tax administration, and structural
inefficiencies. These elements have made it challenging for the government to collect taxes effectively
and in turn, impacted the overall tax to GDP ratio. Efforts to broaden the tax base and improve tax
administration have been ongoing to address this issue.
The taxation system in Pakistan has been criticized for its regressive nature, primarily due to its heavy
reliance on indirect taxes such as sales tax and excise duties, which tend to impact lower-income groups
disproportionately. This approach places a heavier burden on the less affluent sections of society
compared to the wealthier segments. Furthermore, the lack of progressive income tax policies and an
ineffective mechanism for wealth redistribution have also contributed to the regressive nature of the
taxation system.
To make the taxation system more progressive in Pakistan, several measures can be implemented.
These include:

1. Reforming the income tax system to ensure that higher-income individuals and corporations pay a
proportionate share of their earnings in taxes.
2. Introducing wealth taxes to target accumulated wealth and assets, particularly for high net worth
individuals and businesses.
3. Enhancing the effectiveness of tax collection and enforcement mechanisms to prevent tax evasion
and ensure compliance across all income levels.
4. Expanding the tax base by bringing more informal economic activities into the formal sector and thus
broadening the taxpayer pool.
5. Implementing targeted social welfare programs and direct cash transfers to support low-income
individuals and families, thereby reducing their tax burden.

These measures, when executed effectively, can contribute to a more equitable and progressive
taxation system in Pakistan.

External factors

The passage you've provided is discussing various aspects of Pakistan's financial account, particularly in
the first half of fiscal year 2020. Here's a summary of the key points:

1. **Portfolio Investment:** In H1-FY20, there was a significant increase in portfolio investment in local
currency government securities in Pakistan. This was driven by foreign investors focusing more on
Pakistan due to reforms in the exchange rate market. This interest was also influenced by the attractive
risk-adjusted returns offered by fixed income securities in Pakistan.

2. **Foreign Direct Investment (FDI):** Net FDI in Pakistan grew by 68.2 percent year-on-year (YoY) to
reach US$1.3 billion in H1-FY20. This growth was attributed to lower outflows in H1-FY20 compared to
the previous year. One-off inflows from mobile phone operators for license renewals and ongoing
investments in sectors like power and telecommunications contributed to this increase.

3. **Foreign Portfolio Investment (FPI):** Inflows into local currency government securities were the
dominant component of portfolio investment, totaling US$1.4 billion in H1-FY20. However, net inflows
were lower due to the retirement of a significant Sukuk. Foreign investors showed confidence in
Pakistan's economy and increased their FPI in equities, resulting in a net inflow of US$19.0 million.

4. **Net Incurrence of Liabilities:** Pakistan received a net inflow of foreign exchange (FX) liabilities of
US$3.9 billion in H1-FY20. This was a 27.3 percent decrease compared to the same period the previous
year. Government loans increased significantly to US$4.3 billion, while the central bank and private
commercial banks retired some of their liabilities.

5. **Exchange Rate and Reserves:** Pakistan's total liquid foreign exchange reserves increased to
US$17.9 billion by the end of December 2019, up by US$3.5 billion from the end of June 2019. The State
Bank of Pakistan (SBP) saw a substantial increase in its reserves. The PKR appreciated by 3.4 percent
against the US dollar during H1-FY20, and this was driven by better market conditions and higher official
disbursements. The Nominal Effective Exchange Rate (NEER) depreciated in the second quarter due to
currency movements against the US dollar, but the Real Effective Exchange Rate (REER) appreciated in
both quarters due to higher domestic inflation.

This information provides insights into the foreign investment landscape in Pakistan, particularly in the
first half of fiscal year 2020, and how various factors influenced these investments and the exchange
rate.
The excerpt you've provided discusses Pakistan's exports and imports in the first half of fiscal year 2020
(H1-FY20) and highlights key trends and factors influencing these trade flows. Here's a summary of the
main points from the text:

Exports:
1. Total exports in H1-FY20 increased by 3.1 percent, reaching US$ 11.5 billion, the highest first-half
exports since H1-FY15.
2. The growth in exports was notably higher than the 1.9 percent increase recorded in H1-FY19.
3. Pakistan witnessed a notable increase in exports, outperforming many competitor emerging
economies (EM) in the global market.
4. Factors contributing to the export growth include a decline in the Real Effective Exchange Rate (REER),
government initiatives to provide cheaper electricity to the textile sector, and expedited refunds for
major exporting sectors.

Key Exports by Group:

- Textile exports increased by 3.9 percent, with growth attributed to power subsidies and exchange rate
adjustments.
- Rice, readymade garments (RMG), and hosiery were significant contributors to export growth.
- Exports of petroleum oil and lubricants (POL), tanned leather, chemicals, and cement declined and had
a negative impact on overall growth.

Non-Textile Exports:
- Non-textile exports decelerated to 1.8 percent in H1-FY20.
- Rice exports increased substantially, particularly milled basmati rice, with higher demand in Middle
Eastern markets.
- Food group exports, including tea, palm oil, soybean oil, and pulses, also played a crucial role in
supporting non-textile exports.
- Exports of petroleum products (POL) and cement experienced declines.

Imports:
1. Pakistan's imports dropped by 17.0 percent to US$ 23.2 billion in H1-FY20, the lowest level in four
years.
2. A wide range of factors influenced lower import quantums and lower international commodity prices.

Key Imports by Group:

- Energy imports declined by 19.9 percent, with a substantial reduction in petroleum oil and lubricants
(POL) imports.
- The transport sector experienced a significant decline in import demand, particularly in auto parts and
vehicles.
- Steel imports decreased, with a significant drop in imports of finished steel products.
- Food imports, including tea, palm oil, and soybean oil, were affected by changes in unit prices and
quantities.

Energy Imports:
- A drop in energy imports was largely driven by lower international oil prices, reduced demand for fuel
oil, and a changing energy mix.

Non-Energy Imports:
- Non-energy imports declined by 15.9 percent, with notable decreases in the transport, iron and steel,
and fertilizer and chemical categories.

This summary provides an overview of the key points and trends in Pakistan's trade dynamics during H1-
FY20, as discussed in the provided text.

The provided information discusses the current account of Pakistan in H1-FY20 and the growth in
workers' remittances. Here are the key points:

**Current Account in H1-FY20:**

- During the first half of fiscal year 2020 (H1-FY20), Pakistan experienced a significant improvement in its
current account deficit (CAD) compared to the same period in the previous year. This was primarily due
to a steep decline in import payments and positive growth in exports and remittances.

- The overall CAD was reduced to almost a quarter of the level seen in the same period the previous
year, indicating a substantial improvement in the country's external financial position.

**Workers' Remittances:**
- Workers' remittances play a crucial role in Pakistan's current account. During CY 2019, global
remittance flows slowed down for various reasons, including decelerating growth in advanced
economies, lower oil prices, and weakening currencies in source countries relative to the US dollar.

- Despite the slowdown, Pakistan's workers' remittances experienced reasonable growth in CY 2019,
with a growth rate of 5.3 percent compared to 6.9 percent in CY 2018.

- In H1-FY20, Pakistan's workers' remittances continued to grow, with a rate of 3.3 percent. Several
factors contributed to this growth, including an increased number of Pakistanis going abroad for work,
improved economic conditions in Gulf Cooperation Council (GCC) countries due to higher non-oil GDP
growth, a competitive exchange rate in the interbank market, and increased cost of living in Pakistan.

- The growth in remittances in Q1-FY20 was affected by lower inflows from GCC countries, especially the
UAE. However, remittances rebounded in Q2-FY20 and were more broadly based.

- To encourage remittance inflows through formal channels, the government of Pakistan provided
various incentives to customers, banks, and exchange companies. These incentives included schemes for
the reimbursement of marketing and telegraphic charges.

- The country-wise breakdown of remittances to Pakistan showed that flows from the GCC had slowed
down in H1-FY20, while remittances from the US and the UK recorded notable growth.

- In the case of Saudi Arabia (KSA), remittances from Pakistan increased during H1-FY20, reflecting
improved non-oil private sector activities driven by rising government expenditures.

- In the US, the tight labor market conditions and low unemployment rate led to higher wages,
particularly in 'blue-collar' jobs, which contributed to increased remittances. In the UK, despite
economic activity slowing due to Brexit-related uncertainty, the labor market improved, leading to
higher remittances.

Overall, the growth in workers' remittances during H1-FY20 contributed positively to Pakistan's current
account, helping to narrow the deficit. This was achieved through a combination of government
incentives and economic factors affecting remittance flows from different source countries.

Growth n development

The terms "economic growth" and "economic development" are related but distinct concepts in the
field of economics. Here's a breakdown of the key differences between them:

**Economic Growth:**
1. **Definition:** Economic growth refers to the increase in a country's output of goods and services,
usually measured by the change in Gross Domestic Product (GDP) over a period of time, typically a year.

2. **Measurement:** It is typically measured as the percentage change in the level of national income
(GDP) over a specific time frame.
3. **Focus:** Economic growth primarily emphasizes the quantitative expansion of an economy. It is
often used as an indicator of a country's overall economic health and is associated with increased
production and consumption of goods and services.

4. **Limitations:** Economic growth measures do not account for various other factors that influence
the well-being of a society, such as income distribution, environmental sustainability, and overall quality
of life.

**Economic Development:**
1. **Definition:** Economic development is a broader concept that encompasses improvements in the
standard of living, well-being, and quality of life for the people in a society. It goes beyond mere
economic growth and includes various other socio-economic factors.

2. **Measurement:** Economic development is challenging to measure directly because it involves a

wide range of factors. Indicators like the Human Development Index (HDI) consider not only income
(GDP per capita) but also factors like life expectancy, education, and other aspects of human well-being.

3. **Focus:** Economic development focuses on both quantitative and qualitative improvements. It

emphasizes factors like access to healthcare, education, sanitation, social equity, political stability, and
the protection of human rights.

4. **Comprehensiveness:** Economic development considers the overall quality of life, individual

happiness, social justice, and environmental sustainability. It recognizes that improving people's lives
goes beyond just increasing their income.

**Why We Are Interested in the Difference:**

Understanding the difference between economic growth and economic development is important for
several reasons:
- **Policy Implications:** Policymakers need to be aware of the distinction to design and implement
effective policies. Promoting economic growth may not necessarily lead to improved development
outcomes.
- **Human Well-Being:** Economic development is ultimately about improving the well-being of
individuals. Focusing solely on economic growth may neglect other crucial aspects of human life and
societal progress.
- **International Comparisons:** When comparing different countries, it's essential to consider
development indicators beyond economic growth, as this provides a more holistic view of their
prosperity.
- **Environmental and Social Considerations:** Economic development acknowledges the impact of
growth on the environment and the need for sustainable practices. It also addresses social issues like
inequality and poverty.

In summary, while economic growth is an important indicator of an economy's performance, economic

development provides a more comprehensive view of the overall well-being and progress of a society,
taking into account various social and environmental factors. Recognizing and understanding this
difference is crucial for policymakers and economists when assessing and improving the state of a
nation's economy and the welfare of its citizens.
Improving economic growth and development is a complex and multifaceted goal that requires a
combination of policies and strategies. Here are some key policy areas that governments often focus on
to promote economic growth and development:

1. **Macroeconomic Stability:**
- Maintain low and stable inflation rates.
- Ensure fiscal discipline to prevent excessive budget deficits.
- Implement monetary policies that balance growth with price stability.
- Manage exchange rates to promote export competitiveness.

2. **Infrastructure Development:**
- Invest in transportation, communication, and energy infrastructure.
- Improve access to clean water and sanitation.
- Enhance digital infrastructure and broadband connectivity.

3. **Education and Workforce Development:**

- Invest in education and vocational training to develop a skilled workforce.
- Promote STEM (Science, Technology, Engineering, and Mathematics) education.
- Focus on adult education and lifelong learning.

4. **Innovation and Technology:**

- Encourage research and development (R&D) activities.
- Provide incentives for businesses to invest in technology and innovation.
- Support startups and entrepreneurship.

5. **Trade and Investment Policies:**

- Open up to international trade to access larger markets.
- Attract foreign direct investment (FDI) through favorable policies.
- Develop and implement trade agreements and partnerships.

6. **Regulatory and Legal Reforms:**

- Streamline business registration and permitting processes.
- Simplify tax codes and reduce bureaucratic red tape.
- Protect property rights and enforce contracts.

7. **Social Safety Nets:**

- Establish social safety nets to reduce poverty and income inequality.
- Provide access to healthcare and affordable housing.
- Implement targeted assistance programs for vulnerable populations.

8. **Environmental Sustainability:**
- Promote environmentally friendly and sustainable development practices.
- Invest in renewable energy sources and conservation efforts.
- Enforce regulations to mitigate pollution and protect natural resources.

9. **Financial Sector Development:**

- Strengthen the banking and financial system.
- Improve access to credit and financial services for businesses and individuals.
 - Promote financial literacy and inclusion.

10. **Good Governance and Anti-Corruption Measures:**

- Promote transparency, accountability, and the rule of law.
- Implement anti-corruption measures to ensure fair competition.
- Encourage citizen participation in decision-making.

11. **Rural and Agricultural Development:**

- Invest in agriculture and rural development to reduce poverty.
- Provide support to small-scale farmers.
- Promote sustainable farming practices.

12. **Healthcare and Well-being:**

- Ensure access to quality healthcare services.
- Invest in public health initiatives to improve overall well-being.
- Promote healthy lifestyles and disease prevention.

13. **Regional Development:**

- Develop policies to reduce regional disparities in development.
- Invest in infrastructure and job creation in less-developed areas.
- Encourage regional economic clusters and cooperation.

14. **Global Partnerships:**

- Engage in international partnerships and cooperation for development assistance.
- Participate in global initiatives such as the Sustainable Development Goals (SDGs).

It's important to note that the specific policies and strategies should be tailored to the unique
circumstances and challenges of each country or region. Additionally, effective implementation,
monitoring, and evaluation of these policies are critical to achieving sustained economic growth and
development.