Impact of Inflation, Fiscal policy & Trading on Economic growth of Pakistan

INTRODUCTION
Pakistan under developed country has suffered from decades of internal political disputes and low level of foreign investment. Pakistan economic growth scale decreasing Globalization impact on Pakistan economy

ECONOMIC OVERVIEW
Between 2001-07 however, poverty levels decreased by 10% During 2004-07, GDP growth in the 5-8% Growth slowed in 2008-09 and unemployment rose during 2009-10 its current account strengthened and foreign exchange reserves stabilized - largely because of lower oil prices and record remittances from workers abroad.

ECONOMIC OVERVIEW
Real GDP growth in the outgoing year is now estimated 3.0 to 3.5 compared to 2.4 percent This compares with 4.4 percent projected growth for the global GDP, 6.5 percent growth in developing countries and 8.7 percent in South Asia.

ECONOMIC OVERVIEW
Sectorial share in 100% GDP
Years GDP % Commodity Sector (Agriculture) % 20.9 Industry Sector % 25.8 Service Sector % 53.3 2010-2011 100

2009-2010 2008-2009

100 100

21.2 21.8

26.4 25.3

52.4 52.9

Growth in GDP and sector wise contribution

Years 2011-2012 2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 GDP Growth 4.2 2.4 3.8 1.7 3.7 6.8 Agriculture Contribution 0.26 0.13 0.86 0.23 o.92 Industry Contribution -0.02 2.09 -0.03 0.38 2.28 Manufacturing Contribution 0.55 1.01 -0.69 0.92 1.55 Service Contribution 2.15 1.54 0.89 3.08 3.61

ECONOMIC OVERVIEW
Impact of Higher Food and Crude Oil Prices on GDP Growth The year-on-year increase in global food prices is 34.2 percent and for Brent crude oil 39.9 percent in February 2011. 30% increase in global food prices in January has translated to an average of about 10 percent food inflation in a number of regional economies

FISCAL DEVELOPMENT
Pakistans economy mainly remained immune to global financial crisis because of its lesser exposure to international finance. Fiscal balance deteriorated in 2009-10 The government has also announced various temporary tax policy measures through Presidential Ordinance to generate additional revenues of Rs 53 billion during the last quarter of 2010-11 The administrative measures and vigilance will be helpful in generating another Rs 24 billion. These steps will also be helpful in achieving the revised collection target of Rs 1588 billion.

FISCAL DEVELOPMENT

Fiscal indication as % GDP

Years GDP % 2.4 3.8 1.7 3.7 6.8 5.8 Revenue % 14.3 14.2 14.5 14.6 14.9 14.11 Expenditure % 18 20.5 19.9 22.2 20.8 18.4 Deficit % 6.6 6.3 5.3 7.6 4.3 4.3

2011 2010 2009 2008 2007 2006

INFLATION
Inflation can happen when governments print an excess of money to deal with a crises. As a result, prices end up rising at an extremely high speed to keep up with the currency surplus. A rise in production costs, which leads to an increase in the price of the final product. International lending and national debts. Federal taxes put on consumer products such as cigarettes or fuel. As the taxes rise, suppliers often pass on the burden to the consumer, the catch however, is that once prices have increased, they rarely go back, even if the taxes are later reduced.

INFLATION
The beginning of the current year 2010-11 in Pakistan saw number of unfavourable factors impacting the supply and demand situation which created imbalances in the economy.

Inflation in 2010-11:

INFLATION

TRADE & PAYMENTS

The phenomenal growth in developing countrys trade volumes started in the second half of 2010 and early 2011 in Asia have boosted economic growth. Pakistan in the past had crucial sensitivity to higher oil prices and the SBP estimated that a $10 hike in crude oil prices could cause deterioration of 0.5 percent of GDP in the current account

TRADE & PAYMENTS Trade Deficit

Sector wise Import (2009-2010 / 2010-2011)
Years Unit Value Export 572.01 463.35 450.4 350.4 310.03 Unit Value Import 967.44 828.31 790.82 632.3 495.33 Deficit in % 59.13 55.94 56.95 55.42 62.59

2010-2011 2009-2010 2008-2009

Sector wise Export (2009-2010 / 2010-2011)

Sector Export Share

2007-2008 2006-2007

Sector A-Food group B-Machinery group C-Petroleum group D-Consumer durable E-Raw material

Export Share 13.4 10.8 27.2 5.4 23.7 2.6 16.9

A-Food group B-Textile C-Petroleum group D-Other manufacturing E-All others items TOTAL

17.5 55.3 5.4 16.1 5.7 100

F-Telecom G-Other TOTAL

100

CONCLUSION
Now Pakistan suffered form decades of internal politacal disputes and low level of foreign investment from in last 5 years, that effect on Pakistan economic growth that continue down many resosn were involved high import due to shortage of of goods mainly imports of Raw material, Machinary. Oil that are main components that effect on overall economic growth price increase, inflation, unemployment increasing day by day GDP growth decressing last five years. Oil that are main components that effect on overall economic growth price increase, inflation, unemployment Globalization impact on Pakistan economy is high due to restriction of IMF that effect on overall polices of pakistan Due to limited resources and current economic condition of pakistan facing problems due to their expenditure in limited resources.

 Pakistan's trade balance has been in deficit most of the time since the country's independence. Despite much effort by successive governments to liberalize trade, Pakistan's trade regime still has many barriers that are preventing it from being successful.

 Pakistan has faced various problems in trying to integrate its economy with world markets. The opponents of economic integration with world markets argue that it will lead to de-industrialization of Pakistan.

 The basic problem for Pakistan is that its exports are mostly raw materials, which are subject to severe price fluctuations in international market prices. The main exports of Pakistan, cotton and rice, are less competitive in international markets.

Managing the Debt

 The external debt can be managed by taking the following policy measures:

1) Controlling the non-development expenditures of the government, which are currently consuming around 70 percent of public revenue

2) Accelerating and sustaining the GDP growth rate 3) Introducing an effective judicial system that strengthens accountability. This will help in reducing economic corruption and mismanagement.

4) Continuing austerity measures and containing current expenditures on the part of the government.

5) Providing more incentive to Pakistani citizens abroad and foreign residents of Pakistan to transfer their currency into the country. Foreign remittances will help in building up the foreign exchange reserves, thereby reducing the demand on the public debt.

Economic Resilience

 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 period.

 The Asian financial crisis; Economic sanctions according to Colin Powell, Pakistan was "sanctioned to the eyeballs"; Global recession; Severe rioting in the port city of Karachi;

 Heightened perceptions of risk as a result of military tensions with as many as a million troops on the border, and predictions of impending war;

 The post-9/11 military action

The 2005 Pakistan earthquake

Conclusion

Conclusion
Despite these adverse events, Pakistan's economy kept growing, and economic growth accelerated towards the end of this period. This resilience has led to a change in perceptions of the economy,

with leading international institutions such as the IMF, World Bank, and the ADB praising Pakistan's performance in the face of adversity.