PAKISTAN ECONOMY 2010

Page last on January 26, 2010
Economy - overview:Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes and low levels of foreign investment. Between 2001-07, however, poverty levels decreased by 10%, as Islamabad steadily raised development spending. Between 2004-07, GDP growth in the 5-8% range was spurred by gains in the industrial and service sectors - despite severe electricity shortfalls - but growth slowed in 2008-09 and unemployment rose. Inflation remains the top concern among the public, jumping from 7.7% in 2007 to 20.8% in 2008, and 14.2% in 2009.

The government agreed to an International Monetary Fund Standby Arrangement in November 2008 in response to a balance of payments crisis, but during 2009 its current account strengthened and foreign exchange reserves stabilized largely because of lower oil prices and record remittances from workers abroad. Textiles account for most of Pakistan's export earnings, but Pakistan's failure to expand a viable export base for other manufactures have left the country vulnerable to shifts in world demand. Other long term challenges include expanding investment in education, healthcare, and electricity production, and reducing dependence on foreign donors.
GDP (purchasing power parity):$448.1 billion (2009 est.)
$436.4 billion (2008 est.)
$422 billion (2007 est.) note: data are in 2009 US dollars
GDP (official exchange rate):$166.5 billion (2009 est.)
GDP - real growth rate:2.7% (2009 est.)
3.4% (2008 est.)

GDP - per capita:$2,600 (2009 est.)
$2,500 (2008 est.)
GDP - composition by sector:agriculture: 20.8% industry: 24.3% services: 54.9% (2009 est.)
Labor force:55.88 million note: extensive export of labor, mostly to the Middle East, and use of child labor (2009 est.)
Labor force - by occupation:agriculture: 43% industry: 20.3% services: 36.6% (2005 est.)
Unemployment rate:15.2% (2009 est.)
Population below poverty line:24% (FY05/06 est.)
Investment (gross fixed):18.1% of GDP (2009 est.)
Budget:revenues: $23.21 billion expenditures: $30.05 billion (2009 est.)
Public debt:45.3% of GDP (2009 est.)
Inflation rate (consumer prices):14.2% (2009 est.)
20.3% (2008 est.)
Central bank discount rate:15% (31 December 2008)
10% (31 December 2007)
Current account balance:$-2.42 billion (2009 est.)
$-15.68 billion (2008 est.)
Exports:$17.87 billion (2009 est.)
$21.09 billion (2008 est.)
Exports - partners:US 16%, UAE 11.7%, Afghanistan 8.6%, UK 4.5%, China 4.2% (2008)
Imports:$28.31 billion (2009 est.)
Imports - commodities:petroleum, petroleum products, machinery, plastics, transportation equipment, edible oils, paper and paperboard, iron and steel, tea

Unemployment Situation in Pakistan

Pakistan Economic performance

Pakistan

Economic performance

Economic growth in Pakistan in FY2001 decelerated to 2.6% primarily due to the impact of drought on agriculture and hydroelectric power generation. The drought caused a loss in national income estimated at about 2.0%. Nonagriculture GDP grew by 4.3%, which was significantly higher than in the previous year. Agriculture sector output declined by 2.5%, with output of major crops falling by 10.0%. Growth in large-scale manufacturing, however, accelerated to 8.4%—the highest growth rate since the 1980s. While increased capacity propelled output growth in FY2001, the underlying tone for a majority of the constituent subsectors of large-scale manufacturing remained firm. Excluding the subsectors that recorded significant capacity addition (oil refining, automotive, and fertilizer), large-scale manufacturing output grew by 7.0% in FY2001. Investment as a percentage of GDP continued to decline, reaching a new low at 14.7% in FY2001. The decline largely resulted from low private sector confidence, despite improvement in Pakistan’s macroeconomic fundamentals. The major success during the year was a reduced inflation rate of 4.4%, resulting largely from improved macroeconomic and financial policy management. The fiscal deficit in FY2001 was 5.3% of GDP—the lowest in 23 years. The deficit decreased because of stringent control over public expenditure, particularly current expenditure that was reduced by 1.5% of GDP. Development expenditure also declined to only 2.9% of GDP, a record low. In FY2001 exports increased by 7.4%, to over $9.0 billion for the first time. Export volume expanded by over 15.0%, with 8 out of 10 top export items recording double-digit growth. The current account deficit declined to 0.9% of GDP, with improvement from a reduced trade deficit and increased workers’ remittances. Further slowdown in economic growth in FY2001 and declining development expenditure resulted in higher unemployment.

ADB operations

Operational strategy: In 2001, ADB’s operational strategy was anchored on poverty reduction, increasing economic growth, and providing assistance for governance-related reforms. A significant amount (78.0%) of ADB’s assistance was in program lending. While program loans finance the cost of adjustment and complement the economic reform agenda to be pursued under the 3-year $1.3 billion IMF-financed Poverty Reduction and Growth Facility, the counterpart rupees were envisaged to be used for poverty reduction and social sector development. ADB’s 2001 loan program for Pakistan was a record $957 million in the aftermath of the 11 September attacks. ADB’s commitment to help mitigate the impact of the post-11 September events on the Pakistan economy was reiterated by ADB President Tadao Chino, who visited Pakistan in November 2001 and met Pakistan President Pervez Musharraf and Finance Minister Shaukat Aziz.

Policy dialogue: In the context of 2001 operations, policy dialogue focused on agriculture sector reform, designed to ensure a greater role for the private sector in domestic trading of major agriculture commodities, gradual phasing out of administered prices with market forces, and enhancing food security and poverty reduction. Another major initiative was the Access to Justice Program loan, which supported legal and judicial reforms, focusing on helping the Government improve access to justice by strengthening the subordinate judiciary, supporting policy reforms, and enhancing the judicial system to ensure timely commercial adjudication and a mechanism for enforcing contracts, thereby providing a greater comfort for prospective international investors. Policy dialogue also continued under the Energy Sector Restructuring Program and the Trade, Export Promotion, and Industry Program.

Loans and technical assistance: ADB approved 11 loans for 5 projects and programs in 2001 totaling $956.8 million. These are for the urban sector development in the North-West Frontier Province, road sector development (a program loan and two sector loans), access to justice program (two program loans and a technical assistance loan), agriculture sector program (a project loan and a technical assistance loan), and reproductive health. ADB approved 17 technical assistance grants totaling $6.6 million in 2001. Twelve grants were to provide advisory assistance on fiscal decentralization, a forum on poverty analysis, supporting access to justice under the local government plan, institutional strengthening of the State Bank of Pakistan, environmental assessment, institutional reform and road maintenance financing study, poverty reduction study, social impact analysis and resettlement planning, support for the implementation of the national policy and action plan to combat child labor, capacity building for capital market development and corporate governance, and restructuring the gas sector. Five were assistance in project preparation for the preliminary engineering update of the provinces of Punjab and Sindh; additional preparatory work on the Sindh Rural Development Project; and supporting government restructuring and reform.

Project implementation: Since joining ADB in 1966, Pakistan has received 203 loans—including 21 private sector loans without government guarantee—of which 59 were active at the end of 2001. Contract awards totaled $418.9 million, bringing the cumulative figure to $8.0 billion. The contract award ratio was 18.1%, higher than the ADB-wide average of 14.8%. Disbursements during the year totaled $512.3 million, bringing cumulative disbursements to $8.4 billion. The disbursement ratio was 28.2%, higher than the ADB-wide average of 20.5%.

The Pakistan Resident Mission initiated quarterly provincial project review meetings in the four provinces and held two review meetings at the federal level. To enhance further project and portfolio performance, the resident mission conducted two provincial level and one federal level workshops on project management with staff of executing agencies, line ministries, and other government offices concerned. ADB also conducted a country project implementation and administration workshop for executing agency and line ministry staff. Proactive project implementation has improved key portfolio monitoring indicators and overall portfolio performance.

Unemployment Situation in Pakistan

Unemployment Situation in Pakistan By Samina Khalil and Rao Noman Saleem Applied Economics Research Centre July 05 - 11,1999

Unemployment is a central problem because when unemployment is high, resources are wasted and people's incomes are depressed; during such periods, economic distress also spills over to affect people's emotions and family lives.

Now we see that in Pakistan what is the situation of unemployment and what are its economic and social impacts.

In Pakistan labour force include all persons who are of ten years and above, and during the period are without work, currently available for work and seeking for work. On the basis of the existing population of 142.87 millions with Labour force participation rate of 27.46 percent, the total labour force comes to 39.24 million. According to this about 2.4 million persons of labour force were estimated as unemployed in 1999, as construction and transport sectors have absorbed 11.2 percent, 6.8 percent and 5.7 percent, compared to 10.5 percent, 7.2 percent and 5.0 percent respectively in 1994-95.

Suggestions

1) Govt. should make efforts to push economic growth process.

For this purpose Economic Revival Package should announce for the revival of industries sector, to stimulate production and investment.

2) Govt. should seriously try to boost exports through broadening the tax base and lowering tariffs.

3) Govt. should announce a package for the development of agriculture sector .

4) Beside this a number of fiscal and monetary measures should take to attract industrialists and particularly foreign investment.

5) More Technical and Vocational training facilities should be provided. In this way unemployed people will get the chance to enhance their skills and become able to earn reasonable income.

6) With a view to reduce educate unemployment, self-employment scheme should be encouraged in true manners.

(Figures in Millions)

Sector	1994-95	1997-98(E)	1998-99(E)
Agriculture	15.56	16.90	17.37
Mining & Manuf.	03.49	03.79	3.90
Construction	02.40	02.60	2.67
Trade	04.82	05.24	5.39
Transport	01.69	01.83	1.89
Comm.Soc.Ser.	04.75	05.16	5.30
Others	00.55	00.60	0.62
Total	33.26	36.12	37.14

Source: Economic Survey 1997-98.

(Figures in Millions)

Unemployment Labour Force Unemployment Rate(%)

Year Population Total Urban Rural Total Urban Rural

1993	116.74	1.53	0.54	0.99	4.73	5.88	4.28
1994	119.39	1.61	0.62	0.99	4.84	6.51	4.22
1995	122.36	1.80	0.68	1.12	5.37	6.90	4.80
1996	125.38	1.85	0.71	1.14	5.37	6.90	4.80
1997	128.42	2.25	0.83	1.42	6.10	7.10	5.70
1998	131.51	2.31	0.86	1.45	6.10	7.10	5.70
1999	134.51	2.36	0.89	1.47	6.10	7.10	5.70

Source: Labour Force Survey 1992-93 to 1996-97.

Stats on Pakistan Poverty and Unemployment

According to the Human Development Report on South Asia, 2003:

• While less than one-third of Pakistan’s people are income poor, nearly one half suffer from serious deprivation of several opportunities of life.
  
• Nearly two-third of the total adult population (and as much as three-fourths of the adult female population) can’t read or write.
  
• Access to basic services like primary health care and safe drinking water is denied to nearly half of the population. About 38 % of the children under five are malnourished.
  
• The poverty in Pakistan has increased from 21% in 1990-91 to 35% in 1998-99.
  
• The number of poor as per government criteria, increasing at the rate of nearly 6 million per year now touches almost 58 million.
  
• Pakistan’s economy used to derive great benefit from expatriate labour abroad, especially the Gulf countries. This was traditionally unskilled labour engaged in the construction boom of the post-1973 oil price hike shock. However, the opportunities for unskilled labour in Arab countries have been reducing due to the economic changes taking place there.
  
• The number of Pakistani expatriates in the Gulf countries now hovers around one million (compared to nearly 3.8 million Indians). The result has been reducing remittances declining from over $2.5 billion in early 1980s to around $800 million by the end of the ’90s.
  
• Pakistan’s labour force is growing at the rate of 2.4%, and the unemployment rate is growing at an alarming rate of 6% per annum in the last five years.
  
• Coupled with the decline in jobs abroad, the economy’s capacity to generate employment opportunities has been decreasing, which can be figured out from the low growth rates. With the high rate of population growth, the figure for unemployed Pakistanis are likely to go up further.
  
• There is a mismatch in Pakistan in the supply and demand for skills. It’s basically education levels in a country that creates employment skills; studies indicate that Pakistan’s literacy rate is one of the lowest in the world and is worse the countries which have per capita GNP equal to or close to Pakistan.
  
• Less than three-quarters of its school-age population attends primary school. Expenditure on education as a percentage of GNP has been less than 3 % in the last decade

Pakistan unemployment rate chart

Unemployment rate: 7.4% (2008 est.)
5.6% (2007 est.)
note: substantial underemployment exists

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Year	Unemployment rate	Rank	Percent Change	Date of Information
2003	7.80 %	119		2002 est.
2004	7.70 %	122	-1.28 %	2003 est.
2005	8.30 %	75	7.79 %	2004 est.
2006	6.60 %	65	-20.48 %	2005 est.
2007	6.50 %	72	-1.52 %	2006 est.
2008	5.60 %	71	-13.85 %	2007 est.
2009	7.40 %	92	32.14 %	2008 est.

Definition: This entry contains the percent of the labor force that is without jobs. Substantial underemployment might be noted.

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of September 17, 2009

See Also

• Unemployment rate rank chart
• Unemployment rate - comparative map

unempolyment is classified

Unemployment is classified into three categories.
Frictional unemployment (workers who are simply moving between jobs)
Structural unemployment (workers who are in regions or industries that are in persistent slump)
Cyclical unemployment (workers who laid off when the overall economy suffers a downturn. In Pakistan unemployment is of structural and cyclical Understanding the sources of unemployment has proved one of the major challenges of modern macroeconomics. Voluntary unemployment may be or when qualified people chose not to work out the going wage rate unemployment occur. The key element in understanding involuntary unemployment is the inflexibility of wages in the face of economic shocks. The same situation is in Pakistan, inflexibility arises because of costs involved in administering the compensation system.
The upward creep in the natural rate arises mainly because of demographic trends particularly the higher proportion of teenagers in the labour force. In addition, government policies are also increasing unemployment rate i.e. Golden Shake Hand, ban on jobs increasing unemployment rate.