By Mehmood-Ul-Hassan Khan
The government is seriously considering of lowering GDP of 6.5 or 7 per cent and has approved to raise prices of petroleum products which will be gradually increase. The increase in utility bills is also in offing. The government has also reviewed the budget targets for the current fiscal year 2007-08.
The ongoing severe energy crisis has darkened the future prospects of industries as well as people. The LSM is on the decline and ongoing energy crisis will add miseries to the problem. Serious energy shortage, food crisis, inflation, trade deficit, current account deficit and high oil prices in the international markets are supposed to emerge a major risk to the macro-economy. The government estimated power shortage to remain in the range of 1000-2000 mw but it has already touched 3600 mw which has increased the worries of the government. The economy is being running at a 30 per cent energy shortage.
According to the Federal Bureau of Statistics (FBS), Pakistan’s oil import bill reached $3.768 billion which is 14.75 per cent higher from the $3.284 billion last year. The country’s oil import bill is expected at around $10 billion by the end June 2008, which will create problems in the balance of payments for the government and that the new elected government will definitely face this difficulty. It showed that share of oil in total import bill reached 26 per cent during the period under review. On a monthly basis, the import bill of oil has increased by over 39 per cent in November 2007. It indicates an upward trend in the oil import bill which may escalate in the months ahead. Official figures showed that the break-up of the oil import bill showed that the crude oil increased by 12.63 per cent to $1.819 billion in July-November of the current fiscal year to $1.615 billion of last year.
It is estimated that the wheat imports during the current fiscal year of about 2 million tons will be an extra burden of more than $1 billion on the national exchequer. Wheat inflation in Pakistan has been in the double digits mainly as a result of drought in Australia which is one of the top three exporters of the grain. This is driving up global prices for the commodity by 40 per cent last year as the world’s stockpiles fell towards a 26-year low. Local investors of commodity trade are fast moving out of the business. Sugar, edible oil, pulses, rice, milk and eggs are already costly and the prices of many of these items is going further up as the political situation is unstable.
Two of three kharif crops i.e. cotton and rice has not been up to the mark. It is predicted that three million bales of cotton will have to be imported. It would push up the import bill further and would also increase the production cost. Rice production is below target and is already being sold at a higher price. This may cause a spur in the import demand for goods and the import bill at the end of June 2008 may touch $36 to $37 billion. The trade deficit by June may swell over $15 billion and it may cross to $16 or even $17 billion. With cotton production expected to decline by 11 per cent in FY-08, coupled with a wheat crop to post a stagnant to negative growth, real GDP growth for FY-08 could end up much lower than the government target of 7.2 per cent.
The mantra of gross root devolution, people’s participation in decision making, trickle down effects, and self-reliance magnetism are loosing its importance, scope and utility.
It seems that the government has now fully realised its ambitions of the tax collection target for the current fiscal year i.e. Rs1.25 trillion. After the demise of Benazir Bhutto the cumulative outflow reached $37.163 million, leaving only $2.594 million invested. According to the SBP (January 2008) USA, and UK investors withdrew $13.3 million from the equity market on January 8. In the current fiscal year, US investors pulled out $1.183 billion, British investors $885 million, Swiss investors $56 million, Sri Lankan investors $63 million, Hong Kong investors $188 million and Australian investors $48 million, the total foreign investment comes to $2.169 billion during July-December 2007-08 instead of $3.184 billion in the same period of last year. The major drop was witnessed in financial business as the FDI fell to $351 million against $517 million and in the power sector where it fell to $34 million from $92 million.
The principal inflationary pressures in the national economy have firmed up in FY-08, with consumer price index inflation rising to 8.7 per cent in November 2007 over a year earlier. Consumer price index (CPI) rose to 9.3 per cent YoY, in October 2007 principally driven by a 14.7 per cent YoY jump in CPI food inflation. Similarly, WPI inflation accelerated to double digits in November 2007.
The ADB issued its latest report “the Asian Water and Development Outlook (ADWO) once again highlighted Pakistan’s water and sanitation woes and suggested to increase the yearly investment in this very important sector up to 1 per cent of GDP. The country has reached the water scarcity threshold of 1,000 cubic meters per person a year and has been ranked among the worst performers in Asia in terms of water use. Pakistan is ranked at the 17th position among 23 developing countries of the region in the index of drinking water adequacy (IDWA). Spending in the sector currently stands at 0.25 per cent of GDP, or 47 times less.
Concluding remarks
It is seemed that highly projected economic blues has been encircled by dark shadows. The economy is faced with many challenges which are food inflation, wheat crisis, declining exports, high widening trade, current account deficits, severe power shortage, looming budget deficit, low literacy rate, paramount political and geo-strategic issues, stagnating health facilities, poverty, unemployment, regional and provincial disparity are the hallmark of our macro-economic sustainability and stability.
Courtesy: The News
4 Responses to “Challenges currently facing Pakistan economy”
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the whole system is corupt we need to made some reforms on our scales indiviualy.
Patriotism of Pakistanis could be tested anywhere in the world by asking them to help their country in rainy days but what about super class of people (richest feudal, industrialists, drug lords and above all the politicians who successfully run the highly profitable business of politics in the Pakistan. An estimated rate of profit in Pakistani politics is 1000 to million per cent; details can be calculated by politicians increasing wealth. Majority of Pakistanis living abroad are labor class and highly skilled professional. Nobody gives them money for nothing. They have to work hard for it. Some of them are businessmen who also work very hard to earn their fortune. There is no favor or nepotism in open markets of the world. After all these hard work they should give money to the country because few people of super class have taken country wealth abroad. I have lived and worked in Middle East and visited Europe and now living in USA for last 10 years, I found average Pakistan more patriotic that upper class of the country. We are ready to come forward again and will help/ invest in the country but this upper class should be stopped to taking national wealth abroad and participate accordingly in saving and investing in the country. At present two richest group of politician in power, they should provide the biggest share instead of going for begging to the rich nations. The richest nations are not rich by begging but by hard work. The upper class should go and observe how hard Chinese are working, come to USA and observe how people work and live here. The government of Pakistan should immediately issue foreign currency investment bond offering good rate of return still better than IMF and World Bank, We Pakistanis abroad will buy with our savings and is a great help. The bonds should be guaranteed by international authorities the editor of Pakistan Times is a talented lady who invite us to write these comments. Her services are highly appreciated by Pakistanis living abroad. Pray for the country where majority population is helpless in front of few exploiters of supper class of rich politicians and defense forces have no choice but to defend them in the system. KHWAJA AFTAB ALI, Advocate & I.P. Attorney …..pip.law@hotmail.com
America is the biggest challenge for pakistan
The principal inflationary pressures in the national economy have firmed up in FY-08, with consumer price index inflation rising to 8.7 per cent in November 2007 over a year earlier. Consumer price index (CPI) rose to 9.3 per cent YoY, in October 2007 principally driven by a 14.7 per cent YoY jump in CPI food inflation. Similarly, WPI inflation accelerated to double digits in November 2007.
The ADB issued its latest report “the Asian Water and Development Outlook (ADWO) once again highlighted Pakistan’s water and sanitation woes and suggested to increase the yearly investment in this very important sector up to 1 per cent of GDP. The country has reached the water scarcity threshold of 1,000 cubic meters per person a year and has been ranked among the worst performers in Asia in terms of water use. Pakistan is ranked at the 17th position among 23 developing countries of the region in the index of drinking water adequacy (IDWA). Spending in the sector currently stands at 0.25 per cent of GDP, or 47 times less.
Concluding remarks
It is seemed that highly projected economic blues has been encircled by dark shadows. The economy is faced with many challenges which are food inflation, wheat crisis, declining exports, high widening trade, current account deficits, severe power shortage, looming budget deficit, low literacy rate, paramount political and geo-strategic issues, stagnating health facilities, poverty, unemployment, regional and provincial disparity are the hallmark of our macro-economic sustainability and stability.
Courtesy: The News