Pakistan a frontline state has potential and
prospects to make the country self-sustained in macroeconomic
development
By
Syed Jamil Ahmed Rizvi, FCMA
Nov
19 - 25, 2001
Government of Pakistan, Finance Division, Economic
Advisor's Wing, Islamabad released Economic Survey 2000-2001 on June
16, 2001. Some of the highlights of this survey are as follows:
Pakistan's growth performance during 2000-01 was
adversely affected by the worst drought in the country's history.
There are 58 out of 106 districts in the country facing drought which
indicates that around 55% of the area is causing havoc in agriculture
sector.
GROWTH AND INVESTMENT
Growth Trends: Pakistan's GDP at constant factor
cost of 1980-81 registered at a value of Rs. 666,115 million for the
year 2000-01 while it was Rs. 480,413 million in the year 1991-92.
This indicates cummulative increase by 38% during the last decade
which indicates that Pakistan's economy had been growing at an average
rate of 3.8% annually. Real GDP was targeted to grow by 4.5% in
2000-01, which grew by 2.6% as against 3.9% of last year.
Real GDP at market prices grew by 3.3% as against
4.4% last year. After adding indirect taxes and subsidies in GDP at
constant factor cost of 1980-81, the GNP real per capita at constant
factor costs increased by 0.1% and at current factor cost increased by
6.3%.
The growth rate of 2.6 % is amongst the second
lowest growth rates since the last decade in which the lowest was 1.9%
in 1996-97 while the highest rate of 7.7% was achieved in 1991-92.
|
TABLE
A: |
|
GDP & GNP |
At Factor Cost of
1980-81 |
(Rs. million) |
| |
1998-99 |
1999-00 |
2000-01 |
% Change 00 |
% Change
01 |
|
GDP (FC) |
625233 |
649540 |
666115 |
3.9 |
2.6 |
|
GDP (MP) |
669235 |
698902 |
722235 |
4.4 |
3.3 |
|
GNP (FC) |
620031 |
641685 |
657044 |
3.5 |
2.4 |
|
GNP (MP) |
664033 |
691047 |
713164 |
4.1 |
3.2 |
|
Population |
133.01 |
136.01 |
139.08 |
2.3 |
2.3 |
|
GNP (FC) per Capita |
4662 |
4718 |
4724 |
1.2 |
0.1 |
|
GNP (MP) per Capita |
4992 |
5081 |
5128 |
1.8 |
0.9 |
|
GDP (FC) per Capita |
4701 |
4776 |
4789 |
1.6 |
0.3 |
|
GDP (MP) per Capita |
5031 |
5139 |
5193 |
2.1 |
1.1 |
|
Source: Economic Survey
2000-01 Table 1.1, Page 9 of Statistical Appendix |
|
TABLE
B: |
|
GROSS
NATIONAL PRODUCT AT CURRENT MARKET PRICES |
| |
1998-99 |
1999-00 |
2000-01 |
% Change 00 |
% Change
01 |
|
GDP(MP) (Rs million) |
2938379 |
3182822 |
3472149 |
8.4 |
9.1 |
|
Reduction in net factor income |
. |
. |
. |
. |
. |
|
from abroad (Rs million) |
25547 |
44699 |
60816 |
75.0 |
36.0 |
|
GNP (MP) (Rs million) |
2912832 |
3138123 |
3411333 |
7.7 |
8.7 |
|
Population (million) |
133.01 |
136.01 |
139.08 |
2.3 |
2.3 |
|
Per Capita Income at (MP) Rs. |
21899 |
23073 |
24528 |
5.4 |
6.3 |
|
Source: Economic Survey
2000-01 Table 1.5, Page 13 of Statistical Appendix |
|
TABLE
C: |
|
TOTAL
INVESTMENTS TO GDP FOR 5 YEARS (Rs. Billion) |
| . |
External
Resources
(net) |
National
Saving
|
Total
Investment
|
GDP at
Current
Mrkt Price |
% of Total
Investment
to GDP(MP) |
|
1996-97 |
149.9 |
285.2 |
435.1 |
2457.4 |
17.7% |
|
1997-98 |
82.9 |
391.3 |
474.2 |
2677.7 |
17.7% |
|
1998-99 |
121.5 |
335.9 |
457.4 |
2938.4 |
15.5% |
|
1999-00 |
59.0 |
437.8 |
496.8 |
3182.8 |
15.6% |
|
2000-01 |
69.4 |
439.9 |
509.3 |
3472.1 |
14.7% |
|
Source: Economic Survey
2000-01 Table 1.9 A, Page 10, Table 1.8 Page 9, Table 1.5, Page
13 of Statistical Appendix |
Total Investment for 2000-01 fell to 14.7% of Gross
Domestic Product as compared to the investment ratio 17.7% of 1996-97.
TOTAL INVESTMENT AND GDP (MP)
AGRICULTURE
Growth target in Agriculture was 2.6% in 2000-01.
Cummulative Agricultural sectoral share in total GDP at current prices
for the previous 10 years (1990-91 to 1999-00) worked out to an
average of 26.25%. It employs 44% of workforce. Due to shortages of
irrigation water, agriculture was targeted to grow by 2.6% in 2000-01
as against a growth of 6.1% achieved in 1999-2000.
|
TABLE
D: |
|
PRODUCTION OF
MAJOR CROPS (000) TONNES |
| |
1999-2000 |
2000-01(Jul-Mar) |
% Change |
|
Wheat |
21079 |
18535 |
(12.1) |
|
Cotton (000 bales) |
11240 |
10732 |
(4.5) |
|
Rice |
5156 |
4803 |
(6.8) |
|
Sugarcane |
46333 |
43608 |
(5.9) |
|
Source: Economic Survey
2000-01 Table 2.4, Page 24 of Statistical Appendix
%
change in bracket indicates decline in production |
|
TABLE E: |
|
AGRICULTURAL
SECTORAL GROSS FIXED CAPITAL FORMATION (GFCF) At Current
Market Prices (Rs. million) |
| |
1998-99 |
1999-00 |
2000-01 |
% Change
00 |
% Change
01 |
|
Total Fixed Investment in
Agriculture |
32442 |
36455 |
35444 |
12.4 |
(2.8) |
|
Private Investment in Agriculture |
26968 |
33334 |
28084 |
23.6 |
(15.7) |
|
Public Investment in Agriculture |
5474 |
3121 |
7360 |
(43.0) |
135.8 |
|
Source: Economic
Survey 2000-01 Table 1.7, Page 16 & 17 of Statistical
Appendix |
Fixed investment in agriculture sector declined by
2.8 % during 2000-01 as against an increase of 12.4 % in 1999-00.
There was a sharp change in the behaviour of the private and public
investment during the last two years in agricultue sector. Private
investment declined sharply by 15.7 % in 2000-01 as against an
increase by 23.6 % in 1999-00. Public investment increased sharply by
135.8 % in 2000-01 as against a decline by 43.0 % in 1999-00. Water
availability declined by 27.2 % during 2000-01. There was a further
decline of 27.6 % in credit disbursement to agriculture sector in
2000-01, as against a decline of 8.0 % last year. Yields per hectare
of most of the major crops such as wheat, rice, sugarcane, gram and
cotton declined during the year. The only growth was shown in maize
crop where the yield per hectare increased by 4.8 % during 2000-01.
|
TABLE
F: |
|
BASIC
DATA ON AGRICULTURE |
| |
1998-99 |
1999-00 |
2000-01
(Jul-Mar) |
%
Change
00 |
%
Change
01 |
|
Water Availability (MAF) |
133.78 |
133.28 |
97.01 |
(0.37) |
(27.2) |
|
Fertilizer Off-take (000-N/T) |
2583.80 |
2833.40 |
2376.91 |
9.7 |
(16.1) |
|
Credit Disbursed (Rs. Million) |
43683.65 |
40188.63 |
29101.41 |
(8.0) |
(27.6) |
|
Source:
Economic Survey 2000-01 Table 2.1 B, Page 22 of Statistical
Appendix |
|
TABLE
G: |
|
YIELD PER
HECTARE OF MAJOR AGRICULTURAL CROPS (Kg/Hectare) |
| . |
1998-99 |
1999-00 |
2000-01 |
% Change
00 |
% Change
01 |
|
Wheat |
2170 |
2491 |
2278 |
14.8 |
(8.6) |
|
Rice |
1928 |
2050 |
2021 |
6.3 |
(1.4) |
|
Sugarcane |
47784 |
45883 |
45378 |
(4.0) |
(1.1) |
|
Maize |
1730 |
1708 |
1790 |
(1.3) |
4.8 |
|
Gram |
648 |
581 |
512 |
(10.3) |
(11.9) |
|
Cotton |
512 |
641 |
624 |
25.1 |
(2.7) |
|
Source: Economic Survey
2000-01 Table 2.5, Page 25 of Statistical Appendix |
MANUFACTURING
Growth target in manufacturing sector was 5.9% in
2000-01 while the achieved rate was 7.1% as against last year's
revised estimates of 1.4%. The manufacturing sector has witnessed a
sharp acceleration in growth during the current fiscal year mainly due
to the hard fact that Pakistan industry has learned not only to
survive in difficult and tense conditions but also achieve substantial
growth despite the falling investment. This is a dangerous phenomena
and further growth in this sector will be very difficult to maintain
on permanent basis.
|
TABLE H: |
|
SHARE OF
LARGE SCALE & SMALL SCALE MANUFACTURING at CFC of
1980-81 (Rs million) |
| . |
1999-00
Value at FC |
2000-01
Value at FC |
% Share |
% change |
|
Large Scale |
75,578 |
81,475 |
70 |
7.8 |
|
Small Scale |
32,706 |
34,443 |
30 |
5.3 |
|
Total |
108,284 |
115,918 |
100 |
7.1 |
|
Source:
Economic Survey 2000-01 Table 1.1, Page 9 of Statistical
Annexure CFC: Constant Factor Cost |
Gross Fixed Capital Formation (GFCF) in private,
public and general government sectors economic activities of
manufacturing sector at current market prices for the year 2000-01 was
Rs. 93,359 million as against the investment of Rs. 103,548 million of
previous year showing a declining trend by around 11%. As mentioned
earlier that strong rebound in industrial production in the persistent
conditions of structural imbalances is a dangerous phenomena likely to
be followed by the condition of stagflation which appear with two
simultaneous occurance of high inflation rates and high labour
unemployment rate. It happens after the cost push inflation and
stagnation in various macro economic sectors.
INCOME DISTRIBUTION AND POVERTY
Income distribution is directly linked to poverty
alleviation. Poverty level in Pakistan was 40% in 1965 which declined
to 22% in 1990. Afterwards it has gone up 30%. The reasons were
slowing down of economic activities and 50% reduction in remittances
from overseas Pakistanis.
In 1991 a 34% of Pakistan's population lived below
the poverty line on $ 1 per day as compared to 8.4%, 17.4%, 15.5%, 18%
of China, Indonesia, Malaysia and Thailand respectively.
According to the Economic Survey 1999-2000, the
number of poor people that could not meet their daily requirements and
fell below the poverty line, has increased from 17.8 million in
1987-88 to 43.9 million in 1998-99 depicting an increase by 146%
during the last decade. It looks that incidence of poverty trends is
moving out of proportion which is totally an unhealthy position.
Relationship of Head count increase of poor as
compared to population increase during the last decade is as follows:
|
TABLE
I: |
|
POVERTY RATE
AS % OF POPULATION |
|
Year |
Total Population
(in million) |
Poverty Rate as
% of Population |
No. of poor people
(in million) |
|
1990-91 |
109.42 |
22.11 |
24.19 |
|
1992-93 |
115.04 |
22.40 |
25.77 |
|
1996-97 |
126.90 |
31.00 |
39.34 |
|
1998-99 |
133.01 |
32.60 |
43.36 |
|
1999-2000 |
136.01 |
33.50 |
45.56 |
|
Source: Economic Survey
2000-01 Table 1.1, Page 9 of Statistical Appendix
Table
4.3, Page 54 of part-I |
Population increased by 26.59 million during the
last decade whereas people living below the poverty line jumped by
21.37 million head count, which is 80% increase in relation with the
population growth during the period with an average annual increase in
population by 2.659 million people while it is 2.137 million increase
in poor head counts.
FISCAL DEVELOPMENT
Fiscal deficit reduced in 2000-01 from Rs. 206.8
billion or 6.5% of GDP to Rs. 185.7 billion or 5.3% of GDP of previous
year. There was a reduction by 10.2% in the overall Fiscal deficit in
2000-01. In the year 2000-01, the budget deficit was financed mostly
by external sources (64.7%) whereas in 1999-00, the deficit was mostly
financed by domestic resources (67.6%). External financing increased
by 79.5% during 2000-01.
|
TABLE
I: |
|
FISCAL
DEFICIT AS % OF GDP (Rs. Billion) |
| . |
1999-00 |
2000-01 |
|
Overall Fiscal Deficit |
206.8 |
185.7 |
|
Interest (Federal) |
245.1 |
237.0 |
|
Development Expenditure |
100.6 |
110.9 |
|
GDP (MP) |
3182.8 |
3472.1 |
|
% Share of deficit in GDP (MP) |
6.5 |
5.3 |
|
External Financing (net) |
66.9 |
120.1 |
|
% of EF in overall deficit |
32.4 |
64.7 |
|
Domestic Financing (non-bank & bank) |
139.9 |
65.6 |
|
% of DF in overall deficit |
67.6 |
35.3 |
|
Source: Economic Survey
2000-01 Table 4.1 Page 43, Table 4.2, Page 45
Table 4.4 Page 49, Table 1.5 Page 13.
EF:
External Financing DF: Domestic Financing |
MONEY AND CREDIT
Targeted expansion of Money Supply (M2) for the
year 2000-01 was Rs. 147 billion financed Rs. 87 billion from domestic
credit and Rs. 60 billion from net foreign assets. Actual expansion in
money supply from July, 2000 to March, 2001 recorded to Rs. 68.3
billion which is 46.5% below the target.
|
TABLE J: |
|
COMPOSITION OF MONEY SUPPLY (Rs.
Million) |
|
Components |
End June
1999 |
End March
2000 |
End March
2001 |
% in
Total |
% change
in 2001 |
|
Supply of M1 |
. |
. |
. |
. |
. |
|
Currency in Circulation |
287717 |
342018 |
385907 |
26.3 |
12.8 |
|
Demand deposits with scheduled banks |
349115 |
381999 |
347380 |
23.7 |
(9.0) |
|
Other deposits with SBP |
6212 |
6391 |
8283 |
0.6 |
29.6 |
|
Total M1 |
643044 |
730408 |
741570 |
50.6 |
1.5 |
|
Add: |
. |
. |
. |
. |
. |
|
Time deposits with Scheduled Banks |
516586 |
541697 |
587844 |
40.0 |
8.5 |
|
Resident Foreign Currency Deposits |
120917 |
75928 |
137345 |
9.4 |
80. |
|
Total Monetary Assets (M2) |
1280547 |
1321033 |
1466759 |
100.0 |
11.0 |
|
Growth Rate (%) |
6.2 |
- |
4.9 |
- |
- |
|
Source: Economic Survey 2000-01, Table 5.1
Page 53 of Statistical Appendix |
Total Money Supply (M2) for 9 months of current
year 2001 recorded to Rs. 1466.759 billion as compared to Rs. 1400.632
billion for the previous full year 2000 resulting growth of 4.9%. In
1999 the growth rate of monetary assets was 6.2%. Currency in
circulation as of 31st March, 2001 being the most liquid form of money
supply constituted 26.3% of money supply compared to its share of
25.9% in the corresponding period of last year (31-03-2001). M1 is a
measure of the money stock that includes only currency and account
balances commonly used in payments for purchases of goods and
services. M2 includes M1 and liquid assets that cannot be used
directly as a medium of exchange but can be converted into checkable
deposits and other components of M1. The sum of M1 and certain near
monies.
MARKET CAPITALIZATION
The market capitalization of ordinary shares in
terms of profit and dividend payouts in the year 1992 was to the tune
of Rs. 218.360 billion while it has been recorded at Rs. 391.860
billion for the year 2000 end June. The increase in this year if
compared with the capitalization of nine years ago, we come to know
that it increased by 79.5% cumulative signifying an average
capitalization by around 9% per annum. Aggregate market capitalization
from July, 2000 to March, 2001 reported at Rs. 328.240 billion as
against Rs. 500.080 billion of corresponding period and Rs. 391.860
billion for the previous year 2000 end June, which indicates a decline
by 16.23%. All of the major sector listed companies in the economy
faced a decline in market capitalization of ordinary shares during
July-Mar (2000-01) as against the corresponding period of last year.
|
TABLE K: |
|
MARKET CAPITALIZATION OF ORDINARY
SHARES (Rs. billion)
|
| . |
2000
July-Mar |
2001
July-Mar |
% Change
01 |
|
Cotton & Other Textiles |
49.48 |
36.51 |
(26.2) |
|
Pharmaceuticals |
74.69 |
46.89 |
(37.2) |
|
Engineering |
1.61 |
1.58 |
(1.9) |
|
Auto & Allied |
10.22 |
7.50 |
(26.6) |
|
Cables & Electric Goods |
2.42 |
2.17 |
(10.3) |
|
Sugar & Allied |
4.32 |
4.08 |
(5.6) |
|
Paper & Board |
4.64 |
4.53 |
(2.4) |
|
Cement |
14.19 |
7.54 |
(46.9) |
|
Fuel & Energy |
125.92 |
77.99 |
(38.1) |
|
Transport & Communication |
129.62 |
70.76 |
(45.4) |
|
Banks & Other Financial Institutions |
47.99 |
35.46 |
(26.1) |
|
Miscellaneous |
34.98 |
33.22 |
(5.0) |
|
Aggregate Market Capitalization |
500.08 |
328.24 |
(34.4) |
|
Source: Economic Survey 2000-01, Table 6.2,
Page 75 of Statistical Appendix
% changes in parentheses represents negative
signs.
|
INFLATION
Inflation rate in Pakistan is caused primarily by
procurement prices, particularly that of wheat, and administered
prices of fuel, gas and electricity. In addition, an increase in
indirect taxes helps aggravate the situation. Prices increased more
than last year's increase in the consumer groups of food, beverages
& tobacco, fuel & light and transport & communications.
While the increase in the prices of other consumer groups was less
than the increase in last year.
|
TABLE K: |
|
CONSUMER PRICE INDEX GROUPWISE
JULY-APRIL BASE YEAR 1990-91= 100 |
| |
JULY-APRIL CPI |
% Change in CPI
|
|
Consumer Groups |
1998-99 |
1999-00 |
2000-01 |
Year (00) |
Year (01) |
|
Food, Beverages & Tobacco |
225.53 |
229.95 |
239.46 |
2.0 |
4.1 |
|
Apparel, Textile & Footwear |
199.09 |
210.62 |
216.70 |
5.8 |
2.9 |
|
House Rent |
207.53 |
216.52 |
223.04 |
4.3 |
3.0 |
|
Fuel & Lighting |
215.83 |
225.49 |
252.73 |
4.5 |
12.1 |
|
Household Furnitures etc |
198.04 |
204.18 |
209.72 |
3.1 |
2.7 |
|
Transport & Communication |
194.06 |
209.14 |
235.86 |
7.8 |
12.8 |
|
Recreation Entertainment & Education |
212.19 |
204.05 |
211.35 |
4.9 |
3.6 |
|
Cleaning, Laundry & Personal Appearance |
215.19 |
224.69 |
229.85 |
5.9 |
2.3 |
|
Medicine |
215.85 |
218.61 |
234.72 |
12.8 |
7.4 |
|
General |
215.27 |
222.60 |
233.03 |
3.4 |
4.7 |
|
Source: Economic Survey 2000-01, Table 7.1,
Page 79 of S.A |
Average estimated inflation in prices based on the
CPI of above consumer groups for the year 2000-01 has been worked out
below 5%, which may be due to tight monetary policy helped by an
efficient movement of commodities throughout the country.
PAKISTAN BALANCE OF TRADE COMPARED WITH BANGLADESH
|
TABLE L: |
|
IMPORTS, EXPORTS AND BALANCE OF
TRADE (US $ MILLION)
|
|
YEAR |
PAKISTAN |
BANGLADESH
|
| . |
IMPORTS |
EXPORTS |
BALANCE |
IMPORTS |
EXPORTS |
BALANCE |
|
1995-96 |
11805 |
8707 |
-3098 |
6880 |
3393 |
-3487 |
|
1996-97 |
11894 |
8320 |
-3574 |
7152 |
3879 |
-3273 |
|
1997-98 |
10118 |
8628 |
-1490 |
7520 |
4486 |
-3034 |
|
1998-99 |
9432 |
7779 |
-1653 |
8007 |
4339 |
-3668 |
|
1999-00 |
10309 |
8569 |
-1740 |
8403 |
4954 |
-3449 |
|
Total- 5 years |
53558 |
42003 |
-11555 |
37962 |
21051 |
-16911 |
|
Annual Average |
10712 |
8401 |
-2311 |
7592 |
4210 |
-3382 |
|
% of Trade Bal |
. |
. |
27.5% |
. |
. |
80.3% |
|
Source: Economic Survey 2000-01, Table 8.4,
Page 91 Bangladesh Bank's monthly publication
of Statistical Appendix "Economic
Trends" for April, 2001
|
PAKISTAN'S BALANCE OF TRADE BANGLADESH'S BALANCE OF
TRADE
Pakistan's Average annual imports for the last
5-years have been worked out to $ 10712 million which are 41% higher
than Bangladesh. Similarly Pakistan's exports of $ 8401 million are
double that of Bangladesh. Consequently there is a vast gap in respect
of Balance of Trade between these two countries. Bangladesh's adverse
balance of trade in term of percentage is around three times higher
than Pakistan.
|
TABLE M: |
|
BALANCE OF PAYMENTS US $ MILLION |
|
Particulars |
1995-96 |
1996-97 |
1997-98 |
1998-99 |
1999-00 |
1999-00
Jul-Mar |
2000-01
Jul-Mar |
|
Imports (f.o.b) |
12015 |
11241 |
10301 |
| | 
