Factors Impacting On Pakistan

Economy
Introduction
The economy of the country plays a vital role in international level. The economy of Pakistan is the 26th
largest in the world in terms of purchasing power parity (PPP), and 44th largest in terms of nominal GDP

Economics Of Pakistan Page 1



TERM PROJECT REPORT ON
FACTORS IMPACTING PAKISTANS ECONOMY


Submitted By: Shahbaz Qureshi & Lala Rukh
Submitted To: Miss Nabila
Program: 3.5 Years
Title: Term Project Report







Economics Of Pakistan Page 2

TABLE OF CONTENTS


S.no Particulars Page no
1 Introduction 3
2 Factors Effecting Pakistans Economy 4
3 Economic Factors 4
4 Demographic Factors 9
5 Technological Factors 10
6 Social & Cultural Obstacles 10
7 Political & Administrative Obstacles 13
8 Comparison of Economies 16-17
9 Conclusion 18
10 Bibliography 19
Economics Of Pakistan Page 3

INTRODUCTION

The economy of the country plays a vital role in international level. The economy of Pakistan is
the 26th largest in the world in terms of purchasing power parity (PPP), and 44th largest in terms
of nominal GDP. However as Pakistan has a population of over 183 million (the world's
6th-largest), thus GDP per capita is $4,141 ranking 140th in the world. Pakistan is a rapidly
developing country, however, after decades of war and social instability and serious deficiencies
in basic services such as railway transportation and electric power generation

FACTORS EFFECTING PAKISTANS ECONOMY

Economic Factors
1. Low Per Capita Income
The developing countries are characterized by low per-capita income. Per-capita income is low
due to two factors i.e. high population growth and low real national income. People living in
developing countries are poor because their per-capita income is low as Poverty reflected by low
per-Capita income. The effect of low per capita income, it increases the poverty in country and
saving are almost drop to zero on the other hand the consumption is high to fulfill their basic
needs. According to World Bank recent survey on per capita income they ranked as
China 83

Indian. 140

Pakistan.. 143

The per capita income of Pakistan according to World Bank 1,307 US $

China..6,747

India1,507

Pakistan..1,307
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Per capita income comparison between Pakistan, China and India



2. Shortage of Capital
It is also an-important characteristic of developing countries they have the shortage of Capital.
The capital is called, blood of economy, so the countries having shortage of capital remain
backward and poor. Pakistan capital is low in relation to their population. Deficiency of capital is
due to low productivity, low income, low saving's, low investment, foreign debt, and adoption of
consumption. Due to shortage of capital there is low investment, due to low investment the
development of countrys economy is down and no developing in economy.
3. Foreign Debt Burden
Almost all the developing countries have to rely on foreign recourses because these, Pakistan do
not have so much domestic resources to fill their internal gap (S I) an external gap (X M)
So, dependence on foreign economic loans has increased to increase the pace of economic
development. But the volume of debt and debt servicing is increasing quickly. In Pakistan, the
liability of foreign debt and debt servicing increased manifold. Every Pakistani man, woman and
child owes over Rs57,000 to foreign and domestic lenders, which is approximately Rs22,000
more than the per head level when the current government took over. Due under the of debt
Pakistans economy is not growing rapidly due to debt the development of country is not
affected and on the other hand Pakistan is also under pressure the other foreign countries.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
China India Pakistan
Per-capita income
Per-capita income
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4. Extreme Dependence on Agriculture
In Pakistan majority of people live and work in rural area. Pakistan is primarily agricultural. A
great majority of population normal between 60 to 70 percent is engaged in agriculture and allied
occupations. This extreme dependence on agriculture is due the fact that industrial sector has not
grown up properly due to lack of investment. This major occupation of agriculture backward as
well because of primitive technologies, poor organization Emil irrigation facilities etc. therefore
farmers live at a subsistence level. In Pakistan people live 65% in rural areas and 35%-in urban
areas. Due to lack of technology and old techniques our agriculture sectors is facing decline due
to this decline Pakistans economy is also declining. We also waste our fertile land and heavy
portion of budget. Pakistan is one of the world's largest producers and suppliers of the following
according to the different sources i.e. Food and Agriculture Organization of The United Nations
and FAOSTAT given here with ranking:
Chickpea (2nd)
Apricot (6th)
Cotton (4th)
Milk (5th)
Date Palm (5th)
Sugarcane (5th)
Onion (7th)
Kinnow, mandarin oranges, clementine (6th)
Mango (4th)
Wheat (7th)
Rice (14th)
Pakistan ranks eighth worldwide in farm output, according to the List of countries by GDP sector
composition king. Now a days Pakistans agriculture faced decline.
5. UnderUtilization of Natural Resources
Natural resources play an important role in the development of a country. Natural resources
mean all the' material and forces under and above the land with which nature has blessed any
country. These countries are not lacking in natural resources but in fact, natural resources are
under-utilized, un-utilized or mis-utilized in -: countries. So, their problem is that these resources
are not properly utilized due to lack of capital, old techniques of production, sluggish nature of
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the people and small size of markets. In Pakistan, cultivable land is being wasted due to limited
irrigation facilities. The proportion of forests is just 5.2% while it should be 25%. Natural gas is
used inefficiently. According to Japanese, , Pakistanis burn their silver to bake their bread.
6. Unemployment
High rate of unemployment is another prominent characteristic of the develop.no countries.
High growth rate of population, spread of education, urbanization etc. la-;, the causes of
unemployment. The problem of unemployment is getting severe i'," these countries and leads
towards terrorism, robberies and kidnappings Unemployment ratio varies. From 25% to 35% in
these countries. Disguised unemployed in Pakistan is 14 % to 20%.

One of the biggest tragedy of Pakistan is un employment the rate of unemployment rate of
Pakistan increases very rapidly due to lack of jobs and development the directly effect on
Pakistan economy due unemployment the rate of crime and terrorism increases and also
decreases in foreign investments.
7: Low Level of Productivity
It has been observed that in Pakistans productivity of factors of production (especially labor) is
very low as compared with developed countries, Due to low labor productivity, Pakistan is
economically backward. There are many factors which are responsible of low labor productivity
i.e. immobility of labor due to joint family system, lacking the of self-improvement, sluggish,
less hardworking, shrink work etc., low labor productivity results in low income. Due to low
income our saving is zero and due this our investment is also low which causes the decline in
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economy growth. Pakistan facing this factor due to one of the major crises power resources like
electricity.
8. Unproduction Utilization of Resources
In Pakistan, there is shortage of capital as national savings are very low. These inadequate
saving are mostly used for unproductive purposes like for military expenditures; debt servicing,
subsidies, bureaucracy etc. These non-developments, expenditures do not increase the productive
capacity of economy. Due to this expenditures our one of the major part of budget is wasted on
these Unproduction utilization so these expenses effects our economy and also decreases our
economy growth .
9: Export of Primary Goods
Traditionally, Pakistans export primary goods or raw materials an import final goods and
machinery. The following table shows some facts about Ill matter:
Country Commodity Export Earnings
Iran Cotton 90%
Cuba Sugar 90%
Pakistan Cotton 55%

Nature of export earnings of developing countries remains prey to fluctuations because prices of
their exports are low. in the .world markets. So they have to face foreign exchange gap and
saving-investment gap. Due to this we paid a handsome amount in dollars which badly effect
our economy and our foreign reserve on the other hand we also start depending on other
countries.
10: Unsuited Investment Decisions
Resources available in Pakistan are usually invested in those projects that are unsuited for them.
In energy is produced by hydel projects but solar and nuclear energy is very cheap. In the same
way, furnace oil is used to produce electricity rather gas. Due to this we import heavy amount of
oil and gas which disturb our reserves and we face the burden of foreign debts which caused the
declined in economy growth.

11. Market Imperfections
Market imperfections exist when demand and supply forces do not work properly. Market
imperfections are also present in all developing countries. Market imperfections emerge due to
factor immobility, price rigidity, ignorance of market conditions etc.
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12. Poor Consumption Pattern
The low level of income in Pakistan is reflected in their low level of lying. Major part of their
income is spent on necessaries of life particularly on food items. They are too poor to afford
comforts and luxuries. The proportion of expenditure on housing and clothing is also very
small.so they always trying to full fill their needs and want and there is no savings and due to this
no investment and no economy growth.
14. Deficit in Balance
Balance of payment (BOP) is a country's record of external trade with the rest of the world
during a year. Balance of payment almost in all developing countries is in deficit because the
value of exports is less then value of imports. Pakistan balance of payment is unfavorable. In
2013 our balance of payment is also unfavorable due to war against terrorism, energy crises and
other factors which hits Pakistans economy very badly and caused un employment poverty or
other problems
TABLE OF BALANCE OF PAYMENT
Fiscal
Year Situation Reason
1950-51 Favorable Due to the Korean War (Rs. 578.0 Core)
1954-55 Favorable
Due to Devaluation and restrictions on imports (Rs.
09.9 Core)
1955-56 Favorable Due to 20% increase in exports
1958-59 Favorable
Bonus Vouchers Scheme and Restrictions on
Imports
1959-60 Favorable
Bonus Vouchers Scheme and Restrictions on
Imports
1965-66 Unfavorable Deficit due to war against India
2007-08 Unfavorable Deficit ($ 16.8 billion)
2008-09 Unfavorable Deficit ($ 12.72 billion)
2009-10 Unfavorable Deficit ($ 10.945 billion)
2010-11 Unfavorable Deficit ($ 8.3 billion)
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Demographic Factors
17. High Growth Rate of Population
An important characteristic of the developing countries is high growth rate e population. Growth
rate of population is determined by birth rate; death rate or migration. Due to control of
infectious diseases and improved health facilities, death rate is declining and birth rate is rising.
Dependent population is more in the countries as the ratio of children below the age of 15 years
is 40% so the active labor force (working population) has to support them. Working population
in Pakistani 30% while in developed countries it is from 60 % to 70%. Rapid growth rate of
population causes pressure on land, low per-capita income, shortage of food ,development is
eaten up by rising population consequently no improvement' in standard of living.
18. Malnutrition
: Many people in developing countries fight a constant battle against malnutrition, diseases and
ill health. In poor countries due to low productivity and low level of income, there is poor
nutrition in childhood which often restricts the mental and physical growth of individuals.
19. Qualitative Aspect of Population
People in less developed countries in general are lazy and shirked work due to weather,
illiteracy, poor training and backward institutional framework. There is no willingness to work
and the people do not have spirit to develop.
20, Illiteracy
The low levels of living in less developed countries are also attributed to the poor educational
facilities. These countries do not allocate so many funds to improve their education. So, human
capital formation is not done as required to develop.
21. Lack of Initiative and Drive
In developing Countries, there are very few people who can be expressed as daring leadership is
found and dynamic entrepreneurs. No dynamic Producers are risk averter and lack initiate due to
illiteracy, lack of capital, small, size of markets, lack of infrastructure facility* shortage of loan
facilities, ignorance of market opportunities and technological backwardness. In these countries,
they have captured whole market. They have monopolies in pesticides, medicine, equipments
automobiles and computer technology. They change higher prices of their goods, and reap
abnormal profits.


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22. Lack of Skilled Workers
The quality of population is measured by its skills, education and health which are poor in these
countries. These have shortage of skilled workers like .engineers, technicians, managers, scientist
etc. Due to unskilled and illiterate workers unemployment problem arises.
Technological Factors
23. Outdated Technology
People cannot use modern technology in developing countries due to many factors. These
include lack of capital, unskilled and trailed workers, absence- of technical know-how, shortage
of foreign exchange, lack of absorption capacity and lack of labor intensive techniques of
production.
24. Inadequate Infrastructure
Means of transportation, communication and power are called infrastructure of the economy. In
developing countries there is inadequate infrastructure to meet the requirements.
25. Energy Crisis
Self-sufficiency in energy is the assurance to excel any countrys economy. However, in
Pakistan lack of planning has resulted in severe energy crisis including load shedding of
electricity & gas for domestic and industrial sector. This situation has greatly effected the
production capacities of units thus effecting the economy of Pakistan.
Social and Cultural Obstacles
The socio-cultural attitudes of the people also stand in the way of economic development of our
country as per following specifics
.26. Lack of Education:
In Pakistan, more than 39% of the people are illiterate. They are ignorant of the development
taking place in their own country as well as in the world. Even literate people do not possess the
knowledge or formal understanding of economics to contribute in economic development.
27. High Growth Rate of Population
An important characteristic of the developing countries is high growth rate population. Growth
rate of population is determined by birth rate; death rate or migration. Due to control of
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infectious diseases and improved health facilities, death rate is declining and birth rate is rising.
Dependent population is more in the countries as the ratio of children below the age of 15 years
is 40% so the active labor force (working population) has to support them. Working population
in Pakistani 30% while in developed countries it is from 60 % to 70%. Rapid growth rate of
population causes pressure on land, low per-capita income, shortage of food ,development is
eaten up by rising population consequently no improvement' in standard of living.
28. Conservative Approach
The people are mostly conservative in their habits. They feel pride in the native culture and are
generally not receptive to foreign methods of production.
29. Lack of Initiative
People lack self-confidence and initiative. The joint family system, though on the decline, has
also killed the sense of initiative and the incentive to work.
30. Caste System & Occupational Classifications
The caste system functioning mostly in terms of occupation tailors, carpenters, goldsmiths, etc
restrict occupational and geographical mobility. The occupational classification which is mostly
village centered impede the economic development.
31. Religious Beliefs
The religious beliefs of the people condemning the accumulation of wealth, dependence upon
fate and the will of God only are also obstacles to economic growth. People forget here that God
has also said, ''Your duty is to do and then put the result in the hands of God.''
32. Reduction in Domestic Savings
The unnecessary expenditure on marriages, deaths, births, litigations, class pride etc. has reduced
domestic saving and has adversely affected economic progress.


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33. Social Taboos
About half of the population comprises women folk. Our social taboos and customs prevent them
from working and improving, the standard of living and contributing in economic growth.
34, Brain Drain
The emigration of highly educated and skilled professionals and technical manpower from the
developing to developed countries is called brain drain. It is most striking feature in almost all
developing countries that, professional and skilled personnel (doctors, engineers, charted
accountants and economists) are moving to developed countries for the sake of higher salaries
and elite life style. They are unsatisfied with their low salaries and martial comforts.






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Political and Administrative Obstacles
The impact of political and administrative factors on the development of economy of Pakistan is
stated as per following specifics:-
35. Political Stability

For accelerating the rate of economic development, there should be political stability in the
country. If there is a change in the government set up due to elections, or of dictatorship, the
planning job done by the previous government should not be altered altogether. In Pakistan,
since its inception, there are rapid changes in governments. These changes result in change in
economic policies which deter the confidence of investors especially foreign investors.

36. Law & Order Situation

Stable law and order situation is a must to encourage economic growth and to build the
confidence of investors. Various untoward incidents of bomb explosions at the public places,
perpetration of suicide bombings by extremist elements bathed in religion and dogmatism and
firing of bullets on the innocent civilians by the miscreants bear out that volatile law and order
situation is gravely affecting the economic fabric of Pakistan

37. Feeble Planning Machinery

The planning machinery and all others involved in administration should be competent
sympathetic and honest in the performance of the duties assigned to them. Each government
which came into power condemned the planning work done by the previous governments. They
framed their own plans, formulated their own strategies of development and left the claim
without achieving the targets of the Plans. The history of planning shows that with the exception
of the Faith Five Year Plan, all other Plans have failed to achieve their targets. The overall line of
the planning machinery in Pakistan is bureaucratic rather than professional.


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38. Weak Administrative Working

The administration working in various departments is generally weak, incompetent and
unsympathetic. Self-interest is dominating over national interest which is a great barrier to
economic development. The appointment of important department heads is made on political
influences and affiliations which results in incompetency.

39. Indistinct Economic System

Another administrative obstacle line the way of economic development is that we have not so far
been able to decide about the nature of economic system to be adopted in Pakistan. Mixed
economy, Socialistic economy. Islamic economy all are talked about but nothing concrete has
actually been practiced. There should be clarity on this fundamental issue so that planning is
drawn up according to the socio-economic objective of that system and a path of development
laid out.










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COMPARISON OF ECONOMIES : PAKISTAN VS INDIA VS CHINA
INDICATORS PAKISTAN INDIA CHINA
Rank in World
(Nominal)
47 9 2
Growth rate % 3.7 6.5 9.5
GDP Size (Nominal) $233 billion $1.676 trillion $7.74 trillion
Official Center Islamabad Mumbai Pudong in Shanghai
Currency 1 Pakistani Rupee (PKR) 1 Indian Rupee (INR) ( 1 Pakistani Rupee (PKR)
Financial Year July 1 June 30

1 April 31 March

01 January to 31
December
Total Revenue $26.7 billion $218.7 billion $1.149 trillion
Total Expenditure $39.9 billion $311.2 billion $1.27 trillion
Public Debts as % of
GDP
58.2 62.43 43.5
Budget Deficit 5.50% 5.90% -
Rate of Inflation (CPI)
(%)
16.17 7.55 5.4
Gross External Debts $60.3billion
$267.10
$406.6billion
billion
Economic Aid $ 5.0 billion
$2.11
$1.12 per capita
Billion
FDI Stock
$36.50
$100 billion
Billion
Total Export
$20.47 $303.70
$1.897 trillion
billion Billion
Main Export Partners
US 15.8%, UAE 7.9%,
China 7.3%, UK 4.3%,
Germany 4.2%
US 12.6%, UAE 12.2%,
China 8.1%, Hong Kong
4.1%
US 20.03%, Hong Kong
12.03%, Japan 8.32%,
South Korea 4.55%,
Germany 4.27%
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INDICATORS PAKISTAN INDIA CHINA
Total Imports $33.15billion $488.6billion $1.664 trillion
Main Import Partners
China 17.9%, Saudi
Arabia 10.7%, UAE
10.6%, Kuwait 5.5%, US
4.9%, Malaysia 4.8%
China 12.4%, UAE
6.5%, Saudi Arabia
5.8%, US 5.7%,
Australia 4.5%
Japan 12.27%, Hong
Kong 10.06%, South
Korea 9.04%, US 7.66%,
Taiwan 6.84%, Germany
5.54%
Forex Reserves $17.21 billion $295.8billion $3.20 trillion
COMMODITY
SECTORS

Agriculture to GDP (%) 21.2 18.1 9.6
Labour force in
Agriculture
45.00% 52.00% 39.50%
Labour Force in
services Sector (%)
36.6 34 33.2
Services to GDP (%) 53.4 55.6 43.6
Industrial Sectors to
GDP (%)
25.4 26.3 46.8
Labour Force in
industrial sector (%)
13.7 14 27.2
Ease of doing business
rank
105th 132nd 91st
Population 180.71 million 11892 million 13367 million
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INDICATORS PAKISTAN INDIA CHINA
Population below
poverty line %
24 37

Average Gross Salary
($ Yearly)
1,000 1,330
Labour Force (Million) 55.77 million 487.6 million 780 million
Un-employment % 6.2 9.8 4.10












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CONCLUSION
Pakistan inherited an extremely narrow economic base at the time of Partition in 1947. Since
then, the Government of Pakistan is making rigorous efforts to build up infrastructure and
productive potential of the economy through the process of development planning. If the
economic performance since 1947 is evaluated, the overall results are not very encouraging. The
per capita income at market price is very low as compared to other countries like India & China.
The major portion of the population is just above the poverty line and the disturbing feature of
the economy is that whatever economic growth has been achieved, it is accompanied by unequal
distribution of wealth. This has created social tension in the country and has slowed down the
rate of economic growth. Pakistan has devised various strategies to quicken the tempo of
economic development but it has not been able to break the vicious circle of poverty and enter
into take off stage. The main obstacles which have affected the rate of growth in Pakistan include
economic factors, social & cultural aspects, administrative & political factors and many more. In
the race of economic growth, India & China- our next door neighbors are galloping due to
political stability, consistent policies and strong administrative & planning setups. In Pakistan,
poor law & order situation due to war against terrorism and energy crisis are further aggravating
economic problems of the country. The need of the hour is to pay full attention to eradicate all
factors contributing to economic demise of Pakistan, strengthen the financial institutions of the
country and declare an economic emergency to transform Pakistan in to a formidable economic
giant.






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BIBLIOGRAPHY

http://www.worldbank.org/en/country/china/overview
http://saif113sb.hubpages.com/hub/OBSTACLES-TO-ECONOMIC-DEVELOPMENT-IN-
PAKISTAN
Article on A lot of factors affecting Pakistans Economy- The Nation dated 21 June 2013
www.google.com
www.googlescholar.com