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Introduction:

Pakistan is facing Economic challenges. It shows that our country is in the list of
under developed countries. In the last budget, the government gained 4.3 per cent
economic growth but with gas and load shedding problems they didnt achieve the
targets. So due to lake of experience and knowledge they came in the figure of 2.2
per cent growth which shows almost no growth in the current year. The major
problem in Pakistan is increase in population which is directly effecting our
economic growth. Of course, due to higher rate of population, we should increase
our investments but due to less financial reserves this investment is not possible.
The present rate of GDP is around 14 percent which is lower than the developing
countries. If we want to increase our investments for getting higher growth we
should increase our savings for GDP to at least 20 percent, especially when foreign
investments are not involved.
Causes:
The productivity level is very low in under developed countries as compared to
developed countries. Low level of productivity is due to economic
backwardness of people, lack of skill, illiteracy and ill-training. Pakistan facing
economic problem because of low investment in our country. When the
investment is low in a country then there will be less production and the
government revenue is also becomes lower and lower than the economic
condition becomes unstable. Another factor for bad economic situation is less
number of employees in governmental sectors. Government doesnt hire the
employees so there is a shortage of employees in country. Inflation also cause
the economic instability because the price level rises with a great speed and
there is no control on price of goods. Another factor for economic instability is
lower ratio of profit in businesses in our country. Those business mans who
invest their capital in our country will not earn the profit but they bear loss and
then suddenly then shut down their business from Pakistan. The main factor for
instability is political conditions in Pakistan. Every new day there is political
instability in our country which has bad effect on our economy. Our import is
greater than export so this also have negative effect on our economy.

Conclusion:
Our findings show that excessive reserves of foreign exchange and import capacity
enhanced capital formation in Pakistan. Instability associated with export proceeds
is found insignificant, which did not affect growth. Moreover, it is not pernicious
to capital formation. Besides, the reserves of foreign exchange, gold and import
capacity contributed to the level of output in Pakistan. We have also examined the
two stages of transmission mechanism. The results show that export instability did
not affect imports of capital goods and domestic investment in Pakistan. The
above-cited findings provide insights into the relationship between exports
instability and economic growth. It was found that the international reserves are
important which affect different economic activities; therefore, efforts must be
directed to maintain significant level of reserves. The trade deficit is continuously
met through foreign borrowings. However, imports are important. Major imports of
Pakistan are capital goods, which have direct link with production activities. Thus,
import stability and foreign exchange reserves are very important for sustained
economic growth. Therefore, commercial policies must be focused on the stability
and availability of essential imports and to maintain adequate foreign exchange
reserves.