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PAKISTAN ECONOMY
UNEMPLOYMENT
Unemployment is one of the major problems of Pakistan. It is the root cause
of several other problems. High unemployment results in wastage of
resources and depression of income. And most certainly it also effects the
social and emotional life of a person.
It is very unfortunate but true that searching for statistics regarding the
unemployment rate of Pakistan, it is nearly impossible to find relevant figures
due to a lack of base data and massive governmental tempering of statistics.
In 1955, there was a survey held which tried to give the false impression but
later proved fake. In 1965 a survey was held and it was found that the
economy of Pakistan was most stagnant in the region and a 50% ratio of un-
and underemployed labor to the total working force could be taken as nearer
to reality.
According to labor force survey 2001-02, Pakistan labor force stands at 43.17
million and 3.6 million people were of active labor market, looking for a job.
Recent trend indicates that unemployment rate increased from 7.8% in 2000
to 8.3% in 20002.
However it again fell to 7.7% in 2004.
Reason
There are a number of reasons for unemployment in Pakistan, firstly, there is
a serious mismatch between the jobs demanded by the emerging needs of
the economy and the supply of skills and trained manpower in the country.
While the economy is moving towards sophisticated sectors such as
telecommunications, information technology, oil and gas, financial services,
engineering goods the universities and colleges are turning out hundreds of
thousands of graduates in Arts, Humanities and languages. This mismatch
has created waste and misallocation of resources on one hand and the
shortages of essential skills required to keep the wheels of the economy
moving. There is also a lack of technical and vocational training to fill out the
gaps between the demand if skills and their availability, and so there large
number of experienced technicians and professionals who have migrated to
the Middle East and elsewhere.
Graphically
Solution
Some major important steps which should be taken by government to
overcome unemployment are as follows:
1. Economic Growth
2. Exports
Should seriously try to boost exports through broadening the tax base
and lowering tariffs.
3. Agriculture Sector
5. Technical Training
6. Self-Employment Schemes
INFLATION
Increasing cost of living is called Inflation. Or The
general rise in prices across the economy over a year. Inflation is a
key indicator of a country and provides important insight on the state of the
economy and the sound macroeconomic policies that govern it. A stable
Inflation not only gives a nurturing environment for economic growth, but
also uplifts the poor and fixed income citizens who are the most vulnerable in
society.
Inflation rates from 1991 to 1995 have ranged between 9.25 % to 12.9 %.
Due to high rates of monetary expansion, low rate of economic growth in
three out of the five years and adjustment in administered prices contributed
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to the relatively high rates of inflation. In 1995 when price of tradable (in
rupee terms) increased by 19% . Substantial depreciation of the exchange
rate in 1990 and in 1994 also resulted in a relatively sharp increase in the
price of tradable (in rupee terms) in these two years.
has reached as high as 25.0%. The central bank is pursuing tighter monetary
policy while trying to preserve growth.
Graphically
Reason
Economic growth has given rise to the income levels of various segments of
the society. The rising level of income have strengthened domestic demand
and put upward pressure on prices. Supply side pressure emanated from a
variety of factors specially:
• Increase in support price of wheat for three years in a row.
Solution
Inflation is one of the obstacles on the way of development. In Pakistan, it
has squeezed the major part of the population. It needs to be controlled by
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Sources for imports and markets for exports are widely scattered, and they
fluctuate from year to year. In the early 1990s, the United States and Japan
were Pakistan's most important trading partners. In FY 1993, the United
States accounted for 13.7 percent of Pakistan's exports and 11.2 percent of
its imports. Japan accounted for 6.6 percent of exports and 14.2 percent of
imports. Germany, Britain, and Saudi Arabia are also important trading
partners. Hong Kong is an important export market and China a significant
supplier of imports. Trade with the Republic of Korea (South Korea) and
Malaysia is small but not unimportant. Trade with India is negligible.
Consumption
Pakistan’s economy is undergoing structural shift that are fueling rapid
changes in
consumer spending patterns. In particular, the middle class is becoming an
increasingly dominant force.
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Pakistan’s real per capita GDP has increased at an average rate of 5.5
percent per annum over the last four years i.e. (5.5% in 2003-04, 6.7% in
2004-05, 4.7% in 2005-06 and 5.5% in 2006-2007), giving rise to the average
income of the people. Such increases of this magnitude in real per capita
income have led to a sharp increase in consumer spending during the last
four years. As opposed to an average annual increase of 1.4 percent during
2000-03,the real private consumption expenditure has grown at an average
rate of 7.4 percent per annum during the last four years i.e.(11.5% in
2003/04, 13.1% in 2004/05, and 8.1% in 2005-06).
Reason
The extra-ordinary strengthening of domestic demand during the last four
years points to several factors.
• The higher consumer spending feeding back into economic activity is
supporting the ongoing growth momentum.
• It suggests the emergence of a strong middle class with growing
purchasing power supporting domestic demand thus expanding
domestic markets. Together with investment demand it is emerging
as a critical driver of economic growth.
• Pakistan is currently witnessing changes in its demographic structure
as the share of working age population has increased and the share
of dependent population has declined, thus increasing disposable
incomes and current consumption.
• Extra-ordinary rise in consumer spending over the last three years
appears to have contributed, in part to building inflationary
expectations
in Pakistan.
Graphically
Savings
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and National Savings Centers are being shifted to better and specious places.
The aforesaid measures will help to further improve the customer services.
Structure of Savings and Investment (As Percent of GDP)
Description 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Total Investment 17.2 16.8 16.9 16.6 18.1 20.0
Changes in Stock 1.4 1.3 1.7 1.6 1.6 1.6
Gross Fixed 15.8 15.5 15.3 15.0 16.5 18.4
Investment
Public Investment 5.7 4.2 4.0 4.0 4.4 4.8
Private Investment 10.2 11.3 11.3 10.9 12.1 13.6
Foreign Savings 0.7 -1.9 -3.8 -1.3 1.6 3.7
National Savings 16.5 18.6 20.8 17.9 16.5 16.4
Domestic Savings 17.8 18.1 17.6 15.7 14.5 14.4
Solution
National Savings has launched its software development project, the project
of uplifting and upgrading the facilities at the offices of the National Savings,
data entry project, and the establishment of main IT center and installation of
hardware at pilot sites. The processing and selection of all the firms for four
projects have already been made by the CDNS.
Economic Progress
At partition in 1947, the new government lacked the personnel, institutions,
and resources to play a large role in developing the economy. To rise from
such a state surely is a great task, especially when one’s borders are also
insecure. Since then Pakistani officials have sought a high rate of economic
growth in an effort to lift the population out of poverty. Rapid industrialization
was viewed as a basic necessity and as a vehicle for economic growth. For
more than two decades, economic expansion was substantial, and growth of
industrial output was striking. In the 1960s, the country was considered a
model for other developing countries. Rapid expansion of the economy,
however, did not alleviate widespread poverty. In the 1970s and 1980s,
although a high rate of growth was sought; greater attention was given to
income distribution. In the early 1990s, a more equitable distribution of
income remained an important but elusive goal of government policy.
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CONCLUSION
Pakistan has achieved macroeconomic stability, introduced structural
reforms, improved economic governance and resumed the path for high
growth rates. But there is no room for complacency as we are confronted
with challenges of poverty reduction, employment generation, balanced
regional growth, upgrading social indicators and containing inflation.
The second generation reforms aimed at strengthening the country’s
institutions and their capacity to deliver basic services along with the
continuation of sound and consistent economic policy and investment in
human development and infrastructure will be able to steer the country on
the right course. There is a need to understand that “development is more of
an integrated process, it's not just a list of projects”. (Dr. Kaiser Bengali).