Date: 10 May 2012
The event will be held in Islamabad , Pakistan , with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Ashfaque H. Khan
Director General & Dean
National University of Sciences and Technology (NUST) Business School
Musleh Ud Din
Pakistan Institute of Development Economics (PIDE)
Economic Affairs Officer
Macroeconomic Policy and Development Division
United Nations Economic and Social Commission for Asia and the Pacific
Country briefing note <download pdf file>
Growth slowed down in 2011 and moderate pickup projected in 2012
GDP growth in Pakistan slowed considerably to 2.4% in fiscal year 2011 from 3.8% in the previous year, mainly due to prevailing security concerns, the exogenous shock from elevated oil prices and unprecedented floods in a large part of the country. Severe shortages of electricity and natural gas in the country have also hampered economic growth.
GDP is projected to grow by 4% in 2012. While this is an improvement from 2.4% growth in 2011, it still reflects several difficulties being faced by the economy.
Inflation remains stubbornly high
Pakistan has been facing double digit inflation for some years now. Inflation rose 13.9% in 2011 as compared to 11.7% in 2010, driven mainly by high food and energy prices. Food prices rose sharply on the back of major supply disruptions, owing to the devastating floods as well as a spike in imported food stuff prices. The severe energy shortages also put a damper on production of goods and services and contributed to the high inflation and weak economic growth problem.
Inflation is projected at 12% for 2012.
Signs of easing monetary policy to support growth
Pakistan , after several increases in the policy rate, lowered the policy rate by 50 basis points in July 2011 and further by 150 basis points in October 2011 despite inflation remains elevated. The moves were aimed to stimulate private investment and economic growth.
Budget deficit remains large and need to be contained
Budget deficits are generally high in most countries in South Asia . The Government of Pakistan is finding it difficult to contain the budget deficit, estimated at 6.6% of GDP in 2011 as compared to 6.3% of GDP in 2010. The high fiscal deficit in 2011 can be partly attributed to increased security expenditures, the adverse impact of the floods and higher subsidies.
To reduce the deficit, the Government is making efforts to improve tax compliance and broaden the tax base.
A major share of the fiscal deficit is being financed by domestic sources, resulting in a rapid rise in domestic public debt, which, in turn, is fuelling concerns about macro stability and monetary management.
Current account of the balance of payments registered small surplus in 2011 but a large deficit is expected in 2012
In Pakistan , the external sector registered a surplus on the current account, making it a bright spot of the economy in 2011. Exports increased by 29.3% and workers' remittances reached an historic level of more than $11.2 billion in 2011. Rising prices of value-added textiles helped propel the rapid growth of exports. Foreign exchange reserves increased.
However, the current account is expected to register a large deficit in 2012 and financing it could be problematic due to the suspension of the IMF Stand-By Arrangement.
Workers' remittances play a major and positive role in the economy
Remittances from overseas workers are quite substantial and play a major role in the South Asian economies. Governments should consider some special and innovative institutional arrangements to protect migrants and provide social protection coverage. In this regard, a commission should be created to put forward a uniform stance of countries in South Asia to oversee migration and enhance its positive aspects.
Once established, the South Asian Migration Commission could formulate the framework for a coherent and comprehensive response to the issues surrounding migration generally applicable to all the countries in South Asia . By looking into best practices regionally and internationally, the Commission could help in designing policies that harness the benefits of migration in the best possible way for all stakeholders and minimize their negative effects.
Severe energy shortages require urgent response
On the physical infrastructure side, several countries in the subregion, such as Pakistan , Nepal and Bangladesh , are facing severe electricity shortages. Besides electricity, natural gas shortages have become very acute in Pakistan and this has been adversely affecting industrial production, particularly of textiles and fertilizers.
To address energy shortages, the following measures must be undertaken urgently: setting up viable new power projects; minimizing transmission and distribution losses, including theft of electricity; increasing exploration of natural gas, crude oil and coal; tapping of regional markets and setting up infrastructure for energy imports; and incentivizing the development of renewable energy resources. Due to limited public resources, involvement of the private sector should be enhanced and public-private partnerships should be encouraged.
Widespread poverty continues to be a major long-term development challenge
Widespread poverty continues to be a major challenge in South Asia despite some notable success in reducing it over time. Even today, at least one in every three persons in South Asia is classified as poor.
To fight against poverty, countries need to continue to implement economic reforms to improve productivity, strengthen public institutions, improve economic governance and build social safety nets to protect the more vulnerable segments of the population.
To promote more inclusive growth, the provision of basic services, such as health care and education, should remain the principal priority in the policy agendas of all governments. Generating ample employment opportunities are crucial for the poor to earn a livelihood.
Policy brief: Living with high commodity prices <download pdf file>