Mu rt a za Mo i z F ar o o qu i | S P 1 1 - M M- 0 0 02 | M . A.J .U .

, Ka rac h i _______________________________________________________________________________________

Current Economic Situation of Pakistan and Pakistani Government

Pakistan's Cultivation of the Rich alluvial soil of the Indus River basin is its single most important economic activity. Because of extensions and improvements to the i rrigation system, waters of the Indus River and its tributaries flow to the fields, a n ecessity because of scant rainfall. The Indus irrigation system is the world's largest, but there are many problems because of inadequate water management and use. Farmers continue to employ traditional cultivation practices, and support services, such as research and development, are inadequate, although high -yield seeds and fertilizers are fairly widely used. Yields of most crops, with the significant exception of cotton, are low by international standards and substantially below the area's potential. Many farms are too small to support a family using existing agricultural practices. The landless often sharecrop or work as agricultural laborers. A flood in September 1992 temporarily displaced as many as 3 million people and destroyed many irrigation ne tworks. Its effects are expected to limit agricultural production, particularly cotton, in the 1990s. Since Pakistan became independent in 1947, its leaders have generally sought to i ncrease the role of industry in the nation's economy. They achieved a remarkable d egree of success toward this end. A broad industrial base is now in place, producing a wide range of products for both consumer and industrial use. Industrialization, ho wever, has failed to create sufficient jobs for the rapidly expanding urban population. Construction and service-sector activities, especially in trade, transportation, and government, have expanded and now provide more employment than industry. Non etheless, underemployment remains prevalent throughout the economy. An outdated infrastructure is another problem facing the economy. Frequent electricity shortages, for example, hamper industrial development and production.

Introduction to some of the major problems haunting current Pakistani government

Pakistan economic environment is affected by intensification of war on terror and deepening of the global financial crisis which penetrated into domestic economy through the route of substantial decline in Pakistans exports a nd a visible slowdown in foreign direct inflows. Pakistan economy continues to remain exposed to the vaga ries of international developments as well as internal security environment. The intensity of the global financial crisis has further added to Pakistan predicament. Despite support from the IMF and other bilateral and multilateral donors, Pakistan external account remains exposed to a host of uncertainties. IMPROVING THE EFFICIENCY OF DIFFERENT SECTORS OF ECONOMY

Agriculture
Pakistan irrigates three times more acres than Russia. Agriculture accounts for about 21% of GDP and employs about 41% of the labor force . In spite of structural shift towards industrialization, agriculture sector is still the largest sector of the economy with deep impact on socio-economic set up. It is the source of the livelihood of almost 44.7 percent of the total employed labor force in the country . Agriculture in Pakistan used to contribute 53% of the national economy but has now declined to 23% when the manufacturing industry is going up to as much as 55% of the national GDP. As mentioned, agriculture remain to be an important ec o________________________________________________________________________________________ Page 1 of 4

Mu rt a za Mo i z F ar o o qu i | S P 1 1 - M M- 0 0 02 | M . A.J .U ., Ka rac h i _______________________________________________________________________________________

nomic contributor as in fact Pakistan is the largest producers and suppliers of agricultural products according to th e 2005 Food and Agriculture Organization. Pakistan likewise ranks high with respect to farm output. It is the fifth in the Muslim world and worldwide it ranks within the two twenty farm output contrib utors. W ith the present contribution to GDP at 21.8 per cent, agriculture sector is the mainstay of the rural economy around which socio -economic privileges and deprivations resolve. Therefore, government needs to give importance to agricultural sector, as we can take example of Australia, which gives a backbon e importance to agriculture, and now agriculture sector is one of the most privileged sector which Australia possesses, having contribution of $155 billion-a-year for a 12% share of GDP, Australian farmers and grazers own approximate 135,996 farms, covering 61% of Australias landmass and there is a close-to-perfect mix of irrigation and dry-land farming over there.

CONVERSION FROM IMPERFECT MARKET TO PERFECT Inequality in allocation on resources in the economy
The markets in an economy like Pakistan which is more influenced towards imperfect market modules, therefore influence on invisible hands can easily be seen. Theyve the power to divert the investments and capitals from one sector of the economy to another. Take example of Cellular Service sector in contrast to neglected Education sector, therefore allocation of resources provided to both sectors arent on the equality basis but on the interest of individual/invisible hands/motives basis. REDUCING ECONO MIC INEQUALITY

Growth and investment

In growth and in investment we lost investor because of global economic situation, through financial markets which collapse the external demand for its e xports and decline in availability of external capital to finance or invest in growth process of the country. According to global financial crisis was felt on market and investor confidence in many developing countries, including Pakistan, as banking systems and asset markets came under stress. STABILIZING THE ECONOMY THROUGH MACROECONOMIC POLICIE S

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Mu rt a za Mo i z F ar o o qu i | S P 1 1 - M M- 0 0 02 | M . A.J .U ., Ka rac h i _______________________________________________________________________________________

1. Inflation
The rate of inflation is an important macroeconomic indicator and one of the key variables most central banks around the world scrutinize when setting their main policy rate. Pakistan is one of only a handful of countries that is still experiencing double -digit inflation. The surge in food and commodity prices witnessed during the start of fiscal year 2008-09 pushed the Consumer Prices Index (CPI) in Pakistan to a record level of 25.3 percent in August 2008, remaining above the 20 percent level up until February 2009, but on the contrary, it has been 13.8 percent as of July of 2011.

2. Trade and Payments

The global economic meltdown is affecting the Pakistan economy through three indirect channels: the sharp drops in oil prices, has led to sharp easing of import demand pressures; the contraction in global demand, trade, and related activity, is impacting adversely demand for exports and remittances from EU and US in particular; and constricted access to the international credit markets and lower investor appetite for risk is affecting capital inflows, depressing local asset prices, and reducing already low investment level. Pakistan economy needs an integrated policy to deal with external sector vulnerabilities like removi ng structural rigidities in the exports and imports sectors.

3. Poverty
The inadequacy of income to meet basic needs, low quality of life, denial of opportunities and choices basic to human development are different facets of poverty. The main objectives of government policies are to raise the standard of living and improve the socio-economic conditions of the people and thus reduce the incidence of poverty in the country.

4. Transport and Communication facilities

Transportation network of any country is of vital importance to its development and affects all sectors through economic linkages. It ensures safe and timely travel encourages business activities and cuts down transportation costs while granting produces access to markets for their goods. A reliable transportation network also provides swift access to l abor force and hence generates employment opportunities. It has been widely recognized that economies with better road and communication networks are positioned more advantageously in terms of overall competitiveness as compared to economies having poor networks. Enhancements in transportation and telecommunication benefit industry, agricu lture, and other services sectors as well as improving the standard of li ving of the general public, it is therefore , crucial that investments be made to develop and maintain an efficient network of transportation and telecommunication to ensure cost efficient integration of markets both domestically and internationally.

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Mu rt a za Mo i z F ar o o qu i | S P 1 1 - M M- 0 0 02 | M . A.J .U ., Ka rac h i _______________________________________________________________________________________

5. Energy sector
The world energy scenario during 2008-09 has been very eventful, same as Pakistan. International oil prices fluctuated widely, leaving all vulnerable oil import countries like Pakistan under great stress. The volatile energy picture not only made major dents in the macroeconomic variables such as budget deficit, current account balance, inflation, exchange rates and foreign exchange reserves, but also eroded the purchasing power of poor on the back of rising prices of petroleum products. So the major impact has been experienced in the industrial and agriculture sector, because of e nergy shortfall. Energy consumption being an integral part of all the economic activities has also declined as a result of the economic slow down , and therefore the government usually finds it difficult to cop e with the ever-fluctuating prices of furnace oil, but also lags in investing in altern atives solutions like solar, wind and heat powered resources, which Pakistan is lucky to have such resources in abundant but failing to utilize them and in return, an expensive mode of electricity is produced and generated in comparison to the regional countries , and therefore textile manufacturers are preferring transfer their businesses to Bangladesh and Sri Lanka, where electricity tariff in comparison to Pakistan are quite low and competitive, therefore its the responsibility of Pakistani government to give subsidies to local and national businessman and investors, and on the same time, tax exemptions to foreign investors and traders in o rder to win their trust to do business and trading activities in Pakistan, so that investment can be done in Pakistans energy sector so that expansion can be done over there, which would yield in reduction of prices of energy prices which could attract more investors, both foreign and national investors.

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