Pakistan is the 26th largest economy in the world in terms of purchasing power, and the 47th largest in absolute dollar terms. Its production is dominated by textiles, chemicals, food processing and agriculture. Most of the recent acceleration in GDP growth has come from the industrial and service sectors. Despite adverse factors such as energy shortfall and rising costs of imported petroleum products, the economy has shown modest signs of recovery during 2010-11. It has been a period during which the government made efforts to stabilise the economy in its quest for sustainable growth.
The economic as well as social policies pursued by the government during the current year, manifested its resolve to pursue stabilisation with a human face and achieve growth with social equity. The service sector has performed well and has exceeded most of the targets set for it. The decline in the international commodity prices helped in narrowing the macroeconomic imbalances ultimately resulting in a reduced current account deficit and higher foreign exchange reserves. The reduction in imbalances was mainly a consequence of expenditure rationalising, low level of imports, an overall tight domestic demand management and the global recession. However, the military operations and spending related to the welfare of internally displaced person (IDPs) has put an additional strain on the government’s resources forcing a drastic cut in development expenditure.
As the government now prepares the outlines of its budget for fiscal year 2011-12 it faces various challenges and underlying risks. The high level of fiscal deficit is still a potential threat to macroeconomic stability. Inflationary expectations are still high in the wake of increasing utility prices, rising petroleum prices and cross-border smuggling of essential goods that are creating a shortage in the domestic market and forcing their prices to rise. There has been a phenomenal increase in meat prices owing to the smuggling of live animals to Afghanistan as well as export of meat to the Gulf markets. The government so far appears helpless in curbing smuggling not only of live animals, but also other essential commodities.
Source: http://nation.com.pk
The economic as well as social policies pursued by the government during the current year, manifested its resolve to pursue stabilisation with a human face and achieve growth with social equity. The service sector has performed well and has exceeded most of the targets set for it. The decline in the international commodity prices helped in narrowing the macroeconomic imbalances ultimately resulting in a reduced current account deficit and higher foreign exchange reserves. The reduction in imbalances was mainly a consequence of expenditure rationalising, low level of imports, an overall tight domestic demand management and the global recession. However, the military operations and spending related to the welfare of internally displaced person (IDPs) has put an additional strain on the government’s resources forcing a drastic cut in development expenditure.
As the government now prepares the outlines of its budget for fiscal year 2011-12 it faces various challenges and underlying risks. The high level of fiscal deficit is still a potential threat to macroeconomic stability. Inflationary expectations are still high in the wake of increasing utility prices, rising petroleum prices and cross-border smuggling of essential goods that are creating a shortage in the domestic market and forcing their prices to rise. There has been a phenomenal increase in meat prices owing to the smuggling of live animals to Afghanistan as well as export of meat to the Gulf markets. The government so far appears helpless in curbing smuggling not only of live animals, but also other essential commodities.
Source: http://nation.com.pk
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