Growth in Pakistan: A Precarious Phenomenon

Re: # 14
BTW whats with your blog man. Dont be so faithless!

Re: # 14
BTW whats with your blog man. Dont be so faithless!

Re: # 14
BTW whats with your blog man. Dont be so faithless!

Re: # 14its good to know someone understands what i was talking aboout
you are right on mark...the artificial bubble created by privatization spree of telecoms and financial institutes is soon gonna end......
no wonder our stock market was the best performing one.....
...whether it would be sustainable is any body`s guess
cheers

>it seems Pakistani economy is entrapped in a financial bubble and excess money is circulating in the hands of the few urban elite.

Yes, and this bubble is going to burst just as soon as the revenue margins from extensive privitization begin to slowly permeate into the coffers of you guessed it, the Usual Suspects in this mockery of a country. The current growth rate of our economy is misleading at best.

Faithless-Pakistani,

http://pakistan-sucks.blogspot.com

the proof will be in the pudding.

with real growth is an increase in consumption, pakistan being a large country, there will be an FDI bee-line to participate in the gravy. i thunks some of the indian banias see it already.

Re: # 11

Oh!.So, the IMF`s numbers on GDP are all cooked up and incorrect.So, China`s absolute GDP isn`t $1843 billion??.I thought that was quite cool.I admire the chinese for playing the game of international commerce quite well.If all numbers are cooked up, then Pakistan`s boast of 8.4% GDP growth is also cooked up, right?.Maybe you should exponate a new system for measuring a country`s GDP.Get a life my friend.

Re: # 9
Growth rates are just statistical and mathematical numbers and don`t tell everything. It is the absolute number of $ or Rs that goes into the pocket of a person is important. In sicxties when China was penallized for everything, Chinese politicians would boast that steel (or some cereal food production) production jumped by say 1000% or similar things. What does that mean ? Previous year, it was 100,000 tonnes and next year it jumped to 1million! Is 1million big or small

Playing with numbers don`t tell the real story!

the fact that you site something you have written yourself in a rag like asia times online tells me that you are more out of touch with reality than i had imagined. with regards to your broader claims, i am having a hard time understanding what you are saying cause you dont know how to express yourself very well. as far as i can tell, you are claiming that all asset prices have risen in pak due to an increase in m2. this claim is completely absurd. m2 growth in pak has been no different from that in other asian countries like india and indonesia. also as the the sbp report indicates m2 growth has been driven by a huge increase in credit demand which means that money has gone into the the real sector rather than into the financial markets:

http://www.brecorder.com/index.php?id=271071&currPageNo=1&query=&search=&term=&supDate=

``...During the first nine months (July - March) of the fiscal year, broad money has registered a growth of 13.1 percent as against the full-year target of 14.5 percent and last year`s growth of 12.3 percent in the same period. The growth of broad money is largely driven (84%) by expansion in net domestic assets (NDA) which was itself triggered by unprecedented rise in the credit to private sector (Rs 370 billion). The net foreign assets (NFA) contributed only 16 percent to monetary expansion.

The extremely buoyant attitude of the private sector can be viewed by the fact that the cumulative borrowing of this sector during the last three years amounted to Rs 863 billion as against the cumulative borrowing of Rs 580 billion in the previous ten years (1992-2002). More importantly, credit to private sector as percentage of GDP surged from almost 20 percent in 1999-2000 to over 25 percent in 2004-05 - almost 5 percentage point`s increase in the last six years.

The distribution of credit to private sector was highly broad-based as almost all sectors of the economy availed substantial credit. Of course, manufacturing sector claimed 41 percent in the net credit expansion to private sector. Within manufacturing, textile sector received the lion share (62.8%)...``

your other points about growth strategy are completely wacky and dont deserve a serious response.

````````The only country in the region, which comes close to Pakistan in its growth performance, is India growing at a rate of 7.3 percent. In larger Asia, Pakistan stands with the likes of Singapore, Honk Kong and China which are the contemporary economic giants and have followed a growth pattern much similar to that of Pakistan this year.````````


Fer Jiminy!!!.I am at a loss for words.Comparing a low level economy such as pakistan , which is going through what is commonly known as a ``catch-up`` effect in the economic world with the likes of China and India, Hong Kong even!!!.Hey, Guinea has a GDP growth rate of 20% this year.It is the world`s largest GROWING economy!!.I produce facts and figures to support my case.

China GDP according to IMF:
Absolute GDP is $1843 billion
PPP GDP is $8091billion

Indian GDP according to IMF:
Absolute GDP is $750 billion
PPP GDP is $3603 billion

Pakistan GDP according to IMF:
Absolute GDP is $91 billion
PPP GDP is $392 billion

Is there a comparison??.Check with the IMF for the accuracy of the above figures.Another wasteful provocation is what this article is as far as indians are concerned.

Re: # 6

yes you are right , in case of high growth rates rich people have always benefitted in developing countries than the poor. This was the story of structural adjustment plans of 1980s and 1990s. Now we have moved to poverty reduction strategy and the dynamics have changed. Now growth is not the policy objective but poverty allevation is. The assumption that growth will trickle down to alleviate poverty has been refuted by the evidence of 1980s and 1990s. please read this link below to get a brief of what kind of policy outcomes are expected under PRSPs and how different they are from the era of SAP.

http://www.atimes.com/atimes/South_Asia/FC25Df06.html

Regarding China, increasing inequalities are a definite problem. How ever it is much more complicated than growth having unequal effects. The problem is that processes of growth might carry unequal effects and we need to align these pro grwth processes to pro poor outcomes. e.g. Over investmenst in higher education transform a segment of society into highly skilled whereby a portion is left out. International trade in services/outsourcing favors skilled labor over unskilled. In China as well wages of skilled labor are rising as compared to unskilled one. However since China is today a hub of foreign investment and outsourcing, they are getting away with inequality. But Pakistan is not China neither we are in a position to compete with China. So we have to be care ful while following a certain policy or devicing one.

Regarding finacial bubble, so much activity in financial sector shows that we are witnessing a bubble type situation. I havent gone into detail with financial indicator but M2 has currency in circulation + demand and time deposits. Well the growth of M2 which shows finacial dev is primarily due to currency in circulation. Rising inflation is clear evidence to this regard.

Couple of Months ago, Governer State Bank in an interview with ARY told that State Bank is planning to print 5000 ruppee note. Upon the query why , he asnwerred ``well now 5000 ruppees is equal to 100 dollars`.
Well this statement tells a lot about our exchange rate situation as well as the fact that we have excess money in our hands.

regarding the spread in deposit rate and lending rate, there is huge amount of literature available in financial economics which suggests the increasing spread between deposit and lending rate is an indicator of finacial repression not financial development. Interest rate spread is one of the barometers we can check the health of the financial sector/ to know whether things are moving in the right direction.

for people interested in knowing what the market thinks of budget, here are the views of one of the major brokerages in pak. please note the comment on development expenditure (PSDP) which clearly indicates that this article has information which is completely wrong:


AKD Daily

Tuesday June 07, 2005

Review of FY06 Budget: Betting on Growth

The FY06 federal budget is a landmark for Pakistan. We commend and
congratulate the Prime Minster, Mr. Shaukat Aziz, the Federal Minister, Mr.
Omar Ayub Khan, Advisor to PM on Finance, Mr. Salman Shah and the
Ministry of Finance for having broken out of historical mind set. They have
a presented a bold and pro-growth budget, which we feel should have far
reaching positive structural implications for Pakistan’s economy.

This is a business and industry friendly budget with emphasis on facilitating the
growth of medium and small enterprises (SME’s), which generally are considered
major source of employment generation the world over. We believe that the new
concept of small corporate entity introduced in this budget, with capital and
reserves of PkR25mn and annual turnover not exceeding PkR200mn (but not
formed through splitting up or reconstitution of existing business), allowed a 20%
flat rate income tax and exemption from turnover tax are absolute firsts and
nothing short of revolutionary for a country like Pakistan. At the same time, the
budget also caters to lower fixed income groups and strongly emphasizes
developments aspects.

Overall, the fundamental precepts of the budget, in our view, are as under:

1) Position Pakistan as a major player in the global textile trade by giving
opportunities for this industry to become a regional export powerhouse. Given
textile and other exporting industries’ critical position in non-farm employment and
income generation, incentives provided to them in the budget are a major positive
in our view.

2) Provide significant relief to the salaried class both in terms of reduction in
personal tax rate as well as hikes in public sector employee salaries, while
increasing benefits to pensioners and fixed income groups.

3) General reduction in tariffs and corporate taxes. This would allow the
government to avoid any charges of not conforming to WTO requirements. In our
view, this would also help government to negotiate access to developed markets
from a more strong position.

4) Significant increase in the Public Sector Development Program (PSDP), by
over 34%, should support infrastructure growth and social sector development
thus helping enhance employment and incomes, thereby alleviating the high
poverty levels.

In our view the government has chosen to take a calculated yet bold risk by
proposing a highly expansionary budget while also reducing red tape and
tariff anomalies as well as directly providing support to the middle-income
groups.

We believe that the key risk of an over-heating economy and inflation remain in
the background but the government appears to have put its hopes on real GDP
growth of 6-8% which may contain these pressures. The fact that the federal
budget deficit is targeted to rise to 3.8% of GDP in FY06 is a matter of concern.
However if the tax revenue base increases permanently this may be brought
under control in the future. Further, if the agricultural sector, driven as it is by
weather conditions, comes up to expectations we feel that the government may
indeed pull-off another successful fiscal year. And in the process, maintain the
current high economic growth trajectory.

a badly written piece containing crap analysis, logical inconsistencies, absurd claims and outright falsehoods - or in other words, a typical chowk article. in developing countries experiencing high growth rates, rich people people always benefit more compared to poor people. this is even true of a communist country like china:

http://www.forbes.com/markets/feeds/afx/2005/06/19/afx2099852.html

BEIJING (AFX) - China`s income gap widened in the first quarter of the year, with 10 pct of the nation`s richest people enjoying 45 pct of the country`s wealth, Xinhua news agency reported, citing a survey by the National Bureau of Statistics.

China`s poorest 10 pct had only 1.4 pct of the nation`s wealth, the report said.

...`The income gap issue will not become smaller in the next 10 years, but probably will increasingly widen,` Fan Gang, a leading economist at the National Economic Research Institute of China told Xinhua...``

and for the claim that growth in defence budget will cause economic slow down, lets once again look at china:

http://www.asianews.it/view.php?l=en&art=3382

Beijing (AsiaNews/Agencies) – Mainland defence spending for 2005 is expected to maintain double-digit growth and hit 230 billion yuan .. ``

and i have no idea what the author means by a currency bubble? if reference is to value of the rupee, than the claim is completely idiotic given that after inflow from ptcl privatisation, pak`s foreign currency reserves are going to rise by 18% which will actually put a downward pressure on rupee. as for the claim that there is a financial bubble, etisalat paid a 95% premium on the share price for ptcl - an indication that pak market is under-valued.

also a word of advice to chowk-staff. you should stick tp publishing articles on subjects that you have a clue about which is very little i suspect. otherwise you get exposed for what you are.

Pakistanis say that their economy grew at 8.4% for the previous fiscal year. Lets see if this growth rate can be sustained. Which should be difficult , with rising oil prices , an expected slackening of US interest , high inflation etc. Pakistanis tend to get carried away far too easily. This was evident in the days of Karachi Stock Exchange index crossing 10,000 points , only to register a sharp fall and stabilise around 6000.


By the way , India grew at 7.3% the previous year , and 8.5% the year before. If the avg. of last 5-10-15 years are taken into context , India`s economic growth rate by far exceeds that of Pakistan`s.

Well you said, and I quote:
The obsession with growth has also resulted in an education policy..... education policy is further elevating the disparities between the rural and urban which is again a direct threat to the success of PRSPs in Pakistan.

But, in-order to increase the manufacturing and services productivity, it is the high education workforce comes to play. With limited higher studies institutes in the nation, they are not catering for the already present large number of high school graduates that get good higher-education. Increasing the elementary school budget would actually cause more highschool grads competing for the allready limited number of urbanized-for-the-rich-education that is there.

What do you people think...? A reply would be highly appreciated.

The only thing that dictates rise in per captia income is productivity. Unless the productivity of Pakistani farmer increases dramatically they will remain poor. Prices of farm products are at best constant. Worse they can decline due to oversupply.

Peace with India is fine at the sentimental level. Unless there is a cut in the size of Pakistani military establishment there will be no material benefits. The operation of an oil pipeline is at least a decade away.

Pakistan is dependent on the West for both textile exports and concessional financial treatment