Economy of Pakistan

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Comprehensive Report

The economy of Pakistan is the most widely discussed topic in the history and especially in the current situation of Pakistan. Also it is a hot topic in many other International business communities who are engaged in matters with Pakistan. In the meanwhile, it’s the most widely manipulated and falsely projected topic in the news media industry, especially when we talk about local news production units.

You just have landed at the right spot to take a look at the report on the economy of Pakistan formulated by a politically and economically unbiased writer.

PM Imran Khan
PM Imran Khan

Economic Indicators

In the first step, I would like to mention a fact that there is no precisely accurate indicator to judge any economy 100% correctly. But we can select a few economic indicators which can lead us in exploring the best possible results.

Top 10 Economic_indicator

  1. Gross Domestic Product (GDP)
  2. Money Supply
  3. Producer Price Index (PPI)
  4. Consumer Price Index (CPI)
  5. Inflation rate (IR)
  6. Employment rate
  7. Housing
  8. Stock Index (SI)
  9. Spending
  10. Confidence

*To read basic definitions scroll to the bottom.

The Economy of a country is directly influenced by Global-Reputation, Terrorism, Tolerance, Education-level, Peace, Democracy, Global-relations, Civil Rights, Law & Order situation, etc.


Economy of Pakistan and its Problems:

There is a great connection between GDP (growth) and Debt (loans).

During the last 10 Fiscal Years, the economy of Pakistan embraced many changes. Few broke its spinal cord, whereas, others tried to fix it.


Max GDP of Pakistan during the last decade = 5.79 (2017) Healthy

Minimum GDP of Pakistan during the last decade = 2.58 (2010) Weak

GDP OF PAKISTAN 2019 = 3.9 (ADO expectations) Poor

GDP of Pakistan 2019
GDP of Pakistan 2019

External Debt of Pakistan 2019

Debts are meant to return and if not played with correctly can lead to bankrupt.

Max Debt of Pakistan during the last decade = $ 99.108 Billion (2019) Poor

Min GDP of Pakistan during the last decade = $ 52.430 Billion (2014) Healthy

External Debt of Pakistan 2019
External Debt of Pakistan 2019

Debt to GDP ratio of Pakistan 2019

It is a measure of external debt vs Gross Domestic Production. The lower the value of this ratio is, the better is the progress of the government.

Min Debt to GDP ratio of Pakistan during the last decade = 60.1 (2011) Healthy

Max Debt to GDP ratio of Pakistan during the last decade = 72.5 (2018) Poor

Debt to GDP ratio of Pakistan in 2019 is expected to increase by previous 72.5. Poor

Debt to GDP ratio of Pakistan 2019.

Debt to GDP ratio of Pakistan 2019.

Inflation rate of Pakistan 2019

The increase in Cash Flow introduces Inflation. This means that respectively more amount of money is chasing the same available items.

Its not for the first-time in the history of Pakistan that inflation rate is reaching this much high peak. But, its worst as if we analyse and compare it with the last 5-years of the economy of Pakistan.

Inflation should be there for a sustained economic growth. But abrupt increases are harmful!
In all scenarios.

Money Supply of Pakistan (Cash Flow)

Money Supply of Pakistan (Cash Flow) 2019

Cash Flow vs Inflation and GDP 2019

What it tells the increase in an economy cash flow and inflation?

Increase in cash flow (availability of more cash) can increase demand, and if the demand of Imported items increases, than the economy get hurt.

Whereas, in the meanwhile increasing the duty on imported items discourages imports and encourage local-production.

But, if we take a look at local-productions. GDP is decreasing. It means in a nutshell the economy is in a great chaos.

Consumer Price Index (CPI) of Pakistan 2019

It is the rate of goods in the local market for any particular item. Its comparison can reveal the Inflation rates and overall burden on locals.

A high value reveals increased costliness of items in the market.

CPI index of Pakistan in 2018 = 220 Index Better

All time minimum in 2001 = 62.82 Index Healthy

Reaching an all time high in the history `2019 = 244.03 index Poor

Consumer Price Index (CPI) of Pakistan 2019
Consumer Price Index (CPI) of Pakistan 2019

Producer Price Index (PPI) of Pakistan 2019

These are the statistics generated by Bureau of Labor Statistics. These statistics determine the increments or decrements in expenses for production of goods. But they are from the maker or manufacturer point of views.

Producer Price Index (PPI) of Pakistan 2019= 259.57 Index Poor

Producer Price Index (PPI) of Pakistan 2018 = 220 Index Better

Producer Price Index (PPI) of Pakistan 2019
Producer Price Index (PPI) of Pakistan 2019

Stock Exchange Index of Pakistan 2019

The stock exchange of Pakistan is facing severe declines. The higher the index values are, the higher the economic condition is. Therefore the condition of an economy is largely dependent upon this factor and its performance can be measured with a little effort.

But the KSE 100 Index met a 12.7% recession from the very start of 2019.

The Maximum Stock Exchange Index of Pakistan 2017 = 52876.46

The current Stock Exchange Index of Pakistan 2019 = 33106

Stock Exchange Index of Pakistan 2019

Stock Exchange Index of Pakistan 2019

Uncertainty In The Pakistani Market 2019

According to Riebold [1969, p. 24], cash flow is the internal flow of the generation and use of money over a certain period of time. Accordingly, variations of cash flow affect the production decisions [Rivero, 1989].
If there is an increase in cash flow, then production will most likely increase, indirectly improving economic activity (for example, through employment rates and economic growth).

Riebold [1969, p. 24]

Economy Of Pakistan 2019

In a nutshell

The duty on imported items is increased, discouraging local consumption, in the meanwhile there is no local production.

The PPI has also increased which means economic growth glitch or discontinuation.

Whereas an option in the present situation can be : An increase in money supply or cash flow and decrease in the interest rates. This can generate a hope of increase in investment, typically.

Abrupt Inflation rates show the anxiety of the market and poor management

But abnormal rise in the interest rates too, discourages investment in reference to this particular indicator i-e High Cash Flow.

Furthermore no actions are under observation by government which add shame to the injury.

Performance and Definitions:

What is GDP?

It is the value of total goods generated, and services provided in a fiscal year.
Performance in 2019 – Poor

What is Money Supply?

It is the total amount of circulating money. It includes M1, M2, and M3.
M1 includes all currency types (coins, paper notes) or anything that can be quickly converted to cash.
M2 includes M1 and short-term pay-back deposits. Like a car which may take 20 days in case you want to sale it and convert to cash.
M3 includes M2 and long-term pay-back or convert-to-cash assets.
Performance in 2019 – Poor

What is Producer Price (PPI)?

It is the actual expenditure on the production of any element and is also known as Wholesale product cost.
Example: total cost on the production of crude-oil or ice-cream.
Performance in 2019 – Poor

What is the Consumer Price Index (CPI)?

The change in the price of Basic-need-items is calculated under CPI. But it does not include income or other assets.
Example: It’s about the difference between Rice, Tea, Wheat, Pulses, etc. calculated after a span of time, let’s say 6 months or a year (fiscal year).
Performance in 2019 – Poor

What is Inflation rate?

It is the rate of devaluation of your currency.
Example: if 1 dollar was enough to buy 1 bottle of water a year ago. After a decrease in the worth of dollar. Now you need to spend two dollars to purchase the same bottle of water.
Performance in 2019 – Poor

What is Employment rate?

It is the number of people working out of the total number of people reaching the age to work.
Example: There are 60 people working out of total 100 people. Moreover the employment ratio will be (60/100)x100=60% employment to population ratio. Also, it is facing a constant decline.
Performance in 2019 – Poor

What is Housing Sector?

Housing and building schemes are an indicator of growth.
In Pakistan, building and Housing department is the greatest revenue generating sector. Furthermore the Housing sector is a source of attracting foreign remittance too. Therefore this factor sharply determines the economic growth of Pakistan.
Performance in 2019 – Poor

What is stock Index?

Stock Index is the measurement of a selected section of stock market. It can be described as the shares or total divisions of a businesses available for sale to investors. It reveals the future business of any company or a country in a broader perspective.
Performance in 2019 – Poor

What is Spending?

It is the actual consumer activity. Therefore it shows the activity of the people in purchasing goods or services.
Performance in 2019 – Poor

What is Confidence?

I wanted to escalate it to the first position. As it describes the future of an economy in a most precise manner. Therefore the more confident are the investors and consumers, the faster the economy flourishes.
Performance in 2019 – Poor

Consultancy Credits: M. Umair Saleem & Fawad Rafiq Chohan (Chartered Accountants) 

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