Pakistan

Review of Economic Review of Economic PerformancePerformance

Pakistan : Quick FACTSPakistan : Quick FACTSISLAMIC REPUBLIC OF PAKISTANISLAMIC REPUBLIC OF PAKISTANArea: 796,095 sq kmPopulation: 165 mln Capital City: IslamabadReligion: 97% Muslim, 3% Christian and HinduGovernment: Federal RepublicHead of State: Mr. Asif Ali ZardariReal GDP Growth rate – FY08: 5.8%Annual Per Capita Income: US $ 1085Inflation: 12.0%% Legal System: Common LawMajor Industries: Textiles, sugar, vegetable oils, agricultural products, cement, fertilizers, steel, chemicals, sporting goods, light engineeringMajor trade partners for exports: U.S., U.A.E, U.K, Germany, and Hong KongMajor trade partners for imports: U.A.E, Saudi Arabia, Kuwait, U.S, and Japan

PAKISTAN: PAST ECONOMIC PERFORMANCE

Real GDP Growth•GDP growth of over 5% has been witnessed 9 times during the last 18 years period (FY91 to FY08).Out of this, the most consistent pattern of high GDP growth was experienced during the Musharraf era.

•Other instances of high GDP growth were seen during the 90s, under the government of Nawaz Sharif (FY91 & FY92) and Benazir Bhutto (FY95 and FY96).

•A slowdown in economic activity was experienced during the period FY97 to FY02 due to the deteriorating economic condition of the country during this period.

5.4%

7.6%

2.1%

4.4%

5.1%

6.6%

1.7%

3.5%

4.2%3.9%

2.0%

3.1%

4.7%

7.5%

9.0%

5.8%

6.8%

5.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

FY91

FY92

FY93

FY94

FY95

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

Sectoral Share in GDP

26%

15%

9%

51%

25%

16%

8%

51%

24%

16%

8%

52%

24%

16%

7%

52%

23%

17%

8%

52%

22%

18%

8%

51%

23%

19%

7%

52%

22%

19%

7%

52%

21%

19%

7%

53%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Agriculture Manufacturing Other Industrial Services

•Our economy is heavily dependent on the service sector, which has a share of about 53% in the GDP of Pakistan

•Agriculture remains the second important contributor in GDP, with a share of 21% (FY08).

•The share of manufacturing sector, the third largest contributor, has increased from 15% to 19% during the same period, which can partly be attributed to the rising consumerism during this period which led to increased production and sales by manufacturing sector (e.g. Automobile sector)

Sectoral & GDP Growth

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Agriculture 4.5% 1.9% 6.1% -2.2% 0.1% 4.1% 2.4% 6.5% 6.3% 3.7% 1.5%

Manufacturing 6.9% 4.1% 1.5% 9.3% 4.5% 6.9% 14.0% 15.5% 8.7% 8.2% 5.4%

Services 1.6% 5.0% 4.8% 3.1% 4.8% 5.2% 5.9% 8.5% 6.5% 7.6% 8.2%

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

3.5%

4.2%

3.93.9%%

2.0%

3.1%

4.7%

7.5%

9.0%

5.8%

6.8%

5.8%

682 601 472 470 322 484 798 9491,524

3,521

5,153

1,603267 221 27 74

-140

18

153

352

1,820 19

-163

5,140

-28-9-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09-Nov

FDI Portfolio Investment

Foreign Private Investment - (US Mln $)

Monetary Assets(M2) Growth

17.2%

14.5%

9.4%

19.3%

0.6%

15.3%

9.0%6.2%12.2%

13.8%

15.2%19.6%18.0%

15.4%

19.3%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

FY95

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

-Dec

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

in PKR mln M2 Growth

•M2, which includes cash in circulation and deposits, has experienced high growth FY02 onwards with a average growth of 17.4% during the period.

•The high M2 growth has resulted in excess demand and is partly responsible for the high inflationary pressures currently being experienced by our country

•The high interest rates prevalent in the economy will however result in controlling the M2 growth going forward, which is targeted to be curtailed to 10% in the FY09 as per the agreement with IMF.

FISCAL DEFICIT

205 179 206 180 190 181 130 217 325 378 683

7.70%

6.10%5.40%

4.30% 4.30%3.70%

2.40%3.30%

4.20% 4.30%

7.40%

0100200300400500600700800

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

in Bln As % of GDP

(in Billions) FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07FY08

P

External Financing 97 70 121 83 113 (6) 120 149 147 119

Bank (74) 40 (33) 14 (56) 64 60 71 102 464

Non-Bank 156 97 92 85 120 61 8 8 57 100

Privatization Proceeds - - - 8 4 11 28 97 71 -

BREAK OF BUDGET DEFICIT FINANCINGBREAK OF BUDGET DEFICIT FINANCING

Trade Balance

6602

15,295

9,4958,259

4,3521,2084442941,2691,4122,0851,867

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09-N

ov

Export Import Deficit/ Surplus

•The trade balance of Pakistan has grown by more than 7 times during the 10 year period FY98 to FY08.

•The imports of the country picked up pace from FY05 onwards

•The increased imports during the last year are largely to Petroleum products, Edible Oil and import of Wheat and Fertilizer.

*

• Source: State Bank Of PakistanSource: State Bank Of Pakistan

Remittances - (us mln $)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Others 542 461 373 376 612 1,307 1,150 1,163 1,452 1,714 1,889 876UK 99 74 73 81 152 274 334 372 439 430 459 188USA 166 82 80 135 779 1,238 1,225 1,294 1,242 1,460 1,762 767UAE 208 125 148 190 469 838 597 713 716 866 1,090 534Saudia Arabia 475 318 310 304 376 581 565 627 750 1,024 1,251 600

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08FY09-Nov

1490 1060 984 1,087

2,389

3,872

4,237

4,169

4,600

5,494

6,451

2,966

Current Account Deficit

-1,921 -2,429-1,143 -513

1,3383,165

1,314

-1,753

-5,649-7,361

-14,772

-6855

-30,000

-25,000

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Trade Balance Services & Income Account (Net) Transfers (Net) CAD

Source: State Bank of Pakistan, Economic Source: State Bank of Pakistan, Economic Survey 2007-08Survey 2007-08

External Debt - (US mln $)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

IMF 1,630 1,535 1,316 1,415 1,825 1,550 1,529 1,939 2,092 1,762 1,611 1,491 1,407 1,337

Pvt Non-Guaranteed 2,017 2,405 2,706 3,127 3,435 2,842 2,450 2,226 2,028 1,670 1,342 1,585 2,252 2,887

Public Guaranteed 25,754 25,857 25,508 25,876 28,347 27,804 28,165 29,235 29,232 29,875 31,084 32,898 35,349 40,243

FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

* Source: SBP website

Inflation

12.7%

10.6%9.8%

11.3%

13.0%

10.8%11.8%

7.8%

5.7%

3.6%4.4%

3.5%3.1%

4.6%

9.3%7.9%7.8%

12.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

FY91

FY92

FY93

FY94

FY95

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

Food Non-Food CPI

Subsidies - (PKR mln)

31,724 34,040 32,775

61,791 65,496

91,359104,399

151,283146,572

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 2007-08P

Reserves - (US mln $)

1,369

11,88311,227

12,939

15,801

10,700

5,439

2,6662,149

2,3711,7371,977

3,337 3,7303,251

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 2007-08 P

Cash Gold Total Reserves

Per Capita Income ($)

526 507 509586

669733

836926

1085

0

200

400

600

800

1,000

1,200

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Exchange Rate

43.246.8

51.858.4 58.5 57.6 59.4 59.9 60.6

68.4

71.276.8

82.5 84.788.6

92.7100.2

110.3106.4

117.2

136.1

61.368.6

75.5 72.979.2

107.7

61.4

55.0

0

20

40

60

80

100

120

140

160

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

US Dollar UK Pound Euro

• The devaluation of Rupee, esp. in the later half of the FY08, has resulted in significant increase in PKR to other currency exchange rates.

• Among PKR/USD, PKR/GBP and PKR/EUR exchange rates, the latter has experienced steepest increase of about 36%, whereas PKR/USD and PKR/GBP have increased by 13% and 16% respectively.

SECTOR-WISE PERFORMANCE

AUTO SECTOR

Auto Production

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2001 2002 2003 2004 2005 2006 2007 2008 2009F

Total 1300-1600cc Total 1000cc Total 800cc Total Jeeps

Total Trucks & Buses Total Tractors Total Motorcycles

Auto Sales

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2001 2002 2003 2004 2005 2006 2007 2008 2009F

Total 1300-1600cc Total 1000cc Total 800cc Total Jeeps

Total Pickups Total Trucks & Buses Total Tractors Total Motorcycles

Fertilizer sector

Average Retail Prices (in Rs.)

341 346 327 363 394 411 420 468 509 527 587741

564 665 649 670 710 765913 1,001 1,079 993

1,937

3,106

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09- Oct

UREA DAP

0

1,000

2,000

3,000

4,000

5,000

6,000

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Urea Demand & Supply(000 tonnes)

Urea Production Urea Offtake

9301,098

268

1,071

408

1,360

433

1,385

397

1,612

356

1,057

0200400600800

1,0001,2001,4001,6001,800

FY02 FY03 FY04 FY05 FY06 FY07 FY08

DAP Demand & Supply(000 tonnes)

DAP Production DAP Offtake

Cement Sector

0

5,000

10,000

15,000

20,000

25,000

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Cement Production & Dispatches(000 tonnes)

Local Dipatches Exports

ENERGY SECTOR

Crude Oil(000 Barrels)

20,543 19,986 20,395 21,084 23,195 22,625 24,119 23,936 24,615 25,587

51,982 52,51257,699

61,161 63,546 60,694 6121548,093 48,651 50,294

67,10171,424 72,729

78,04384,485 84,608 83,807

23,458

52,505

32,93832,85529,826

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 2007-08E

Local Extraction Imports Consumption

* Source: Economic Survey 2007-08 and ADB website* Source: Economic Survey 2007-08 and ADB website

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000FY

92

FY93

FY94

FY95

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

Natural Gas(million cubic feet)

Supply Consumption

BANKING SECTOR

Deposits, Advances & Investments of Scheduled Banks(Rs. In bln)

970 1,000 1,069 1,1701,325

1,5901,760

2,044 2,1272,409 2,484

2,6512,943

1,4131,688 1,782

1,993 2,1432,356

2,6622,813

3,000

3,461 3,5663,832

471625 724 745 732 626 716 730 795 776

1,116 1,2111,008

1,7611,928

2,0792,266

2,4872,731

2,9663,207

3,4173,674

4,0654,407

4,689

1,517

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08

Advances Deposits Investments M2

Lending & Deposit Rates

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08

Lending RateLending Rate

Deposit RateDeposit Rate

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