Turnitin Originality Report

Introduction by Muhammad Hassan Tariq

From General (General)

 Processed on 22-Apr-2019 13:18 PKT

 ID: 1116809626

 Word Count: 1148

Similarity Index

99%

Similarity by Source

Internet Sources:

99%

Publications:

0%

Student Papers:

35%

sources:

1
74% match (Internet from 20-Feb-2019)

http://www.pakistaneconomist.com/2018/01/01/pakistan-economy-2018-swinging-hope-
despair/

2 25% match (Internet from 18-Apr-2019)

https://www.csis.org/analysis/economic-crisis-pakistan-again-whats-different-time

paper text:

Economic Crisis of Pakistan (2017-2018)

1It may be mentioned here that the economy of Pakistan is the 25th
largest in the world as far as purchasing power parity (PPP), and
38th largest concerning nominal gross domestic product. Pakistan
has a population of over 200 million (the world’s 6th-largest), giving
it a nominal GDP per capita of $1,550, which ranks 132nd in the
world. However, Pakistan’s undocumented economy, according to a
rough calculation is estimated to be 36 percent of its overall
economy, which is not taken into consideration when calculating per
capita income. Pakistan is a developing country and is one of the
Next Eleven, the eleven countries that, along with the BRICS, have a
potential to become one of the world’s large economies in the 21st
century. There is no doubt that Pakistan is a land of opportunities
but the sad fact is that it has never been tapped sincerely and
honestly.

1Pakistan’s GDP growth, according to a recent report by Moody’s

Investors Service, is expected to be closer to 5 percent in both fiscal
year 2017 and 2018, while the fiscal deficit will be wider than
expected.
2By the end of June 2018, Pakistan had a current account deficit of
$18 billion, nearly a 45 percent increase from an account deficit of
$12.4 billion in 2017. Exorbitant imports (including those related to
the China-Pakistan Economic Corridor (CPEC)) and less-than-
projected inflows (export revenues and remittances) have led to a
current account deficit widening, with foreign currency reserves
levels covering less than two months of imports—pushing Pakistan
towards a difficult economic situation. (TOI, 2018) Part of Pakistan’s
financial crisis stems from the fact that 2018 was a poor year for
emerging markets. Global monetary tightening, increased oil prices,
and reduced investor confidence have negatively impacted the
country’s already precarious economic situation. But the country’s
deep structural problems and weak macroeconomic policies have
further exposed the economy to an array of debt vulnerabilities.
(Naqshbandi, 2018) Pakistan has had an overvalued exchange rate,
low interest rates, and subdued inflation over the last few years. This
loose monetary policy has led to high domestic demand, with two-
thirds of Pakistan’s economic growth stemming from domestic
consumption. An overvalued exchange rate has led to a very high
level of imports and low level of exports. Pakistan’s high fiscal deficit
was accelerated even further in 2017 and 2018 because elections
have historically caused spending to rise (both of the most recent
fiscal crises followed elections). Perhaps the greatest financial
issues facing Pakistan are its pervasive tax evasion and chronically
low level of domestic resource mobilization. Taxes in Pakistan
comprise less than 10 percent of GDP, a far cry from the 35 percent
of countries that are part of the Organisation for Economic Co-
operation and Development (OECD). Pakistan also suffers from
impediments in the energy sector through frequent and widespread
power outages that hurt its competitiveness.

1Owing to weak domestic policies and slow world economic growth,

Pakistan is not getting enough FDI. The government is also facing
 pretty tough challenges to increasing tax revenues by eliminating
structural flaws in the tax system. Just when the economic growth
should be touching 6 to 7 percent to provide jobs to the growing
workforce, the government is failing to take it to even 5 percent.
According to Asian Development Bank (ADB) Outlook in fiscal year
2018, projections for growth and inflation are maintained, but the
current account deficit is expected to exceed the earlier forecast
again by a wide margin.

(F.Runde, 2018)

1The current account deficit is projected to remain around last year’s

level, that is, in the range of 4.0 to 5.0 percent of GDP, State Bank of
Pakistan (SBP) report stated. The fiscal year 2018 budget envisages
fiscal deficit at 4.1 percent of GDP. Achieving this target may be
challenging, given the capital spending requirement of the
government for completing various projects under CPEC and likely
increase in provincial spending during the election year. Moreover,
any shortfall in revenue may keep the fiscal deficit close to fiscal
year 2017 level. Thus, the current account is likely to settle between
$4 billion to $5 billion and fiscal deficit will remain between $5 billion
to $6 billion. The economy is likely to continue to expand with low
and stable inflation in fiscal year 2018. Encouraging trends in private
sector credit indicate underlying dynamics in real economic activity.
However, maintaining this momentum going forward would largely
depend on addressing emerging challenges in external and fiscal
accounts, the report added.

1As the year ended amidst political uncertainties and disruption in

financial management due to the absence of a full-fledged Finance
Minister the challenges ahead for Pakistan’s economy has touched
unprecedented height and therefore, requires a very careful planning
and cautious scheduling of disbursement. Due to the fall in Rupee
the economy has suffered. It may be mentioned here that when the
central bank withdrew its support on December 13th, Pakistani rupee
was hit hard, adversely affecting the currency. Pakistani rupee has
always remained between 104 and 105 per dollar since 2015, but in
last three sessions it lost its value by over 5 percent. Currency’s
level always has a direct bearing on various aspects of the economy.
The outcome of the devaluation of Rupee against US dollar in the
domestic market incidentally coincided with a rise in the crude oil
prices in the global market resulting in an upward trend in oil prices
from January 2018. The trend will obviously result in increase in the
manufacturing and transportation cost resulting in price hike of all
the commodities produced locally. Thus in 2018 the country may
witness considerable price hike. Finance managers of the country
must therefore, take all possible measures to maintain price hike to
an acceptable level. With no major change in extreme issues like
electricity and gas shortage, unemployment, and poverty, Pakistan
may continue to face the problem of fiscal consolidation. The
absence of practicable ideas based on ground realities to deal with
the changing circumstances, may turn out to be the government’s
most significant weakness to maintain financial discipline and
economic harmony. On the other hand balance of payments issue
may pose very serious risks to economy during the next fiscal year,
mostly because of ballooning deficits and erosion in foreign
exchange reserves down the line. The business community also
expects the next year to be full of challenges. They argue the country
requires paying $12 billion in first half of 2018 as per its liabilities.
“Exports can grow by more than 20 percent in 2018 provided that
government reduces energy prices reasonably with the consent of
stakeholders,” a business leader said. Keeping in view the liquidity
position the government may be left with no choice but to cut its non
development and administrative expenditures to reduce fiscal deficit.
The debt servicing is also a major non development expenditure that
is hampering the economic growth badly.