Title:

Structural challenges inhibit Pakistan from growing as fast as its neighbors:

2016:
Pakistan’s growth accelerated in FY16, driven by consumption whereas investment remained
low. Exports continued to fall once soft world demand exacerbated the consequences of
Pakistan’s long decline in aggressiveness.
Once achieving economic science stability, the government authority continued to deliver on its
structural reform agenda in FY16, however abundant remains to be done if growth is to be strong
and sustained. The government’s next challenge are going to be to speculate in health, education
and nutrition; Pakistan’s staggering fall in financial condition over the last fourteen years has not
been in the middle of an identical improvement. The country’s long growth depends on this
investment in its people, this is what is going to build growth matter for Pakistanis.
Pakistan, while not growing as quickly as its neighbors. It has continued its modest growth
recovery. Growth in FY16 is anticipated to choose up to 4.5 % from the 4.2 % in year 2015. It
has just like the remainder of the region, Asian country is benefitting from low oil cost that have
reduced the deficit (in spite of a notable decline in exports) and enhanced consumption.
Aggressive remittances and rising investments underneath the China Asian country Economic
Corridor2 (CPEC) have conjointly supported growth in H1FY16. However, growth remains well
below the five.5 % target envisaged in Pakistan’s Annual set up FY16 and therefore the South
Asia average of percent 7.5.

Structural challenges inhibit Pakistan from growing as fast as its neighbors:

The effects of the high remittances and low oil value windfall (driving such high growth rates
within the remainder of South Asia) square measure somewhat hampered in Asian nation by its
continued domestic structural challenges. Unreliable electricity offer, restricted financial house
and a poor business setting still impede investment. Further, Asian nation has been steady losing
market share in world trade as a result of its exports square measure focused in retardation
markets, trade facilitation is poor and its foreign policy is advocate and sophisticated.

Investment may be initiating to recover, and policymakers have directed

Pakistan’s historically low savings rate
Investment, a key in progress challenge in Pakistan’s economy5, is predicted to extend
marginally in FY16 on the rear of accrued national savings and public disbursement on
infrastructure, principally CPEC. Non-public sector loans for long investment have accrued well
in H1FY16 compared with the corresponding amount within the previous year. However,
whereas national savings tend to be the foremost reliable supply of funds for investment,
Pakistan’s historical rate of savings has been terribly low.
Pakistan’s fiscal amount is improving because of the greater discipline and an
economic reform program
Pakistan’s fiscal position has undergone a significant consolidation over the last three years as
the fiscal deficit (excluding grants) has declined from 8.5 percent of GDP in FY12 to 5.4 percent
of GDP in FY15. Two factors explain this apparent departure from the past. First, the elected
government appears to be more committed to fiscal discipline. Second, the government has
prepared an economic reform program with fiscal consolidation as a cornerstone. The program is
supported by the IMF under the Extended Fund Facility (EFF), which commits the government
to actions that lower the fiscal deficit.
The commercial enterprise deficit of the consolidated government has fallen to percent 1.7of
value thanks to restraint in federal continual expenditure and a percent of 20 increase in tax
revenues.
The commercial enterprise consolidation effort throughout H1FY16 continuing to be supported
by the provincial governments, that registered a combined surplus of % 0.5 of value. It is quite
typical for consumption to be the most important part of combination demand. However, within
the case of Asian nation, consumption constitutes an awesome % 92 of value and contributes
seven share points towards value growth.
In real terms, investment growth in FY16 decelerated sharply to % 5.7 from %13 in FY15. The
magnitude relation of investment to value remains comparatively low at fifteen.6 percent.
Though the non-public sector’s magnitude relation of investment to value declined from % 10.5
of value in FY15 to % 10.3 in FY16, this was balanced by a rise normally government
investment.

External position of Pakistan got better despite a minor increase in the

current account deficit:
The current account deficit widened slightly in FY16 that was paid by healthier monetary flows
compared to FY15. This resulted in associate overall surplus of US$ a pair of.7 billion for FY16,
slightly more than the FY15 surplus of US$ a pair of.6 billion. This allowed interchange reserves
to grow for a 3rd consecutive year.

Increasing remittances continue to support the current account in 2016

The secondary financial gain surplus increased to US$ 23.3 billion throughout FY16 from US$
22 billion in FY15. This increase is principally supported by continuous growth in workers’
remittances that grew by % 6.4 throughout FY16.

The financial account appreciated good inflows during year 2016:

The monetary account recorded an arrival of $ 5.5 billion (% 2 of GDP) in year 2016, which
shows expansion as compared to the previous year 2015 as it was dollar 5 billion, %1.8 of the
gross domestic product.
  Foreign direct investment of dollar 1.9 billion in year 2016, US $1.0 billion above
the previous year
 Disbursements by many-sided development banks value U.S.A. $3.6 billion
FDI flows multiplied to %1.3 of value in year 2016, the best rate since financial
year 2010.

REFERENCES:
https://documents1.worldbank.org/curated/en/935241478612633044/pdf/109961-WP-PUBLIC-
disclosed-11-9-16-5-pm-Pakistan-Development-Update-Fall-2016-with-compressed-pics.pdf