A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC

CONDITIONS

Presently, managers, whether working in the public sector or in private businesses in

Pakistan, require an informed, current and strategic perspective on the economic performance
of the country. Understanding the state of the economy is only part of the story while using
this information to forecast the future of the economy generally completes the tale. This is a
challenging task, especially due to the unavailability of standard approaches and ways of
synthesising and extracting insights from macroeconomic indicators. An understanding of
macroeconomics is even more important since managers too often rely on ad hoc analyses
that either miss or misinterpret vital economic information. Such a situation leads to
uninformed and vague analyses that further leads to inconsistent or faulty policies.

This note will help the public financial managers to identify, organise, and interpret key
economic indicators of Pakistan. Before we discuss these economic indicators it is pertinent
to develop a perspective on macroeconomics.

MACROECONOMIC PERSPECTIVE

Microeconomics deals with individual decision making behaviour. These individuals may
include households, business firms, etc. An example of a microeconomic decision would be,
how to maximise production in order to lower prices and remain competitive. On the other
hand, macroeconomics deals with the economy (See Exhibit 1). It examines the behaviour of
economic aggregates such as aggregate income, consumption, investment, and the overall
level of prices. Aggregate behaviour refers to the behaviour of all households and firms

This technical note was written by Dr Salman Khan at the Lahore University of Management Sciences to serve
as basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation. This material may not be quoted, photocopied or reproduced in any form without the prior written
consent of the Lahore University of Management Sciences. This research was made possible through support
provided by the United States Agency for International Development. The opinions expressed herein are those
of the author(s) and do not necessarily reflect the views of the US Agency for International Development or the
US Government.

© 2013 Lahore University of Management Sciences

 11-125-2013-2

together. For example, macroeconomics would look at how an increase/decrease in net

exports would affect a nation's capital account or how GDP would be affected by the
unemployment rate.

Macroeconomics can be further divided into different components such as monetary and
fiscal components. The monetary policy of a country determines the level of money supply
and its subsequent effect on the interest rate. The central bank is the one responsible for
developing, maintaining and applying the monetary policy. It uses different tools to alter the
interest rates in order to control inflation and/or money supply in the economy. These tools
include increasing short and long run interest rates through offering government treasury
bills 1 , Pakistan income bonds 2 and controlling bank reserve requirements 3 . Generally,
monetary policy is used to support the fiscal policy.

Fiscal policy is related to government policies regarding revenues and expenditures.

Revenues include direct and indirect taxes4 while expenditures include development and non-
development expenditures. The main concern of the fiscal policy is to determine the tax rate
for individuals, business firms, etc. The right tax rate can increase the revenue without
causing a major shift in economic indicators or a disruption in business sentiments. On the
expenditure side, the government has to introduce polices in order to reduce expenses i.e.
ensure efficient operations while directing the major portion of expenditure towards
development spending such as infrastructure development, poverty alleviation, employment,
etc.

MACROECONOMICS AND PUBLIC FINANCIAL MANAGEMENT

Generally, there are three major factors that can affect a country‟s budget from one year to
the other. These factors include i) revenues, including direct taxes, indirect taxes and other
non-tax sources of revenues; ii) the effect of rare events in the previous year that reduced
revenues e.g. floods, earth quakes, etc.; iii) current government expenditures, which include
1
Treasury bills represent government short term commitments with a period ranging from 1 month to 12
months.
2
Pakistan Income Bonds are government‟s long term commitments with a period ranging from 3 years to 10
years.
3
Reserve requirement represents the amount of cash the bank should keep in its vaults. The bank capacity to
lend tends to fall if the central bank increases the reserve requirements and vice versa.
4
A tax that is paid directly by an individual or organization to the imposing entity including real property tax,
personal property tax, income tax or taxes on assets. Direct taxes are different from indirect taxes, where the tax
is levied on one entity, such as a seller, and paid by another, such a sales tax paid by the buyer in a retail setting
(source: http://www.investopedia.com/terms/d/directtax.asp ).
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 11-125-2013-2

spending on defence, interest payments, grants/subsidies, government operating costs, social

programs and services, etc.

The budget needs to be balanced each year. The effect or variability of the factors mentioned
above need to be considered before developing a budget for the next year, since these factors
impact the available budgetary resources. The budgetary exercise is not restricted to the
national budget only. All the public organisations at the individual level also undergo the
budgetary exercise. These organisations develop the expenditures for the next year using
previous year expenditures as a benchmark and therefore face the challenge of realistically
forecasting future expenditures.

Preparing the budget is an essential and critical planning tool. The foremost difficulty, faced
by an organisation, while preparing a budget is to determine future income and expenditures.
Since budgets are prepared before the start of the fiscal year, unknown factors/events need to
be predicted. For this purpose the budget developers review historical trends and make
assumptions about future expenses in order to accurately predict the organisations financial
situation for the next year.

In this process, the historical trends and assumptions can fail if the actual
revenues/expenditures deviate from the predictions e.g. if revenue falls short of target or
expenditure surpasses the planned target. This could be due to several reasons and can be
divided as either external or internal factors. External factors include revenue loss or increase
in expenditures due to natural disasters, governance issues, wars, economic downturn etc.
Internal factors include inadequate tax coverage and collection and inefficient public
governance leading to higher expenditures. It is pertinent to note that amongst different
budget items, expenditure is the most difficult one to predict since it can be affected by
events that are either natural or politically motivated e.g. an increase in salary and benefits,
expenditure to finance the war on terror, energy crisis and onetime events such as floods,
earthquake, and social programs such as the Benazir Income Support Program.

In view of the reasons mentioned above, it is of utmost importance that the budget analyst
understands the macroeconomic indicators and their uses in determining appropriate
assumptions for developing a budget, be it at the national or organisational level. Exhibit 6
and 7 provide the Pakistan government expenditures, revenues and capital account in order to
familiarise the reader with different types of accounts in these categories. Next, we will
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 11-125-2013-2

discuss the macroeconomic structure of Pakistan and its application in public financial
management.

PAKISTAN’S MACROECONOMIC STRUCTURE

Pakistan‟s macroeconomic structure comprises of three major sectors namely, commodity

producing sector, industry and the
services sector 5 . The commodity
producing sector is divided into ,
agriculture, forestry, fishing,
livestock, minor and major corps.
The industrial sector includes
electricity and gas distribution,
construction, slaughtering, small and
household manufacturing and large
scale manufacturing. The services sectors includes social services, public administration and
defence, ownership of dwellings, finance and insurance, wholesale and retail trade, transport,
storage and communication. The Figure 1 shows that on average the commodity producing
sector holds a share of 47% of real GDP while services and industrial sector holds 52% and
25% respectively.

The sectoral growth rates given in

Figure 2 over the last 10 years depict
a very gloomy picture. The reasons
for declining growth rates are due to
number of reasons including
disasters (both natural and
manmade) such as earth quake in
2006 and floods in 2009, war on
terror (security), global financial
crisis, political instability, etc.

In order to make sound budgetary assumptions specially taking into account the numerous
challenges as discussed earlier, the analysts requires an integrated macroeconomic

5
Economic Survey 2012-13, Ministry of Finance, Pakistan.
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 11-125-2013-2

framework. In the next section we develop one such macroeconomic analytical framework to
credibly assess the Pakistan economic performance and its sustainability.

AN ANALYSIS OF PAKISTAN’S ECONOMY

We can divide the analysis of Pakistan‟s economy into two parts. The first part constitutes
analysing the current state of the economy. This includes analysing the GDP and growth,
unemployment and utilisations, inflation and interest rates. The second part provides
guidance for analysing the sustainability of the current economy in the future. This includes
examining the debt and deficit, external balances and exchange rates, savings and
investments.

i) GDP & Growth

Gross Domestic Product (GDP-market price) is defined as, the market value of the final
goods and services produced
within a nation‟s borders over
a given period of time, which
is usually a quarter or a year.
Real GDP (GDP-fixed cost)
measures the value of these
goods and services using the
prices from a fixed “base
year,” thereby controlling for
changes in prices and
facilitating the comparison of production levels across time. Gross National Product
(GNP) is defined in the same way as GDP except that it accounts for goods and services
produced only by the nationals of a country. As shown in Figure 3, Pakistan GDP and
GNP has witnessed increasing trend over the years. The analysts must be wary of the fact
that the GDP/GNP alone does not give complete information about the current state of
the economy and therefore these indicators must be analysed along with other indicators.

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Following is the equation of GDP:

GDP = C + I + G + NX

Where, C: Consumption (purchase of goods and services by households for current use),
I: Investment (purchase of goods and services by business for producing future output)
G: Government Expenditures and N: Net Exports (Export-Imports). As shown in Figure
3 above, Pakistan witnessed a steady growth in GDP and GNP between 2003 to 2011. In
addition, the GNP of Pakistan is greater than its GDP which means that Pakistanis are
contributing more to the output of the economy compared to the foreigners working in
Pakistan. Exhibit 3a, 3b, 3c and 3d show the individual variables in comparison to BRIC
(Brazil, Russia, India and China) countries. The household consumption in Pakistan is
greater than any of the BRIC countries over the 21 year time period. The data indicates
that Pakistan‟s investment and government expenditure is the lowest over the time period
while it experienced negative net exports when compared to BRIC countries. The growth
rates in GDP components are also more volatile compared to BRIC countries (See
Exhibit 3e, 3f and 3g).

The yearly change in GDP gives the

GDP growth rate. This tells us how
the economy has performed
compared to the last year. Pakistan‟s
GDP and GNP exhibited a declining
trend over the past 7 years as shown
in Figure 4. Exhibit 2a and 2b give
insight on the GDP (based on market
and constant prices) from BRIC
countries when compared with Pakistan. The GDP pattern clearly indicates that Pakistan
lies at the bottom.

Since the GDP growth rate measures the rate of increase in the economy‟s total output, it
therefore shows how much more value is being produced in the economy. When
compared to BRIC, (shown in Exhibit 2c), Pakistan performed better in the past (before
2007) when compared to Brazil and Russia, while closely following the growth rate of
India. However, the growth rate appears to be well below BRIC countries after 2007.

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Another indicator, GDP per capita, measures the value of what can be consumed per
person, with the proceeds of an
economy‟s output. It often serves
as a measure of the standard of
living in an economy. Though
Figure 5 shows a continuous
upward trend in Pakistan per
capita income however when
compared to BRIC countries,
Pakistan‟s per capita is closer to
India while the rest of the
countries lie well above it (Exhibit 2d and 2e ).

The public financial managers can use GDP (the size of the economy), GDP growth rate
and per capita income as an indicator of the behaviour of future increase/decrease in
revenue/expenditures. For instance if these indicators are showing increasing trend then
the economy is performing well and if required the managers can increase the budgetary
expenditures. In addition, the growth rates of the individual variables in the GDP
equation can also provide valuable insights regarding the behaviour/trend of the
consumers, industry and the government. This can eventually lead to an efficient policy
making process. Managers at the organisational level will therefore need to assess their
budgets in the light of increasing or decreasing GDP.

ii) Unemployment & Utilization

The unemployment rate is the percentage of those individuals looking for work who
cannot find it, while utilisation is
defined as the percentage of
unused capacity of factories and
equipment. The unemployment
rate has direct consequences for
the government and the
economy. A persistently rising
unemployment rate indicates a
contracting economy, i.e. the
GDP growth rate is continuously falling. Since the unemployment indicator is considered
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as a lagging indicator6 of the economy, therefore, the falling unemployment effects (due
to increasing GDP growth rate) come later. Pakistan has been able to keep its
unemployment rate below 6% for the last 5 years as shown in Figure 6.

The direct consequence of high unemployment is that the government tends to adopt an
„economic stimulation policy‟ i.e., the government increases its spending in order to
stimuli demand which in turn creates business activity and reduces the unemployment
rate. One popular mode of such a policy is to increase the current (non-development
expenditures) salaries/benefits of government employees. This leads to more disposable
income for the households and thus their consumption spending increases creating a
demand for business products. The unemployment rate together with the poverty
indicators can provide useful insights to policy makers.

For public financial managers, an increase in unemployment rate indicates a loss of

revenue (tax loss) as well as an increase in expenditure (indirect payments). Therefore,
the unemployment rate stands as an integral part of the assumption for the budget
forecasting activity.

iii) Inflation and Interest Rates

Inflation is the rate of change in the overall price level of an economy. As shown in
Figure 7, Pakistan has witnessed a rising (double digit) inflation in the last 5 years.
Inflation has a direct effect on the
consumer purchasing behaviour
and cost of doing business.
Inflation deteriorates the value of
cash holdings. During inflation
consumers tend to spend more and
save less. The cost of living
inflates and therefore the
consumers demand higher salaries. This in turn results in expensive labor and rising cost
of raw materials for the businesses. Pakistan witnessed a sharp increase in inflation from
2005 onwards resulting in deteriorating living standards. Exhibit 4a shows inflation in

6
http://economics.fundamentalfinance.com/macroeconomics/economic-indicators.php
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 11-125-2013-2

Pakistan versus the BRIC countries. Pakistan experienced higher inflation rates amongst
the group from 2007 onwards.

From the governments‟ perspective, inflation can help reduce its debt burden. Since debt
is fixed, it‟s cheaper to pay it back when there is high inflation. In Pakistan, the State
Bank of Pakistan (SBP) is responsible for controlling inflation. Sometimes the
government uses inflation as an implicit policy to create economic activity in the short
run. To achieve this, the SBP increases the money supply in the market. With this greater
supply and less demand of the currency, its value falls leading to increased spending
which in turn increases business activity, albeit only in the short run.

Inflation also tends to reduce the competitiveness of a country in the global market.
Given high levels of inflation, the value of the currency of a country rises in relation to
other countries, making its exports expensive. Fewer exports translate into a low demand
for the country‟s currency and therefore push the value of the currency downwards.

Interest rates are the prices at which money can be borrowed. When a central bank lowers
these rates, it is attempting to encourage individuals and firms to borrow money and
spend; in other words, it is using
an expansionary monetary
policy. The potential cost of
such a stimulus is inflation.
When a central bank keeps
interest rates persistently low, it
risks making money cheap and
pushing up prices. Interest rates
also provide information about
the market‟s perception of risk. If a government, or a sector within a country, is perceived
as an increasingly risky debtor, the supply of capital to it will fall and the interest rate at
which it can borrow will rise. Pakistan faced rising interest rates from 2004 onwards as
shown in Figure 8. A direct consequence is rising cost of doing business and stagnant
economic activity. The real interest rates remain close to zero or negative. This means
that the major factor causing the upward jump in the lending and deposit interest rates
remains inflation.

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Public financial managers have to take the rate of inflation/interest rate as an integral part
of budget forecasting. These rates in effect can tell how much future revenue/expenditure
will increase/decrease in nominal terms. However, the managers also need to assess the
conditions that cause inflation.

iv) Debt and Deficit

Deficit is the difference between government revenues and expenditures. Figure 9 shows
the Pakistan budget deficit as percentage of GDP. The average budget deficit stands at
6% of GDP from 2006 to
2012. This average budget
deficit is on declining trend as
the budget estimate (B.E) for
the year 2012-2013 stand at
4.7%. The budget deficit is
considered good if the
government is spending on
development projects such as
infrastructure financing. Deficit becomes an issue if the government spends revenue on
current expenditures such as public sector compensation, grants/subsidies, defence and/or
interest payments. Pakistan‟s development expenditure is very low with the largest
spending on non-development expenditures such as interest payments, defence and
grants. In order to finance the budget deficit, the government has to borrow loans from
local and international markets.

Pakistan has persistently faced a budget deficit due to rising public expenditures. This
situation led the government to
borrow constantly from local as
well as international creditors.
Figure 10 shows the trend in
Pakistan‟s debt level which is
curtailed over time. The
government prefers to borrow
from the local market because
it is inexpensive compared to the international credit market which is both expensive and

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comes with multiple conditions regarding loan settlement. Recently the SBP reported that
Pakistan is about to enter into a „debt trap‟ 7 . This means that interest payments will
become large enough to require additional loans in order to honor the payments.

From public financial management point of view, a large deficit and rising debt is a
matter of concern. In order to solve the situation, the government should make drastic
spending cuts. At the level of public organisations, managers are required to define the
national budget deficit as a constraint on organisational budget. Reduction in current
expenditures will allow the government to shift more resources towards development
expenditures.

v) External Balance and Exchange Rate

The external balances refer to Current Account (CA) balance and Capital Financial
Account (CFA). The Current
Account (CA) balance is an
economy‟s net proceeds from
trade in goods, services, and
payments for the factors of
production (such as labor and
capital), with the rest of the
world. The CA balance is equal
to the opposite of the CFA
balance which indicates borrowing on account of CA. If the CA is negative i.e., imports
are greater than exports then the government borrows credit from foreign markets. This
leads to a surplus CFA account. In sharp contrast to a stable economy, Pakistan ran a
CFA surplus during the period 2007-12 while the current account balance remains
negative over the same period as shown in Figure 11.

An economy‟s external balances are challenged by the stability in exchange rates.

Exhibit 4e shows that the Pakistani Rupee is the weakest when compared to the BRIC
countries.

7
http://www.sbp.org.pk/reports/annual/arFY12/Domestic_External_Debt.pdf
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 11-125-2013-2

vi) Savings and Investments

Saving is the economy‟s share of output which is set aside for future use. Savings can be
either public or private in nature.
Public saving represent the
government‟s budget surplus (where
revenues are greater than
expenditures), while private saving
is done by individuals and
businesses. Savings can be lent to
businesses and individuals to fund
investments. This is the purchase of
assets that will generate production
in later periods. Because existing equipment and skills deteriorate over time, investment
is imperative for an economy that wants to maintain or increase its standard of living. As
shown in the Figure 12, Pakistan has a very low saving and investment rate. Also,
Exhibit 4d further provides evidence that Pakistan has the lowest saving rate compared
to BRIC countries. This trend may be due to a combination of different economic factors.

The public financial manager needs to identify the factors that affect budget forecasting.
These factors are transformed into assumptions in order to approximate the future budget
given the current state of the economy. Exhibit 8 provides an economic evaluation sheet in
which different possibilities can be explored. As a first step, the manager should assess the
current performance of the economy. The second step is to analyse whether the current
performance of the economy will remain the same or will it become better or worse. The
third step is to identify the rate at which the revenues or expenditure should be
increased/decreased. Such an analysis will result in a more reasonable estimate, unlike the
situation where the manager uses arbitrary rates for budget forecasting.

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Exhibit 1
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

Source: Karl Case, Ray Fair, (2004), ‘Introduction to Macroeconomics’, Principles of

Economics, 7/e, Chapter 17, Prentice Jall Business Publishing.

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 11-125-2013-2

Exhibit 2
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

GDP (Current USD) GDP (Constant 2000 USD)

8E+12 8E+12

7E+12 7E+12

6E+12 6E+12

5E+12 5E+12

4E+12 4E+12

3E+12 3E+12

2E+12 2E+12

1E+12 1E+12

0 0

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (2a) Figure (2b)

GDP Growth (Annual %)
20

15

10

0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-5

-10

-15

-20
Pakistan Brazil Russian Federation India China

Figure (2c)
GDP Per Capita (Current USD) GDP Per Capita(Constant 2000 USD)
14000 6000

12000
5000

10000
4000
8000
3000
6000

2000
4000

2000 1000

0 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (2d) Figure (2e)

Source: http://data.worldbank.org/
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 11-125-2013-2

Exhibit 3 (p1 of 2)
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

Household Final Consumption Expenditure, etc. (% of GDP) Gross Capital Formation (% of GDP)
90 60

80
50
70

60 40

50
30
40

30 20

20
10
10

0 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (3a) Figure (3b)

General Govt. Final Consumption Expenditure (% of GDP) External balance on goods and services (% of GDP)
25 25

20
20
15

15 10

5
10
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
5
-5

-10
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

-15
Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (3c) Figure (3d)

Source: http://data.worldbank.org/

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 11-125-2013-2

Exhibit 3 (p2 of 2)
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

Household Final Consumption Expenditure (Annual % Gross Capital Formation (Annual % Growth)
Growth) 100
35
80
30
60
25

20 40

15 20

10
0

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
5
-20
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-40
-5

-10 -60

Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (3e) Figure (3f)

General Govt. Final Consumption Expenditure (Annual %

Growth)
60

50

40

30

20

10

0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

-10

-20

-30

-40
Pakistan Brazil Russian Federation India China

Figure (3g)

Source: http://data.worldbank.org/

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 11-125-2013-2

Exhibit 4
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

Inflation (Annual %) Lending Interest Rate (%)

100 100

90 90

80 80

70 70

60 60

50 50

40 40

30 30

20 20

10 10

0 0
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011
-10
Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (4a) Figure (4b)

Foreign Direct Investment, Net Inflows (% of GDP) Gross Domestic Savings (% of GDP)
7 60

6
50

5
40

4
30
3

20
2

10
1

0 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (4c) Figure (4d)

Official Exchange Rate (LCU per USD, period average) Portfolio Equity, Net Inflows (Current USD)
100 5E+10

90
4E+10
80

70 3E+10
60
2E+10
50

40
1E+10
30

20 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

10
-1E+10
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

-2E+10
Pakistan Brazil Russian Federation India China Pakistan Brazil Russian Federation India China

Figure (4e) Figure (4f)

Source: http://data.worldbank.org/
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 11-125-2013-2

Exhibit 5
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

Development Expenditure on Revenue Account

Revised Revised
Budget Budget
Description
Estimate 2011- Estimate 2012-
12 13
General Public Service 113,461 136,314
011 Executive & Legislative Organs, Financial &
Fiscal Affairs, External Affairs 50,788 39,665
014 Transfers 11,413 32,026
015 General Services 32,581 38,287
016 Basic Research 1,289 1,638
017 Research & Dev. General Public Services 12 39
019 Gen. Public Services not Elsewhere Defined 17,379 24,659
Defense Affairs and Services 1,393 2,021
025 Defense Services Division 1,393 2,021
Public Order and Safety Affairs 3,800 5,531
031 Law Courts 1,048 1,000
032 Police 1,614 1,657
033 Fire Protection 9 45
034 Prison administration and operation 720 -
036 Administration of Public Order 409 2,829
Economic Affairs 37,277 49,264
041 Gen. Eco. Commercial and Labor Affairs 369 761
042 Agri., Food, Irrigation, Forestry & Fishing 32,855 45,085
043 Fuel and Energy 354 270
045 Construction and Transport 3,147 1,190
046 Communications 442 1,821
047 Other Industries 111 138
Environment Protection - 135
055 Administration of Environment Protection - 135
Housing and Community Amenities 3,557 2,743
061 Housing Development 6 15
062 Community Development 3,401 2,323
063 Water Supply 150 405

Source: http://www.finance.gov.pk/budget/abs_2012_13.pdf

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 11-125-2013-2

Exhibit 6 (p1 of 2)
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

Development Expenditure on Revenue Account

Revised Revised
Description Budget Budget
Estimate 2011- Estimate 2012-
12 13
General Public Service 113,461 136,314
011 Executive & Legislative Organs, Financial &
Fiscal Affairs, External Affairs 50,788 39,665
014 Transfers 11,413 32,026
015 General Services 32,581 38,287
016 Basic Research 1,289 1,638
017 Research & Dev. General Public Services 12 39
019 Gen. Public Services not Elsewhere Defined 17,379 24,659
Defense Affairs and Services 1,393 2,021
025 Defense Services Division 1,393 2,021
Public Order and Safety Affairs 3,800 5,531
031 Law Courts 1,048 1,000
032 Police 1,614 1,657
033 Fire Protection 9 45
034 Prison administration and operation 720 -
036 Administration of Public Order 409 2,829
Economic Affairs 37,277 49,264
041 Gen. Eco. Commercial and Labor Affairs 369 761
042 Agri., Food, Irrigation, Forestry & Fishing 32,855 45,085
043 Fuel and Energy 354 270
045 Construction and Transport 3,147 1,190
046 Communications 442 1,821
047 Other Industries 111 138
Environment Protection - 135
055 Administration of Environment Protection - 135
Housing and Community Amenities 3,557 2,743
061 Housing Development 6 15
062 Community Development 3,401 2,323
063 Water Supply 150 405
Health 782 1,316
073 Hospital Services 396 719
074 Public Health Services 386 597
Recreation, Culture and Religion 90 146
081 Recreation and Sporting Services 55 41
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 11-125-2013-2

Exhibit 6 (p2 of 2)
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

082 Cultural Services - 75

083 Broadcasting and Publishing 35 30
Education Affairs and Services 16,141 17,377
091 Pre & Primary Edu. Affairs & Services 120 30
092 Secondary Edu. Affairs & Services 68 26
093 Tertiary Edu. Affairs & Services 14,346 15,859
095 Subsidiary Services to Education 79 66
097 Education Affairs & Services not
Elsewhere Classified 1,529 1,396
Social Protection 941 914
107 Administration 894 900
108 Others 47 14
Dev. Exp. on Revenue Account (PSDP) 177,441 215,762
Other Dev. Exp on Revenue Account 114,488 144,520
011 Executive & Legislative Organs, Financial &
Fiscal Affairs, External Affairs 50,040 72,020
014 Transfers 5,665 11,500
019 Gen. Public Services not Elsewhere Defined - 15,000
041 Gen. Eco. Commercial and Labor Affairs 10,000 10,000
042 Agri., Food, Irrigation, Forestry & Fishing 44,982 26,000
107 Administration 3,802 10,000
Dev. Exp. on Revenue Account (i+ii) 291,930 360,282

Source: http://www.finance.gov.pk/budget/abs_2012_13.pdf

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 11-125-2013-2

Exhibit 7
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS

Development Expenditure on Capital Account*

Revised Revised
Budget Budget
Description
Estimate Estimate
2011-12 2012-13
Public Sector Development Program
General Public Service 172,728 216,499
011 Executive & Legislative Organs, Financial
& Fiscal Affairs, External Affairs 285 200
014 Transfers 150,093 176,732
017 Research and Dev. General Public Services 22,350 39,567
Economic Affairs 5,893 4,510
041 Gen. Eco., Commercial and Labour Affairs 49 68
042 Agri., Food, Irrigation, Forestry & Fishing 117 125
044 Mining and Manufacturing 1,899 1,386
045 Construction and Transport 13,843 9,212
Less Recoveries from Railway -10,015 -6,281
d. Dev. Expenditure on Capital Account 178,621 221,009
i. Other Dev. Exp on Capital Account 7,271 9,768
014 Transfers 7,271 9,768
d. Dev. Expenditure on Capital Account 185,892 230,777
A. Public Sector Dev. Program (c i+d) 356,062 436,772
B. Other Development Expenditure (c ii+d i) 121,759 154,288
II. Total Development Expenditure (A+B) 477,822 591,059
III. Total Exp. (Current + Development) 3,133,859 3,266,307
*in million

Source: http://www.finance.gov.pk/budget/abs_2012_13.pdf

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 11-125-2013-2

Exhibit 8
A FRAMEWORK FOR ASSESSING PAKISTAN’S MACROECONOMIC
CONDITIONS
Economic Assessment Sheet
Economic Variable Behavior Impact Behavior Impact
Current Performance of the Economy
GDP & Growth Increased Expansion: Decreased Recession:
The economy The economy
Unemployment & Utilization Decreased is expanding. Increased is contracting.
Possibility 1

Inflation & Interest Rates Increased & Decreased &

Decreased Increased
Current Performance will be Better/Same/Worst
Debt and Deficit Will decrease The economy Will increase The current
will continue economic
External Balances and Exchange Will decrease to expand. Will increase performance
Rates will continue
to deteriorate.
Savings and Investments Will decrease Will increase
Current Performance of the Economy
GDP & Growth Increased Expansion: Decreased Recession:
The economy The economy
Unemployment & Utilization Decreased is expanding. Increased is contracting.
Possibility 2

Inflation & Interest Rates Increased & Decreased &

Decreased Increased
Current Performance will be Better/Same/Worst
Debt and Deficit Will increase The economy Will increase The economy
will start will start
External Balances and Exchange Will increase contracting. Will increase expanding.
Rates

Savings and Investments Will increase Will increase

Current Performance of the Economy
GDP & Growth

Unemployment & Utilization

Possibility 3

Inflation & Interest Rates

Current Performance will be Better/Same/Worst
Debt and Deficit

External Balances and Exchange

Rates

Savings and Investments

Possibility

Number of possibilities can be

developed…
4

Source: Developed by Author.

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