Assignment # 02

Name: Aamir shaikh

Roll Number: 39100
Course Title: Economics Analysis for Managers
Date of Submission: 21-0ct-2017
Teachers Name: Syed Khurram Zaidi
Class Timings: 03:00 06:00pm (Saturday)
INFLATION RATE IN PAKISTAN:
Consumer Price Index (CPI) is the main measure of price changes at the
retail level. It measures changes in the cost of buying a representative
fixed basket of goods and services and generally indicates inflation rate
in the country. The Consumer price index was computed for the first
time with 1948-49 as a base for industrial workers in the cities of
Lahore, Karachi and Sialkot only. Continuous efforts have been made,
since then, to make CPI more representatives by improving and
expanding its scope and coverage in terms of items, category of
employees, cities and markets. Accordingly, the CPI series were
computed with 1959-60, 1969-70, 1975-76, 1980-81 and 1990-91 as
base years. At present, the CPI is being computed with 2000-01 as base
year. And according to the studies of CPI, the inflation rate during the
fiscal year 2000-2001 was 4.41, during the fiscal year 2001-2002 it
dropped down to 3.54, further dropped to 3.10 during the fiscal year
2002-2003, rose again to 4.57 during 2003-2004, increased drastically to
9.28 during 2004-2005 and then dropped to 7.92 during 2005-2006. And
by the mid of October 2006, the CPI is reported to be 8.43.
The Sensitive Price Indicator (SPI) is computed on weekly basis to
assess the price movements of essential commodities at short intervals
so as to review the price situation in the country. The SPI is being
presented in the Economic Coordination Committee of the Cabinet
(ECC). Sensitive price indicator was originally computed with 1969-70
as base which was subsequently switched over to 1975-76, 1980-81 and
1990-91 as base year. Presently, the SPI is being computed with base
2000-2001. And Sensitive Price Indicator (SPI) shows the facts as; 4.84
in 2000-2001, 3.37 in 2001-2002, 3.58 in 2002-2003, 6.83 in 2003-2004,
11.55 in 2004-2005 and 7.02 in 2005-2006. Recently (By the mid of
October 2006) the SPI is reported as 9.86.

Pakistan Inflation Rate:

Inflation Rate 3.86% in September 2017 on a year on year basis as
compared to 3.41% in the previous month. Inflation Rate increases
0.45% than the previous month.
Discount Rate:
In Pakistan, interest rates decisions are taken by the State Bank of
Pakistan. On 23rd of May, 2015 the discount ceiling rate was replaced
by a new official interest rate, the SBP Policy rate. It was last updated on
October of 2017 And the current discount rate is 5.75 in 2017.

Pakistan GDP(1952-2017):
The Gross Domestic Product (GDP) in Pakistan was worth 283.66 billion US dollars
in 2016. The GDP value of Pakistan represents 0.46 percent of the world
economy. GDP in Pakistan averaged 67.19 USD Billion from 1960 until 2016,
reaching an all-time high of 283.66 USD Billion in 2016 and a record low of 3.71
USD Billion in 1960.

Pakistan GDP Annual Growth Rate

The Gross Domestic Product (GDP) in Pakistan expanded 5.28 percent in 2016
from the previous year. GDP Annual Growth Rate in Pakistan averaged 4.92
percent from 1952 until 2016, reaching an all-time high of 10.22 percent in 1954
and a record low of -1.80 percent in 1952.
GDP Constant Prices in Pakistan increased to 11777600 PKR Million in 2016 from
11138200 PKR Million in 2015. GDP Constant Prices in Pakistan averaged
9691105.45 PKR Million from 2006 until 2016, reaching an all-time high of
11777600 PKR Million in 2016 and a record low of 8216160 PKR Million in
2006.

Pakistan Debt:
Pakistans loan situation has steadily grown worse over the course of the last year as government
has continued to take on more loans from local and foreign institutions. While taking loans is not
unique to this government, the rate at which the loans are accruing is certainly unprecedented.

Pakistans Current Debt

2016 was a record setter in terms of debt for our country. Pakistans foreign debt stood at $72.98
billion (Rs. 7.40 trillion ) after the first half of 2016. During the last fiscal year, Pakistans debt
increased by $7.9 billion, a record amount of foreign debt.
 During the past three-odd years, the current government has taken $25 billion in foreign loans.
Out of the $25 billion, $11.95 billion was used to pay off other loans.

For the same duration, the PML-N government has borrowed PKR 3.1 trillion ($30 billion) from
local banking institutions in rupees. (This is local debt and does not add up in the foreign debt
mentioned above.)

Summing up, Pakistans total debt (local and foreign) had increased by $55 billion in the three-
odd years of the current govt. Loans from the Chinese institutions are separate thing altogether
and more details regarding those are still incoming.

We would like to mention that domestic borrowings are often not mentioned because their affect
is not as adverse as foreign debt. The government could simply devalue local currency and make
up for local payments.

Debt Predictions
According to data from the Trading Economics, Pakistans external debt will cross $75.54 billion
(PKR 7.90 trillion) when the details for Jan 2017 come out.

It is expected to cross $79.35 billion (PKR 8.30 trillion) in 6 months time and at the rate it is
progressing, the analyst firm says by 2020 the foreign debt will reach $87.1 billion (PKR 9.12
trillion).

Pakistans Debt Due in 18 Months

Pakistan has to pay $11.5 billion within the next 18 months. Various international monetary
institutions are owed different amounts from that sum. These are:

Pakistan has to pay a sum of $8.76 billion to International Monetary Fund (IMF), World Bank
and Asian Development Bank.
$160 million has to be paid in Saudi Riyals to Islamic Development Bank.
Pakistan has to pay $1.6 billion to China within 18 months.
Japan has to be paid back 192 billion Yen.
Paris Club from France is owed 625 million Euros.

Debt History
Lets take a look at Pakistans debt history:

Pakistan had received $121 million from 1951 to 1955.

 The figure nearly had tripled in the next five years.
By December 1969, the external debt of Pakistan had amounted to $2.7 billion.
Pakistans total external debt was $3 billion by December 1971.
Foreign debt figure had then subsequently increased to $6.3 billion in 1977.
Pakistans external debt was $21.9 billion in 1990.
It was $35.6 billion in 2000.
Pakistans foreign debt and liabilities in July 2013 stood at USD 61.9 billion
In July 2014, Pakistans foreign debt soared to USD 63.4 billion, showing an increase of USD
1.5 billion.
In July 2015, the foreign debt rose to USD 65.1 billion recording an increase of USD 1.7 billion.

Pakistan Purchasing power parity:

The Gross Domestic Product per capita in Pakistan was last recorded at 4866.20 US dollars in
2016, when adjusted by purchasing power parity (PPP). The GDP per Capita, in Pakistan, when
adjusted by Purchasing Power Parity is equivalent to 27 percent of the world's average. GDP per
capita PPP in Pakistan averaged 3833.68 USD from 1990 until 2016, reaching an all time high of
4866.20 USD in 2016 and a record low of 3055 USD in 1990.
S.No: Year Discount rate Inflation GDP Debt Purchasing power
Parity
1956 3.0% 2.98 -
1957 2.54 -
1958 5.47 -
1959 4.05 0.83 -
1960 6.9 4.89 -
1961 1.6 6.01 $16.7 billion
1962 -0.5 7.19 $26.5 billion
1963 1.5 6.48 $27.6 billion
1964 4.2 9.38 $35.8 billion
1965 5.0% 5.6 7.56 $3.8 billion
1966 7.2 3.08 $3.6billion
1967 6.8 6.79 $4.5 billion
1968 0.2 6.49 $6.0billion
1969 3.2 9.79 $8.90 billion
1970 5.3 1.23 $11.5 billion
1971 4.7 2.32 $14 billion
1972 6.0% 5.2 6.80 $17 billion
1973 8.0% 23.1 7.45 $20 billion
1974 9.0% 26.7 3.88 $19 billion
1975 20.9 3.25 $23 billion
1976 7.2 2.84 $28 billion
1977 10.0 10.1 7.78 $34 billion
1978 6.1 5.53 $41 billion
1979 8.3 7.33 $52 billion
1980 11.9 6.40 $60 billion
1981 11.9 7.56 $58billion
1982 5.9 6.79 $81 billion
1983 6.4 3.97 $10.4 billion
1984 6.1 8.71 $12.25 billion
1985 5.6 6.36 $15.3 billion
1986 3.5 5.81 $20.3million
1987 4.7 6.44 $24.8 billion
1988 8.8 4.71 $29.0billion
1989 7.8 4.44 $33.3 billion
1990 9.1 5.42 $3 billion
1991 10.0 11.8 7.57 $37.7 billion
1992 14.0 9.5 2.10 $43.7 billion
1993 17.0 10.0 4.37 $51.9 billion
1994 15.0 12.4 5.06 $62.4 billion
1995 16.50 12.3 6.60 $68.8 billion
1996 20.0 10.4 1.70 $7.84billion
1997 18.8 11.4 3.49 $9.39 billion
1998 16.8 6.2 4.80 $10.56 billion
1999 13.7 4.1 3.91 $13.89 billion 282
2000 11.2 4.4 1.86 $16.45billion 282
2001 12 3.1 3.71 $17.99billion 299
2002 8.5 3.3 4.73 $17.75billion 311
2003 7.48 $18.95billion 318
7 2.9
2004 8.96 $20.28 billion 347.3
7 7.4
2005 5.82 $33.97 billion 395.3
8 9.1
2006 8.7 7.9 6.01 $38.8 billion 437.5
2007 3.68 $42.38 billion 411.9
9.1 7.6
2008 1.21 $42.32billion 427.3
12 20.3
2009 4.09 $44.15billion 432.9
12.8 13.6
2010 $53.62 billion 464.9
12.6 13.9
2011 $57.21 billion 494.8
13 11.9
2012 10.7 9.7 $61.83 billion 523.9
2013 9 7.7 $56.19 billion 574.1
2014 9.4 7.2 $52.43 billion
2015 $63.5 billion
7.9 2.5
2016 $63.2 billion
5.85 3.8
2017 5.75 11.40 $7.90trillion
Conclusion:
Inflation Rate in Pakistan averaged 7.9 percent from 1997 until 2016, reaching an all time
high of 20.3 percent in 2008 and a record low of 2.5 percent in 2015. Inflation
Rate 3.41% in August 2017 on a year on year basis as compared to 2.91% in the previous
month. Inflation Rate increases 0.50% than the previous month.
Discount Rate in Pakistan averaged 10.70 percent from 1997 until 2016, reaching an all
time high of 18.8 percent in 1997 and a record low of 5.85 percent in 2016. The State
Bank of Pakistan (SBP) maintained the policy/discount rates had remained unchanged at
5.75 percent owing to the stability in macro-economy and rising inflation.

From above facts and figures it is concluded that the highest inflation rate was in the regime of
military dictator PERVEZ MUSHARRAF and debt was 40.5 billion dollar. The highest
discount rate was in the regime of FAROOQ LAGHARI elected democratically and at that time
the debt was 35.8 billion dollar. So in my opinion, During this visit, Farooq Leghari was well-
versed and discounted.