Too often one hears of a gloomy prognosis predicting doom for the Pakistani economy. Lets see what kind of story the actual numbers tell in comparison to more advanced economies of the world.
In March 2009, Pakistan’s trade deficit narrowed by almost 50%, as imports declined faster than exports. Good news for the currency one would think.
Worker remittances were a record high in March 2009 at US$743 million an increase of 23% over last year. Cheerful news that.
While Japan’s exports plummeted by 50%, China’s by 26% and India’s by 33%, Pakistan’s exports were down by 25%. Even though, the competitive peer group is formidable, Pakistan is the best performer.
On the corporate profitability front, during the worst global down turn in a century, Pakistan’s corporate profitability of listed companies declined by a mere 3% in aggregate in the 3rd quarter of 2009.
Now let’s focus our attention on what is believed to be the most important measure of the long term health of an economy, Total debt to GDP. Total debt is defined as all debt in an economy including domestic and foreign, public and private. As the credit crunch has duly reminded the world, the best of human endeavor cannot endure the burden of debt. The largest, most technologically advanced, most innovative, most well governed countries in the world have fallen victim to the debt trap. How ironic.
Pakistan’s total debt is around US$113 billion. US$45 billion foreign debt plus US$37 billion domestic bank credit plus US$45 billion domestic government debt minus US$14 billion of domestic government debt held by banks. Pakistan 2008 GDP at current exchange rate was about US$160 billion. As a percentage of GDP Pakistan’s total debt is roughly 70% of GDP. USA’s government debt alone is around 100% of GDP. Total debt, domestic and foreign, public and private is about US$53 trillion or about 378% of GDP.
USA owes US$11 Trillion in government debt [9], US$17 Trillion in financial sector debt, US$13.8 Trillion in household debt, and US$11.10 trillion in corporate non financial debt. UK’s personal debt (mortgage, credit cards, auto loans to households) alone is more than a 100% of UK’s GDP, and government debt is an additional 52% of GDP. Total domestic credit is about US$5.4 trillion or about 250% of GDP. However, UK’s external debt around US$10.5 trillion or roughly 500% of GDP, a staggering number–UK GDP is around US$2.2 trillion. A soft reminder that a pull back by foreigners on the their deposits can create nothing short of mayhem in the country. Japan’s government debt is about 170% of GDP, total domestic credit (less euphemistically known as domestic debt) is about US$10 trillion or about 210% of GDP. Japan’s GDP is about US$4.8 trillion.
The developed economies have paid for their progress through a mountain of debt and that mountain is starting to slide. If you follow the debate on the subject amongst the experts, the consensus is that there is no honest way out of it, bail out packages notwithstanding. The viability of these economies is now an open question.
USA, Japan and UK economies are going to shrink by between 5-10% over this year. Pakistan’s is expected to grow by about 2%.
I think the numbers bear testimony to the resilience of this nation. It takes a beating, but keeps on going. Yet if anyone concludes from the above that things are not as bad as they seem and therefore no need to get all worked up it would be the wrong conclusion. For the same reason that a doctor puts the most effort in a patient that has a hope for survival, and not in the one that is almost dead, Pakistanis must focus their efforts on Pakistan. Exactly how, is up to their imagination and resolve.
Pakistan has issues, very serious ones and most of them are related to governance. It is nothing short of a miracle that with such serious governance issues the economy is doing better than some top economies in some specific yet critical areas. Compared to the task that the OECD economies face, which has technical intractibilities, the resolution of Pakistan’s problems require political will. In other words Pakistan has the luxury to be able to choose and it has a fighting chance. It can choose to reform and decide which direction it is going to go. If, the country makes the right choice, it can emerge as a major global power house in 20 years or less.
Maulana Rum said, if an ant seeks the rank of Solomon, don’t smile contemptuously upon its quest. Everything you possess of skill, and wealth and handicraft, wasn’t it first merely a thought and a quest?
Pakistan is no ant, out of 233 countires in the world, it is 6th largest in terms of population, 45th in term of GDP and 34th in terms of area. But maybe it needs to be as industrious.
Let the thought flourish, let the quest begin.
These numbers are irrelevant. The “growth” in Pakistan’s economy is HEAVILY inflated by the authorities. For example, during Shaukat Aziz’s time as Finance Minister, he pointed out that machine imports grew by 20% wihch would indicate industrialization, but he included leisure items such as cell phones and iPods into the the definition of “machine imports” so it was heavily deceptive.
Also, as jks pointed out, these figures mean nothing to the average Pakistani for whom even the most basic necessities of life are slowly but surely slipping out of his reach. Poverty and inflation are at an all-time high, the new government’s fiscal policies are disastrous and the govt. itself is HIGHLY corrupt. The tourism industry is almost dead, industrialists and entrepreneurs are packing up and leaving for other countries, as are skilled and qualified young people.
X0 > My previous comment can be summarized as:
“Pakistan has a lot of potential however, false sense of security and undeserved pride only makes us less likely to achieve true progress. The numbers are only feel good numbers that don’t mean anything. We must be realistic and work hard to actually fix things instead of comparing how horribly we are doing compared to how horribly everyone else is doing.”
I agree with Asad.
I admire the intent of the article – that there are good things in the economy despite all the bad, but I have not in my life seen a worse case of misuse of economic statistics.
All the numbers are chosen in the aftermath of the global economic crisis and suggest that the growing economies of the world are doing worse in this crisis than Pakistan. What is the surprise, or pride, in that.
When the stock market goes down the rich loose more than the poor be case the poor have nothing invested in the market. Does that mean we all want to be poor! I hope not.
What this is showing is just how isolated the Pakistan economy is. I DO AGREE THAT THERE ARE GOOD THINGS HAPPENING IN PAKISTAN ECONOMY. But these are not those things.
And, for anyone who has taken Economics 101, comparing personal debt of UK and Pakistan is beyond ridiculous (it will get you an F)… think about what you take personal debt for…. The personal debt in Somalia is nearly zero, would you rather have Somalia’s economy or the UK’s?
JK your comments can be summarized as follows :
Until everthing is perfect main nahain khailta.
Missing the point aren’t you. These numbers are there despite all the crap and numbers do count for something.
Pakistan has always had the potential to be a great, peaceful, and prosperous country. Unfortunately, terrible mistakes have been made continuously, over and over, since many decades. What right choices are being made today?
This is no time for patting ourselves on the back.
These numbers mean nothing since the average Pakistani is an uneducated person living in poverty with no relief in sight. There is no accountability. There aren’t even proper service standards for power companies and they can’t even lay wires correctly. Citizens of China, Japan, Germany etc do their jobs with pride. Things are made with high quality. Many individuals don’t have the “good enough”, or “sab chalta hay” attitude. No one here strives for perfection and when you respectfully demand perfection they either get angry or they laugh. There is no unity amongs different provinces, etc. There is extreme violence, hatred, and racism.
These things that I have listed will have to be first fixed before we will ever get to a point where we have good governance.
Percentages during a period of recession don’t mean anything. A 50% decrease in exports for Japan is not as bad as a 25% decrease in exports in Pakistan. There are many more factors involved in the health of a nation than just the GDP to debt ratio.
I am all for supporting pakistan and supporting progress but just fooling ourselves into some stupid false sense of security is useless.