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.
Well said Arjun !
In your experience do you find the Pakistani elite more self critical / negative or Indian. OR would you say its a tie.
In my experience I find Pakistanis to be more negative / self critical.
@ Misfit:
Instead of just looking at wiki numbers for comparison, I suggest you try and understand how these numbers are calculated. The difficulty is in terms of conversion for various currencies for their local purchasing power. For example, the Big Mac index uses the price of a hamburger for PPP calculation. But it doesn’t make sense because most people don’t eat hamburgers all the time for food.
So the ADB came up with this methodology that uses a basket of 800 goods/services used in various Asian countries to come up with real GDP and real income numbers in terms of actual living standards and consumption patterns. Please go to the ADB link I posted and read it.
The numbers you quoted are based on Big Mac index PPP calcs . They don’t have any real meaning.
I think basic issue here is whether you see the glass half-full or half-empty.
Pakistan’s “base” on a per capita basis is actually higher than our neighbors.
Pakistan
Good general point, and I like the writer’s patriotism. Wish the writer also had a basic understanding of macro-economics and which measures and comparisons are and are not meaningful. The writer gets just about everything wrong on that count. But I like the general sentiment anyhow.
Well done, whatever is performed