战略与国际研究中心-South-Asia-Monitor_-Pakistan_-Avoiding-Economic-Disaster_3页_184kb

Pakistan: Avoiding Economic Disaster Summary

Core Content

Pakistan faces a severe economic crisis, marked by sluggish growth, high inflation, and a deteriorating balance of payments. The country's economic challenges are exacerbated by external factors such as the global financial crisis and the war on terror, as well as internal issues like weak tax administration and underinvestment in social sectors.

Main Economic Challenges

• GDP Growth Decline:
  Pakistan's GDP growth dropped from an average of 6% over the past five years to 2% in 2009, the lowest in South Asia. This reflects a significant slowdown in economic activity.

• Weak Tax System:
  The tax-to-GDP ratio is only 9%, one of the lowest globally. Fewer than 1.5 million Pakistanis pay taxes due to a complex, self-assessment-based system and numerous exemptions.

• Agriculture and Manufacturing:

  • Agriculture performed relatively well, contributing 21.8% to GDP, but is vulnerable due to poor monsoon conditions in 2009.
  • Manufacturing suffered heavily, with a 50.4% decline in large-scale production, driven by rising oil prices and instability.

• Inflation Crisis:
  Inflation surged to 22.3% during July 2008–April 2009, one of the highest globally. Food inflation, averaging 26.6%, has had the most significant impact on the poor and society at large.

• Balance of Payments Strain:
  Pakistan's current account deficit improved to $462 million from $4.3 billion the previous year, but the country remains vulnerable due to its reliance on remittances and exports to the U.S. and Europe. Remittances dropped by 19.7% in 2008 but rebounded in 2009.

• Investment Stagnation:
  Investment as a share of GDP has remained stagnant at around 15%, far below other countries with similar income levels. Foreign investment fell by 42.7% in the first 10 months of the fiscal year 2009.

International Support and Political Complications

• Kerry-Lugar Bill:
  The U.S. provided $1.5 billion in economic aid annually under the Kerry-Lugar bill, aimed at supporting Pakistan's development and showing long-term commitment. However, the bill's conditions, such as reporting on governance and counterterrorism, sparked political backlash in Pakistan, seen as interference in internal affairs.

• Friends of Democratic Pakistan:
  This group pledged $5.7 billion in support, with $2 billion expected to be disbursed in 2009. Despite this, the program's effectiveness has been questioned due to corruption and inefficiencies.

• IMF Support:
  Pakistan requested IMF assistance in 2008, which approved a $7.6 billion program with strict fiscal requirements. This program contributed to deflationary job losses and economic strain.

Social and Human Impact

• Food Insecurity:
  Over 77 million Pakistanis are food-insecure, with 95 of 121 districts facing hunger and malnutrition. The 2009 food stampede in Karachi highlighted the severity of the issue, even in an affluent city.

• Benazir Income Support Program (BISP):
  Launched in 2008, BISP provides $12 monthly to 3 million families. While it aims to alleviate poverty, it has faced criticism for corruption and lack of transparency. The government plans to expand it to 7 million families.

• Power Crisis:
  A chronic power shortage has cost the economy 7% of industrial output and 2% of GDP. The government implemented daylight saving time to reduce energy consumption, but the crisis persists.

Displacement and Refugee Crisis

• Swat Valley and Waziristan:
  The conflict in Swat Valley displaced over 2 million people in early 2009, and the ongoing military operation in Waziristan is causing further displacement. As of October 2009, 30,000 refugees in South Waziristan had not received promised aid, and an additional 250,000 could be displaced by year-end.

Future Outlook

• Short-Term vs. Long-Term Needs:
  The government must balance short-term relief with long-term investment in infrastructure and social sectors. Political rivalries and instability are complicating these efforts.

• U.S. Policy Considerations:
  While U.S. aid is crucial for Pakistan's economy, it must be more transparent and responsive to immediate needs. Policymakers should also focus on long-term underinvestment in both economic and human capital.

• Job Creation:
  International donors must prioritize job creation as a key component of economic recovery, especially in the context of rising unemployment and poverty.

Key Information

• GDP Growth: 2% in 2009, lowest in South Asia.
• Inflation Rate: 22.3% (July 2008–April 2009), with food inflation at 26.6%.
• Tax-to-GDP Ratio: 9%, one of the lowest in the world.
• Investment as % of GDP: 15%, below international standards.
• Foreign Investment (2009): $2.2 billion, down 42.7% from 2008.
• Remittances: Volatile, with a 19.7% drop in 2008.
• Refugee Situation: Over 2 million displaced in Swat Valley, 30,000 in Waziristan without aid.
• Benazir Income Support Program: Provides $12/month to 3 million families, with plans for expansion.

Conclusion

Pakistan's economic challenges are multifaceted, involving both internal structural issues and external pressures. While short-term aid and relief measures are necessary, they must be complemented by long-term investment in infrastructure, education, and health. The U.S. and other international donors must navigate political sensitivities to provide effective and sustainable support.