Front Matter Page
© 1996 International Monetary Fund
February 1996
IMF Staff Country Report No. 96/8
Pakistan—Recent Economic Developments
This report on recent economic developments in Pakistan was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with this member country. As such, the views expressed in this document are those of the staff team and do not necessarily reflect the views of the Government of Pakistan or the Executive Board of the IMF.
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Front Matter Page
INTERNATIONAL MONETARY FUND
PAKISTAN
Recent Economic Developments:
Prepared by a staff team consisting of Mr. B. K. Short (Head - MED), Messrs. A. Furtado, S. Tareq, H. Hirschhofer (all MED) Mr. A. Kouwenaar (PDR), Mr. E. Ruggiero (FAD), Mesdames R. Moalla-Fetini, and O. Liu (all MED)
Approved by the Middle Eastern Department
December 6, 1995
Contents
Basic Data
I. Overview
II. The Domestic Economy
1. Overall trends in output
2. Trends in expenditure and savings
3. Sectoral developments
a. Agriculture
b. Industry
c. Services
4. Price developments
5. The privatization program
III. The Public Finances
1. Overall budgetary trends
2. Budgetary revenue
a. Expansion of the domestic tax base
b. Tariff reform
c. Revenue developments
d. Exemptions and concessions
3. Budgetary expenditure
a. Expenditure developments
b. Expenditure control
4. Federal-provincial fiscal transfers
5. The 1995/96 budget
IV. The Financial Sector
1. Institutional set-up
2. Evolution and sources of domestic liquidity
a. Overall monetary developments
b. Net domestic assets
c. Net foreign assets
d. The money multiplier
3. Developments in monetary and credit policy
a. Monetary policy
b. Credit policy
c. Level and structure of rates of return
4. Structural reforms in the financial sector
a. Liberalization of credit ceilings
b. Auctioning of government securities
c. Autonomy of the State Bank of Pakistan
d. Privatization and restructuring of financial institutions
e. Regulation and supervision of financial institutions
V. External Sector Developments
1. Balance of payments developments
a. Overall trends
b. Exports
c. Imports
d. Terms of trade
e. Services and transfers
f. Capital account
g. Official reserves
2. External debt and debt service
3. Trade regime
a. Institutional set-up
b. Import regime
c. Export regime
d. Regional and global economic cooperation
4. Exchange rate policy and exchange system
a. Exchange rate policy
b. The exchange system
Text Tables
1. Sectoral Origin of Gross Domestic Product, 1990/91-1994/96
2. Expenditure and Savings, 1990/91-1994/95
3. Output of Major Crops, 1990/91-1994/95
4. Wholesale and Consumer Price Indices, 1990/91-1994/95
5. Summary of Consolidated Fiscal Operations, 1990/91-1995/96
6. Consolidated Federal and Provincial Revenue, 1990/91-1995/96
7. Consolidated Federal and Provincial Expenditure, 1990/91-1995/96
8. Factors Affecting Changes in Domestic Liquidity, 1990/91-1994/95
9. Factors Affecting Changes in Reserve Money, 1990/91-1994/95
10. Balance of Payments, 1990/91-1994/95
11. Merchandise Exports, 1990/91-1994/95
12. Merchandise Imports, 1990/91-1994/95
13. External Debt and Foreign Currency Liabilities, 1990/91-1994/95
14. Summary of External Debt and Debt Service, 1990/91-1994/95
Statistical Appendix
15. Gross Fixed Capital Formation by Economic Sector, 1990/91-1994/95
16. Gross Investment in the Manufacturing Sector, 1990/91-1994/95
17. Sectoral Origin of Gross Domestic Product, 1990/91-1994/95
18. Area, Production and Yield of Major Crops, 1990/91-1994/95
19. Selected Commodity Prices, 1990/91-1994/95
20. Increases in Procurement Prices of Selected Agricultural Commodities, 1990/91-1994/95
21. Output in Selected Industries, 1990/91-1994/95
22. Domestic Retail Prices of Selected Petroleum Products, 1990/91-1994/95
23. Natural Gas Prices, 1990/91-1994/95
24. Budgetary Financing, 1990/91-1995/96
25. Domestic Debt, 1990/91-1994/95
26. Consolidated Federal and Provincial Government Subsidies, 1990/91-1994/95
27. Budgetary Expenditure, Social Action Program, and Public Sector Development Program, 1992/93-1995/96
28. Summary of Federal Government Operations, 1992/93-1995/96
29. Summary of Provincial Government Operations, 1992/93-1995/96
30. Monetary survey, 1990/91-1994/95
31. Accounts of the Scheduled Banks, 1990/91-1994/95
32. Accounts of the State Bank of Pakistan, 1990/91-1994/95
33. Mandatory Credit Targets for the Commercial Banks Under Priority-Sector Lending Schemes, 1990/91-1994/95
34. Concessional and Mandatory Credit to Nongovernment Sectors, 1990/91-1994/95
35. Sectoral Distribution of Scheduled Banks’ Credit to the Nongovernment Sector, 1990/91-1994/95
36. Bank Financing for Commodity Operations, 1990/91-1994/95
37. Commercial Bank Deposit and Loan Rates of Return Under the P.L.S. System, 1989/90-1994/95
38. Commercial Banks Permissible and Actual Outstanding Level of Credit Under the Credit-Deposit Ratio Framework, 1992/93-1994/95
39. Direction of Trade, 1990/91-1994/95
40. Value, Volume, and Unit Value of Major Merchandise Exports, 1990/91-1994/95
41. Composition of Imports, 1990/91-1994/95
42. Merchandise Trade by Economic Category, 1990/91-1994/95
43. Trade Indices, 1990/91-1994/95
44. Services and Transfers, 1990/91-1994/95
45. Home Remittances from Pakistani Nationals Abroad, 1990/91-1994/95
46. Medium- and Long-Term Capital, 1990/91-1994/95
47. Selected External Aid Indicators, 1990/91-1994/95
48. Short-Term Capital, 1990/91-1994/95
49. Foreign Currency Deposits of Residents and Nonresidents, 1990/91-1994/95
50. Gross Official Reserves, 1990/91-1994/95
51. Public and Publicly Guaranteed Debt to Official Creditors, 1990/91-1994/95
52. Foreign Interest Payments, 1990/91-1994/95
53. Summary of Nontariff Trade Measures Affecting Pakistan’s Exports to Selected Countries, 1994-95
54. Exchange Rates and Relative Consumer Prices, 1990/91-1994/95
55. Trade Flows and Outstanding Balances Under Bilateral Payments Agreements, 1990/91-1994/95
56. Karachi Stock Exchange Quotations with Respect to Foreign Exchange Bearer Certificates, 1990-95
Charts
1. Growth and Inflation, 1990/91-1994/95
2. Investment and Savings, 1990/91-1994/95
3. Government Revenue, 1990/91-1994/95
4. Money and Credit, 1990/91-1994/95
5. Exports and Imports, 1990/91-1994/95
6. Current Account and Official Reserves, 1990/91-1994/95
Pakistan: Basic Data
Includes changes in foreign currency deposits held by residents.
Annual averages based on monthly data reported by the Fund’s Information Notice System (decrease means depreciation).
Changes in percent of the initial stock of domestic liquidity.
Weighted average yield (in percent per annum) of the accepted bids at treasury bill auctions. Data for 1993/94 are for July-April. Treasury bill auctions began in March 1991.
Beginning in 1992/93, the budget definition excludes the operations of WAPDA, OGDC, NFC, PTVC, and PTC.
In 1990/91-1991/92, defense-related payments are included in imports.
Service of medium- and long-term debt.
Excluding gold.
| Prel. | ||||||||
|---|---|---|---|---|---|---|---|---|
| 1990/91 | 1991/92 | 1992/93 | 1993/94 | 1994/95 | ||||
| (Annual percentage changes, unless otherwise specified) | ||||||||
| National income and prices | ||||||||
| Real GDP (at factor cost) | 5.6 | 7.7 | 2.3 | 3.8 | 4.7 | |||
| GDP deflator (at factor cost) | 13.2 | 10.2 | 8.9 | 12.9 | 14.5 | |||
| Consumer prices (period average) | 12.7 | 9.6 | 9.3 | 11.2 | 12.9 | |||
| External sector (in U.S. dollars) | ||||||||
| Exports, f.o.b. | 19.8 | 14.6 | 0.3 | -1.4 | 17.9 | |||
| Imports, f.o.b. | 13.1 | 73 | 11.7 | -13.6 | 16.7 | |||
| Private transfers (net) 1/ | 3.7 | 29.2 | -21.4 | 2.7 | 0.3 | |||
| Terms of trade | -9.7 | 5.3 | -1.4 | 6.6 | -3.6 | |||
| Real effective exchange rate 2/ | -2.8 | -2.7 | 1.5 | -5.0 | -0.4 | |||
| Money and credit 3/ | ||||||||
| Money and quasi-money | 16.3 | 30.3 | 18.0 | 16.0 | 16.6 | |||
| Domestic assets (net) | 16.8 | 27.9 | 25.1 | 10.1 | 12.6 | |||
| Of which: Government sector (net) | 9.2 | 20.8 | 15.2 | 3.1 | 4.1 | |||
| non-government sectors | 6.5 | 8.4 | 13.1 | 6.3 | 10.6 | |||
| Rates of return 4/ | 8.7 | 10.5 | 12.3 | 12.4 | 11.7 | |||
| Public sector operations | ||||||||
| Total revenue | 0.9 | 38.0 | 12.1 | 13.2 | 13.7 | |||
| Of which: Tax revenue | 9.6 | 25.6 | 8.5 | 17.0 | 23.3 | |||
| Total expenditure | 15.5 | 25.2 | 20.7 | 3.3 | 14.8 | |||
| Of which: Current expenditure | 14.9 | 23.3 | 15.6 | 7.1 | 17.9 | |||
| (In percent of GDP, unless otherwise specified) | ||||||||
| Public sector operations | ||||||||
| Total revenue | 16.5 | 19.2 | 19.5 | 18.9 | 18.0 | |||
| Of which: Tax revenue | 12.8 | 13.6 | 13.3 | 13.3 | 13.8 | |||
| Total expenditure | 25.3 | 26.7 | 29.1 | 25.7 | 24.8 | |||
| Of which: Current expenditure | 18.8 | 19.5 | 20.4 | 18.7 | 18.5 | |||
| Overall public sector balance | -8.7 | -7.4 | -9.6 | -6.8 | -6.8 | |||
| Budgetary financing (net) 5/ | 8.7 | 7.4 | 8.0 | 5.9 | 5.6 | |||
| External financing (including grants) | 2.5 | 1.9 | 1.9 | 1.6 | 1.5 | |||
| Bank budgetary support | 3.9 | 5.8 | 4.7 | 0.8 | 1.1 | |||
| Other domestic financing | 2.3 | -0.2 | 1.4 | 3.5 | 3.0 | |||
| Investment and savings | ||||||||
| Gross domestic investment | 19.0 | 20.1 | 20.7 | 19.5 | 19.1 | |||
| Gross domestic savings | 17.1 | 13.6 | 12.0 | 14.2 | 14.1 | |||
| Gross national savings | 14.6 | 17.1 | 13.6 | 15.7 | 15.2 | |||
| External sector 6/ | ||||||||
| Current account balance (excluding official transfers) | -4.3 | -3.1 | -7.1 | -3.8 | -4.0 | |||
| Overall balance | — | 0.3 | -1.2 | 3.1 | 0.4 | |||
| External debt | 39.3 | 40.4 | 45.4 | 48.4 | 43.4 | |||
| Debt service ratio, including use of Fund credit | ||||||||
| (in percent of current account receipts) 7/ | 18.0 | 16.6 | 22.5 | 22.7 | 22.5 | |||
| Current account deficit (excluding official transfers) | -1,981 | -1,500 | -3,687 | -1,964 | -2,402 | |||
| Overall balance | 6 | 130 | -589 | 1,584 | 247 | |||
| Gross official reserves (in weeks of current year’s imports, c.i.f.) 8/ | 3.3 | 5.5 | 2.2 | 12.6 | 12.9 | |||
Includes changes in foreign currency deposits held by residents.
Annual averages based on monthly data reported by the Fund’s Information Notice System (decrease means depreciation).
Changes in percent of the initial stock of domestic liquidity.
Weighted average yield (in percent per annum) of the accepted bids at treasury bill auctions. Data for 1993/94 are for July-April. Treasury bill auctions began in March 1991.
Beginning in 1992/93, the budget definition excludes the operations of WAPDA, OGDC, NFC, PTVC, and PTC.
In 1990/91-1991/92, defense-related payments are included in imports.
Service of medium- and long-term debt.
Excluding gold.
| Prel. | ||||||||
|---|---|---|---|---|---|---|---|---|
| 1990/91 | 1991/92 | 1992/93 | 1993/94 | 1994/95 | ||||
| (Annual percentage changes, unless otherwise specified) | ||||||||
| National income and prices | ||||||||
| Real GDP (at factor cost) | 5.6 | 7.7 | 2.3 | 3.8 | 4.7 | |||
| GDP deflator (at factor cost) | 13.2 | 10.2 | 8.9 | 12.9 | 14.5 | |||
| Consumer prices (period average) | 12.7 | 9.6 | 9.3 | 11.2 | 12.9 | |||
| External sector (in U.S. dollars) | ||||||||
| Exports, f.o.b. | 19.8 | 14.6 | 0.3 | -1.4 | 17.9 | |||
| Imports, f.o.b. | 13.1 | 73 | 11.7 | -13.6 | 16.7 | |||
| Private transfers (net) 1/ | 3.7 | 29.2 | -21.4 | 2.7 | 0.3 | |||
| Terms of trade | -9.7 | 5.3 | -1.4 | 6.6 | -3.6 | |||
| Real effective exchange rate 2/ | -2.8 | -2.7 | 1.5 | -5.0 | -0.4 | |||
| Money and credit 3/ | ||||||||
| Money and quasi-money | 16.3 | 30.3 | 18.0 | 16.0 | 16.6 | |||
| Domestic assets (net) | 16.8 | 27.9 | 25.1 | 10.1 | 12.6 | |||
| Of which: Government sector (net) | 9.2 | 20.8 | 15.2 | 3.1 | 4.1 | |||
| non-government sectors | 6.5 | 8.4 | 13.1 | 6.3 | 10.6 | |||
| Rates of return 4/ | 8.7 | 10.5 | 12.3 | 12.4 | 11.7 | |||
| Public sector operations | ||||||||
| Total revenue | 0.9 | 38.0 | 12.1 | 13.2 | 13.7 | |||
| Of which: Tax revenue | 9.6 | 25.6 | 8.5 | 17.0 | 23.3 | |||
| Total expenditure | 15.5 | 25.2 | 20.7 | 3.3 | 14.8 | |||
| Of which: Current expenditure | 14.9 | 23.3 | 15.6 | 7.1 | 17.9 | |||
| (In percent of GDP, unless otherwise specified) | ||||||||
| Public sector operations | ||||||||
| Total revenue | 16.5 | 19.2 | 19.5 | 18.9 | 18.0 | |||
| Of which: Tax revenue | 12.8 | 13.6 | 13.3 | 13.3 | 13.8 | |||
| Total expenditure | 25.3 | 26.7 | 29.1 | 25.7 | 24.8 | |||
| Of which: Current expenditure | 18.8 | 19.5 | 20.4 | 18.7 | 18.5 | |||
| Overall public sector balance | -8.7 | -7.4 | -9.6 | -6.8 | -6.8 | |||
| Budgetary financing (net) 5/ | 8.7 | 7.4 | 8.0 | 5.9 | 5.6 | |||
| External financing (including grants) | 2.5 | 1.9 | 1.9 | 1.6 | 1.5 | |||
| Bank budgetary support | 3.9 | 5.8 | 4.7 | 0.8 | 1.1 | |||
| Other domestic financing | 2.3 | -0.2 | 1.4 | 3.5 | 3.0 | |||
| Investment and savings | ||||||||
| Gross domestic investment | 19.0 | 20.1 | 20.7 | 19.5 | 19.1 | |||
| Gross domestic savings | 17.1 | 13.6 | 12.0 | 14.2 | 14.1 | |||
| Gross national savings | 14.6 | 17.1 | 13.6 | 15.7 | 15.2 | |||
| External sector 6/ | ||||||||
| Current account balance (excluding official transfers) | -4.3 | -3.1 | -7.1 | -3.8 | -4.0 | |||
| Overall balance | — | 0.3 | -1.2 | 3.1 | 0.4 | |||
| External debt | 39.3 | 40.4 | 45.4 | 48.4 | 43.4 | |||
| Debt service ratio, including use of Fund credit | ||||||||
| (in percent of current account receipts) 7/ | 18.0 | 16.6 | 22.5 | 22.7 | 22.5 | |||
| Current account deficit (excluding official transfers) | -1,981 | -1,500 | -3,687 | -1,964 | -2,402 | |||
| Overall balance | 6 | 130 | -589 | 1,584 | 247 | |||
| Gross official reserves (in weeks of current year’s imports, c.i.f.) 8/ | 3.3 | 5.5 | 2.2 | 12.6 | 12.9 | |||
Includes changes in foreign currency deposits held by residents.
Annual averages based on monthly data reported by the Fund’s Information Notice System (decrease means depreciation).
Changes in percent of the initial stock of domestic liquidity.
Weighted average yield (in percent per annum) of the accepted bids at treasury bill auctions. Data for 1993/94 are for July-April. Treasury bill auctions began in March 1991.
Beginning in 1992/93, the budget definition excludes the operations of WAPDA, OGDC, NFC, PTVC, and PTC.
In 1990/91-1991/92, defense-related payments are included in imports.
Service of medium- and long-term debt.
Excluding gold.