Economic Crisis In Pakistan

Made By: Mahnoor Qazi.

Assisted By: Ashish, Ishrat, Nosheen

What is Economic Crisis?

A situation in which the economy of a country experiences a sudden downturn brought
on by a financial crisis. An economy facing an economic crisis will most likely experience
a falling GDP, a drying up of liquidity and rising/falling prices due to inflation/deflation.
An economic crisis can take the form of a recession or a depression. Also called real
economic crisis.

Present Scenario:
Pakistans economy is in a downward spiral. Inflation is at 25percent (food inflation 50%),
foreign reserves are falling, and the government is in danger of defaulting on its foreign
debt.
A spike in global food prices has hit Pakistanis especially hard, and the global financial
crisis only threatens to exacerbate Pakistans economic woes. Pakistan is watching foreign
investors flee.

Causes Of Economic Crisis?

Since most economic crises are unexpected, it is usually difficult to
determine the exact cause of the crisis. However, there are a number of
situations that provide the setting for an economic.

It is important to note that the presence of these conditions does not

automatically lead to an economic crisis.

Here are some of the causes of an economic

crisis:

Uncertainty:

When participants in a market are uncertain

about issues such as the expected value of
stocks and securities, then they are unlikely
to trade in the same manner that they used to.
Investors will shy away from the particular
market, resulting in cash flow problems as
well as reduced trading. The reasons for
uncertainty range quite widely, from political
instability to change in government policy.
Uncertainty is presumed to be one of the
most prolific contributors to economic crises
all over the world.

Fraud:

When the there is rampant mismanagement

of funds, both in the public sector and in the
private sector, an economy loses a lot of
money, leading to cash flow problems.
Furthermore, investors lose confidence in
that economy because they are not assured of
returns for their investments
Investors therefore withdraw their
investments and chose to invest elsewhere.
When this occurs, then an economic crisis is
imminent.

Dealing with a crisis:

Handling an economic crisis is quite a

complicated affair, which depends largely on the
nature of the crisis itself
it is always important when trying to avert a crisis,
to think long term, rather than looking for quick
fixes.

ENERGY CRISIS:
Inflation means price hike, huge gar between demand
and supply, too many rupees chasing too few things.
More supply of Money due to; AID after 9/11.
Growth in banking sector and investment in real
estate. Poor supply of goods, food items due to low
yield.
Inflation due to rise in oil prices, food, removal of
food subsidy, devaluation of Rupee, higher import
price, Government borrowing from State Bank Rs .
544 billion. Resultantly increase in wage-price.
Delay in monetary tightening by the State Bank.
Government claims 25% while actual is 32% while
food inflation is 45%

Deceleration of growth in
manufacturing:

Energy crisis. Terrorist incidents. High interest rates discouraged Private investment.
High imports and low exports. 75 industrial units in Karachi and 85 in Faisalabad were
closed due to energy crisis.

Fiscal deficit:

6.5% of GDP, target was 4%. Due to slippage

in revenue and expenditure- Dismal Growth;
lower Tax collection.
Heavy subsidy on oil effected current
expenditure, increased in development
expenditure. Decline external financing
flows, so the government borrowed from
SBP which caused monetary expansion,
continuous Defense Budget.

Conclusion:

Pakistan is surrounded by numerous internal and

external threats of gigantic magnitude. Our mother
land is the achievement of millions of sacrifices.

It is prime duty of every individual, the society, and

the state to uphold the constructive norms in order to
get honor in the community of nations.

Pakistan is not a poor country, but a poorly managed

country; only a sincere leadership with real
commitments can turn this hell into heaven.

Need is for restoring confidence of people who have

potential to achieve all the colors of rainbow.

Only energetic people, a dedicated leadership with

strong military muscles, improved economy and
dynamic society face.