nice info in this thread. i have a few questions if someone can provide me the numbers.

1) what is the base year for the current GDP, when was the base year changed and what was the base year before the change?
2) what is the value of the spending multipier in Pakistan?

Question 1

The current base year is 1999-2000

http://www.sbp.org.pk/reports/annual/arfy04/Chapter_2.pdf
see table 2.1

The base year was changed in 2004

Previous base year was 1980-81

http://www.sbp.org.pk/reports/annual/arFY0...0Investment.pdf
see table 2.1

Question 2

Nishat and Bilgrami (1991) used a simple Keynesian structural model to estimate the remittances multiplier for Pakistan, taking data for the period 1959-60 to 1987-88. They found a multiplier of 2.4, which operates primarily through consumption.

http://www.pide.org.pk/Research/Report187.pdf

thanks for the info smegster. but the value of the spending multiplier will much more since that particular research was done in 1991 and the data was taken upto 1987-88. thats 20 years old data. i think the spending multiplier now will be above 3.5.

Does a higher spending multiplier mean the size of the economy is not that much greater than it was in the 90s?

no, a higher spending multiplier means that an investment of a particular amount of money will result in an increase in aggregate demand (or GDP) by a much higher value than it would have in the 90s.

spending multiplier is a critical component in understanding the true state of an economy. for example many people assume that an increase in the GDP by 50 billion dollars means that 50 billion dollars have been invested in the economy. but that is not the case. if the value of the multiplier is, lets say 5, then a 10 billion dollar increase in investment will lead to a 50 billion dollar increase in GDP. this is known as the multiplier effect where an initial investemt of a particular amount leads to an increase in aggregate demand by a multiple of that amount.

what is the rationae behind the multiplier effect? well, GDP can be calculated by 2 methods, the income and the expenditure approach. although the multiplier effect can be explained by both approaches, it is easier to understand by the expenditure approach. in short, in the expenditure approach, whatever you spend on final goods and services is included in the GDP. for example, someone sent you a $10 bill from abroad. now you went to a restaurant and bought food with that $10 bill, so the GDP will increase by $10. but the $10 bill doesnt vanish here, it is now in the hands of the shopkeeper, and he will spend that $10 bill, lets say to buy toys for his children. so there wil be another $10 increase in the GDP, leading to a total increase in the GDP by $20. lets say that the toy store owner further spends that $10 bill to pay his bills, so there is another increase in the GDP by $10. notice that the initial increase in investment was only $10, but that $10 note has lead to an increase in GDP by $30. in other words, the multiplier is the number of times a note circulates in the economy, on an average.

Dude it will be VERY INTERESTING to compare the 1999-2002 period with 2003-2007. 1999-2002 is when US aid had not made much difference. Afterwards, we all know that remittances have increased, people shifted their money to Pakistan, this pushed up stocks, real estate and that brought in real estate developers like Emaar etc.

The telecom growth has really gone well for the country, all credit to musharraf for stimulating growth but then isn't it a growing sector all over world its just that he didn't 'kill' the opportunity.

Now from the FDI: I would really take out the 'privtisation proceeds' because thats out national assets being sold out quite cheap; I don't oppose it but don't forget the most loss-making entities in public sector are still with the public sectopr, Musharraf couldn't dare to privatize them.
KESC and PTCL was indeed good achievement, credit to Musharraf.

Also, I will take out the portfolio investment from the FDI figure because they are overseas opportunists coming here to reap benefits of rising stock values, the stock are rising because the remittance are coming in, remiitance are coming in because overseas pakistanis are not feeling secure, people not feeling secure because US & west gone mad after 9/11... I mean these things are linked you cannot view them in isolation.

TO be honest we can't say how would Nawaz Sharif had done (economically) under these circumstances maybe as good, maybe better..

Go and learn something b4 u open ur mouth in a ignorant manner...

Increase in Moblie market has created jobs and brought wealth to the nation... do i need to explain the whole chain and how ppl benifited from increase in mobile phones and entrance of International companies..

SO what we import that much phones after all their is a market and it also shows how ppl are earning more so they can affored to spend more....

So what if mobile market sales have gone up? Do you guys think Pakistanis are morons to buy a mobile phone without thinking if they can afford one? Or you want to take away their right to get a decent mobile for themselves altogether? Its a pathetic argument, to tell you the truth.

Where is Shamraz?? Since Mush-bashing is his favourite hobby I thought he'd spoiling this thread as usual...lost for words is he?

Why dont you learn to read properly before you touch the keyboard? Seems like you are arguing with expert economists in the government of pakistan itself because they disagree with your simpleminded assesment of the situation. Here is a quote from the govt report, just one single line:

The report said that the exponential growth in the country’s fastest growing telecom industry was burdening the overall import.

Now read it. You have no concept of wealth creation, value added by manufacture nor very obviously do you have any concept of balance of payments. Its plain obvious to anyone who reads that article and can understand English that the govt is very worried about the explosive growth in an industry that is entirely consumer oriented and they are trying to fix it by adding manufacturing jobs locally to fix partially the huge amount of forex that leaves pakistan because of these cellphones and their infrastructure

My own personal opinion is that the mobile phone market is like a drug addiction all over the world so many pakistanis who buy a phone without thinking actually might be doing something moronic. Yes these phones are useful and in fact much more useful than landlines for communication purposes because you can text and obviously you can move around with them but if you actually READ the article the government study says that people in pakistan are changing their phone models very very fast just to get their hands on the latest trendiest cellphone but the utility that they get out of the phones remains unchanged, it is just a communications device. Add to that the fact that all the phones so far have been manufactured overseas and its obvious to anyone that this is a big problem in terms of trade balances and according to projections its going to get worse next year and bleed the country more.

Why do you people not get it? Its put up there in plain language by the government itself.

Leave it to the Pakistanis whether they want to buy cheap or expensive mobiles. The most a government can do is levy additional duty, which it is already doing.

A good way to improve the trade balance is giving more support to businessmen (and not only the textile industry). That will help improve exports.

Diversification in technology and engineering is the way forward otherwise Textiles have very limited scope in terms of growth these days.

Bye Bye Benazir, welcome Nawaz Sharif, Zardari.


There are a butt-load of policies that the government could (and should) initiate, in order to increase domestic entrepreneurship. Pakistan has a lot of human resource that is being wasted. Doctors are one example - the demand is high, the supply is even higher, but they fear opening up their own clinics due to bad business environment & bankruptcy.

Some people are ranting a lot about Pakistan recent trade deficit, so I thought that it is best to explain that too. I am not saying that trade deficit is good or bad, but let see what importance is the effect of trade deficit on Pakistan as for those who rant about trade deficit a lot, they to me are just ignorant of knowledge and facts. Reason is that, trade deficit for a country does not matter at all rather it is good under certain circumstances. Most important is 'balance of payment' and that is what a country should always keep watching, as country's external account is most effected by that. For instance:

Trade deficit is exports minus imports. But a country earns and spends foreign currency in many other ways and not just export/import.

Biggest way Pakistan spends foreign currency during corrupt periods (when crooks like NS, BB rule) are by corrupt rulers taking foreign trips for medical reasons, shopping, holidays, etc ... all at the expense of Pakistan, and then using their corruptly obtained money to buy properties, Jewellery and most of all transferring billions of dollars they looted and plundered from Pakistan to their Switzerland bank accounts. These crooks and corrupts buy every dollar expatriates send home using hundi to transfer their looted and plundered rupees in their Switzerland accounts.

On the other hand, major foreign currency earning for Pakistan is not exports but workers remittance, that in my rough estimate is over 25 billion dollars a year ... though officially we get a fraction of that, but still, officially or unofficially, all of it is part of Pakistan dollar earnings.

Other major way of earning or spending foreign currency is services and invisibles (What I know, UK is one of the largest invisible foreign exchange earner in the world, whereas USA has the largest invisible external expenditure in the world). Further, FDI also affects balance of trade and Pakistan received plenty of FDI since 2001.

All earnings and expenditures adds together to give final balance of payment result. If balance of payment goes negative (that was norm throughout Pakistan history until Musharraf came to power), Pakistan has to borrow expensive dollars at 5 to 15 percent interest (depending on credit rating) to finance that. Balance of Payment = Total dollars Pakistan gets from all sources (other than loan) - minus - Total dollars Pakistan spends in all ways. Effect of negative balance of payment is:

External debt increasing
Rupee devaluing
Local debt increasing
Credit rating going down (or staying down if it is already down)
Chances of default on external debt (for Pakistan, it happened in 1999)
Well ... many bad could happen.

Though, balance of payment deficit has its own safety value, still it is harmful. That is, a country could never have huge balance of payment deficit as local currency start devaluing fast and other countries stop giving such parasite country dollars to spend, be that dollar as debt or whatever (exception is USA who keeps getting dollars from foreign countries to finance their balance of payment deficit, because their currency itself is trading currency 'dollar').


Throughout Musharraf period (1999 to 2007) balance of payment was positive (that in spite of Pakistan paying around $4 billion dollars a year ... around $30 billion dollars during those 8 years ... as interest alone on foreign debts of $38 billion that Musharraf government inherited from past rulers) and that is why:

Pakistan external debt did not increased and Pakistan kept paying interest on debt taken by past crook.

Pakistan external debt to GDP ratio went down from over 60 percent (1999) to around 25 percent (June 2008).

Pakistan dollar reserves increased from below $1 billion to over $15 billion.

Pakistan National debt to GDP ratio went down from around 110 percent (1999) to around 52 percent (June 2008).

Pakistan currency did not devalue substantially and did not devalue from 2002 onward (until early 2008 when crooks and thugs got back again in corridor of power).

Pakistan came out of situation of being an international defaulter state (Pakistan technically defaulted in 1999) ... something that affects a country most and is major cause of bringing misery to the country.

Pakistan external credit rating kept getting better and better (since 1999) until crooks got into corridor of power (early 2008).

Pakistan stock market kept performing as best stock market in the world (rose from below 1200 in 1999 to around 16000 in 2008 ... a rise of 13 times from 1999.

Pakistan companies kept increasing dividend payments (for instance, average dividend of shares in 2007 rose around 10 times what it was in 1999)

Pakistan interest rate kept going down (Interest on savings was around 20 percent in 1999 that came down to around 5 percent at one time though it went up and was around 9 to 10 percent this year)

Pakistan average inflation that was over 10 percent during 1988 to 1999 (and most years during that decade saw over 10 percent inflation) got reduced to around 5 percent from 1999 to 2007 (there was seldom any year when inflation went above 10 percent).


Simple example for those who do not understand figures easily:

Let see what happens when balance of payment is negative ... though there is trade surplus of $5 billion:
Pakistan imports = $ 15 billion
Pakistan exports = $ 20 billion
Trade surplus would be $5 billion

Remittances to Pakistan = $ 5 billion
Pakistan exports plus remittances = $ 25 billion
Result = $10 billion surplus from trade and remittance.

But, at the same time if Pakistan spends $15 billion dollars on dollar interest payment, expenditure on foreign trips, health visits by people, other services, and other transfers than ... overall balance of payment would be $5 billion negative.

$ 15 billion - $ 10 billion (because of trade surplus and remittance) = $5 billion balance of payment deficit.

So, to cover this balance of payment $5 billion deficit, Pakistan have to cover that with their reserves (if they have enough) or would have to borrow increasing external (dollar) debts.

Now let see what happens when balance of payment is positive ... though there is trade deficit of $10 billion:
Pakistan imports = $ 25 billion
Pakistan exports = $ 15 billion
Trade deficit would be $10 billion

Remittances to Pakistan = $ 5 billion
Pakistan exports plus remittances = $ 20 billion
Result = $5 billion deficit from trade and remittance.

If Pakistan pays $5 billion interest on past debts than total deficit would be $10 billion.

But, at the same time if Pakistan earns $15 billion dollars from services, grants and other ways than Pakistan would have $5 billion balance of payment surplus.

This $5 billion balance of payment surplus Pakistan can use to increase their reserves or pay back past external (dollar) debts.

I hope that from above example, one can see the affects clearly.


Now, after knowing this, let see what happened during 1988-99 and 1999-2008:

1988 to 1999 (period of corrupts and thugs):

1988 = Pakistan reserves around $1 billion plus external debt around $17 billion.

1999 = Pakistan reserves below $1 billion plus external debt $38 billion.

[Actually, external or dollar debt was much more than $50 billion dollars in 1998 but Crook thug Nawaz Ganja stole those dollars and converted it to Rupee debt at the rate of Rs 46 to a dollar (or around Rs 10 less than market rate)].

So, Pakistan resulting balance was around $21 billion negative for year 1988-1999 (it would have been around $35 billion negative if Nawaz crook had not stolen dollars of expatriates].


Now let see what happened from 1999 to 2007 (period of honest General):

1999 = Pakistan reserves less than $1 billion plus external debt $38 billion.

Oct 2007 = Pakistan reserves around $15.6 billion plus external debt $40 billion.

Shows that total balance of payment was around $13 billion positive ... $15 billion increase in reserves but $2 billion increase in debt.

June 2008: present Pakistan external debt is 40.5 billion dollars.
Pakistan reserve is around $11 billion.

Well done Salim

Very well put!

Brother thanks.

Maybe because it is in English ? and for English translation, they depend bilndly on their political gods.

Interesting Link : Beggers going high tech on mobiles.

Is this the wealth people are talking about due to the usage of mobiles ?




Yes, we can ! It has been 70 days since the two crooks are in power. They cant even hold the line let alone take it forward. If the things continue on with the way the are going, we'll be back within one year to where we were in 1999 !!