GLOBAL FINANCIAL CRUNCH AND ITS IMPACT ON PAKISTAN ECONOMY.............. The global financial crisis would have little impact on Pakistan because financial market of Pakistan is somewhat isolated from other international financial markets and due to basic nature of its export according to the report issued by state bank of Pakistan. There are two possible ways through which global financial crisis would have affected Pakistan; Pakistani banks and external sectors. But Pakistani banks and other external have limited interaction or exposure to international financial markets, due to which global financial crisis had little impact on Pakistan. According to annual report 2011-12 issued by state bank of Pakistan, there are total 9,528 banks branches from which only 101 branches are based overseas and reflect less than 10% of the assets of banking system. Investment accounts for less than 20% of foreign operations and within banking system, only three banks dominate the foreign operations. The report explains further impact of global economic slowdown on Pakistan’s trade account is likely to be neutral and positive, besides the fact, financial crisis may result in an increase in inward sending of money and checks etc. from foreign countries to Pakistan. Conversely, the financial account of the country is the most exposed to a global financial crisis. However, because trade the surplus is already small, any further decline is likely to be very small. Pakistan has one of the lowest unit cost of production as compare products in the foreign region. As a result its exports to Asian countries – such as China, Afghanistan, the Middle East and India – are increasing. Demand in these Asian markets is less affected by the global financial crisis,” according to the report of State bank of Pakistan. Sixty percent of Pakistan’s imports consist of raw materials and other intermediaries products. As a result of financial crisis around the globe, international raw material prices will be significantly reduced along with the country’s import bill. Thus, if exports stay at the current level as before and import bill is reduced, Pakistan’s external account stands to benefit which will be trade surplus. The inflow of workers’ in Pakistan will increase because of job losses for overseas Pakistani workers. Inward flow of money could increase and Pakistani people living in foreign countries will benefit from depreciation of the local currency. Some overseas Pakistanis might consider this a good time to invest in their home country,” the report said. Furthermore, it might be a benefit for Pakistan and other countries which are under developed because they were somewhat saved from the global financial crisis but it doesn’t mean that it’s a good strategy. In normal conditions long run benefits of developed economies outweigh the benefits of under developed economies.
Posted on: Wed, 31 Jul 2013 13:35:59 +0000
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