Chapter 3

Pakistan’s Economy and Monetary Policy

At the time of independence, Pakistan lacked the institutions, personnel, and

resources required to play a significant role in steering the economy on the track to

development. Since then Pakistan has been able to achieve a fairly high rate of

economic growth of 5.25 percent through rapid industrialization. In the 1960s, the

country was well regarded as a model for many developing economies. Fast growth of

the economy, however, could not lessen prevalent poverty significantly. In the 1970s

and 1980s, larger attention was given to securing a fairer distribution of income,

mainly through reforms as well, which coupled with high growth rate reduced poverty

sharply to 23%. In the early 1990s, however, a more just income distribution was not

much emphasized.

Pakistan economy could not remain immune to the domestic and international

challenges that adversely affected its socio-economic setup. In response to these

challenges, the government has used fiscal, monetary and other policies to minimize

their adverse effects, in particular to stabilize the inflation rate at a low level and

achieve high growth rate of GDP at the same time. To this end Five Year Plans have

been regularly implemented since the early 1950’s, though not always succeeding to

achieve its targets, especially with respect of equitable growth and poverty reduction.

These matters are discussed at some length in this chapter. However, its main focus is

on a discussion of Pakistan’s macro-economy in general and of monetary policy

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 Chapter 3: Pakistan’s Economy and Monetary Policy

instruments and their effectiveness in particular. To keep the narrative focused on

recent events we begin the discussion from the 1980’s. The period of the study is

divided into three sub-periods, from January 1982 to June 1990, from July 1990 to

June 1999 and from July 1999 to June 2010. Then we discuss the current economic

challenges and the changes in the key economic indicators of Pakistan’s economy.

Lastly, we review some empirical evidences for Pakistan economy relating its

monetary policy.

3.1. Economy from January 1982 to June 1990

In the 1980s, the economy showed a remarkable GDP growth rate averaging

6.50% for the decade. In 1985, the GDP growth rate escalated to 8.7% which was then

the highest growth rate in the country’s history. During this period, the policy efforts

were also devoted to initiate market friendly deregulation of the economy along with

deliberate policy intervention to foster public-private relationship. In particular, the

government encouraged private sector investment in trade and industrial policies.11

The macroeconomic picture in this period was characterized by comparative

macroeconomic stability and the restoration of private investment activities. Also,

significant structural changes were introduced in the agriculture sector. To some

extent, these reforms were responsible for increasing the growth rate of agriculture

from 2.1% during the 1970s to 4.0% during, 1980s. This recovery in agricultural

growth was an important factor in reinforcing overall growth. The annual average

growth rate of output in the manufacturing sector after registering a sharp decline to

3.8% during 1970, rose significantly to 9.2% during 1980s, although it did not

compare favorably with 13.4% attained in the 1960s. The services sector share

11
Economic policies provided additional export incentives, focused on the need for flexible exchange
rate management and improved the investment climate for private enterprises.
37
 Chapter 3: Pakistan’s Economy and Monetary Policy

increased equally. The growth rate of real per capita GDP, which was 1.3% per annum

during 1970s rose to 3.5% during the 1980s. The income distribution during this

period was fairly good compared to other countries of the region at about 30%

whereas the population below poverty line was 23 %.

3.1.1. State Bank of Pakistan and Monetary Policy

During 1982-1990, the SBP maintained a conservative monetary stance. As a

result, the average annual rate of monetary expansion of 16.2% was significantly

lower than the 18.8% rate during the 1970s. In 1980s, budget deficits (usually the main

cause of excessive monetary expansion) were partly financed from private savings

mobilized through national saving scheme (NSS), with higher than market interest

rates. This strategy worked well to decelerate monetary expansion on account of lower

government borrowing from the banking system. But it led to a persistent rise in

interest payments by the government. The main difference between the fiscal deficits

during 1970s and 80s, was the way they were financed (during 1970s, domestic

financing for the budgetary deficit came largely from money creation and led to instant

pressures on inflation). A gradual diversification of preferred financial assets also

occurred during this period. Annual credit plan continued to be the main instrument

for determining growth of liquidity and credit in the economy. Also the system of

ceilings on credit by individual banks to private sector became the policy style and

became an important weapon to restrain growth of money. Another factor causing

deceleration in monetary expansion during 1980s was the continuous draw down of

foreign reserves and hence of the net foreign assets of the commercial banking system,

which fell down for most of the years during this period. However, the general

conservative stance of the SBP, the monetary and credit policies continued to be

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 Chapter 3: Pakistan’s Economy and Monetary Policy

directed towards providing adequate credit to productive sectors in general and the

priority sectors in particular, and at the same time discouraging its flows to speculative

and less essential purposes.

The SBP continued to use a fixed exchange rate is an anchor for monetary

policy-- that is, it maintained a fixed rate as a primary objective of monetary policy.

On 8th January, 1982 the exchange rate regime in Pakistan was converted to a

managed float system, based on a basket of currencies.12,13 The difficulty of the

balance of payments in the early 1980’s demanded stronger action to prevent the

looming crises. To this end, the government decided to adopt a managed float system

in January 1982. The peg with US Dollar was discarded. The rupee devalued from Rs

9.90/US dollar to Rs 11.84 in 1982 which after gradual depreciation reached Rs 18/

US dollar by the end of June 1988. The nominal exchange rate depreciated almost

twice as fast as warranted by relative change in the prices between Pakistan and its

major trading partners. A positive aspect of it was it helped the growth of workers’

remittances besides providing some boost to exports, though the structure of exports

did not change significantly.

3.2. Economy from July 1990 to June 1999

Since 1990, the emphasis has been on growth through structural reforms. For

this purpose, a host of measures, aimed at denationalization, privatization,

deregulation, reform and liberalization of industrial, commercial, fiscal, monetary and

exchange policies have been undertaken. In the proceeding discussion an attempt is

made to analyze trends in some of the key macroeconomic variables. In sharp contrast

12
The period, just after the debate among the economists regarding option of free float in exchange rate
to be preferred over hard peg, saw many countries including developing ones opting for the flexible
regimes.
13
The basket includes; US Dollar, Pound Sterling, Dutch Mark, Turkish Lira,
39
 Chapter 3: Pakistan’s Economy and Monetary Policy

to the bright performance of the earlier years, Pakistan’s did rather poorly during the

1990s. It could indeed be called a lost decade, marked by declining growth and

sluggish tax-to-GDP ratio causing a steady increase in large fiscal imbalances. In this

period average GDP growth remained 4.61%, much behind that of previous period

which averaged more than 6.5%. The real GDP growth decelerated to an average of

5% and to 4% during first and second half of the 1990s. The proximate cause was the

very performance of the commodity-producing sectors. The large-scale destruction of

the agricultural infrastructure in the wake of wide-spread floods caused the agriculture

sector to grow at a negative rate. Then the politically motivated factors administered

shocks to the large scale manufacturing and the services sectors, which contributed to

a decline in growth. To it, the banking sector crisis added hugely to the overall

macroeconomic slow-down. The saving and investment rates also fell to a lower level.

The investment rate fell to almost 15.5 % in the 1990s.declined to 8.6% in the first half

and further to 6.1% during 1995 to 1999. The National saving rate, which witnessed a

marginal improvement from 14.7% in the 1980s to 14.9% in early 1990s, sharply fell

to 12.7% in second half of the decade.

To arrest these declining trends, the government tried to control fiscal

imbalances in this era, the government acted rather perversely: it cut down the

development expenditures, which declined from 6.4 percent in 1990 to 3% in 1999. At

the same time, it did practically nothing to mobilize tax revenue collection or cut down

non-development expenditures. Rather than reverse the declining trends in both the

real and the financial sectors by strong expansionary policies, the focus of structural

reforms was to rationalize the microeconomic side of the economy. The government

tried to meet the challenge by removing ‘distortions’ in the structure of relative

prices, especially of the relative prices of the agriculture products, by adjusting the

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 Chapter 3: Pakistan’s Economy and Monetary Policy

exchange rate and removing the protection offered to industry, and by reducing or

eliminating the subsidies on the urban consumers. As if to worsen the situation, the

international prices of cotton, wheat and rice declined.14 The performance of the

agriculture sector did not improve as the financial provision for the reconstruction of

the agricultural infra-structure destroyed by floods was reduced rather increased as

part of the cut-down in development expenditure of the government. The industrial

sector did no better. On the one hand, a series of measures were taken to rationalize it.

The indigenization process in the manufacturing industries through a deletion

program was converted to Industry Specific Deletion Program in 1995. In order to

encourage deletion, the industries were protected and the import of raw materials was

allowed through concessions in duties, ranging from zero to a maximum of 35%. But

in the absence of strong demand conditions huge investment in cement, sugar, thermal

power generation through IPPs, automobiles and electrical durables only resulted in

capacity utilization of 60-70%. In industrial sector, the center of attention of structural

reforms initiated in late 1980s was to reduce the protection to make it competitive in

the international markets. Through efficient resource allocations, the price controls

were to be removed. Exports expanding industries were to be encouraged and

promoted. In early 1990s, the government took a number of policy measures to boost

foreign direct investment (FDI) by opening such industries where foreigners were

allowed to participate in 100% equity of the industries. Many other actions were taken

in this regard like technical fee, liberty in foreign exchange regimes, removal of

restrictions and non-tariff barriers. In 1997, the government also opened the

agriculture, services and social infrastructure for FDI. Despite such substantial

14
Ishrat Hussain “Reforming Pakistan Economy: Performance, Progress, Prospects and Problems”,
speech delivered in Washington DC on 9th April 2002, Cited in M Ashraf Janjua “History of State Bank
of Pakistan (1988-2003)”
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 Chapter 3: Pakistan’s Economy and Monetary Policy

increase in the FDI, due to political instability in 1990s, the true fruits which Pakistan

could attain from these measures could not be achieved and the pattern of inflows into

Pakistan has been interrupted. However, most of these efforts to encourage the

performance of the industrial sector came to a naught because of the stringent

monetary policy. The generally high interest rates must have stunted the growth of

private sector.

Monetary Policy and Credit Development in 1990s

Before the 1990’s structural reforms agenda, the conduct of monetary policy

was by the use of direct controlled instruments along with Cash Reserve Ratios (CRR)

and statutory liquidity requirements (SLR). The Bank rate remained unchanged at 10%

for many years. The principal instrument of monetary control was bank-wise credit

ceilings. A market based monetary and credit management system was introduced at

the beginning of 1990s. Major reforms in this phase included the introduction of

public debt auctioning, abolition of credit ceilings and credit deposit ratio (CDR).

These measures paved the way for management of monetary and credit expansion

through use of market oriented measures such as open market operations (OMO),

along with occasional changes in discount rate and CRR.

Credit Ceilings Regime: The system of credit ceilings which started in 1973,

remained a policy option until July 1992, when CDR replaced it. In most of the years

excessive government borrowing led to a higher rate of monetary expansion that

sparked inflationary pressures in the economy and sometimes even crowding out of

the private sector. During the entire period of CCR, the government controlled the

structure of interest rate. The system of credit deposit ratio was introduced which was

more flexible. It was a modified version of CCR. Under this system, banks could

expand credit to private segment of the economy up to a certain percentage of

42
 Chapter 3: Pakistan’s Economy and Monetary Policy

deposits, which was to be decided by SBP. The credit for CDR calculation was

defined to include: (i) loans, and other cash facilities, (ii) bills purchased and

discounted domestically, (iii) loans to banks, (iv) all investments. There are some

elements which are excluded from CDR definition: (a) government securities’

investment, (b) Advances to central and provincial governments, (c) foreign bills

purchased and settled. The CDR for the July-Sep 1992 was fixed at 30% of banks’

average weekly local currency deposits and 40% of Banks’ foreign currency deposits.

This system was abolished on 30th September 1995. The CDR operated under the

guidance of the SBP. In summary both actions (CCR and CDR) adversely affected the

profitability and balance sheet of banks and led to an increase in the volume of loans

and segmented the credit markets. After the abolition of (CDR) in September, 1995,

indicative targets for expansion of credit to the private sector were set for commercial

banks. As in the case of CDR, the indicative targets were within the framework of

annual credit plan and were operative simultaneously with a number of policy changes

effected since 1989 to shift the management of monetary policy to market-oriented

mechanism. For individual banks, targets were worked out on the criteria on the basis

of the bank size, the returns offered on saving deposits, recovery of defaulted loans

ration involving average of preceding three quarters, banks’ forecast regarding

predictable deposits mobilization, and finally, the amount of loan portfolio.

Other Credit Control Measures:

Pakistan, in 1990s, moved towards liberalization of the economy and

privatization of public sector enterprises including some banks. It was then a realized

fact that for many years monetary policy was being determined by public sector

borrowing. So Government of Pakistan and International Financial Institutions formed

a comprehensive reform agenda for financial sector which was introduced in 1989
43
 Chapter 3: Pakistan’s Economy and Monetary Policy

under Financial Sector Adjustment Loan (FSAL). It also included various

preconditions for the formulation and implementation of a market based monetary

policy. This program introduced auctioning of government debt, raise interest rate

along with segmentation of the credit market. The instant actions which were taken

include devaluation and sudden change of the government subsidies to balance the

budget.

These measures however did not result in any dramatic change in the overall

macroeconomic performance, partly because they take effect with a considerable time

lag even when successful to make a noticeable impact on the economy.15 In the short

run, stabilization policies are usually adopted to control the immediate negative impact

on the business cycles and to reduce the current account deficits in balance of

payments and the budget deficits to sustainable levels. In the long run, the focus of

attention must remain the strategies for a high growth path and an equitable

distribution of national incomes and wealth. However, the government did not take

any effective steps to either promote growth rate or reduce the income equality.

3.3. Economy from July 1999 to June 2010

The growth of real GDP in this period was generally higher than that in the

previous decade but it was much too volatile to make a decisive impact on poverty. On

a whole it averaged a little more than 4.6% annual, showing maximum of 9% (in

2004-05; highest in the country’s history) and a minimum of 1.7% (in 2008-09). Main

contributors of the growth in the mid of this decade were services sector and large

scale manufacturing. The growth of agriculture sector was also impressive in 2004-06.

Growth in large-scale manufacturing has been rather broad as many sub-sectors

15
World Bank 1982
44
 Chapter 3: Pakistan’s Economy and Monetary Policy

recorded a high growth. As stated earlier, growth has been underpinned by cooperative

macroeconomic policies and benign condition of financial markets. Per capita income

doubled during 1999-2007. In 2006 investment reached a record level of 23% of GDP.

The foreign direct investment appeared to be a major source of external flows for

Pakistan and provided a non-debt support to the economy.

Economic Survey of Pakistan 2010-2011 claims that Pakistan’s fiscal position

focused on the sustainability of economic growth in accordance with declining debt

servicing, curtailing poverty and investing in infrastructure, both physical and human.

During this period fiscal deficit which remained about 6.9% on average in 1990s,

averaged 4.5% during 2000-10. The survey also claims that since 1999-2000 the fiscal

deficit has been contained due to rationalization of expenditures. The expenditures

structure was shifted from current to development and overall expenditures remained

18.7% of the GDP during the entire period and revenue remained 14.2% on average.

Total tax collection in this period increased to 300% i.e., from Rs. 346.6 billion in FY

1999-00 to Rs. 1327.0 billion in FY 2009-10, but the sharper increase in GDP did not

changed tax to GDP ratio which was 9% in 1999-00 and 10.1% in 2009-10.

The debt servicing liabilities showed a sharp decline from 42 percent of total

revenue in 1999-2000 to 31.6 percent of revenue in 2009-10 and from 53.5 percent of

current expenditures to 31.7 percent of current expenditures in the same period.

3.3.1. Monetary Policy and Inflation

Monetary policy on the eve of the 21st century witnessed an expansion of

liquidity: the growth of monetary assets averaged a little more than 15% for three

consecutive years, from 2001 to 04. The main conduct of monetary policy was placed

on open market operations (OMOs). Practically government always found it

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 Chapter 3: Pakistan’s Economy and Monetary Policy

convenient to pass on the fiscal burden to the monetary policy. So the monetary policy

in Pakistan has mostly been accommodating like in many other developing countries.

However, beginning in 2005, this liberal monetary stance changed to a process of

contraction of monetary policy, which also became aggressive rather than being

broadly accommodating. However, the moderate (low) interest rate helped raising

industrial investment by increasing private sector’s credit demand. This resulted in

gradual rise in core inflation. Inflationary expectations rose when the government

decided to unfreeze the petroleum prices in the mid of 2004.

To curb inflation, in April 2005 SBP raised discount rate by 150 bps to 9%

and further to 9.5% in July 2006. High growth of credit in private sector reflected

more demand pressure despite the rise in discount rate. It needed further actions by

SBP, one of which was taken on August 1st, 2007 by an increase of 50 bps in the

discount rate. On 30th July 2008 the discount rate was 13%, on 30th Nov 2008 it was

15%; 17th August 2009 it was again 13%; 27th March 2010 it was 12.5% and on 31st

January 2011 it was 14%. As a result of these actions, some noticeable changes

occurred in the monetary indicators. The average growth of net bank credit to

government sector during this period was 24.16%, which includes large increases in

FYs 2007-08 and 2008-09 of about 63% and 34% respectively.

Similarly the growth of the net credit to private sector reduced from 34.36%

in FY 2004-05 to 4.8% in FY 2009-10. NDA growth reduced from 22.15 to 5.1% in

the same period. The average growth of NFA remained about 9.5% during this period

which contributed to the average growth of money supply which remained 19.38

percent during 2000-2010. Thus, on the average, the monetary tightening stance has

checked the growth of credit to private sector by a large.

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 Chapter 3: Pakistan’s Economy and Monetary Policy

The second half of this period is marked by rising inflation majorly above

10%. The average CPI inflation during 2005-2010 remained above 14%. Main cause

of this inflationary episode is the food inflation which was estimated at 18.4%. This

increase in inflation is attributable to the rise in food inflation which has been mainly

due to increase in prices of milk, poultry, meat, sugar, fruits and fresh vegetables due

to shortfall in production of these things and large increase in world food prices.

3.4. Monetary Policy in FY 2010-11

Government’s intense dependence on SBP borrowing to finance the fiscal

deficit has led to a persistent increase in demand pressures. Consequently, inflationary

stress was significant in the beginning of FY 2010-11 and it was only made worse by

destructive floods. Moreover, the shrunken external financing flows owing to

difficulties in the implementation of the IMF program and reduced availability of loan-

able funds from non-bank sources elevated the pressures on the State Bank of Pakistan

to finance the fiscal deficit. The SBP policy rate remained 10.27 % on average since

2001 and to target the inflation and to control the demand related risks to

macroeconomic firmness, SBP kept the policy rate above this average since August

2010. As an aftermath of heavy floods, the rate was further increased by cumulative 14

percent up to 30th November 2010 well above the long run average until April 2011.

Execution of such a severe stance required mopping up excess liquidity in the market

while remaining responsive to macroeconomic conditions on a day to day basis. To

this end, the weighted average overnight money-market-repo rate has increased by 124

bps on average, up till 27th January 2011.

Unfortunately, the budget deficits have been much too large to be financed by

the weak tax collections. This in turn, raised inflationary pressures, and made

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 Chapter 3: Pakistan’s Economy and Monetary Policy

monetary management more complex; it also increased current account deficits. These

developments have eroded the effect of monetary tightening actions, and raised the

risks for further increase in inflationary pressures. In this backdrop, tackling widening

imbalances has become vital as these imbalances not only augment the inflationary

pressures, but also hamper growth prospects. The importance of small and stable

inflation to achieve high long run growth also extends a basis for the coordination of

monetary and fiscal policies.

3.5. A Brief Review of Monetary Literature from Pakistan

The literature available for the discussion of effectiveness of monetary policy,

particularly on the question of identification and implementation of the policy is rather

sparse. For this purpose, in closed economy context the most important work is done

by Malik and Ahmad (2007) recently, where authors have analyzed the rule-based

monetary policy with macroeconomic performance of Pakistan’s economy. They

found that the State bank of Pakistan has not followed no well-known, theoretical rule

a; rather the monetary policy formulation has mainly been discretionary. The interest

rate response function in a closed economy version of the model shows the interest

smoothing behavior of the policy maker. Further through counterfactual analysis they

show that the following any type of rule (particularly Taylor rule) would have

performed in more responsive manner. Reasons could be; (i) SBP would not like to

lean against the wind in the economic situation of Pakistan where economic

performance and decision making is less elastic to policy changes; (ii) Fiscal

accommodation. Pakistan economy is more affected by the external shocks than by

internal policies.

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 Chapter 3: Pakistan’s Economy and Monetary Policy

The measurement issue of monetary policy is first taken by Khan and

Qayyum (2007). This study argues that there is a strong disagreement about a single

use of monetary indicator as suggested by, for example, Sims (1992), Bernanke and

Blinder (1992), Christiano and Eichenbaum (1992) and Bernanke and Mihov (1998).

The monetary condition index which is considered to be a measure of monetary policy

is a weighted some of interest rate and exchange rate changes have been criticized

because it imitates the changes in both exchange rate and interest rate which are not

related to monetary stance. For Pakistan Economy the measure based on Bernanke and

Mihov (1998) is found to be better than the monetary condition index because it

includes many financial variables which may be important in transmission mechanism

of monetary policy.

Akbari and Rankadua (2006) argue that monetary policy in Pakistan since

1999 shows a clear-cut inflation targeting trend. This leads our thinking to address the

issue in an open economy framework. A comprehensive study of the issue will add to

the existing literature, for developing countries in general and for Pakistan in

particular.

On the issue of transmission mechanism of monetary policy Agha et al (2005)

have done a detailed study. They established a VAR model to examine the

transmission mechanism of policy in Pakistan by estimating four models in which they

endogenized the choice variable first, and then exogenized, representing a specific

channel. Therefore, basic model with a variable of interest, such as credit to private

sector for credit channel, and evaluate the results obtained with the exogenized credit

channel in the same model.

These findings indicate that monetary contractions lead initially to a fall in

domestic demand, then this reduction in domestic demand is explained into a steady

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reduction in price stresses that ultimately reduces the overall prices with significant

lags. Additionally with this interest rate channel, there is a diffusion system in which

banks play an imperative role. There is an active asset price channel for Pakistan,

whereas, comparatively the exchange rate channel has been less significant. Zaidi

(2005) provides a theoretical discussion on exchange rate regimes and their connection

with monetary policy in Pakistan.

3.6. Concluding Remarks

It will be useful to briefly re-examine the information about Pakistan’s

economy in the context of broad aim of this study. For example, the use of alternative

sources of financing the budget (particularly domestic debt) in 1980s, inconsistencies

in policies both at political and economic front in 1990s and high volatility in growth

and inflation at the eve of this century, are questions of concern for researchers. The

use of monetary policy tools has also been miserable; using saving schemes and

monetary growth at the same time; increasing discount rate to curb inflation while

failing to achieve its avowed policy goals. One could see several reasons for such

response; for example, more than required money growth and cost-push inflation. The

increase in the domestic credit and budget deficit which remained above five percent

on average with an average inflation of about eight percents during last two decades

show poor performance of policies; both at fiscal and monetary fronts. Similarly

financing of budget deficit through monetization has been a classic example of a

developing country with ex post unusual inflation. To restrict money supply to private

sector, ceilings on credit were imposed. The multi-facet reforms’ agenda of 1990s to

emphasize growth, could hardly bring any fruits, rather the economy witnessed the

recession. The main reason of slow growth has been the miserable large-scale
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manufacturing sector. The excessive government borrowing crowded-out private

investment and led to higher rate of inflation.

On one part government introduced a flexible plan of credit to deposit ratio

and indicative credit targets, whereas on other part it started increasing discount rate

after peg of decade. These actions produced below 5% average GDP growth with an

average inflation of about 10% in 1990s. The monetary expansion after 2001

witnessed a warm market response and the economy saw a new boom. The tight

monetary policy which could not control inflation generated low investment and tax

revenue in FYs 2009-11. So, a higher than required increase in money supply leads to

an unusual inflationary episode which then, needs to be curtailed through different

measure. The governments’ urge to increase the cash reserve ratio also generates

inflation. The SBP shows a passive behavior in middle inflation regime with a higher

than normal bandwidth of tolerance level, as we find in the empirical analysis of this

study. Similarly too strict behavior of SBP is witnessed in the high inflation regime.

On the practical ground (as as later part of this study shall reveal) the use of monetary

policy tools has been mystifying; using saving schemes and money growth

simultaneously; using implicit inflation targeting and failing everything.

All this discussion lays the foundation of a counterfactual analysis on the

observed data to identify that the policies used by State Bank of Pakistan were

optimal, or there are some other alternatives, which could perform even better.

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Appendix 3
Table 3.1: Selected Macroeconomic Indicators during 1982-2009*
Indicators 1982-90 1990-99 2000-09
Average GDP growth % 6.5 4.27 6.0
Average Inflation % 7.2 9.72 6.4
Average Imports % 12.67 12.85 22.30
Average Exports% 16.22 15.71 15.02
Average Monetary Growth % 13.2 14.20 19.38
Average Trade Balance (Million US$) -2940.1 -2540.63 -3130.2
* Data Source: IFS

Table 3.2: Major Economic Indicators 2009-2011

Months of Years FY 09 FY 10 FY 11
Growth Rate (%)
Large Scale Manufacturing July-January -5.3 3.0 1.0
Exports (fob) July-February 3.5 1.9 24.6
Imports (fob) July-February -1.5 -8.2 17.3
Tax Revenue July-January 23.0 10.2 10.9
CPI (a 12 Months Moving Average) July-February 21.7 12.6 13.9
Credit to Private Sector July-March 3.8 4.8 6.7
Money Supply July-March 2.1 5.7 9.4
US dollars Billion
Liquid Reserves (total) End-February 10.6 15.1 18.1
Remittances July-February 4.9 5.8 7.0
Net foreign direct Investment July-January 1.9 0.9 1.2
As % of GDP
Budget Deficit July-December 2.0 2.7 2.9
Trade Deficit July-February 7.2 5.4 5.4
Current Account Deficit July-January 4.9 1.7 0.04
nd
Source: 2 Quarterly report of SBP FY2010-11

52