Pakistan Economic Stimulus Package

Pakistan economic stimulus package is required to be examined very carefully. In October 2008 inflation in Pakistan touched 30%, and their national currency rupee was devalued by 25%. Fiscal deficit was 10% of GDP and foreign exchange reserves were just enough to sustain imports for about six weeks.

It required at least $3 billion in short run and a further $10 billion to fill in balance of payment gaps. Matters were worsened by terrorist attacks on Islamabad Marriott Hotel when IMF delegates were on a visit to Pakistan. All these factors make an economic stimulus package to Pakistan even more necessary than before.

IMF support could act as an economic stimulus package for Pakistan. It is expected to come with enough pre-conditions specifically at cost of budget outlay on defense and development. Economic stimulus of Pakistan in form of alternative aid could be arranged from Saudi Arabia in form of deferred long-term payment for oil. Syed Naveed Qamar, in order to provide Pakistani economic stimulus package to national economy, has withdrawn subsidy on fuel gas, and would remove subsidy on electricity from June 2009 onwards. Gross domestic product (GDP) is expected to grow at 4.7% in 2009-10 as compared to 4.2% in 2008-09. Pakistan economic revival process, initiated by their finance minister in September 2008, was essentially designed to raise foreign exchange reserves.

Pakistan economy is expected to be dependent on textiles and services and primarily be driven by private investments and consumption. Monetary policy is directed towards controlling inflationary pressures. A widening gap between services and trade revenues is, to a considerable extent, countered by growth in foreign remittances. Compared to last five years, depreciation of Pakistan rupee is expected to take place with respect to US dollar.

Since October 2008 Pakistan has been asking for financial assistance from International Monetary Fund in order to keep its economy afloat. These requests have come from higher levels of Pakistani governance. They had asked for an audience from International Monetary Fund in order to find out ways to address critical financial issues in Pakistan. Prices of important items like oil and food have gone up thus signaling a critical phase in Pakistani economy.

Pakistan - Fast Facts

Pakistan is a Lower income economies coming under the South Asian region as to the classification made by the World Bank on the basis of income and region for the year 2006.

Pakistan is an agricultural based economy by employing more than 50 % of the country's labor force and constitutes more than 25% of the GDP. The industrial sector is also performing better in the recent years.

Major agricultural products in the country are maize, sugar cane, rice, wheat, milk, mutton, eggs and cotton. Important industries in the country are food processing, textiles, chemicals, clothing and paper products. The economy also gets major revenues from the exports of cotton, rice, leather and carpets.

Pakistan Economy

      


 Pakistan is a South Asian country that was established in 1947.  Its neighboring regions include India, Iran, Tajikistan, Afghanistan, and China. It is located along the Arabian Sea and has a coastline spanning 1,046-kilometre (650 mi). The mountain ranges of Karakoram and Pamir in the northern and western highlands of the country include K2 and Nanga Parbat which are counted among the highest peaks in the world. The major by-air gateways to Pakistan are Islamabad, Karachi and Lahore. It can also be reached by train from India and Iran. Pakistan’s main cities are Quetta, Gawadar, Peshawar, Sialkot, Multan and Faisalabad.

Pakistan Economy: Profile

Pakistan is a developing country and its economy is the world’s 27^th largest economy based on its purchasing power. However, the country remained impoverished due to internal political disturbances and negligible foreign investment, since independence. With rise in development spending by Islamabad, the country’s poverty levels reduced by 10% from the year 2001 to 2007. The economy grew between 2004-07 due to rise in GDP from 5 to 8%. This was largely due to development in industrial and services sector irrespective of severe electricity shortfalls. However, the year 2007 witnessed a lot of political and economic instability leading to depreciation of Pakistani rupee. The growth of the economy was affected once again during the 2008 global economic recession

HELOC: Home Equity Lines of Credit

HELOC, or Home Equity Lines of Credit, refers to loans issued against home equity of the borrower with the amount sanctioned available for withdrawal during an agreed period. This type of loan is different from standard home equity loans or reverse mortgages because the borrower is not provided with the total sanctioned amount upfront. Instead, the borrower uses lines of credit to borrow, as and when required, during the agreed period. In most of the cases, HELOCs are second mortgages, but they can be first and third mortgages as well.

Features of HELOC: Home Equity Lines of Credit

These loans are granted against the equity in the applicant’s house wherein the equity refers to the amount spent to acquire and improve the property. They work like a credit card with the total amount that can be borrowed decided in advance. These loans have a draw period during which the borrower can use the credit line and pay only the interest. The draw period is generally between five to ten years. At the end of the draw period, the borrowers have several options before them.

They can either

§         Pay back the full principal HELOC amount borrowed

§         Pay a HELOC Balloon payment

§         Pay based on loan amortization schedule

The interest rate on these loans is variable and depends on an index such as the prime rate. However, the interest paid on these loans is usually tax deductible. Some of these loans include the option to convert from variable rate interest to fixed rate interest loans. They are quite convenient for funding intermittent needs and the upfront costs for these loans are very low.

The major disadvantage in using a HELOC is that the interest rates on it are tied to market rates. Any change in market rates has an immediate impact on the rates of home equity lines of credit. In the aftermath of the 2007 financial crisis, several lenders in the US informed the borrowers that their home equity lines of credit had been frozen, suspended, restricted or rescinded. Thus, HELOC’s also carry the risk of  lenders cutting down on an unused credit lines.

Economy Articles 1

From command economies to traditional, barter, bubble and service economies, this section details numerous topics relative to various types of economies.

This section has been designed to provide background information about different aspects of various economics.

This section includes articles related to different types of economic systems, as well as a number of contemporary issues influencing the world economy, the distribution of economic powers, the issue of globalization, and other topics of interest.

While different types of economies prevail in certain regions of the world, these economies may illustrate many similarities, as well as differences, depending on the specific example.

A fuel economy for instance, is dominated by the international demand for crude oil and gasoline, while a command economy is a market system that is heavily regulated by the government.

These articles also provide information about the open economy - where no obstruction is imposed on trade or commerce, investment or other financial activities.

Other topics are discussed in this section include the traditional economy, barter economy, bubble economy, and the service economy.

Issues that are selected for this section are related to particular economies, but at the same time these issues are also dominating the global economy. Some of these important issues include crises such as the global credit crunch, renewed fears about inflation and its effect on world economies, the downfall of the US housing market, major sporting events such as the Olympics and their economic impact, and world economies in general.

Other featured articles focus on the growth of China and India, with a special emphasis on the different challenges faced by these emerging markets.

Globalization and its impact on developing economies is also discussed in this section, while more information is contained in the country-specific sections that focus on the economic development of each country.