The Role Of State Bank In Economic Development

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02 Nov 2017

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This essay has been written and submitted by students and is not an example of our work. Please click this link to view samples of our professional work witten by our professional essay writers. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of EssayCompany.

We are also thankful to the respected faculty member of SZABIST Larkana and our course instructor of Money & Banking subject in 4th semester of BBA program Sir Tanveer Ahmed Laghari, whose proper guidance and apprehensive nature helped us to complete this project. This project work improve our skills and during this project we learn many new things about the State Bank of Pakistan, we became aware about the different roles performed by the State Bank of Pakistan in development of our country, we hope that we will be given such works in future so that our skills could be strengthened.

In last we are obliged to our group mates and classmates for their love and support to complete this project.

Regards:

Ahmed Ali Bhutto (1111135)

Danish Riaz Shaikh (1111107)

Iftikhar Ahmed Shaikh (1111145)

Vishal Perchani (1111167)

Executive Summary

Introduction

We have chosen topic "The role of State Bank in the economic development of Pakistan" for our term project of Money and Banking course. This project is to cover all the areas regarding the micro and macro developments of the country concerned with the State Bank and its policies.

State bank of Pakistan is the central bank of Pakistan. It was established in 1948. Initially state bank of Pakistan was entrusted with the task to "regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage".

In financial sector reforms of 1994 State Bank of Pakistan got full autonomy. "On January 21, 1997 this autonomy was further strengthened when the government issued three Amendment Ordinances. These changes gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy and to set limit on government borrowings from the State Bank of Pakistan".

The State Bank of Pakistan also performs both the traditional and developmental functions to achieve macroeconomic goals. The traditional functions may be classified into two groups:

The primary functions

The secondary functions

Issue of notes

Regulation and supervision of the financial system

Bankers’ bank

Lender of the last resort

Banker to Government and

Conduct of monetary policy.

Agency functions like management of public debt

Management of foreign exchange etc.,

And other functions like advising the government on policy matters

Maintaining close relationships with international financial institutions.

State Bank of Pakistan Banking Services Corporation SBP-BSC was established in 2002 in order to perform operational functions of SBP. SBP-BSC is subsidiary of State Bank of Pakistan having 16 offices in major cities of the country and its key functional and operational areas include;

Currency management

Foreign exchange operations and adjudication

Export finance scheme

Payment & settlement systems and

Banking services to the government.

While State Bank of Pakistan performs the important function of policy making, SBP-BSCs handle most of the operational areas.

HISTORY

Before independence, Reserve Bank of India was the central bank of sub-continent. It was not easy to setup a central bank from the day of independence, therefore, at the time of partition reserves of central bank were divided between both the countries i.e. India and Pakistan with a ratio of 70:30. Further, Reserve Bank of India continued its duties as central bank for both the countries.  However, working for own central bank had been started in Pakistan and finally on July 01, 1948 Quaid-e-Azam Mohammad Ali Jinnah inaugurated State Bank of Pakistan at Karachi since then it is working as Central Bank of the country.

Initially, under State Bank of Pakistan order 1948, SBP was charged with the duty related to issuance of currency notes and keeping reserves with a view of securing monetary stability in the country.

However, State Bank of Pakistan Act 1956 further strengthened the bank by giving it authority to regulate the credit and monetary policy of the country.  In 1997, now all money exchange companies are also working under the umbrella of SBP.  Hence, since 2005 central bank of Pakistan is acting as a regulatory and controlling authority for money exchange companies just like commercial banks of the country.  

The State Bank of Pakistan (SBP) is the central bank of Pakistan. While its constitution, as originally lay down in the State Bank of Pakistan Order 1948, remained basically unchanged until January 1, 1974, when the bank was nationalized, the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. The headquarters are located in the financial capital of Pakistan, Karachi with its second headquarters in the capital, Islamabad.

Before independence on 14 August 1947, during British colonial regime the Reserve was the central bank for both India and Pakistan. On 30 December 1948 the British Government's commission distributed the Reserve Bank of India's reserves between Pakistan and India -30 percent (750 M gold) for Pakistan and 70 percent for India.

The losses incurred in the transition to independence were taken from Pakistan's share (a total of 230 million). In May, 1948 Muhammad Ali Jinnah (Founder of Pakistan) took steps to establish the State Bank of Pakistan immediately. These were implemented in June 1948, and the State Bank of Pakistan commenced operation on July 1, 1948

Under the State Bank of Pakistan Order 1948, the state bank of Pakistan was charged with the duty to "regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage".

Vision Statement

Mission Statement

To transform SBP into a modern

and dynamic central bank, highly

professional and efficient, fully

equipped to play a meaningful role,

on sustainable basis, in the economic

and social development of Pakistan

To promote monetary and

financial stability and foster a

sound and dynamic financial

system, so as to achieve sustained

and equitable economic growth

and prosperity in Pakistan.

Involvement of State Bank in the Commercial banks (Bankers’ bank)

Central banks are bizarre hybrids. Some of their functions are identical to the functions of regular, commercial banks. Other functions are unique to the central bank. On certain functions it has an absolute legal monopoly.

The commercial banks maintain a current account with the central bank and can borrow money in the very short term. Thus, the banks which have to supply banknotes for their customers (either over the counter or through automatic teller machines) obtain them from the central bank which has an issuing monopoly.

The commercial banks have to lodge a number of guarantees with the central banks; in the case of banks established in Belgium these are lodged with the National Bank. They also indicate the amount of credit which they wish to obtain and the interest rate which they are prepared to pay, the minimum rate being fixed by the ECB Governing Council.

Central banks take deposits from other banks and, in certain cases, from foreign governments which deposit their foreign exchange and gold reserves for safekeeping (for instance, with the Federal Reserve Bank of the USA). The Central Bank invests the foreign exchange reserves of the country while trying to maintain an investment portfolio similar to the trade composition of its client - the state. The Central bank also holds onto the gold reserves of the country. Most central banks have lately tried to get rid of their gold, due to its ever declining prices. Since the gold is registered in their books in historical values, central banks are showing a handsome profit on this line of activity. Central banks (especially the American one) also participate in important, international negotiations. If they do not do so directly - they exert influence behind the scenes. The German Bundesbank virtually dictated Germany's position in the negotiations leading to the Maastricht treaty. It forced the hands of its co-signatories to agree to strict terms of accession into the Euro single currency project. The Bunbdesbank demanded that a country's economy be totally stable (low debt ratios, low inflation) before it is accepted as part of the Euro. It is an irony of history that Germany itself is not eligible under these criteria and cannot be accepted as a member in the club whose rules it has assisted to formulate.

The main function of a modern central bank is the monitoring and regulation of interest rates in the economy. The central bank does this by changing the interest rates that it charges on money that it lends to the banking system through its 'discount windows'. Interest rates is supposed to influence the level of economic activity in the economy. This supposed link has not unequivocally proven by economic research. Also, there usually is a delay between the alteration of interest rates and the foreseen impact on the economy. This makes assessment of the interest rate policy difficult. Still, central banks use interest rates to fine tune the economy. Higher interest rates - lower economic activity and lower inflation. The reverse is also supposed to be true. Even shifts of a quarter of a percentage point are sufficient to send the stock exchanges tumbling together with the bond markets. The financial sector in Pakistan comprises of Commercial Banks, Development Finance Institutions (DFIs), Microfinance Banks (MFBs), Non-banking Finance Companies (NBFCs) (leasing companies, Investment Banks, Discount Houses, Housing Finance Companies, Venture Capital Companies, Mutual Funds), Modarabas, Stock Exchange and Insurance Companies. Under the prevalent legislative structure the supervisory responsibilities in case of Banks, Development Finance Institutions (DFIs), and Microfinance Banks (MFBs) falls within legal ambit of State Bank of Pakistan while the rest of the financial institutions are monitored by other authorities such as Securities and Exchange Commission and Controller of Insurance.

Banker to Government

The State Bank conducts the banking business of Federal and Provincial Government and some government agencies. These functions performed by the Bank are akin to those ordinarily performed by commercial banks for their customers. The Bank provides the following services to the governments:

A. It accepts the deposits of cash, cheques and drafts by the Government and Undertakes the collection of cheques and drafts drawn on other banks. The Bank transfers government funds from one account to another or from one centre to another as advised by them. The statutory provisions for this function were made first in the State Bank of Pakistan Order, 1948 and then in the SBP Act, 1956. Federal and Provincial governments keep their deposits with the Bank free of interest. In turn, the Bank does not charge any commission to the governments for the banking services rendered to them.

B. The Federal and Provincial governments can obtain advances from the Bank subject to mutual agreements in respect of the terms and conditions for such advances. The Bank makes ways and means advances to the Federal as well as to the Provincial governments without any collateral security. However, sometimes loans are also granted to the Provincial governments against the

collateral of Federal Government securities.

C. On behalf of Federal, Provincial or Local governments the Bank also undertakes sale/purchase of gold, silver, approved foreign exchange, securities or shares in any company, collection of return on these shares/securities, transaction of SDR, etc. (Section 17(13) of the act).

Functional Strategies

To ensure the soundness of the financial sector, the SBP will focus its efforts on financial sector

Deepening, proactive supervision and regulation of financial institutions, strengthening of financial sector, privatization of the Public Sector Banks and divestment of Government shares in privatized banks, and promotion of Islamic banking as a parallel system.

In the area of monetary management, the SBP will work on developing a forward looking policy

framework, enhancing the effectiveness of Monetary Policy implementation, improving research and data dissemination capabilities, and deepening the financial markets.

For prudent exchange rate and reserves management, the focus of SBP will be on building in-house reserve management capacity, liberalizing the capital account in a phased manner, capacity building in the area of risk management, strengthening of reporting mechanism of exchange companies and documenting all capital flows especially cash transactions.

The main targets for the SBP to ensure an efficient and sound payment system will be through

implementation of the RTGS, promotion of E-banking, establishment of an electronic clearing house, and development of Public Key Infrastructure (PKI) and Digital Certification.

Financial Sector Deepening and Broadening of Access

For financial sector deepening and broadening of access, the short to medium term strategic plan is to consolidate and build on the existing initiatives in Agriculture finance, SMEs, Mortgage and

Microfinance. The strategy includes strengthening of the exiting microfinance regime and expansion of agriculture credit to small farmers and for livestock. For the SMEs, as an initial step, delivery of credit by banks will be monitored and intermediary/technical support organizations will be encouraged to assist the SMEs in preparing bankable proposals. In the medium term, the staff of the banks will be trained in program lending and the proposed guarantee scheme by the Government of Pakistan

(GoP) will be established. To pursue this strategy, close coordination will be established with the

Small and Medium Enterprise Development Authority (SMEDA).

The SBP will organize itself internally to respond to the needs of SME and Infrastructure Financing by inducting skilled manpower in these areas and train younger staff by sending them for attachments.

Core Functions of State Bank of Pakistan

State Bank of Pakistan is the Central Bank of the country. While its constitution, as originally lay down in the State Bank of Pakistan Order 1948, remained basically unchanged until 1st January 1974 when the Bank was nationalized, the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today.

Under the State Bank of Pakistan Order 1948, the Bank was charged with the duty to "regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage". which required the Bank to "regulate the monetary and credit system of Pakistan and to foster its growth in the best national interest with a view to securing monetary stability and fuller utilization of the country’s productive resources". Under financial sector reforms, the State Bank of Pakistan was granted autonomy in February 1994 State Bank of Pakistan and institutionalized the process of appointment of the Chief Executives and Boards of the nationalized commercial banks (NCBs) and development finance institutions (DFIs), with the State Bank having a role in their appointment and removal. The amendments also increased the autonomy and accountability of the Chief Executives and the Boards of Directors of banks and DFIs.

Like a Central Bank in any developing country, State Bank of Pakistan performs both the traditional and developmental functions to achieve macro-economic goals. The traditional functions, which are generally performed by central banks almost all over the world, may be classified into two groups:

(a) the primary functions including issue of notes, regulation and supervision of the financial system, bankers’ bank, lender of the last resort, banker to Government, and conduct of monetary policy, and

(b) the secondary functions including the agency functions like management of public debt, management of foreign exchange, etc., and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions. The non-traditional or promotional functions, performed by the State Bank include development of financial framework, institutionalization of savings and investment, provision of training facilities to bankers, and provision of credit to priority sectors. The State Bank also has been playing an active part in the process of islamization of the banking system. The main functions and responsibilities of the State Bank can be broadly categorized as under.

DEVELOPMENTAL ROLE OF STATE BANK

The responsibility of a Central Bank in a developing country goes well beyond the regulatory duties of managing the monetary policy in order to achieve the macro-economic goals. This role covers not only the development of important components of monetary and capital markets but also to assist the process of economic growth and promote the fuller utilization of a country’s resources.

Ever since its establishment, the State Bank of Pakistan, besides discharging its traditional functions of regulating money and credit, has played an active developmental role to promote the realization of macro-economic goals. The explicit recognition of the promotional role of the Central Bank evidently stems from a desire to re-orientate all policies towards the goal of rapid economic growth. Accordingly, the orthodox central banking functions have been combined by the State Bank with a well-recognized developmental role.

The scope of Bank’s operations has been widened considerably by including the economic growth objective in its statute under the State Bank of Pakistan Act 1956. The Bank’s participation in the development process has been in the form of rehabilitation of banking system in Pakistan, development of new financial institutions and debt instruments in order to promote financial intermediation, establishment of Development Financial Institutions (DFIs), directing the use of credit according to selected development priorities, providing subsidized credit, and development of the capital market.

The Role of, State of Pakistan in Money Supply and Reserves

The State Bank of Pakistan is the premier banking organization of the country. It is the central bank of Pakistan; it has the power and all rights of controlling the operations of all the commercial banks of Pakistan. The bank was formed after the independence in 1947 and has given the all powers.

The basic work of the State Bank of Pakistan, as the central bank, is to control and monitor the money supply in the country. This is done by appropriate issuance of notes, supervision and regulation of the entire financial system, foreign exchange management, etc.

State bank maintain the money supply by controlling the interest rates in the country. With more interest rates, people would invest more in banks for the purpose of getting high returns. So in turn government would get more money also.

Under the State Bank of Pakistan Order 1948, the Bank was charged with the duty to "regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage".

Regulation of liquidity:

As working with having power of central bank of the country, state bank has been entrusted by the responsibility to make and run monetary and credit policy in a manner consistent with the government targets and goals for growth and inflation and the recommendations of the monetary and fiscal policies.

REGULATION AND SUPERVISION:

One of the fundamental responsibilities of the State Bank is regulation and supervision of the financial system to ensure its soundness and stability as well as to protect the interests of depositors. The rapid advancement in information technology, together with growing complexities of modern banking operations, has made the supervisory role more difficult and challenging. The institutional complexity is increasing, technical sophistication is improving and technical base of banking activities is expanding. All this requires the State Bank for endeavoring hard to keep pace with the fast-changing financial landscape of the country.

The effects of State Bank’s implication on the Stock Market

Overview of the Stock Market and the Monetary Policy Developments:

In Pakistan there are three stock exchange markets, namely the Karachi Stock exchange (KSC, the Lahore Stock Exchange (LSE) and the Islamabad Stock Exchange (ISE). The Pakistan capital market is regulated by the Security and Exchange Commission of Pakistan (SECP), when the Corporate Law Authority was destroyed in Pakistan; it was established in 1997 by replacing the Corporate Law Authority. These Stock Markets are established in year 1947, 1974 and 1997. The Karachi Stock Exchange (KSE) is the main and leading stock Exchange among all these three markets in Pakistan.

During the decades of 1960’s the growth of equity market due to industrialization policies pursued by the government of Pakistan and State Bank, The decade of 1970’s started with political turmoil and unrest in the eastern part of the country. The decade of 1990’s witnessed changes in the policies functioning of the stock market. In the beginning of 1991 significant measures were taken including the opening of the market to international investors; removal of constraints to repatriation on investment proceeds, gains, and dividend; deregulation of economy and allowing commercial banks in the private sector; liberalization of foreign exchange restrictions and allowing Pakistanis to have foreign currency accounts.

Due to domestic political crisis, the equities market of Pakistan In 1995 collapsed and a discouraging economic outlook. KSE established a `Defaulting Companies Counter’ in August 1997 for those companies which had committed various defaults under listing regulations of the Exchange. The KSE has shown improvement during 1997-98. Further, the Karachi Stock Exchange introduced a computerized trading system i.e. a KATS (Karachi Automated Trading System). Due to different measures the number of listed companies rose to 762 in 2000. In addition the listed capital and market capitalization are 229,314.8 million and 394,445.7 million respectively. On the other hand, the growth in activity indicated by trading value and turnover ratio was tremendous. Since late 90s the turnover ratio has been phenomenal and increased to almost 500% in 2003. As a result Pakistan ranks first in the world in terms of turnover ratio. The KSE has been among the best performing markets for the last two years.

The Actual and Specific Role of State Bank of Pakistan

Basically the central banks are specific banks who charge the interest on particular loans and also on short term bonds. According to the criteria of the central banks they lend money in to private banks to increase their network and also by doing this they have power to regulate the growth of economy. By making money lending expensive and increasing the interest rate amount which slow the growth and prevent from inflation that policy known as Contractionary monetary policy. Another condition from which central bank make the money lending inexpensive and low the interest rate which raised the growth and cause the recession that policy known as Expansionary monetary policy.

The central bank had three main specific roles that maintain the economic system with in a country

To maintain price stability, subject to the monetary regime in current operation for example the gold standard, a pegged exchange rate or an inflation target.

To maintain financial stability and to foster financial development more broadly.

To support the State’s financing needs at times of crisis but in normal times to constrain misuse of the State’s financial powers. In the past this meant preventing debasement and misuse of the inflation tax. Prospectively it may in future also involve preventing misuse of the bank tax.

According to these three conditions the central banks naturally regulate the economy and these objective were be shifted over a time period with the support of the state financing along with a particular criteria. In recent years the developed economies including the United states, Australia. United Kingdom, China and Japan have developed their real estate markets which causes the price increases in land and in securities in domestic markets. And these the real estate prices and securities prices (share prices) can damage the economy if they can be break out or may lead to the price crashes. On the other hand the central bank has the power to signify the cost and uncertainties which may be come in way of central bank to get involved in certain conditions which are such as:

A central bank's response to a share market bubble in its own economy may be influenced by concern for the effects on share markets in other countries.

The central bank may be constrained by considerations of international relations especially in the area of exchange rate policy it may be difficult to harmonize the slow pace of international diplomacy on economic policy with the rapid developments in a bubble economy.

The authority of a central bank to control a price bubble may be uncertain, because the bubbles may not affect the broader economic indicators typically relied on by central banks in formulating monetary policy.

The economic sector in which the bubble occurs will often be within the regulatory jurisdiction of an institution other than the central bank, and thus the central bank may face bureaucratic opposition to any intervention.

The bubble economy may be the result, in part, of financial deregulation which has the effect of directing bank credit into particular economic sectors, especially real estate. Depending on applicable law, the central bank may not have the authority to deal with the underlying root causes of the credit surplus.

Any action by the central bank against a price bubble is likely to encounter political opposition from a variety of sources: interests which profit directly from the bubble, interests which, while not profiting directly from the bubble, would nevertheless be harmed if the central bank tightened monetary policy, and members of the public who are swept along in the general euphoria.

The central bank's ability to act against a bubble economy during the early stages is likely to be adversely affected by uncertainty about whether the phenomenon is really a bubble, or rather a series of price increases based on economic fundamentals.

The central bank may need the support of politicians if it is to act decisively against a bubble economy especially during the early stages when the price increases are likely to enjoy widespread popular support. If such support is not forthcoming the central bank may not be able to take firm enough action to deal with the situation.

The power of a central bank to act against a bubble economy may depend on the bank's own political position other things equal, a politically independent central bank is likely to have somewhat greater discretion to act against a bubble than a politically dependent one

How Much Policies are Favorable for Development made by State Bank

Basically the state bank of Pakistan is the central bank of the country as concerned with the policies the state bank regulate the those polices which are highly considered nationalized in the domestic country as coming to the point the State bank of Pakistan Act 1948 the bank has charged the duty to operate the regulation system of the currency as International and as well as domestic. The main purpose of the state bank is to "regulate the issue of banks notes and keeping reserves because of securing monetary stability with in a country and also operate the currency system as well as the credit system with in a country". Under the act of financial sector reforms the state bank of Pakistan was granted the autonomy in February 1994 and this act was enlarge in 21st January 1997 by issuing the three amendment Ordinance in the parliament and that Amendment was approves by the parliament. According to the Act of ordinance 1962 state bank give full authority to the Banking companies that they should conduct the independent monetary policy and also in this Act the state bank set the limit on government borrowing.

If we can say that in developing nation any central bank can regulate those policies which are highly favorable for the both traditional and developmental (Industrial) functions to achieve the macro-economic goals within a country. In the traditional function the state bank developed two types of policies which are performed by every central bank almost and those policies are divided into two groups 1) Primary which includes the issue of currency notes how much amount of currency notes were be published that was conducted by state bank on the reserves that the country have, state bank also regulate the supervision of the financial system which include the how much amount of central bank was given to the credit holders and how much was the criteria of interest rate will be charge on the particular lenders and also state bank regulate the system into private banks as well as government banks to maintain the records of their customers at least 20 years. 2) Secondary part includes the agency functions like the management of public debt and the management of foreign exchange which shows that how much currency fluctuate domestically as well as Internationally, Another functions are also performed by state bank such as by giving the advice to the government on policies and matters and maintain the close relationship with International financial institutions.

As coming to the Industrialization polices the state bank performed those functions which include the development in the financial framework such the Intuitional of savings and investment because from which the state bank generate more income to build the nation economy and by giving such loans to the private sector companies from which the state bank get more return which was highly beneficial for the any developing country establishment. State bank also promote the facilities to credit priority sectors by providing them such benefits and advantage which highly admirable for them by giving them extension in their credit limits. State bank also play an active role by making himself part in the process of Islamic banking system which was for those domestic person they didn’t want any interest rate and regulate those polices in the particular banks which was highly effective for their customers.

As concerned with the policy rate of state bank that the bank members was decided to unchanged its policy rate at 14%. This decision was taken by the central board of directors of the State bank under the chairmanship of SBP Governor Mr. Shahid H. Kardar in Lahore.

Role of the State Bank in the GDP and GNI of Pakistan

GDP

As concern of the role of the state bank in the gross domestic product in the country development was that the GDP target the growth of any national income and output. GDP can be defined as in three ways in first way the GDP can be define as that the GDP equal to the total expenditures for all final good and services generate within the economy in a specific time period. In second way the GDP impact on the production stage in Pakistan by all the industries and plus all the taxes generated through from production sector as well as from employment sectors which includes the labor because the labor is source of any country that generate more economy and give high tax income within country. And the third way was that the GDP is equal to the sum of the income that was generated by compensation of employees and plus all the production taxes that are imposed on the exports and also plus the amount of the gross operating which highly give surplus amount for the development or establishment of the country through gross domestic Income (GDI).

According to the gross domestic product (GDP) the growth was increase in the year of 2009-10 fiscal years (FY 10) it was likely to be 3.3% that was higher than the previous year which was 2.0% in fiscal year (FY 09). This report shows that the improvement in industrial output is expected to be good then the agricultural. Thus in FY10 there was less import and more export in demand from manufacturing companies and that raised the commodity prices and cause certain improvement in that particular fiscal year (FY10).

GNI

Basically the GNI is the combination of the Nominal income and the purchase power parity (PPP). The Gross National Income (GNI) consist of the some expenditure and the purchasing ability of the country citizen that how much they are able to take the resource from other countries or the vice versa basically GNI has some component which makes it such the personal consumption expenditure plus the gross private investment plus the government consumption expenses and plus the net income from required assets after deducting only two elements which are the gross imports and other one is the Indirect business tax. The GNI can be calculated as

GNI= GDP + (FL-DL) + NCL = C + I + G + (X-M) + (FL-DL) + NCI

As concerned with the development sector the country is largely depend upon the agricultural sector which give 65 % to the population, 50% to the employees and about 25% to the gross national product. According in fiscal year in Pakistan the GNP growth was reduce to 2.6% from 3.0% and the growth in population was not sufficient to cover the ratio the gross national income and about 40% of population in Pakistan live below in the poverty line and the world bank define the poverty line as the person income is less than a one dollar in a day is lived below in poverty line. The comparison of other nation as compared to the Pakistan the china is 4.6% in poverty while India is 35.5% as compared to the Pakistan that was the very bad economic outlook of the country. Many citizen of the country they want to migrate from Pakistan to the other nation because of worse GNI and high Inflation in a country. A recent research show that the 62% of the people of Pakistan almost the adult would like to shift or migrate from their home country to go to the aboard for their better future and half of those are wishing to work with the overseas and they wish that they didn’t want to return back to their homeland and they eager to settle at abroad.



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