The Pakistan Development Review
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Don’t Fall in Love with Parity: Understanding Exchange Rate Depreciation
Full text linkKey Takeaways from Global Research Exchange rate is like
temperature in a human body: It merely reflects underlying weaknesses.
Like the human body artificially holding the temperature down for long
periods without addressing the causes is likely to lead to grievous
consequences. There is no such thing as an active devaluation policy
for boosting exports. Holding the exchange rate at an artificially
appreciated rate is only possible through reserve loss. These losses
cannot be incurred over the long run as reserves are finite and market
participants know that reserves can be attacked to their advantage.
Bolstering the exchange rate through exchange and import controls serves
only to disrupt supply chains and eventually weaken the domestic
economy. At best it is a short-run painful solution
Experimental Evidence on Public Good Behaviour across Pakistan’s Fractured Educational System
No full textThis paper investigates how Pakistani higher education
students from different social strata act within the context of a game
that allows for cooperation and punishment. Findings reveal that both
female and male madrassa students are the most generous players.
Moreover, there is more gender and social consciousness in male students
than female students when deciding to penalise or not. Male madrassa
students penalise female students more than male higher-income students;
moreover, elite male students penalise male madrassa students more
heavily than fellow elite students. The latter result suggests the
presence of spite among elite boys towards high contributors if they
belong to another social class/group. This research helps us break from
social stereotypes that depict lower-income madrassa students as
particularly intolerant of other social groups. JEL Classification: C71,
C90, D91, Z12, Z13 Keywords: Higher Education, Madrassas, Public Goods
Game, Social Stratification
The Spatial Effects of Road Infrastructure on Employment in Pakistan: Quantifying the Role of Complementary Factors
No full textThis study uses district-level panel data to measure the
spatial effects of road infrastructure on employment while accounting
for institutional quality, rural connectivity, and labour productivity
in Pakistan. The estimates based on the spatial regression model show
that road density positively and significantly impacts employment. A 10
percent increase in road infrastructure would lead to a 4.3 percent
increase in employment directly and indirectly—the spillover effects of
road infrastructure help optimise the benefits of public investment in
infrastructure projects. Empirical results reveal that institutional
framework and access to rural areas complement road infrastructure in
channelising road development’s employment effects. These findings
suggest a call for a comprehensive policy to reap the potential benefits
of road infrastructure. Apart from developing the road network, the
government should also develop complementary factors, namely
institutional reforms and rural connectivity. Keywords: Road
Infrastructure, Employment, Institutional Quality, Spatial Analysis,
Pakista
Huzaima Bukhari and Ikramul Haq. Tax Reforms in Pakistan: Historic and Critical View
Full text linkIn their book entitled Tax Reforms in Pakistan: Historic &
Critical View authors Huzaima Bukhari and Ikramul Haq take up the
important yet often under-researched topic of the taxation system in
Pakistan. The book is a collection of various writings on the topic by
the authors spanning over three decades and has been published online by
the Pakistan Institute of Development Economics (PIDE)
Endurance or Submission: How Terrorism Frame Households’ Time Allocation?
No full textTerrorism cause psychological injury, placing an unsettling
impact on human life. In Pakistan, the continuous stream of terrorism
since 2009 induced fear, expectedly influencing households’ behaviour
about their economic decisions. In this context, the study empirically
investigates the effects of terrorism on households’ time allocation
decisions in the pre-2009 and post-2009 periods to track their time
allocation for business activities and leisure. For this study, 200
households are interviewed from district Peshawar of the KPK province in
Pakistan, one of the worst-hit districts from terrorism. Findings of the
study reveal that in general, terrorism has posed a significant impact
on households’ time allocation patterns. Analysis explains that in the
post-2009 period, increasing incidents of terrorism triggered fear in
the people’s minds. Consequently, time for business activities shrunk
while the time for leisure increased. To be more exact, households
preferred to stay at home and spend time on leisure activities (with no
financial yield) rather than engaging in business activities. JEL
Classification: D91, R23, R28 Keywords: Terrorism, Fear, Violence, Time
Allocation Pattern, Pakista
Remove Service Charge on IBFTs to Encourage Digital Transactions
No full textThe State Bank of Pakistan (SBP) announced on June 16, 2021,
that it has now allowed banks to charge a transaction fee of 0.1 percent
of the transaction or PKR 200, whichever is lower on Inter-Bank Funds
Transfers (IBFTs). SBP has made compulsory free-of-cost IBFTs of up to
PKR 25,000 per month per account. For accounts exceeding the limit, the
banks will charge the transaction fee as mentioned above. Following the
onset of the COVID-19 pandemic, on March 19, 2020, the Government of
Pakistan and SBP decided to make all IBFTs free of charge. The idea
behind this decision was to limit consumer visits to banks and thus
restrict the COVID-19 threat. Before that, the banks were allowed to
charge a transaction fee on IBFTs as per SBP’s defined schedule of
charges. The practice did continue for a little over a year until after
the third wave, the state bank, as mentioned above, assumed an improved
COVID-19 position for reviewing the policy and thus reimposed the
charges on digital funds transfer. Since then, Pakistan has entered the
fourth pandemic wave as a much deadly delta variant and other new
variants grow rapidly in Pakistan. Consequently, the basis of this
review and policy change can be contested on the pandemic spread
grounds, but for now, this policy viewpoint discusses the decision from
an economic and financial perspective
An Analysis of Pakistan’s Agricultural Commodities based on Effective Protection Rate and Its Decomposition
No full textThis study analyses the impact of the government’s
interventionist policies in the product and input markets for the two
leading crops of Pakistan, wheat, and cotton. The study employs standard
measures of the nominal rate of protection (NRP) and effective rate of
protection (ERP). In addition, it also proposes a method to additively
decompose the ERP into two components representing the effect of
distortions in the product and input markets. The study finds that
government policies in the wheat market are mostly designed to protect
flour mill owners and thereby ordinary consumers at the cost of farmers.
Since the consumers of wheat by far outnumber the wheat growers, this
policy design seems to represent a political decision to appease the
common public. Regarding cotton, the study finds that the government
does not intervene much in the market to the extent that farmers are
left at the mercy of monopolistic procurement agencies and
better-informed rent-seeking intermediaries in the marketing chain.
Export procedure is so cumbersome that only the well-informed and
well-connected traders can benefit from price hikes in the world market.
The study recommends serious reconsideration of government policies in
the light of normative considerations. In this context, open debate on
agricultural policy in Parliament and the Senate would be highly
desirable
Policy Insights to Maritime Economy in Pakistan
No full textThe term “Blue Economy” originated in 2012 from the Rio+20
Conference of the United Nations on Sustainable Development and Growth.
Given the vastness of oceanic resources, the blue economy has been
touted as the panacea for all economic woes of less developed coastal
countries. It basically refers to leveraging the coastal and marine
resources for economic benefits, emphasising sustainable economic growth
and environmental conservation. United Nations 2030 Agenda for
Sustainable development directly linked sustainable economic growth and
Blue Economy via SDG 14. World Bank defines Blue Economy as:
“Sustainable use of ocean resources for economic growth, improved
livelihoods, and jobs while preserving the health of ocean ecosystem.”
Due to its international obligations for SDGs, Pakistan has integrated
SDGs into its domestic development agenda, which implies that Pakistan
is cognizant of the blue potential
Why do We Have Less Investment than China and India?
Full text link1. INTRODUCTION Pakistan has experienced macroeconomic
instability since the early seventies. Because of the country’s
persistent macroeconomic uncertainty, savings and private investment
have been discouraged, resulting in low aggregate investment and
volatile output levels. It has one of the lowest investment-to-GDP
ratios that is 15 percent, about half of the South Asian average of 30
percent. Here we will review the evidence from Pakistan to inform
policymaking and local research about (1) The investment trends and
patterns in the economy and comparison with its regional counterparts.
(2) The factors which can stimulate the investment
Friendly Fire: Wheat Subsidy in Punjab, Pakistan
Full text linkDuring the past decade every year the Punjab government has
faced an awkward situation at wheat harvest. It must buy millions of
tons of wheat at an above-market price despite massive carry-forward
stocks already lying in its granaries. Cost of procuring such huge
quantities and subsidising sales to flour mills is enormous and is met
with commercial borrowing. In recent years, the government has struggled
to balance its accounts for wheat operations; its outstanding liability
to commercial banks stood at Rs. 444.7 billion in June 2018, viz. 22
percent of the total budget of the province in 2017-18. Clearly, the
government procures more wheat annually than it needs with borrowed
money that it cannot pay back. Ostensibly, wheat procurement aims to
benefit small farmers, but its procedures exclude, rather than include
them. Conversely, consumers end up buying expensive wheat-flour. A
significant beneficiary of the procurement regime appears to be
commercial banks finance the procurement and earn interest thereupon.
Keywords: Food Subsidy, Wheat Procurement, Subsidy Refor