MACROECONOMIC FRAMEWORK IN  PAKISTAN

MACROECONOMIC FRAMEWORK IN PAKISTAN
Ms. Mahjabeen Cheema (Assistant Chief, Planning Commission)
Ms. Zaira Najam (Research Officer, Planning Commission)
Institutional Framework • Ministry of Planning, Development & Reform
Planning commission • Ministry of Finance
Economic Affairs Division • State Bank of Pakistan • Pakistan Bureau of Statistics
Planning Commission
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sets longer term vision and priorities
integrative role in sectoral policy formulation
tracks progress against respective goals and ensure optimal utilization of scarce resources
TYPES OF PLANS
PERSPECTIVE PLAN
•Long term Vision
•Economic, Social and Technological Policy Framework
(10‐25 years) •Statement of goals and targets
MEDIUM TERM PLAN
ANNUAL PLAN
•Broad framework for formulation of annual plans
(3‐5 years)
•Instrument for translating long term goals and medium term targets into operational framework
•Strategy and time frame for achievement of targets
•Performance evaluation of inputs in achieving key annual targets
•Investment programming in the public sector and indicative targets for private investment
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Perspective Plan : Vision 2025
Growth & Development Objectives
Achieve 5‐6% growth in medium and 7‐8% inclusive and sustained growth in long term by
 Ensuring macroeconomic stability
 Removing energy shortages
 Managing Internal Security
Short / Medium Term
Long Term
 Reforming PSEs
 Enhancing productivity and competitiveness
 Vibrant markets and trade openness
 Quality Governance
 Creative Cities
 Connectivity to compete
 Youth and Community
Introduction to MTMF Pakistan
• Based on RMSM‐X (Revised Minimum Standard Model Extended)
• Introduces multiple economic agents in a consistent flow‐of‐funds framework
• Contains 4 Economic sectors
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Public ‐‐‐ Central Government
Financial ‐‐‐ Monetary System
Foreign ‐‐‐ The Balance of Payments
Private ‐‐‐ Non‐Government agencies
Interrelations in Flow‐of‐Funds Framework
National
Accounts
Government
Sector
Balance of
Payments
Private
Sector
Monetary
Sector
RMSM‐X Model • Focuses on Real Sector. • Determination of growth
Data Requirement
• The minimum data requirements for assembling the
consistency framework are one year of historical data for
flow variables and two years of data for stock variables.
• The RMSM is an accounting framework that links the
national accounts and the balance of payments, with
particular emphasis on foreign financing gap and
projections of foreign borrowing. The concern is
medium‐term growth and its financing.
Overview of Model Interface
• Original Data Sheet (ORD): Data entry for base year
• Assumptions Sheet (ASU): Sub‐divided into four sections, with user‐specified figures
• Sectoral and Summary sheets: DIT (private sector), CCH (consistency check), BOP, MON (Monetary), GOV, SNA (National Account), TRA (Trade Block) etc
Closure Rules of the Model
• Public Closure
– Exogenous : Growth, Inflation
– Endogenous: Government budget
• Private Closure
– Exogenous : Growth, Inflation
– Endogenous: Private Sector variables
• Policy Closure
– Exogenous : Fiscal & Monetary Policy variables – Endogenous: Growth, Inflation,
Use for the Govt/ MoF
– MoF is responsible for maintaining Financial discipline in the country, – Rmsm‐x: economic agents are highly interlinked and integrated, rmsm takes most of this into context and thus closely imitates the real world etc
– using it for medium term projections, growth, MTBF etc.
Advantages & Applications
• Analyze changes in, composition and dynamics of 4 economic sectors (Private, public, external, banking)
• Evaluate the impact of local and external shocks on major macroeconomic indicators
• Analyze future policy
Limitations of the Model
• Too vast. Large number of assumptions, leaving space for human error
• Requires expertise in all 4 sectors
• Large data requirement
Pakistan Specific Limitations
• Assumptions are subject to economy but certain shocks, both domestic and international can hamper model expectations
• Matter of subjective/human judgement
Way Forward..
• Formation of core group to incorporate SDGs
• Members from MoF, SBP, Planning, EAD.