MACROECONOMIC FRAMEWORK IN PAKISTAN Ms. Mahjabeen Cheema (Assistant Chief, Planning Commission) Ms. Zaira Najam (Research Officer, Planning

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1 MACROECONOMIC FRAMEWORK IN PAKISTAN Ms. Mahjabeen Cheema (Assistant Chief, Planning Commission) Ms. Zaira Najam (Research Officer, Planning Commission)

2 Institutional Framework Ministry of Planning, Development & Reform Planning commission Ministry of Finance Economic Affairs Division State Bank of Pakistan Pakistan Bureau of Statistics

3 Planning Commission sets longer term vision and priorities integrative role in sectoral policy formulation tracks progress against respective goals and ensure optimal utilization of scarce resources

4 TYPES OF PLANS PERSPECTIVE PLAN MEDIUM TERM PLAN ANNUAL PLAN Long term Vision Economic, Social and Technological Policy Framework (10 25 years) Statement of goals and targets Broad framework for formulation of annual plans (3 5 years) Strategy and time frame for achievement of targets Instrument for translating long term goals and medium term targets into operational framework Performance evaluation of inputs in achieving key annual targets Investment programming in the public sector and indicative targets for private investment 4

5 Perspective Plan : Vision 2025

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7 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 Reforming PSEs Short / Medium Term Long Term Enhancing productivity and competitiveness Vibrant markets and trade openness Quality Governance Creative Cities Connectivity to compete Youth and Community

8 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 Public Central Government Financial Monetary System Foreign The Balance of Payments Private Non Government agencies

9 Interrelations in Flow of Funds Framework National Accounts Balance of Payments Government Sector Private Sector Monetary Sector

10 RMSM X Model Focuses on Real Sector. Determination of growth

11 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.

12 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

13 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,

14 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.

15 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

16 Limitations of the Model Too vast. Large number of assumptions, leaving space for human error Requires expertise in all 4 sectors Large data requirement

17 Pakistan Specific Limitations Assumptions are subject to economy but certain shocks, both domestic and international can hamper model expectations Matter of subjective/human judgement

18 Way Forward.. Formation of core group to incorporate SDGs Members from MoF, SBP, Planning, EAD.