Impact of Global financial crisis
By: Nauman Ayubi Butt
Roll # 8511
Table of contents
1) Reason of choosing this topic
3) The term ‘Financial Crises’
4) Financial Crisis 2007-2009
5) Causes of the crisis
6) The crisis getting global
7) The Financial crisis and Pakistan:
8) Sectoral impact of the crisis in Pakistan:
9) External sector impact
10) Financial Sector impact on
i) Foreign exchange
ii) Banking sector
iii) Circular debt
iv) Stock market:
12) Economic business sector impact
i) Impact on textile industry
13) Social Sector Impacts
14) Poverty and unemployment:
16) Technique to ...view middle of the document...
Outside of the U.S, the bank of China and France BNP Paribas were the first
international institutions to declare substantial losses from subprime catastrophe,
Ireland, Portugal, Spain and Italy were the worst hit. The U.S Federal Reserve, the
European Central bank, the bank of Japan, the reserve bank of Australia and the bank
of Canada all began injecting huge chunks of liquidity into the banking system. France,
Germany and the United Kingdom announced more than $222 billion of new bank
liquidity and nearly $1 trillion in interbank loan guarantees, towards the end of 2007, it
had become quite clear the subprime mortgage problems were truly global in nature.
The global financial crises also effects South Asian exports and could hurt income.
Pakistan is another country in South Asia that has been severely affected by the
financial crises. In fact, Pakistan seems to be one of the hardest hit with this global
crisis. Its economy is already in crises. Pakistan is also facing a serious liquidity crunch,
with the only solution being international support. Saudi Arabia has refused to give
Pakistan a financial concession on the oil trade, as well. The only option for Pakistan is
to approach international monetary fund, which will set highly stringent conditions for the
The term ‘Financial Crises’:
The term financial crises is broadly used for many things means if there is great
loss happen than its called financial crisis but its mainly related to banking panics. Other
situations in which we often use this term is in stock market crashes.
Financial Crisis 2007-2009:
The financial crisis of 2007-2009 has been called the most serious financial crisis
since the great depression by leading economists, with its global effects characterized
by the failure of key businesses declines in consumer wealth estimated in the trillions of
U.S dollars, substantial financial commitments incurred by governments, and a
significant decline in economic activity.
Causes of the crisis:
It is not clear yet whether we stand at the start of a long fiscal crisis or one that will pass
quickly, like most other post World War II recession.
1) Fundamental mispricing in the capital markets.
2) Mistakes made by the Fed and the others banks by keeping the federal funds
rate too low for too long created bubble and housing bubble. In other words, with
artificial low fed funds target, banks filled themselves on cheap funding and made
cheap loans available.
There has been great disparity in the quantity and quality of loans in the
recent years. In terms of quantity, there was an increase in low-rated
issuances of shares from 2004-2007. Moreover loans that were issued
were mainly given to finance leveraged buyouts. Over the same period
average debt leverage ratios grew rapidly to levels never seen previously.
In terms of quality, there was also a general increase in non
documentation and high loan-to-value subprime mortgages.
3) Plus the...