261 Pakistan Economic and Social Review Volume 48, No. 2 (Winter 2010), pp. 261-278 SOCIAL IMPACT OF GLOBAL RECESSION ON PAKISTAN IDREES KHAWAJA, TAHIR MAHMOOD and USMAN QADIR* Abstract. This study examines the impact of global recession on the economy of Pakistan. For a fragile economy like Pakistan, coping with even a single economic crisis is difficult, let alone the two, that followed in quick succession — the unprecedented surge in commodity prices and then the global recession. The social impact of these crises on Pakistan can come through: a possible fall in remittances from UAE and the United States, reduced output growth, fiscal tightening, falling exports and a depreciation of the exchange rate. Given the state of economy at the onset of the recession, the Keynesian prescription of strong fiscal stimulus could not be administered for stimulating recovery. Coupled with the adverse changes in the variables referred above, this will serve to increase the poverty head count ratio in the country. If the suspicion of fall in remittances from UAE or US comes true; there is more bad news to be had for the poverty head count ratio. I. INTRODUCTION The global financial crisis and the recession that followed were the two worst economic crises that the world had witnessed since the great depression of the 1930s. The direct impact of the global financial crisis on developing countries including Pakistan has been limited due to non-integration of the domestic financial sector with the global financial sector (IMF, March 2009). However, the crisis has set in motion global recession which has not spared the Low Income Countries. The average annual global economic growth is expected to fall to mere 1.0 percent after averaging around 4.0 percent during *The authors are, respectively, Associate Professor at Pakistan Institute of Development Economics, Islamabad; Assistant Professor of Economics at University of Veterinary and Animal Sciences, Lahore; and Research Economist at Pakistan Institute of Development Economics, Islamabad (Pakistan). (Corresponding author e-mail: tahirnns@yahoo.com)