ECONOMIC CHALLENGES OF PAKISTAN, ITS CAUSES AND WAY FORWARD

Imagine yourself in an international jeep race competition: where your worn out jeep’s
dilapidated engine abruptly stops after making awkward sound, whereas the rest of the
competitors are moving in fast speed with enthusiasm, leaving nothing but, mud and
dust at your face. Same case applies on economic competition where every state has a
goal to surpass others.
The world is constantly getting ahead in this economic race ; updating themselves,
overcoming challenges, getting prosperity in order to not to left behind. Global economic
system and its opportunities are divided in two parts: the west and the rest. Such
unequal divisions ghastly effects when are combined with domestic economic
challenges those Pakistan is facing now a days.
The economic vow goes top to down, driven whimsical, ad hoc policies its formulation,
execution, and implementation .Such lackluster approach results as fiscal and energy
deficit, low tax to GDP ratio, heavy spending on imports and lowest exports, devaluated
rupee agriculture live stock and services almost at ventilator.
To overcome these economic challenges Pakistan for a long time depended on
international powers and financial institutions and those remain careless and eager so
much so that they would hardly hesitate to unplug the ventilator of 207774520 million
people merely to charge their phone. First thing first is yearly rising fiscal deficit.
It has reached at $ 23.3 billion and resulted as severe balance of payment issue. The
coming government is already set and keen to knock the door of international Monetary
Fund it has reach to 5.8 %. Whereas cherry on the cake is lack of energy which
severally harmed industries and services, and has slowed down the turbines and
engines of growth. Investors and industrialists have wind up their business from
Pakistan to other south Asian and Gulf state.
Little earning and heavy spending has hardly yielded any good result. There is a big
glaring difference in Pakistan’s GDP and the exact amount to run the country’s affairs
and all system of state. So every government tried to bridge this gap by taking loans
neither they cut extra useless expenditure nor enhanced their own skills and utilized
their resources to raise earnings. Economy is going through ridiculous imbalance of
exports, imports, Pakistan heavily rely on US for advanced weapons, technology,
surgical instruments, machines, fighter jets etc and their heavy cost has become liability
and compliance on economy.
Owing to large number of buying the rupee is devaluating and inflation is rising, 1k.g
tomato price is almost equal to a $, is this how economy runs in developing states?
Pakistan is left with $ 9billions as per official statement of state bank, on this account
Pakistan can only afford to buy one month goods. And the number of remittances is too
low to maintain $ dollar level. On other side Pakistan’s trade with other states is very
low almost negligible if compared with buying and selling ratio.
This proved to be fatal besides its fragile monetary policy. According to FBR tax to GDP
ratio is 11.2 (2017 -2018) slightly better than previous but the FY18 tax collection falls
Rs 129 billion short of target. Such indicators are equally responsible in economic
meltdown. In previous budget services to some extent performed as per target.
Innovation is the key to success and selling one’s product if it is eye catching and well
design. According to world economic forum Pakistan ranks 113 the lowest out of 127
innovative states.
There is hardly any single back up support system for entrepreneurs. Contrary to this
U.S congress long ago passed a law supporting entrepreneurs if they go bankrupt in the
long run of innovation and business. Economic philosopher in U.S economy brief
magazine says’ United states has given their people the freedom to fail and grow again
‘that is the reason behind technological advancement , innovative products and
business starts ups .such things is totally missing here.
Feeble domestic industry, services, and technological backwardness has damaged to
economy and this vacuum is being filled by Chinese products. Small industry owners
and workers are afraid of over flooding of Chinese products in markets. OASIS an
organization supporting domestic industry conducted a survey and the fear of getting
worse was showed by domestic industry owners and workers moreover government
and large scale manufacturers was criticized for not taking viable steps.
Services sector also suffering because of non sustainable governance, energy crisis,
and technological backwardness. It has been published widely where boilers and
engine fault has caused fatal causalities and the Baldia factory incident was not less
than any the night mare for labor working in Pakistan. FDI shows slight growth to $ 2.76
billion in (2017-2018) somehow better but overall remain poor, because of unfavorable
conditions the investors are preferring other south Asian states Bangladesh and India
rather than Pakistan. And it brings chaos and unemployment in youth, ultimately
Pakistan experience ‘Brain drain’.
More than FDI the vacuum of brain Drain and skill labor will take years to fill. Thus, low
FDI and high unemployment and lack of skill labor has created a severe issue to
economy. According to ILO Pakistan have world’s 10th largest work force 63.34 million
and agriculture accounts for 43.7 %. Once Pakistan has been agrarian economy, large
chunk was availed by agriculture it has now shrunk to 3.46 according to previous budget
highlights around 19 .5% we are earning from agriculture.
Though it has potential to get its previous glorious position back. Drastically slowed
agricultural production is a setback to economy which is already weak on industrial and
live stock ground. When it comes on catering live stock we as a nation are still
practicing century old ways of hoarding. Neither good doctors, nor hospitals in every
district or big cities are available for live stock and most of them die causing heavy loss
and those which remain alive suffer with diseases. Hoarding (at professional) level is yet
to be introduced.
Moreover the shortage of water forces them to move from one place to another. All
these creates sufferings for them and results as abandonment and economic loss.
Stable and corruption free government is overt secret of strong economy. Sustainable
democratic system, with investor friendly policies and incentives, strengthen economy
and invite foreign direct investment. China has, three decades ago, adopted the same
course of direction.
Contrary to this, what is happening here is unpredictable political system, wild unruly
dharna ‘s , extremists and bigots blocking interchanges and main roads causing loss in
stock exchange and etc hardly sent good message to the world. Like famous saying Old
habits die hard’ seems apt here to define our ritual of abandoning economic policy in
mid. As it was done with (strategic policy frame work 2015- 2018) Thus it is another
challenge and reason for economic meltdown.
Economy of Pakistan is facing all these issues because of two major areas which are
needed to be worked on immediate basis one of them is; general causes which dragged
economy and the second is lackluster approach towards economic policy formulation,
execution and its monitoring. Despite being backbone, economic policy is not being
given its due attention.
Not because policies are abandoned in lurch, but the detail study of successful and
failed are not being done before formulating new and comprehensive policy. Such pre
planning is unseen here. In-depth zoom in, systematic synergetic structural process can
hardly be seen in economic sphere of Pakistan.
Stake holders reservation make that economic policy and its reservation into a weaker
state, their continuous criticism (more often than not genuine) reservation create an
uncertain environment and lack of confidence, whose basic requirement is confidence
and team work of all stake holders. In this way economic policy loses its credibility and
creates uncertainty.
There is lack of consensus and no multi stage approval of economic policy so it became
easy to raise questions. Excessive dominance or most probably the veto power of
finance minister prevails. Before initiating any policy commerce ministry take all stake
holders, business bodies, chambers, research institution, academia federal and
provincial ministries and agencies together.
Despite having ample importance, selection criteria in this domain is excruciatingly
painful. Recruitment from outside remain resented. Contrary to this, India has attracted
top ranking economist of international level from outside Indian economic service. And
those who are recruited from outside they experience non cooperation, remain
suspicious in the eyes and preoccupied with court cases against his /her appointment.
Furthermore, the intra service rivalries etc create hindrance whereas court interventions
end up relying alone on seniority basis. Neither finance ministry nor commerce and
trade is taking any interest of capacity building training of young economist , their skills
up gradation, and preventing them from lapsing into cynicism, lethargy and being
dishonest, in absence of such steps they get disappointed and few leave whereas other
remain dormant.
Chief economic advisor and think tank has a vital and leading role to play but they
remain at large in playing their efficient role. But most of them lack insight international
exposure and experience of policy formulation. Resultantly there is no coherent,
consistent policy with long term benefits and sharp strategic objectives. Job of chief
economic advisor is to lead the staff for policy making but now he is only there to
produce economic survey.
There is absence of provincial economic advisory cell which should be there and
headed by 21 grade professional expert, and those selected through merit and
transparent recruitment will have been fruitful and help in maintaining harmony amidst
both; provincial and federal. There are few general causes as well, effecting economy
gravely they hinder progress on economic grounds. Economy is prey to
mismanagement and over that population explosion.
There is not a single country in this world where vehicles are being run on non
renewable gas but Pakistan. This gas would otherwise have used in running engines,
industries and wheel of progress. Though, Pakistan not only have the potential but
resources as well, to compete, it has 4th largest coal reserves of the world and
thousand kilometer ideal coastal line of Sindh and Balochistan, rich land, culture and
tourism etc. On proper management the youth bulge (more than 60% of population can
be an asset from liability, if manage properly.
Investors from either neighboring India or farthest Netherlands must be seen as the
emblem of $ and prosperity not with suspicion. Another example of mismanagement
is, even the economy is not seen having economic prism and lens rather than putting
defense and finding threats everywhere harm Pakistan.
They will bring business and jobs and employment for youth which might otherwise
have been prey to terrorism. Concentration of wealth both; at international and national
level gravely harms economy. According to Oxfam report 1% people hold more than
50% of wealth and left negative effects on socio economic and political situation as
widely seen now a days. Hefty $ 600billion of Pakistan is stashed in foreign banks, the
tax free save heavens.
Such handful number of people is: mostly from builder mafia, own industries ,evade
taxes and have large number of stock exchange, they tend to acquire disproportionate
political and economic power and that become skewed in favor of that small wealthy
group. Those people have a wrinkle finger in every economic issue because they mold
economic wave in their favor. Loopholes in governance and corruption menace can be
widely seen and have taken its roots. Bad governance, lawlessness, rising population
and poverty continue to raise severe issues to economy and keep it at large.
These are one of those few pre requisite surety required for investing money
somewhere. And these things remain blurred then the economy will have to suffer, as it
is suffering now a days. The economy of Pakistan is in dilapidated condition and has
myriad reasons for, few of them are centered with the loopholes in economic
policy(formulation, executions, and reservations on it) and the rest are general causes.
In order to uplift economy there is dire need to take some steps on warlike bases.
One should start with major structural reforms in economic policy and staff: according to
former governor of State Bank Ishrat Hussain ,ranging from the selection criteria, clerk
bps 9 to economic advisor and finance minister must be transparent and open
recruitment within the cadre of FPSC or impartial third party selection without any
ambiguity. Poorly skilled and learned can perform poorly, so putting good battalion will
surely yield positive results.
No one should have the veto power on accepting or rejecting an economic policy, but
rather it be multi stage approval. Decentralize Sectoral policy making ministers, and
finance commission responsible. Taking all stake holders (from business bodies,
chambers, research, institutions academia, federal and provincial ministries and
agencies together and after extensive discussion then it be sent to cabinet, council of
common interest and national economic council.
By following this course of direction there would be reservations on economic matters
and policy implementation. To have in-depth zoom in and day to day checking, there
must be matrix prepared that clearly outlines responsibilities and accountabilities of
different executing agencies key performance indicators with milestones and time lines.
Each concerned minister would monitor, review, progress and submit annual report to
cabinet. CCE, NEC(national economic council), Parliament and unresolved matters to
the Prime minister. Hopefully this would minimize the gap between poor implementation
and well intentioned executive policies.
The efficient role of Economic Advisor and think tank, which has poorly shrunk to merely
preparing economic survey. Albeit, the job of Chief Economic Advisor is to lead the staff
for policy making process. Moreover think tank’s insight, their interest and international
exposure of world’s successful policies will ensure coherent and consistent economic
policy. It will be further applauded if they share their policy work on official website and
consider recommendations from there. This will make comprehensive and coherent
economic policy.
After major structural reforms and policy formulation restructuring and overhauling,
there is extreme need to tighten its grip on execution. Equal system where corrupt Tax
evaders, politicians, builder mafia , bureaucrats, and all powerful institutions, and elite
never go tax free. Rising petrol price, removing subsidies on eatable items soar inflation
and chaos. Rather NAB ,FBR, Income tax department and related agencies must be
more vigilant and active to increase tax to GDP ratio.
Though this task is hard because of vested interest of powerful class, despite through
court intervention and collected efforts this could be done. Pakistan should built
exclusive economic zones for business , and investors with 24/7 electricity and security
with investor friendly policies and incentives and subsidies given to them to grab bucks
into national exchequer. Skill training (STEVTA) type programs where youth learn and
work in development and progress need to be started on warlike basis.
Otherwise they might have been prey to extremism. COAS in recent event himself
expressed that terrorist are targeting youth now. Three decades ago china had taken
the same steps of first controlling the soaring population and then enhancing the skills
of those who were already born. And now China is questioning the might of the sole
super power U.S. Pakistan can adopt many, if not most, China economic policy steps to
deal with population.
Pakistan has never practiced any policy to supporting entrepreneurs and remains at the
last in innovative countries even Ghana and Vietnam are ahead of Pakistan. old product
design and technological backwardness with no inovataivity compel Pakistan to buy at
abroad and sell at home policy whereas; U.S.A ,South Korea, Japan are one of those
states supporting entrepreneurs and technical education.
Last but not the least, putting a reign on market forces and groups that might be threats
to economy or create topsy turvy and chaos is highly needed here. Along with that,
gender inclusive policies, bringing equality and equity to in workforce will yield
tremendous results. Women make half of the country where as the full country is being
run because of them.
Since few decades Pakistan’s economy remains indebted, faced ups and downs.
People have suffered a lot because of reasons ranging from policy formulation to
execution and general causes plus bad governance: like Lack luster approach towards
structural reforms, shrinking FDI and severally entangled domestic issues, like
abandonment of policies cause unbridgeable harm.
But all these issues are mainly of mismanagement which can be solved many countries
from developing to under develop have gone through such challenges and overcome.
Now it’s our time to deal with that, by adopting shrewd course of direction surpass those
short comings as a sovereign determent nation.
Otherwise these shortcomings and economic dependency can be exploited by other
powerful states because here survival of the fittest rule applies. Depending on IMF,
loans, U.S.A, Strategic position, neighbors etc is not a good option, Pakistan’s
government and its economic policy must have to strengthen its shoulders and flexes its
own muscles to get out from this quagmire of melting down economy.
https://onlineindus.com/english/Economic-challenges-of-Pakistan,-its-causes-and-way-forward/24048
accessed on 28 Aug 2019