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Pakistan’s struggling economy

Abdul Wajid Khan

Pakistan’s economy is facing the worst time of its history and witnessing some serious jolts. Pakistan is struggling to counter its current economic instability. The major problems of our economy are the result of increasing inflation, constant depreciation of the rupee against the dollar, mismanagement, corruption and bad governance. The increasing prices of petroleum products, low growth rate, energy crisis, menace of terrorism, worsening law and order situation add insult to injury.

Pakistan’s economy is dependent to a great extent on foreign reserves including the home remittances sent by overseas Pakistanis, coalition support fund and loans from international organizations. It is facing current account and fiscal deficit. Due to increasing current account deficit and foreign debt payments, foreign reserves are in decline. Other foreign inflows have been almost at a standstill because our foreign ministry was deniedthe letter of comfort from the international monetary fund. IMF did not release the further settled payments because of disputes on tax reforms in Pakistan as per its conditions. It has created a burden on the central bank to meet the current account deficit. A high current account deficit and low foreign inflows have caused a further decline in foreign reserves. Similarly, the imports are greater than the exports in Pakistan; one reason for the disparity in the balance of payment of our country. Currently, the Ministry of Water and Power is faced with the challenge of liabilities to independent power producers (IPPs). If the government fails to pay the dues in time, international credit rating agencies can downgrade Pakistan’s ratings which may damage its image in the business world.

Due to critical energy crisis, Pakistani industry is almost facing a total collapse. Unemployment is increasing drastically. Unfortunately, the Pakistani industry is facing the worst of its crises due to the shortage of electricity. The role of the industry is very crucial in economic development of a country .Today’s westernization and modernization is the result of Industrialization. The people in the west and in modern world enjoy all comforts and luxuries of life due to creation of modern goods and services. Unfortunately Pakistani industry is facing its worst crises due to shortage of electricity. The high costs of energy increase the cost of production also. Now the Industry is fighting hard for its survival. Smuggled goods have paralyzed our local industry; a great loss to our national exchequers. Customs and excise services need to be made more efficient to avoid illegal trade and losses.Agriculture, once the back bone and the largest contributor to Pakistan’s economy, has been adversely affected by floods. The government failed to achieve the proposed target of production of wheat and vegetables. Many food items were imported to fulfill domestic needs.

FBR failed to formulate and implement appropriate revenue policy for tax collection. The actual tax-paying population amount to a very small percentage of the total. The elite unfortunately fail to pay their taxes more often than not. If tax is collected properly we can reduce the influence of international agencies like IMF and World Bank.

In 1960s, the growth rate of GDP was 6.5% while, presently Pakistan has an average growth rate of 2.9%. Although, Pakistan’s economy is on its death bed, all of these challenges can be overcome as Pakistan has a lot of potential for steady economic growth. Pakistan remained a model of economic development around the world during the early 1960s. Our resources are abundant. Our human resources are some of the most talented in the world and our natural resources are more than adequate. Besides its mineral resources of gold, copper, silver, gas and precious stones, Pakistan can better its economy by tapping another resource… tourism. Pakistan is uniquely and strategically location with 1000 kilometers of coast and may easily become a hub of transnational trade.

What the country is badly in need of is a strong democratic system. This would strengthen national institutions, and formulate and implement internal and external policies to get eliminate terrorism and its related issues and maintain law and order. It needs to create investor friendly policies to encourage foreign investors, and groom local industry, agriculture and exports. The quality of education desperately needs improvement to enable us to meet these goals. Pakistan could number among the strongest economies of the world through proper management, good governance, and consistency and continuity of transparent economic policies. Writer is media scholar, currently pursuing his master degree in mass communication from NUML.

Courtesy: Pakistan Observer

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