Historically the GDP growth rate of Pakistan has never been appreciable for a longer period but in the first five decades of its independence, Pakistan’s GDP growth rate was higher than the world GDP growth rate.
By Maham Fatiama
Pakistan since its independence in 1947 facing a financial crisis. The country’s political crisis at different times has been one of the main cause of the financial crisis. Pakistani economy can be called a mixed economy as most of the large public sector organizations are playing a vital role in the annual GDP of the country.Pakistani governments have been failed to collect taxes. This has been a continues cause of failure of the Pakistani economy and not a single government could do the needful to collect taxes from the mass. So, the indirect taxes as another option to run the system of the state was introduced but that caused a price hike and poverty rise as well. Such a system of tax collection has been a direct cause of the failure of governments in the past as well.
The tax collection is slow and the government has to import goods as well. This is because fled of foreign reserves in Pakistan and also cause trade deficit and current account deficit as well. Currently,the Pakistani government facing the same issue of deficit in trade. Wrong financial policies of the past government have caused this crucial issue. Many of the public organizations are not working in profit. So, the government has to back these organizations. This is again a dilemma for the national economy.Pakistan will not sustain as a robust economy if they would not cape such issues. Certain experiments are also a cause of the crisis. For example, before 1970s Pakistan’s private sector was booming and companies were making profit hence making jobs vacancies? But, during the regime of Zulfiqar Ali Bhutto, Pakistani companies were nationalized and they came under the direct control of the government of Pakistan. Therefore many of the companies and businessmen shifted to other lands in the search of a level playing field.
This cause flees of capital from the market and the stock exchange shares were dropped. Consequently, Pakistan went under a serious threat of unemployment and poverty. No proper scheme of poverty elevation was introduced in that era. Then, In the regime of General Zia Ul Haq economy in an attempt to restructure the economy, a new form of the financial system was introduced. A semi-Islamic financial system was introduced. The system could not deliver because the world financial powers and militarymites did not accept him as the president of Pakistan as he dismissed Z.A Bhutto an elected Prime Minister of Pakistan. Then, governments of Nawaz Sharif and Benazir Bhutto started a race of lending money from international institutions like IMF and World Bank. This situation increased the overall loan over Pakistan. Then, After the Nuclear explosions in 1998 Pakistan had to face economic sanctions from the USA. This drastically affected Pakistani exports and the cycle of the economy. This was the advent of a new crisis. General Pervez Musharraf then dismissed Nawaz Sharif started ruling the country. This was a new bad situation in other bad situations.
So, he again had to lend money from the IMF. The current government of Imran Khan is also facing a decade’s long problem of trade deficit and imbalance of payments. So, he again borrowed from IMF but this time the conditions of IMF are quite strict and it is not easy for the government and public to digest. Pakistan has to set free the currency rate and it would not be controlled by State Bank of Pakistan similarly new indirect taxes will be levied on goods and all the subsidies will be waived off. This all would be a hard task for the government but they will have to do all to get the first installment from IMF to run the financial system of the country. At present Pakistan is the 23rd largest in the world in terms of purchasing power parity (PPP), and 40th largest in terms of nominal gross domestic product. Pakistan has a population of over 207 million (the world’s 6th-largest), giving it a nominal GDP per capita of $1,641 in 2019, which ranks 147th in the world and giving it a PPP GDP per capita of 5,709 in 2018, which ranks 130th in the world for 2018.According to Jim O’Neill’s research paper, Pakistan is listed as the next eleven emerging economies in the 21st century. This is because of the country’s potential to grow in different sectors of the economy if she takes precautionary measures.
Historically the GDP growth rate of Pakistan has never been appreciable for a longer period but in the first five decades of its independence, Pakistan’s GDP growth rate was higher than the world GDP growth rate. If we start analyzing the economy of Pakistan from sector to sector then some really fantastic figures and estimates could be seen. The industrial sector of the country contributes to 20 percent of GDP. In 2018 it recorded a growth of 5.80% as compared to the growth of 5.43% last year. Manufacturing is the most vibrant subsector of the industrial sector having 64.8% contribution in the industrial sector and in GDP it accounts for 13.6%. Major sectors in industries include cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals, machinery, food processing,and medical instruments, primarily surgical. Pakistan is the largest producer and exporter of surgical instruments in the world. In Pakistan,SMEs have a significant contribution to the total GDP. Small and medium enterprises contribute to the 90 percent of all the enterprises in Pakistan and employ almost 80 percent of the total non-agriculture labor which is huge. So, the industrial sector is truly progressing despite the country’s economy in pressure.
(To be Continued)
The Information Communication sector is also growing and IT exports are increasing every year. The total number of IT companies increased to 1306 and the total estimated size of IT industry is $2.8 billion. According to Pakistan startups report almost 1 million Pakistanis to work as a freelancer over the famous freelancing websites like Elance, freelancer, guru,and fiver. This makes the Pakistani nation one of the five largest nations working as freelancers. This freelancergenerates income and helps the country by exporting the IT products to the international market and earn foreign reserve for the country. Pakistani textiles industry accounts for 70 percent of exports of the country. But the industry is not growing in accordance with the international standards and not using or adopting the latest technology. Infect they are using conventional technology which is the greatest drawback of the industry. Due to such low capacity, the country mostly exports raw material, raw cotton, yarn to the world and despite the fact that country has great potential in this area, Pakistan is not earning a handsome amount by exporting textile goods to the world. Such a lack of modern technology has caused textile imports from Chinawhich is causing flee of capital.
The Pakistani defense industry was established in 1951 to tackle the challenges at its borders. Now Pakistan is developing latest tanks, Jets,and guns which can be exported globally but due to issues of national security Pakistan is not exporting any item at a larger scale. This all has made the defense sector a white elephant but the nation has to praise and preach this elephant due to a danger on its eastern border. This all makes his sector a burden over budget and Pakistan has to cutoff subsidies to stay safe from her enemies in east. This was the situation of the main sectors of the economy. Pakistan International Airlines, Pakistan Railways,and Pakistan Steel had been in a great depression and in spite of making profits, these organizations have become white elephant over the budget and many times these organization survived by bailout packages. Similarly, there are many other public organizations which are not making profits and the government has to back them up. The national health system is subsidized by the government of center and provinces. There is not a custom of national health insurance in the country which is causing a bottleneck towards making health systems and hospitals independent of governmental funds to run their system.
Therefore, by viewing the entire system it can be said that the system is mismanaged. It needs a strong political will and the homework to tackle issues of the economy. The country is rich in natural resources, minerals and there is a very high potential in the tourism sector of the country. If the government would take a look into the possibilities of growth of Pakistan economy then the situation can be better. Pakistan has the potential to grow but needs to change its way of governance. The country has to develop strong trade ties with countries in her region and rest of the world to boost up exports and get subsidies in imports, it would be equally beneficial for Pakistan’s foreign reserves and tackling trade deficit. Pakistan must avoid any war and must finish as soon as possible wars that are being fought by her against terrorism. This will surely attract the attention of international investors to invest in Pakistan. Pakistan, on the other hand,must also change its system of governance and political culture as well. The country also needs to balance the power in the center and the role of its military in political issues must be limited if the country wants to look forward and change its luck.