Economic Crises In Pakistan
An economy is a complex structure of consumers and producers which have
a beneficial role for each other. Pakistan's economy is a mixed type of economy that
has three major sectors i.e. agriculture, industry, and services. The contribution of
these sectors into the economy is given as agriculture contributing 21% of the GDP;
industrial share is 20.9% while services sector share is 57.7% of the GDP.
The trade account remained in deficit during most of the years in history and is still in the same condition due to more dependence on imports. The excessive dependence on imports has also disturbed our foreign exchange reserves. The continuous devaluation of the Pakistani rupee was also a result of these economic problems. Public debt, to manage the economy, is rising sharply as it reached more than 60% of GDP.
It is evident from the above discussion that Pakistan’s economy has a lot of problems, so an integrated economic, social and political framework is needed to bring Pakistan out of this imbroglio.
If we look at the historical performance of the Pakistan economy,
then it is observed that after the 1980s Pakistan's economic growth has been
continuously decreasing except in the era of General Pervaiz Musharaf. All sectors
growth has declined after the 1980s but there was a slight improvement in the 2000s
decade.
The abundance of natural resources, human capital, excellent geographical location, and hardworking masses are the strengths of Pakistan's economy.
BUT, low literacy rate and ignorance, shortage of capital, no regard for rule of law and institutions, inefficient and ritual–ridden social system and corrupt political environment, dominated by non-progressive elements of tribal sardars, feudal and religious advisors are some weaknesses of Pakistan economic system.
Pakistan’s mountain of debt: High expenses (repayment of previous loans and security costs) and low revenue (tax evasion and losses of government-owned companies) leave Pakistan with no money to spend on its people. Deficits are plugged through more borrowing. Then there is the issue of the ever-increasing debt, which eats up some 30 percent of the budget every year. Pakistan continues to take out loans to be able to cover repayments of past borrowing. It recently signed yet another deal with the International Monetary Fund (IMF) for a bailout package worth $6bn. This bailout means repayment of loans in order to avoid insolvency.
Also, it is evident from the picture above that low growth of local production and increases dependency on imports increase the inflationary rate more than the growth. No government in the past had adopted such policy which will increase the growth of the industries even expensive power projects done by the government in order to reduce load-shedding and gain the sympathy of the people increases the cost of production and many exporters shift their production to Bangladesh.
Pakistan is facing economic challenges for seven decades and in Pakistan, the investment and saving level is down. In recent years rapid decrease has been witnessed in factors of production of Pakistan’s economy. It depends on agriculture huge proportion of national income is from agriculture. The agriculture sector in recent time has declined it contributes 20% to national income before it was 50%. Developed countries improve their growth for more production.
In flashback, Pakistan was 3rd largest milk producer and 3rd largest producer of rice but the level of supply of many in June 2007 to 3793 billion brought economic instability and caused inflation in Pakistan. Pakistan is largely dependent on agriculture but low production from the agriculture side and increased import of agricultural product is another catastrophe for Pakistan from the past government policies.
The supply of money has become an economic depression in Pakistan. The ratio remains low because foreign investors are not ready to invest in Pakistan because of security issues. In 1960 national saving in GDP was only 10 percent and in 2008 it was 15 percent afterward at declined rapidly in 2007. Investments should be made in technology to make high products rather than low-quality products.
The reality about Pakistan's resources and its Political Injustice.
One of the mainstays of any country around the world for economic development is its existing reserves of the natural resources and assets base. Pakistan has plenty of natural resources such as large reserves of oil and gas, a great quantity of copper and ore deposits, in addition, huge coal and salt pits, and gemstones. Likewise, it possesses sound manufacturing industries of textiles and clothing, steel fabricating, cotton ginning factories, sugarcane mills, sports goods, and leather manufacturing, etc.
Apart from these mineral resources and industries, Pakistan also has vast tracts of agricultural land. Out of the total geographical area, about 27 percent is cultivated, and of this, 80 percent is irrigated. Pakistan has one of the most developed irrigation systems in the world, i.e. Indus Basin Irrigation System. We have rivers and sea. We have harbors to export and import goods. We are blessed with four seasons and fit tropical weather in terms of farming and agriculture.
There is no doubt that Pakistan is a resource-rich country and possesses mineral fuels, manufactured goods, and beverage and tobacco (13%). Moreover, the other resources include food and live animals (11%), crude materials (11%), chemicals (11%), machinery (8%), and miscellaneous articles (8%). In addition, we have 175 billion tons of coal reserve. It is up to 618 billion barrels of crude oil. The natural gas reserves are also in abundance, it’s about 885.3 billion cubic meters.
Despite being blessed with fertile agricultural land, an abundance of minerals, and a sound industrial base, our economic development is not progressing as it should.
The major challenges in achieving economic development are:
Energy crisis: The constant leading power cut-off challenge has troubled the economy. Since the year 2000, this curse has wreaked havoc on the overall economy. As admitted by Federal Minister for Water and Power Khawaja Muhammad Asif during a National Assembly session a few days ago that the power shortfall has exceeded up to 5,000MW. Until the energy lingering crisis is not resolved the determined economic development is a far-off dream.
Terrorism:It is a huge stumbling block for economic generation in Pakistan. Since 2002 we are a war-torn country. The State Bank of Pakistan report (2016) says that the war on terrorism has cost $118 billion. According to Global Terrorism Index (2016), out of 163 countries, Pakistan stands 4th worst hit. This has long been a reason for Pakistan’s negative international image which has limited foreign investment in the country.
Wealth Concentration: In Pakistan wealth is concentered among a few rich families. The rest of the population is dependent on them. Due to wealth concentration, around 35 percent of people spend their lives under the poverty line. According to Multidimensional Poverty Index (2016), 39 percent population of Pakistan lives in poverty, which means that 4 out of 10 people in Pakistan live in poverty.
Corruption: Since 1947, the ongoing corruption has steadily planted its roots. In current circumstances, it has become a highly political debate as even the prime ministers of the country are accused of it. Corruption has proven to be a menace for institutions. According to the corruption perception index (CPI 2016) out of 175 countries, Pakistan stands at 116.
Youth unemployment: We are blessed in having about 63 percent of the youth population. Half of them are unemployed. According to Asian Development Bank (ADB), 50.7 percent of the population aged 15 years and above is employed. Of it, the female ratio is very less. The rest are struggling for survival. On average, Pakistan needs to create 20 million jobs annually for young people alone.
Lack of quality education: Education is a key component for economic progress. Unfortunately, our current literacy is 60 percent, least in South Asian countries. About 25 million children are out of school. More importantly, on the grass-root level, thousands of schools are lacking very basic facilities such as sanitation, water, electricity, boundary walls, etc.
Poor health facilities: The public hospitals depict bleak pictures where we find a lack of proper medicines, beds, equipment and etc. Due to the absence of basic health facilities, 170 women die from pregnancy for every 100,000 births. For every 1,000 babies born, 66 die before their first birthday. In addition, approximately 44 percent of children in Pakistan are stunted. Every day, due to malnutrition and poverty children are dying in Thar.
Tax evasion: Regressive tax system collects about 90 percent of tax revenue from common men. Big corporations, landlords, businessmen, politicians do not pay their due share of taxes. They earn a lot but pay less tax; on the other hand poor earn less but are taxed more. Each year billion rupees are evaded through tax havens established in foreign counties. The incidences of tax evasion have hampered Pakistan’s economic progress.
Lack of good governance: We lag good governance and pro-poor fiscal policies.
Democracy Proves to be unfit and the biggest crises.
Pakistan's political system runs in the hands of those corrupt masterminds who have made democracy the biggest minting machine for them. there are four types of community living politically in Pakistan one is Feudals who are born governors since the independency they have their own territory and no one else even think about standing against them in the elections, secondly, Makhdooms, PIR system with shrine worshipers, people think its a curse to go against them so they are also the default elected members of the ruling class. Thirdly the capitalist and business class running key industries of Pakistan and have their money power to outclass anyone standing against them. and fourthly sectarian system under this system people are ready to elect even donkey if he will be selected to stand in the election.
What should be done to overcome the above challenges?
Government should improve relations with neighboring countries like India, Iran, and Afghanistan.
For economic information, communication, and technology sectors among others should be given more preference and the government should improve ICTs system. Because in forthcoming years, all the economies will be measured through technologies. India earns lots of money through its IT industry.
The employment zones for youth should be opened so as two-thirds of youth could contribute to the economy of Pakistan. They could use their potentials and skills for a better Pakistan.
The alarming education system should be improved. The quality education from primary to university should be ensured. A proper school monitoring mechanism should be designed. A new and upgraded curriculum needs to be introduced. Instead of investing a lot of budget on the defense side, more budgets should be allocated for education.
Quality vocational training zones should be established in each district for youth as they could learn technical skills in different cadres and trades. Government should ensure those vocational zones that how they are operating and functioning. One of the primary ways of enhancing the economy is to support entrepreneurship and to create new avenues for growth by guiding the youth.
Before everything else, the government ought to overcome the lingering energy crisis.
Pakistan should enhance export competitiveness by reducing cost of doing business. Pakistan should adopt strategic approach to increase its export in neighbouring markets and underline the need of holding single country.
As a result of overall economy dilemma, the common men and women in the country are facing economic deficiency and deprivation.
For decades, the Pakistani authorities have been unable to establish effective tax collection practices. Currently, only one percent of Pakistanis pay their taxes and the country has one of the lowest tax-to-GDP ratios in the world.
Successive governments have avoided imposing stricter controls because they have been staffed by members of the same elites that are actively evading taxes. They are able to do so not only because of government inaction but also because of widespread corruption. In fact, it is cheaper for them to bribe than to pay their dues.
Thus, the tax burden in Pakistan falls overwhelmingly on the poor who pay in various indirect ways and who already struggle to make ends meet. Currently, a third of the nation is living below the poverty line.
Khan promised to crack down on tax evasion and corruption before coming to power but little has been done so far. He has not introduced any measures to address corruption in the ranks of his own party, for example. Recently it emerged that a minister in Khan’s cabinet had evaded paying taxes for years by transferring his luxury properties to one of his employees, but no action has been taken against him so far.
Given this selective justice, it is hardly surprising that a recent tax amnesty scheme implemented by the government in which tax debt is forgiven in exchange for a fee failed to kick off.
While Khan’s government is failing to raise revenue flows it is also failing to cut non-developmental expenditures.
The biggest source of such spending after debt-servicing is the military which officially receives around 18 and 23 percent of the budget every year.
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