An overview of Pakistan’s economy
Pakistan is facing a financial crisis since its independence in 1947. There are many reasons but political crisis has always been a major one.
Currently, we are facing trade deficit and that is because of wrong financial policies of the past governments. That is also because certain experiments were done with the economy in the past which didn’t prove fruitful. 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, semi-Islamic financial system was introduced which could also not deliver because the world financial powers did not accepted him as the president 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. 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. Then General Pervez Musharraf seized the power and he again had to lend money from the IMF. The present PTI government is facing decades long problem of trade deficit and imbalance of payments. For bailout package the present government has to borrow from IMF.
There are some measures which could help to rebuild Pakistan’s economy. For example, the government should set free the currency rate and it would not be controlled by State Bank of Pakistan. Similarly new indirect taxes should be levied on goods and all the subsidies should be waived off. This all would be a hard task for the government but they will have to do 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.
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.
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. 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 China which 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 bear it due to a danger on its eastern border.
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. 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, 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.