Pakistan’s score on the Economic Freedom Index 2019 improved by a nominal point as judicial effectiveness and property rights outpaced modest performance in monetary freedom and fiscal health.

According to a report compiled by Washington-based Heritage Foundation, Pakistan’s economic freedom score improved by 0.6 point to an overall score of 55, ranking the economy 131st freest in the 2019 index.

However, Pakistan is ranked 32nd among 43 countries in the Asia-Pacific region, and its overall score is below the regional and world averages, the report added.

At a global level, Hong Kong, Singapore and New Zealand are the top three ranked countries on the World Economic Freedom Index.

The report further said that although some aspects of economic freedom had advanced modestly in Pakistan in recent years, decades of internal political disputes and low levels of foreign investment had led to an erratic growth and underdevelopment.

“Excessive state involvement in the economy and omnipresent regulatory agencies has inhibited private business formation,” it added.

Moreover, lack of access to bank credit undermines entrepreneurship, and the financial sector’s isolation from the outside world slows down innovation.

According to the report, about 25% of adult Pakistanis have access to an account with a formal banking institution.

The report highlighted that in economically-free societies, governments allow labour, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.

The report further states that in an economically-free society, “Individuals are free to work, produce, consume, and invest in any way they please.”

The international foundation measures economic freedom by assessing the rule of law, government size, regulatory efficiency and access to open market. The data is also shared with investors, business and finance leaders, policymakers, academics, journalists, students, and teachers.

The report emphasised that the tax system of Pakistan is complex despite reforms to cut rates and broaden the tax base.

Over the past three years, government spending has amounted to 20.3% of the country’s output (GDP), and budget deficits have averaged 5.1% of GDP.

Progress in improving the entrepreneurial environment has been adequate. The government’s 2018-2019 budgets increased spending on subsidies for the construction sector and for items such as food (especially sugar), power, water, and textiles by 36%.

The combined value of exports and imports is equal to 25.8% of GDP. The average applied tariff rate is 10.1%. As of June 30, 2018, according to the WTO, Pakistan had 66 non-tariff measures in force.