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Sunday, April 14, 2024

Pakistan: A country caught in complex economic downturn

The budget deficit is increasing every year. The pressure of debt along with the tough recommendations of FATF act like a sword of Damocles hanging overhead. The decreasing revenue and low tax-to-GDP ratio have always hindered the smooth flow of the economy.

Pakistan is caught in complex tangles of economic downturn. Every day we see an unprecedented rise in inflation, unemployment, and poverty. The lives of poor people are getting worse day by day. Our dwindling foreign exchange reserves and current account deficit are augmenting the economic downfall.

The budget deficit is increasing every year. The pressure of debt along with the tough recommendations of FATF act like a sword of Damocles hanging overhead. The decreasing revenue and low tax-to-GDP ratio have always hindered the smooth flow of the economy. Financial Resource constraints along with poor GDP growth have portrayed an abysmal picture of Pakistan’s incompetency.

Read more: Pakistan economy in long term ICU – Editorial

Understanding the matter better

These economic challenges further generate many socio-economic problems: food crisis, water shortage, physical infrastructure inadequacies_ transport fragility, aging irrigation system, power outage, energy crisis_ poor human resource development i.e., low literacy rate, absence of health care facilities, and compounding mortality rate.

These problems are compounding with each passing day. There is an urgent need to look at the causes of these economic challenges to bring the economy on track. Multiple factors have contributed to the economic fallout of the country. Some of them have been inherited from the colonial past, while others are indebted to political and administrative impediments. Here we would take a brief at the causes of economic challenges being faced by the country one by one:

First of all, the land of Pakistan has witnessed a long colonial rule

The colonizers destroyed the indigenous economic setup of the land and launched their system. The result was the introduction of feudalism. The large swathes of land were awarded to their beloved servants. As a result, a cleavage emerged in the society when a lower middle class was alienated from the elite class. Even after independence, Pakistan could not get rid of the poisoning impact of the system. This also halted the pro-development programs in the backward areas of Pakistan including KPK and Balochistan.

Secondly, the partition catastrophe followed by the administrative crisis caused a heavy setback. The delay in the constitution-making process and running of the ‘independent land’ on the constitution of 1835 were grave loopholes at that time which left an unresolved vacuum in the political landscape of the country. The seat of the prime minister changed 7 times in the first 11 formative years of Pakistan. The consequence was that many efforts for the recovery of the economy could not bear fruits.

Read more: Did Pakistan economy really progress under PM Khan?

Thirdly, three important pillars of the economy_ the agriculture sector, industrial sector, and trade have never been utilized to their full potential.

Despite being the largest sector in terms of the population attached to it, the agriculture sector has continuously been ignored. The government at many times emphasized the importance of the sector and offered subsidies. But the subsidies are not enjoyed by the poor farmers. The mafia grabs all the grants and subsidies leaving the farmers empty-handed. Moreover, our agricultural system is old and outdated. It consumes almost ninety percent of freshwater available in the country. Fertilizers are being used which contaminate the richness of the land. Farmers don’t get their demanded prices when the commission sets the prices of their crops at Gala Mandi (Grain Market).

The industrial sector is producing low-average products

Usually, it gets tough for factory owners to run a factory when duties and taxes are imposed upon them. Due to less production of the raw material our industry is also lacking quality production day by day.

The current account deficit is increasing. Due to the low production of wheat crops and products, export is decreasing while imports are increasing. The revenue that’s why does not help to sustain the economy. We have to rely more upon debts which aggravate the economic situation. International institutes like the IMF and World Bank impose difficult terms and conditions which stagnate our economy.

Fourthly, Pakistan since its birth has been entangled in the debt trap. Each successive government is intensifying the figures. Pakistan had to rely on loans in the very first budget of February 1948 presented by Malik Gulam Muhammad. Now the loan Pakistan outweighs four times the budget. And almost thirty percent of the budget is allocated for the payment of interest.

Read more: Matiari-Lahore transmission line to boost Pakistan economy: China

Fifthly, the three administrative heads of the governor state bank of Pakistan, the chairman of FBR, and the finance minister make up the structure of our economic framework. But quite sorrowfully, all these three institutions are being headed by IMF-trained figures who have least to no concern with our economy.

Sixthly, Pakistan is blessed with both natural and human resources. Whereas the country possesses rich natural and mineral resources, it also has more than 65% youth out of the total population. That’s a unique number and a great blessing of the Almighty. But regretfully the country has been unable to put up efforts to utilize these blessings.

The problems don’t end here!

Reko Diq in Balochistan possesses a rich reservoir of gold and copper but due to inadequacies in infrastructure, the country is unable to utilize its natural resources. Moreover, there are the largest salt mines and the highest mountains like K2 but all too vain.

Education has been unable to cultivate creativity which can be utilized in various sectors of the country. If a student graduates in agriculture, business, or computer studies, he should develop new ideas to foster growth in the respective field. But sorrowfully, due to poor education and a race of ‘cramming’ have deprived the nation of the creative processes. We are still running the aging agriculture system, outdated industrial zones, and lagging in the race of technological pace.

Read more: Pakistan economy to suffer if Afghan peace talks fail

Last but not least the country’s low tax-to-GDP ratio is also a threat to the economy. There is no consciousness among the public regarding taxation. The scions of big companies evade taxes and the government for its vested interest does not pay heed to this growing challenge. Their assets are increasing at a rapid speed and there is no check and control setup to bring these companies inside the taxation network.