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Sunday, April 14, 2024

Pakistan’s economic development amidst global challenges

Pakistan on the right track of economic development despite global challenges. However, if the hurdles are not handled tactfully, it may hamper the stability and growth rate of the economy, experts warn.

Pakistan’s plan and action for economic growth are well coordinated. However other factors such as inflation and global protectionism play a vital role in the overall boost of the economy, says Rizwan Shaikh, head of EMEA Emerging Markets Corporate Banking at Citibank.

While speaking to the Business Recorder Shaikh also pointed out that vaccination rates and efficiency will also be a key factor in the pace of development and how quick the recovery from the pandemic is.

According to the latest results, 525,000 doses of the Covid-19 vaccine have been administered as of Tuesday. However, the rate of total vaccine administration is quite low than that of other countries. With an average of 9.5 doses out of 100 people, Pakistan is still behind as the Global average has gone up to 45 doses per 100 people.

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Growth of the economy

Despite the unprecedented circumstances, Pakistan has still been able to increase the Gross Domestic Product (GDP) growth rate to 3.9% for FY 2020-2021. This has been a milestone as the growth rate has surpassed the predicted numbers given by both the World Bank and International Monetary Fund (IMF).

Speaking on the subject, Prime Minister Imran Khan credited the smart lockdowns and the governments’ tireless efforts of keeping the economy going for the success rate. Recently Imran Khan has offered housing incentives to boost the economic growth and development of the majority of his population.

The government has also subsidized low-cost housing and forego tax evaders if they invest in construction projects as construction-related activities have a huge impact on growing economies.

Due to these efforts, the country has seen its first real estate investment trust in more than six years and the cement production capacity will increase by 31% to 91 million tons after the announced cement expansions are completed.

The State Bank of Pakistan has recently announced that remittances from overseas workers hit a record high of $29.4 billion in fiscal year 2020-21. This becomes a huge help in boosting the rupee value in the international market.

4 years after the last international sale of bonds, the country has also sold $1 billion in a reopening of an existing three-tranche bonds launched in March a deal that raised $2.5 billion.

Challenges up ahead

The next goal for the government is to target the growth rate of 4.8% for the current fiscal year. However, fresh Covid waves and risks of widening current account deficit could become a hurdle in the way.

Additionally, inflation rates had gone as high as 9% in FY 2020-21 despite the official target of keeping it at 6% which show how big of an impact does pandemic and global commodity prices play for the economic growth.

Read more: Here’s how to reform Pakistan’s economic policy

Speaking to Business Recorder, Citi Country Officer (CCO) for Pakistan Ahmed Bozai also said that the demographics are in favor of Pakistan as FMCGs, tech and pharmaceutical companies all want to invest. The interest of the investors has also changed from primarily being from UK and U.S. to Middle-eastern and Turks.

Other upcoming plans include the development of Special Economic Zones (SEZs) in various areas of the country that are estimated to bring $50 billion Foreign Direct Investment (FDI) by 2023.

Similarly, CPEC and its development will also play a vital role in the economic stability as will the reduction in money laundering and increase in tax collection.