Daily Times

Pakistan is a country blessed with enormous natural reserves and manpower. Still, it is plunged in a downward spiral of economic recession. Some of the obvious reasons are bad governance, corruption, nepotism and impediments towards entrepreneurship and investments (both by domestic and foreign investors). Moreover, a miserable tax system has also added insult to the injury. After the independence of Pakistan, the pace of economic development was exemplary for almost three decades, as described by Ishrat Hussain in his book “Governing the Ungovernable: Institutional Reforms for Democratic Governance”. Due to this phase of development, Pakistan served as a model to other developing countries. However, some bad economic policies along with unstable political situations are some of the reasons for the aggrieved economic situation of the country.

Every new government that takes the charge, first of all, complains about the dismal economic situation of the country. Similarly, the incumbent government right after assuming the office talked at length about the inherited economic woes. In the beginning, the government announced to instigate an austerity drive and then went to all friendly countries to demand aid. Fortunately, Saudi Arab, China and the UAE granted loans that saved the dwindling economy from bankruptcy. Even the government had to carry out a loan of $6 billion from the IMF to reduce economic vulnerabilities and to secure sustainable and balanced economic growth.

The current economic situation of the country is that its current account deficit (CAD) has risen from $2.7 billion in 2015 to $18.2 billion in 2018. The fiscal deficit of the country stands at 8.9 percent of the GDP. Austerity measures and imposing high tariffs on imports have lowered the trade deficit, but this has been done by a decrease in imports, and a meager increase in exports. Even depreciating the currency value didn’t do well in raising exports.

One of the major challenges that are impeding economic growth is flawed taxation system. Against IMF’s estimated tax potential of Pakistan to be at 22.3 percent of GDP, actual tax revenue stands at 11.6 percent. Business owners and landlords are reluctant to pay their taxes. The over-complicated and hefty process further aggravates the tax collection system. To overcome tax evasion, confidence-building measures (CBMs) need to be adopted to build the trust of business owners and landlords.

Besides, Pakistan has failed to attract long term and short term foreign investments in the country. Foreign Direct Investments (FDIs) are considered a vital source in rejuvenating the economy of a country. In 2018, Pakistan stood at 136th position on the scale of the Ease of Doing Business (EoDB) Index. This year Pakistan improved twenty-eight points and now it stands at 108th position. This is a huge achievement, as it brings more foreign investments in the country. However, to get out of the economic recession we need persistence and continuity in our policy to achieve short and long term goals.

Other than that, the performance of the agriculture sector is below par. There is a huge gap in Pakistan’s agricultural output potential and its annual yield. The reason is that the ways of farming in Pakistan are outdated. Modern ways and state of the art equipment and technology need to be adopted to revitalize the agricultural output of Pakistan.
Another important sector where reforms are needed is in the outdated energy sector. Pakistan’s main source of energy is thermal, which affects the economy in a negative way. Fuel is imported, which is a huge burden on the economy and also adds in the current account deficit (CAD). There is a need to innovate the methods to generate energy, mainly through renewable resources. Pakistan has the opportunity to reap the most benefits from CPEC projects related to energy.

Last but not least, the issue of good governance is needed to be addressed on an immediate basis. Good governance can carry a nation towards development, despite having meager resources and manpower. Singapore provides the best example of such a scenario.

They say that “Where there is a will there is a way”. Despite the dismal economic situation of the country, the path towards prosperity is never a farfetched dream. Through proper measures, the country can overcome any kind of crisis and rise against the odds, as they say, “There is always spring after winter”. If thorough reforms are introduced in the tax system, tax collection may become more efficient. Steps towards ensuring further improvements in ease of doing business should be taken with diligence. National interest should prevail over personal interest. State of the art equipment and machinery should be used in the agricultural and industrial sectors. Social uplift should be the main focus of the administration, as it tackles various issues regarding extremism, education, population and pollution among others.

As World Bank’s country director to Pakistan rightly said: “Pakistan’s growth must be driven by investment and productivity, which will put an end to the boom and bust cycles that affect the country every few years”. With strong will and vehemence, Pakistan will soon be able to achieve the status and its lost glory which she enjoyed during the 1980s.

The writer currently works at National Officers Academy Islamabad.