Economic Crisis In Pakistan .pdf

Introduction Historical Background In 90’s under Ricardian era Misunderstood by Keynesian period Pakistani current Economic situation Jim O'Neill ranking Present economic situation Challenges and prospects Natural calamities Earthquake Flood Poor Management Macroeconomic problems of Pakistan The next ten year can make or break How to solve Taxation Technology Due to the emergence of 3G and 4G, E-commerce market Human Capital demographic transition youth bulge Foreign entrants Uber and Careem

In the nineties of the last century, Pakistan was still in the Ricardian era of saving/investment deficiency rather than in the Keynesian period of idle capacity and lack of effective demand, tried to promote economic growth through consumption liberalization and cheap money policy, and landed the country in double digit inflation, deeper internal and external debt and ultimate slowdown in economic growth. The economy of Pakistan is the 23rd largest in the world in terms of purchasing power parity (PPP), and 38th largest in terms of nominal gross domestic product. Pakistan has a population of over 207 million (the world's 5th-largest), giving it a nominal GDP per capita of $1,641 in 2018, which ranks 147th in the world and giving it s PPP GDP per capita of 5,709 in 2018, which ranks 130th in the world for 2018. However, Pakistan's undocumented economy is estimated to be 36% of its overall economy, which is not taken into consideration when calculating per capita income.

Pakistan is a developing country and is one of the Next Eleven countries identified by Jim O'Neill in a research paper as having a high potential of becoming, along with the BRICS countries, among the world's largest economies in the 21st century. The economy is semi-industrialized, with centres of growth along the Indus River. Primary export commodities include textiles, leather goods, sports goods, chemicals, carpets/rugs and medical instruments The present economic situation presents some opportunities for Pakistan. But the country also has some serious long-term challenges. Unless the long-term challenges are decisively tackled, such opportunities will only lead to sporadic bursts of growth rather than a sustained upward trajectory. Some of the challenges and prospects faced by Pakistan’s economy are Mounting debt, Rising imports, declining exports,Excessive taxation and regulations,Lack of political consensus, Low savings, consumption-oriented society, Lower investment and tax collection, Increased government borrowing, Shrinking share in world trade, Governance and implementation weaknesses and Uncertainty due to lack of continuity of policies Superimposed on man-made impediments to full exploitation of the economic potential of the country have been natural disasters, like earthquake and flood, which added to the economic misery of the ordinary people of Pakistan, damaged infrastructure, contributed to budgetary weaknesses, pushed up prices and further jolted the already fragile economy. However, natural disasters are only a small part of the story. In fact, it can be argued that flooding was directly linked with lack of long term economic planning and inability of the top leadership of the country to develop a consensus for water resource management, in particular building of dams. In the case of earthquake, if large foreign aid flows were utilized effectively and honestly, the natural destruction could be turned into an opportunity for economic betterment of the affected region. Instead, mishandling of natural disasters, and reported misuse of funds collected to help rehabilitate the disaster affected people and infrastructure, not only eroded further the credibility of the government but also provided an additional proof that bad governance was indeed the main cause of poor economic management of the country. Implementation of difficult policy choices, and not their diagnosis, is the real problem of economic management in Pakistan. The main macro economic problems of Pakistan are well know to even ordinary citizens and well articulated by professionals. These are: slow and erratic economic growth, persistently high inflation, extreme poverty of the bulk of the population coexisting with prosperity of a few, deep and rising debt burden, and huge budget deficit.

The challenge right now is to contain the damage. We can only rebuild once the extent of damage is ascertained Economies, especially the sinking ones,are not saved by taking measures that please and appease people. Measures that might irritate the public at large in the present but give them relief in the future are the ones that will work. The next ten years are very crucial as they could either ‘make or break’ Pakistan’s economy. Pakistan was predicted to be world’s fastest growing Muslim economy in 2017 ahead of Indonesia, Malaysia, Turkey and Egypt. Despite rising economy, Pakistan is still hampered by image problem. Pakistan needs to move along with structural reforms by locating root causes of the problems and challenges its economy faces. For the past four years, Pakistan has witnessed 81 percent rise in tax revenue, which is, seemingly, a big plus. Last year’s budget showed a 5.4 percent growth in GDP, which is highest and the first time in over a decade. Allowing Federal Board of Revenue (FBR) to work as an independent, impartial, transparent, accountable and professional outlet will surely make this core institution a modern, effective and efficient tax administration. Hence, this will induce taxpayers’ confidence in FBR, which will lead to increase in tax collection in an equitable and fair manner. Eventually, the greater the amount of finance available, the higher the chances of it being allocated for the infrastructure development (roads, telecommunications, water, sewerage). This will help create jobs, generate income for the millions and trigger economic activity. With the 10th largest labor force in the world, Pakistan has important strategic endowments and development potential. One of Pakistan’s key strengths is the demographic bulge especially growing proportion of young adults. Pakistan has capacity to send across large number of young unskilled/semi-skilled people. Having over 30 million plus population in the age group of 25-35, Pakistan can put this valuable asset by imparting training in different technical fields to respond market needs abroad. Pakistan is currently passing through a demographic transition, which has resulted in a ‘youth bulge’ (63% of our population comprising of youth, 69 million aged below 15) and an increase in the working-age population as a share of the total population. To reap the ‘demographic dividend’ of this change, the economy needs to provide education and create productive and remunerative employment for young workforce entrants. Foreign entrants such as Uber and Careem, through their entry, have acknowledged the economic potential of a nation with young population. Moreover, innovation through digitization and entrepreneurship are playing their part in human capital development.

Due to the emergence of 3G and 4G, the size of e-commerce market, one of the most important drivers of a digital Pakistan, is expected to grow up to US$1 billion by 2018. Pakistan is making good progress on Business-to-Business (B2B) front as software industry aims to achieve the goal of US$5 billion export mark by year 2020 through software development and service outsourcing. Conclusion note While there is an urgent need to fix pressing challenges, more deep-rooted reforms are required to develop and attract talent to serve in the public sector and businesses. Instead of politicians, the community leaders, academics and intellectuals should come forward and play their role in societal transformation.