Issues of Pakistan’s Economy and their Solutions

 Issues of Pakistan’s Economy and their Solutions

S.M.Zubair Sherazi

Seventy years have been passed since the establishment of Pakistan. This duration can play a significant role in advancing any country’s economy.

In spite of that Pakistan has, so far, implemented several Five-year plans, but the desired objective of economic development is still far away. The economy is creeping at a tortoise pace even with the help of foreign-aid crutches, the country despite being an agrarian by its very nature, could not attain self-sufficiency till now even in food–grain. Foreign debts have accumulated to such an extent that it has begun to sallow more than one–third of the annual budget and one-fourth of foreign exchange earnings per annum. Such an alarming state of economic affairs is a result of a number of obstacles. Some, very critical of them, maybe divided into the following four broad categories.

1)      ECONOMIC OBSTACLES

Economic obstacles are of the following nature.

        i.            Viciousness of the vicious circle of poverty: Pakistan being an underdeveloped and deficient resourced country has been badly trapped in a vicious circle of poverty. This circle is caused by the consequences of the backwardness of economic forces like low productivity, market imperfections, deficiency of capital, the small size of the local market,  low inducement to investment and low capacity of saving etc.

       ii.            Under-utilization of available natural resources:  Under-utilization of available natural resources like land, water, minerals and power etc. is another main obstacle to economic development. Pakistan is quite rich in these natural resources. Its land is fertile, water is plentiful, the climate is suitable, but these resources are not being fully exploited due to the lack of developed human resources.

      iii.             Rapidly growing population: The population of Pakistan is growing at almost 2.6% per annum, which is the highest rate of growth in the world. As a result, the proportion of dependable population below 15 years and above the age of  65 has gone up to almost 55%, which is adding an unbearable burden on the economy, having weak foundations,  What has, so far, been achieved through development efforts has simply absorbed by rapidly growing  non- functional population.

     iv.            Low level of technology diffusion constraint:  Low level of technology diffusion is also impeding the growth of the various sectors of the economy. It is so because the country is confronting a number of problems like lacking required technical know-how, exists of surplus unskilled labour, low rate of human capital formation, deficient institutions and low standard of technical education and training.            

       v.            Agricultural dependency constraint:  Nearly 60% of the total population is depending, for her livelihood, directly or indirectly, on agriculture sector which itself is in developing stage, Its contribution to GNP is decreasing instead of increasing, Highly inequitable distribution of land resources, the faulty tenure system, soaring effects of waterlogging and salinity and limited use of latest agricultural technology are the critical hurdles affecting the performance of this key sector which, in turn, affects the efficiency of all the other sectors and sub-sectors of the economy.

     vi.            Huge magnitude of indebtedness:   As of Jan 2016total debt liability stood at Rs   68.550 billion, which constituted almost 180% of  GDP 36% of export earnings, 23% of foreign exchange earnings, 83.3% of tax revenue, 63% of total revenue, 45.5% of total expenditure and 52.6% of current expenditure. Such a huge magnitude of indebtedness is coming in the way of efforts to finance economic development projects in a number of ways.

    vii.            Huge non-development expenditure: The order of non-development expenditure; made on defence and debt servicing, is very high. More than 70% of the current revenue is spent on these two heads. 

  viii.            Low level of foreign exchange earnings:  Pakistan being basically a foreign trade-oriented country, has to rely upon the export of a few items like cotton, rice, carpets, sports, surgical instruments and hides and skins etc. The excessive reliance on a few primary types of exports has made the economy unstable. Besides, unfavourable terms of trade, restrictions of the quota system and the restriction to follow a liberal trade policy have further decreased the foreign exchange earnings.

     ix.            Persistent devaluation and depreciation of rupee:  So far, Pakistan’s Rupee has lost its external value nearly to 450% over the years, Persistent devaluation and depreciation are also serving as a big hurdle in the process of economic development. The efforts which have been so far made to increase the level of foreign exchange earnings have simply vanished with the devaluation and depreciation of the Rupee.

2)      SOCIAL AND CULTURAL OBSTACLE 

Pakistan’s current social and cultural setup is also serving as a deterrent factor to her economic development. More than70% of the population is illiterate. In the remaining 30%, such people are also included who can just read and write their names. Consequently, the majority of the people due to their mass illiteracy are mostly ignorant to the development taking place within the country not to speak of around the world.

The society as a whole may be labelled as consumption-oriented or a highly extravagant society unnecessary expenditures on different occasions like marriages, deaths, births and other ceremonies merely showing the class pride, are lavishly made. Therefore, the propensity to save and to invest is among the lowest in the world. Furthermore, most people are conservative in their habits and approaches of mind. They are, therefore, not easily receptive to new technology and the latest scientific methodology of production. The caste system is also operating frequently in terms of occupational activities, though most are urban-centred, yet they come in the way of the economic development process in a number of ways. The majority of the people are religious-minded and a number of sects are activated with full fervour of sectarianism. The country has to suffer all the negative approaches.

 Thus the rate of functional or economically activated population is among the lowest in the world.

3)      POLITICAL OBSTACLES.

So far, the political factor has been playing a regrettable role in the economic development of the country since it came into being. The political uncertainty, the instability of the government and the inconsistency of economic policies had been the key factors, which played their worst negative role. There had been frequently occurring rapid change not only in the successive governments but also in economic policies, strategies and priorities. Each government, which took over the power, had been badly following the policy of condemnation of whatsoever was done by the predecessor government. It had been a frequent practice of each new government to formulate its own plans, chalk out its own course of action, set up its own priorities and select its own strategies at the heavy cost of giving up the ongoing uncompleted projects. The country, thus had to suffer an irremediable cost of economic development so far has been made.

Ironically, the country could not be benefitted from the selfless services of the true, honest, and loyal statesmen; with exception of a few early founders. Most of the politicians had been considering politics a highly profitable business. Their activities had been mainly focused to grind their own axes; to plundering the national wealth by hook or by crook. The credit goes to those politicians who inducted the deplorable phrase of horse-trading in the history of Political Science.

4)      ADMINISTRATIVE OBSTACLES.

There is no need to mention these obstacles because everyone is well aware of it e.g. according to recently NAB’s submitted report to ATC only Dr Asim has allegedly been involved in Rs 450 billion (4, 50, 000000000) corruption. 

Solutions

Ø  Development of agriculture sector on preferential bases.

Ø  Reactivating Industrial Sector.

Ø  Facilitating means of transportation in a true sense.

Ø  Employing experts rather than inexperienced and illiterate men.

Ø  Equal Distribution of wealth.

Ø  Providing technical Education.

Ø  The Economy should be industrial rather than agrarian nature.

Ø  The case of extortion should be dealt with ironic hands.

Ø  Corrupt politicians should be sentenced to death.

ؠؠ Interest free loans should be granted to start small businesses without any documental hurdles.

Ø  Islamic Economic system is the sole solution to all these upper mentioned problems.

* Jan 2016