Pakistan at present stands at the threshold of socio-economic change and any wrong step can be extremely devastating.


By AVAIS BABAR CHISHTI, BBA, IBA-Karachi. University Campus.
Sep 26 - Oct 02, 2005


This is the third article for Inter-university articles contest by PAGE.

Long gone are the days when a handful of firms provided goods and services to an economy; when central bankers had to take only their own economy into account while making decisions, and when producers were not being penalized of not producing efficiently. Now, the world has entered the 21st century with a rapid economic boost, but is it true for our own economy? With the past of very surprising highs and lows in our economy, and our very ambitious present economic policies, where should we see the economy of Pakistan in 2010?

Pakistan, a developing country, is faced with a number of challenges on the economic front. The population growth rate at present has been brought down to 1.96% per year, which although is high, but quite satiating in comparison to recent years. Our GDP has been steadily growing and it is forecast to grow at 7.0% for this fiscal year. While our economic growth figures seem quite pleasant, one cannot ignore the widespread poverty existing in the country. During much of our history, underdevelopment and poverty haunted our economy. Apart from these two factors, fiscal mismanagement obscured the potential of our country which had resources and entrepreneurial skills to facilitate rapid economic growth.

One may wonder, that why such a contradiction between our growth rate and our standard of living (poverty) exists. A closer look into the Pakistan's economy vividly explains the situation. One of the major reasons of poverty in our economy, apart from widespread unemployment, is the uneven distribution of income and resources. The wealth of our nation is concentrated in a very smaller percentage of the population and the rest of the population suffers. This ever widening gap between the rich and the poor has also given birth to various social crimes, as a German philosopher said: "Poverty is the root of all evils". Another depressing indicator of our economy is the ever rising inflation rate. It has risen to around the catastrophic level of 9% this year, with food inflation being the highest at 14.9 % (wholesale price index). Higher food inflation consequently puts bulk of the burden on the poor class of our economy which has food as the major part of their expenditure. This sharp rise in the inflation is mainly because of the government efforts to boost the economy by expansionary fiscal and monetary policies. This was further worsened by the destruction of crops by draught and flooding during the recent years.

Apart from the persistent problems of inflation and poverty Pakistan's economy has survived a number of economic shocks. The three wars with India really put a lot of burden on our developing economy. Following the nuclear tests in 1998, the sanctions put by various countries on which our trade was heavily reliant, gave our economy a major set back. The four-year long draught, which shook our agriculture industry was the sort of welcome we got from the 21st century. The only positive outcome we got from the disastrous 9/11 was in the form of rescheduling and writing off of loans, and an abrupt rise in the remittances of overseas Pakistanis that reduced our trade deficits and strengthened our external position. Further, the steep rise in oil import bill and withdrawal of special facility regarding payments of oil imports from Saudi Arabia is another big challenge for our economy. To add to all these woes, a much grim situation can be expected after the implementation of WTO regime, if we fail to respond positively and quickly. In view of all these economic chaos, where do we see our economy five years later?

In spite of all these challenges faced by our economy, we are heading in the right direction. The debt relief from the international lenders has provided our economy a much needed sigh of relief. Our economic policies have been consistent for quite a few years now, and the foreign investors are now willing to invest in our country. Pakistan has made governance reforms, privatization and deregulation as the corner stone of its economic revival. The deregulation and privatization of various publicly owned industries in the recent years, along with the tax holidays and lowering of duties is a positive step for the accomplishment of this objective. Our KSE-100 stock exchange index has performed really well, and in the first four years of this century it was termed as the best performing major market index. Though, the rapid growth has stabilized to some extent, it is expected that with the development of new projects proposed by the government, it would be touching new horizons. In view of all these developments, the confidence of investors, both foreign and local, has strengthened and this will play a pivotal role in the development of our economy in the years to come.

The present administration must now shift its focus to the key issues of inflation, unemployment and poverty. Recently, the government supplied food necessities to the people at lower prices, in an attempt to absorb the supply shocks, which could have propelled inflation. The government has been encouraging the growth of construction, automobile and telecommunication industry. The effect of this could be seen in the form of more employment opportunities being created and consequently a decline in poverty.

Pakistan must exploit its natural resources in the most productive manner to be on its way to a prosperous nation in 2010. We are basically an agrarian economy. 23% of our GDP is comprised of it and it provides employment to 44% of our labor force. We have been traditionally a producer of raw agricultural products, which has undermined our profits to great extent. We are one of the largest producers of raw cotton. Pakistan possesses vast energy reserves including gas, coal and some vast proven oil reserves. A major part of Pakistan trade deficit is attributed to large imports of oil. The exploitation of our own oil is certainly very capital incentive, but it seems to be inevitable in the years to come. Our labor force is heavily employed in the primary sector. This has caused our economy an incredible loss as primary products have quite low value in the international markets.

The year 2010 is marked by some mixed expectations of hope and despair. This is the era of technology-based production, competition and efficiency, the quality of human resources and so on. Pakistan at present stands at the threshold of socio-economic change and any wrong step can be extremely devastating. Now the choice is ours, either to carry on with our self motivated and short-term approach and doom our future generations, or to make some well worth sacrifices and broaden our thinking, so our generations could be proud of us. If we do the latter we can really expect to see a prosperous, competitive and flexible economy of Pakistan by the year 2010.