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
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.