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Economic Problems of Pakistan

Economic problems

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Huzefa Baloch
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42 views5 pages

Economic Problems of Pakistan

Economic problems

Uploaded by

Huzefa Baloch
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ECONOMIC PROBLEMS OF PAKISTAN AND WAY

FORWARD
An economy is the large set of production and
consumption activities that aid in determine how
resources are allocated. Pakistan has been facing severe
economic challenges as the country knocks the IMF’s
doors time and again for a bailout package. The country’s
growth rate is slow as Pakistan has fallen behind India,
Bangladesh and China in terms of potential growth rate.
The country’s GDP rate is less than most of the Asian
countries with inadequate foreign exchange reserves and
foreign direct investment.
LESS GROSS DOMESTIC SAVING RATE
Out of every hundred rupee of our national income, we
consume 96 rupees and saves only 4 rupees which
means the amount of money which is available for
economic growth is too little. Currently, Pakistan’s gross
domestic saving rate is 3.8%; however, Bangladesh’s
gross domestic saving rate is bigger than Pakistan which
is 25%.
TRADE DEFICIT
A trade deficit occurs when a country imports more than
it exports. In other words, when a country buys more
than it sells, it has a trade deficit. According to the
Pakistan Bureau of Statistic, Pakistan’s imports bill is 26
billion dollars while its exports amount to 14 billion
dollars, which means the country is having 12 billion
dollars trade deficit.
FISCAL DEFICIT
A fiscal deficit is a shortfall in a government’s income
compared to its spending. A government that has fiscal
deficit is spending beyond its means. Pakistan’s budget
deficit stands at 7% of the GDP in 2023-2024 owning to
the large subsidy given on oil and power.
INFLATION RATE
Inflation refers to upward trend in the average cost of
goods and service over a time and there is decline in the
value of currency as a medium of exchange. Currently,
Pakistan is having 32% of inflation which has decreased
the purchasing power of currency.
INCREASING CIRCULAR DEBT
Circular debt is vicious cycle where everyone in energy
sector chain owes everyone else money. Government, in
order to give subsidies to consumers, could not
compensate the power companies. As a result, the
current circular debt of power sector stands at 2.6 trillion
rupees.
INADEQUATE FOREIGN EXCHANGE RESERVES
Foreign exchange reserves are the assests held by the
central bank in foreign currencies. They are used for
backing the exchange rate and influencing a monetary
policy. According to the State Bank of Pakistan, the
current foreign exchange reserves of Pakistan stand at 13
billion dollars.
DECREASING REMITTANCES
Remittance is a sum of money sent by non-residents of a
country working abroad to his or her family back home.
According to the State Bank of Pakistan, the inflow of
remittances stands at 2.3 billion dollars.
BAD SOCIAL INDICATORS
The current literacy rate of Pakistan is 62% which means
38% population is still illiterate in the country. Similarly,
unemployment rate in Pakistan is 6% and according to
the World Bank report, 37% population is living behind
the poverty line.
WAY FORWARD
1. Pakistan needs to stabilise economic environment to
attract investors. Key economic indicators such as
inflation should be brought down and exchange rate
must be stabilised.
2. Pakistan needs to increase its exports and decrease
imports in order to overcome trade deficit.
HOW TO INCREASE EXPORTS AND DECREASE EXPORTS
1. IMPROVE IT SECTORS
Pakistan exports IT around 1.5 billion dollars and India
exports around 74 billion dollars worth of IT products.
2. IMPROVE SMALL AND MEDIUM ENTRPRISES
Small medium enterprises make 25% of the exports.
Therefore, Pakistan needs policies that empower SMES
and allow reaching their true potential.
3. REDUCE OIL IMPORT
Oil is main import of Pakistan as the country imports
10 billion dollars worth of oil. To reduce oil import,
Pakistan can use alternate energy resources to reduce
oil consumption.
3. Government should bring more tax filers rather than
overburdening the current tax payers. It should
reduce the number of goods and services that are
not taxed or are taxed at a lower rate. Bosnia and
Georgia adopted this model. Many people in
Pakistan do not know how to file a tax. Therefore,
the government should make tax filing process
easier.
4. Livestock and dairy sector accounts for 60% in
agriculture and contributes 11% to GDP. This sector
is almost equal to the large-scale manufacturing. The
government should involve private sector in the
development of this sector for the production of
milk and dairy products in order to export them.

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