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Salman Nausher
Essay
Salman Nausher

19
 Salman Nausher

Economic Crisis in Pakistan

Introduction:
Since its independence in 1947, Pakistan has been plagued with political, social and religious
turmoil and that has taken a toll on its economy too. In simple words economy is the state of a
country or region in terms of the production and consumption of goods and services and the supply
of money. Economy is as important for a country as backbone for a human body. It is blood in veins
of nations, strength in human muscles, base for brutal wars and motives for governments to rule.
Economic crisis in Pakistan has broken the socio-economic fabric, created unrest among the masses
and endangered the geo-political stability of Pakistan. Economy is the backbone for a country’s
industrial development, social harmony and political order. It plays a vital role in making a country
prosperous and self reliant. Any shakeups in economy will shackles growth of a country. Recently
Pakistan is facing a dire macroeconomic crisis. This crisis must be overcome as early as possible.

Present Scenario:

“The latest United Nations report on world economic situation and prospects for
2019 says economic growth in Pakistan is projected to slow down markedly in 2019
and 2020 to below 4.0 per cent, after an estimated expansion of 5.4pc in 2018.”
-World Bank

Presently Pakistan is facing dire macro-economic challenges. It is spending more on imports than it
receives on exports, with its current account deficit having risen from $2.7 billion in 2015 to $18.2
billion in 2018. The major driver of this rising current account deficit is an expanding trade deficit,
which is mostly due to the rising imports under new China-Pakistan Economic Corridor (CPEC)
projects and low exports in general. It can be easily observed that, the Pakistani rupee has sunk by
over 30 percent in the past seven months owing to a balance of payment quagmire. Recently the
rupee touched 141 against the U.S. dollar. In 2018, the depreciation of the Pakistani rupee against
the U.S. dollar alone was responsible for an excessive USD $7.9 billion increase in public external
debt. The inflation rate is now touching 9.4 percent, which is a record level high over the last five
years mostly due to rupee depreciation and rising energy prices.
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Going forward the government of Pakistan is committed to take decisive corrective adjustments to
restore the economy on a path of stability and growth. The government is of the view that fiscal
and price adjustments alone are not sufficient, and that unless the much delayed deep structural
and institutional reforms are implemented with firm and unflinching resolve, the entrenched
imbalances plaguing the economy will keep resurfacing. The government vowed to create 10 million
jobs through construction of five million houses, give concessional loans to startups and developing
special economic zones under second phase of CPEC. It set up a body with representation from
private sector to take inputs to solve economic difficulties and promoting the concept ease of doing
business.

Causes of Economic Crisis:

Energy Crisis:

The constant leading power cut-off challenge has troubled the economy. Since the year 2000 this
curse has wreaked havoc on the overall economy. According to the National Transmission and
Dispatch Company (NTDC), the electricity production in the country is 11, 500 Megawatts, whereas
required amount is 14,500 Megawatts. Which means Pakistan is still facing a 3000 Megawatts of
energy shortfall. Until energy lingering crisis is not resolved the determined economic development
is a far-off dream.

Lack in quality education:

“Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime.”-
Laozi

Education is a key component for economic progress. Unfortunately, our current literacy is 60
percent, least in South Asian countries. About 25 million children are out of school. More
importantly, on grass root level, thousands of schools are lacking very basic facilities such of
sanitation, water, electricity, boundary walls etc. The human capital of a state has been considered
as an important element for the economic growth and development of that country. Education is
known as the pivotal factor for improving the quality of the human capital. For this reason,
education plays a vital role in the social and economic development of a country. No nation can
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succeed in achieving a sustainable economic growth without providing a better education to its
human capital.

Youth unemployment:

We are blessed in having about 63 percent of youth population. Half of them are unemployed.
According to Asian Development Bank (ADB) 50.7 percent of the population aged 15 years and
above is employed. Of it, the female ratio is very less. The rest are struggling for survival. On an
average, Pakistan needs to create 20 million jobs annually for young people alone.

Terrorism:

It is a huge stumbling-block for economic generation in Pakistan. Since 2002 we are a war-torn
country. The State Bank of Pakistan report (2016) says that war on terrorism has cost $118 billion.
According to Global Terrorism Index (2016), out of 163 countries, Pakistan stands 4th worst hit. This
has long been a reason for Pakistan’s negative international image which has limited the foreign
investment in the country.

Wealth Concentration:

In Pakistan wealth is concentrated among a few rich families. The rest of the population is
dependent on them. Due to wealth concentration, around 35 percent people spend their lives
under poverty line. According to economic survey (2018) 24.3 percent population of Pakistan lives
in poverty, which means that 1 out of 4 people in Pakistan live in poverty.

Poor health facilities:

The public hospitals depict bleak pictures where we find lack of proper medicines, beds, equipment
and etc. Due to absence of basic health facilities, 170 women die from pregnancy for every 100,000
births. For every 1,000 babies born, 66 die before their first birthday. In addition, approximately 44
percent children in Pakistan are stunted. Every day, due to malnutrition and poverty children are
dying in Thar.

Good Health Care: (for suggestion)

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Good healthcare = good economy

A good healthcare system is vital. It means the population has access to combat illness and
therefore, there are no financial burdens, because of healthcare, on the country and the individual,
due to a reliable workforce. This generates a thriving economy. For example, the World Health
Organization (WHO) consistently commends France on its healthcare system, and France has a GDP
of around 2.8 trillion USD.

The OCED Observer also cements the idea of how the economy depends on a strong healthcare
system. Through the data they collected, they state a 10% increase in life expectancy creates an
economic growth of around 0.3%-0.4% a year.

Ineffective Tax Policies:

Tax policy is a living example of this phenomenon. Every incoming government starts policy
formulation without examining the previous experience. The same mistakes are repeated again and
by the time it completes its tenure no tangible results are achieved, compelling its successor to
deem the policy a failure and restart the process. Compared to other factors, top-down driven,
whimsical and ad hoc policies have done much damage to the economy.

Tax evasion:

Regressive tax system collects about 90 percent tax revenue from common men. Big corporations,
landlords, businessmen, politicians do not pay their due share of taxes. They earn lot but pay less
tax; on the other hand poor earn less but are taxed more. Each year billion rupees are evaded
through tax havens established in foreign counties. The incidences of tax evasion have hampered
Pakistan’s economic progress.

Over Population:

When the population increases, it directly effects the consumption of that particular country this
effect decreases the GDP and GNP of that particular country and also increases the imports. More
population guarantees more consumption. This leads to misuse or overuse of natural resources.
Increase in population growth leads to decrease in man to land ratio. In the result, land become
inelastic and one cannot increase the amount or supply of land. All these effects are negative
symptoms for the economy and economic development.
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