Pakistan is passing through very difficult times in its 73 years history. From fighting against terrorism to fighting against corruption and nepotism; the country is stuck neck-deep in myriad of problems. Current government of Imran Khan has a stupendous task at hand to take the country out of this pit. The most challenging task faced by the current government is to strengthen the economic condition of the country. Economic condition of Pakistan is precarious. Corruption along with mismanagement of resources has manifolded the problem to an extent that the country faces current account deficit of staggering USD 6308 million in 2018 which was the worst in its history. Last 10 years starting from 2008-2018 were an economic disaster for Pakistan. Slow recovery occurred after 2018 and by now the country has a surplus of USD 778 million in its current account.
There are severe allegations of fraud and corruption against previous PPP & PMLN governments which is visible from the economic indicators of the country. Pakistani Rupee devalued in comparison to US Dollar from USD 1 = Rs 58 in 2007-08 to USD 1 = Rs 160 in 2019-20. Some concerned circles believe that what the previous governments did was a classic example of what an Economic Hitman would do to an enemy state. Like taking loans at higher interest rates from foreign countries and investing in low returning projects like Metro’s, Housing Schemes, Orange, Yellow, Green line projects and not completing them in stipulated time period. This strategy has put a huge burden on our national exchequer and disturbed the country’s balance of payments position vis-à-vis payments in dollars to foreign contractors. Coupled with this, previous governments made contracts that benefitted the parties signing the agreements (in the form of kickbacks from the projects) and not the state of Pakistan. Example of such projects include LNG terminal contract with Qatar at higher rates, Independent Power Producers (IPPs) contract with federal government to provide electricity at higher costs as compared to neighboring countries. Finally, the most infamous Reko-Diq case where due to negligence on part of the government the country has to pay a heavy fine to the company extracting the minerals. All these events had a compound effect on weakening our economy.
In 2018 when the PTI government took over the reins of the country they were shocked to see the gravity of the situation. Urgent steps were taken but the economic condition was so poor that Imran Khan has to ask for help from friendly Arab countries and to go for IMF package so as to improve the economic condition of the country. PTI government had to repay the installments along with interest on previous loans and to take further loans to boost the economic condition of the country. All of this come at a cost which the government has to bear by increasing the tax rates thereby causing a rise in prices of goods which in turn causes inflation rate to increase as the value of Rupee devalues. Loans received from IMF and other sources have strings attached to these and the government has to follow their directions; like increasing the prices of oil and electricity which is a daily consumable item. Increase in these products’ prices put a burden on ordinary citizens and create problems for poor and middle-class people. This vicious cycle is known as debt trap where the country has to take further loans to manage its economy and to repay the previous loans. Pakistan is stuck in a debt trap and government has to take some drastic measures to come out of it like going after white-collar criminals to recover the looted money, introduce FBR reforms to increase tax base, provide tax concessions and investor friendly policies to boost local production and encourage investment. These steps are in the right direction but will take some time to improve the overall situation.
Apart from this Pakistan also faces another serious threat from its arch-rival India. Due to our current economic condition, we are in a precarious situation that for 2 consecutive years the government has to freeze the budget of military. By taking into account the effect of inflation and devaluation of Rupee means that government has technically reduced the military budget. Forces hostile to Pakistan also came in a commanding position by using FATF as a screw-tightener to further strangle the economy of Pakistan. Informal and un-registered sector accounts for nearly 71% of Pakistan economy and by complying with FATF recommendations Pakistan would have to clamp down on this sector which might create further problems for Pakistan’s already fragile economic condition as thousands of labor force might get laid-off.
If Pakistan wants to break this chain of economic strangulation then it must increase its tax base, go for self-reliance through local production of goods and services, encourage foreign investors and companies to invest in manufacturing and services sector which will ultimately provide job opportunities for the youth and improve the economic condition of the country. However, the recent Coronavirus pandemic has had a negative impact on global economy and Pakistan is no exception to it. Pakistan is one of those few countries which had successfully weathered the storm and managed to sustain its economy due to Allah Almighty’s grace, but still a lot needs to be done to keep the economy on the right track of progress.