Pakistan, the world’s sixth most populous country has embarked its journey as the Islamic Republic of Pakistan and adopted its constitution in 1956 under a democratic framework. However, the country lost the track from very early of its being coming to existence marred by frequent coups, the imposition of Martial Law, rigged elections, the list is endless. Rampant corruption, unemployment, poverty has become part and parcel of common people. With ever-growing debt and increased inflation would make life more miserable in times to come. The economy is on a downward spiral for the past several years as it got trapped in a vicious circle of” loan and its repayment through loan”. Pakistan has been surviving on aids, primarily from America and loan from International Monetary Fund (IMF) and World Bank. It approached IMF recently for the 22nd time and received $6billion bailout package to ease its economic crisis.
Current State of the Economy
Pakistan is facing challenges on almost on all fronts – be it poverty, illiteracy or unemployment. It appears that the economy is on the verge of collapse as some economic drivers are:-
Debt- The total debt is approximately $95.1 billion as on June 2019.
GDP – The nominal GDP per Capita of the country was $1641 in 2018 and $1357 in 2019 which rank 147th and 154th respectively.
Growth rate – The annual growth rate averaged 4.94% from 1952 till 2018. There has been a shrink in growth rate in 2018 from the previous year from 5.79% to 5.20% and anticipated to be around 4.50% in 2020.
Inflation rate – The ideal inflation rate is about 3-4% for the sustained growth of the country. However, the inflation rate of Pakistan stands at 7.64% as on June 2019 whereas it is 2.05% and 2.10% in respect of India and China respectively.
FOREX reserve – The Foreign Exchange Reserve of the country was $14.950 in February 2019.
Account trade deficit – The trade deficit of the country has shrunk by $2 billion to $19.264 billion in the July 2018– January 2019 against $21.32 billion during the corresponding period the previous year.
Ease of doing business – As per latest World Bank annual rating, Pakistan rank 136 in the Ease of doing business.
Tourism – Pakistan is the 4th most treacherous country in the world and ranks at 124 in the world which has negatively affected the tourism industry and had contributed only 2.9% ($ 832.1million) of total GDP.
Unemployment – The unemployment rate is approximately 6%
Poverty- Poverty stands at 40% in 2018 as against 29.5% in 2014
Stock – A Chinese consortium has acquired 40% Million Equity of Pakistan Stock Exchange for $85 aimed at mobilising funds for China Pak Economic Corridor (CPEC)
A Memorandum of Understanding ( MoU) for CPEC project between China and Pakistan, at first was signed for $46 billion in 2015 which swelled to $62 billion, for infrastructure development in roads, power sector, and railways to give a boost to Pak economy. As per the report issued by IMF, Pakistan has to repay this loan at an approximately $3.5 billion per annum from 2023-24 onward for the next twenty years. It appears that CPEC is not a contract but a debt trap by China as it has a very appalling reputation in debt return. China, in past, had invested in Sri Lanka but when Sri Lanka failed to repay the loan, it had taken over the Sri Lankan Port on lease for 99 years and now Sri Lanka has to pay taxes for its usage like any other country. Similarly, China had taken over Zambia’s national resources when it failed to repay the loan. Is China following old British tactics? What will be the fate of Pakistan, if it also falters on repayment of the loan is any body’s guess?
In spite of such miserable economic crisis, Pakistan continues to increase its defence budget unabated every year in the garb of tenuous security threats from India. It had increased its defence budget by 20% for 2018-19 to $9.6 billion. It is to be noted that India’s defence budget is six times higher than Pakistan’s defence budget which is 25% of GDP. Is there any comparison?
It is well-established fact that Pakistan is breeding ground for terrorism and terrorist which played more havoc in its own country besides India, Afghanistan and other parts of the world. Terrorism is central to the downfall and current crisis of Pak economy as it stands isolated internationally. Foreign investment has dried up as it is the 4th most unsafe country in the world. America has already suspended $2 billion aid, already in Grey list of Financial Action Task Force(FATF) and the threat of getting blacklisted looming large, economic crisis may lead to economic collapse and Pakistan be a “Failed State” soon.
The economic situation of Pakistan is transiting through a critical phase and people are looking towards the solution of the challenges of the increase in debt, increase in import and decrease in export, low saving, lower investment, low tax collection, lack of policy implementation, excessive taxation and scores of others. Pakistan needs to perk up the security of the country by shunning terrorism to ensure an investment-friendly environment that attracts more foreign direct investment (FDI). Above all, Pakistan has to improve its relation with India and boost the trade with its neighbour. There has been a meagre trade of $2 billion between the two countries which also got stalled post-Pulwama incident. The bilateral trade may be augmented upto$36 billion benefitting the Pak most and earn a profit of approximately$10 billion which will have a significant impact on its economy despite the fact that it will have hardly any substantial impact on Indian economy whose overall trade stand at $700 billion. It is for Pakistan to take a call.
09 Jul 19/Tuesday Written by Fayaz