This article is about Pakistan’s Economic Challenges and Government Policies. Here, you will understand what economic challenges Pakistan is facing and what policies the Pakistani government should adopt.
Economic Challenges and Pakistan’s Government Policies
Pakistan is facing uncertainty in receiving the next tranche of $96 million from the International Monetary Fund (IMF), as the IMF staff mission has raised further questions over the financing of the aid package announced by the Prime Minister last month.
The IMF has expressed concerns over the tax amnesty scheme, including relief in petrol, diesel, and electricity prices. On the other hand, IMF spokesman Jerry Rice said that Pakistan’s economy is facing external challenges. Therefore, rising oil prices in the global market are a challenge, rising petrol prices can make food more expensive and rising food prices will further increase inflation.
According to economists, the IMF is also watching the current political crisis in the country and will wait for the outcome of the no-confidence motion before taking any decision. All are currently engaged in resolving political issues and this is affecting the decision-making of these ministries as well. The bureaucracy has also adopted a “watch and wait” policy.
At present ministers do not have influence in their ministries, bureaucrats are also suspending the implementation of a decision made by a minister and are waiting to see if the ministers will remain after the no-confidence motion or will have a new minister.
Under the Public Sector Development Program, more funds are released at the beginning of the last quarter of the financial year, ie in the month of March, however, this is not the case at present. This is because the political crisis has trapped the government in such a way that it is unable to pay attention to it and the pace of work on infrastructure projects has not increased as much as in the past quarter.
On the other hand, Finance Minister Shaukat Tareen has said that due to government measures, the economy has risen from a negative to a 5.6 level. Pakistan’s economy is now stable and moving forward. Needless to say, bringing financial transparency has restored investor confidence, the global crisis and inflation are hitting the poor the hardest, our focus is on getting the victims and the low-income class back on their feet.
According to reports, the review talks between Pakistan and the IMF have been fruitless due to alleged violations on various fronts, which the staff of the fund has termed as deviation from the agreed program of the IMF. IMF staff raised strong objections to the reduction in petrol, diesel, and electricity prices, as well as the Prime Minister’s relief package for tax breaks for the industrial sector.
The IMF has stipulated that Pakistan will not grant any tax exemption and this is part of a continuous structural standard. Exemption from the IMF Executive Board is required for the issuance of. The IMF has asked Islamabad to increase the discount rate, allow free movement of foreign exchange, reduce the Successful Pakistan Program (KPP) and harmonize it with prudent financial management. Reverse the relief package measures.
The real problem of Pakistan is the current account deficit which is increasing. If we do not have more dollars then it will be difficult. The main factor in our trade deficit is the purchase of oil which has increased by 45% in the last year where you used to order oil for 100 but now they are asking for 150. If oil prices continue to rise then the trade deficit will increase further.
The second factor in Afghanistan. Until the situation in Afghanistan improves, there will be no foreign investment. In the last 10 years, many new industries, many new sectors have sprung up and activities have intensified. The key relief is the work ahead. Tax-to-GDP needs to be increased. While the tax-to-GDP ratio is below 9, this means that there is still potential to move direct taxes forward. ۔
According to experts, if the household income is 18000 and the expenses are 25000, then it is a matter of concern. The government will borrow every year and take out more loans to pay it off, so the debt will continue to grow until incomes increase. This is what is happening with Pakistan. Income is low and expenditure is high. According to experts, this is what has been happening in the last 10 to 12 years. About 60-70% of the income is spent on debt and interest payments. Has increased its fiscal deficit.
7.8% of the US was 5.9% of India. The total estimate of Pakistan was a 4000 billion gap. If it is less than 2000 billion after six months then it is not a cause for concern. Although it should still be below, the real problem of Pakistan is the current account deficit which is increasing.
If we do not have more dollars then it will be difficult. Although decisions have been made by the ECC and other forums, their decisions cannot be implemented unless it is ratified by the federal cabinet, which has been adjourned three times in the last three weeks.
At present, the people are burdened with heavy taxes. The working class and the common man are deprived of basic necessities. The rupee is depreciating against the dollar. In this economic turmoil, commodity prices do not seem to be in control. Numerous taxes are also causing prices to rise. Stockpiling, illegal black marketing and disruption of supply also lead to inflation.
Unsustainable foreign loans are also weakening the economy, and the printing of exorbitant notes to cover government expenditures and economic deficits is fueling inflation. The unequal distribution of wealth also contributes to inflation as the rich turn to the underprivileged, which leads to inflation.
Economic instability cannot be eliminated unless the government prioritizes economic stability over self-interest. People’s sources of income have already halved due to the negative effects of the coronavirus. The worst affected are the middle and poor who live in rented houses. Rising house and shop rents for the last ten years have also been driving up inflation which no government has ever tried to control. Nor has any legislation ever been enacted in this regard.
Rising fees of private hospitals, doctors, and schools and expensive medicines are also a major source of inflation. Health and education are both the responsibility of the government but unfortunately, there are government hospitals or schools in the country where the standard of treatment and education is low. Inferior people give birth to inferior offspring and, thus, propagate their inferiority.
In addition to the taxes levied on the public, the state provides health and education services to the people, but also to the elite. In these circumstances, the elites have crushed the low-income classes.
The nation is in despair. It is the duty of the government and the political leadership of the country to take it out of despair and put it on the path of hope, progress, and prosperity. Therefore, there is a need for the US leadership to put aside its differences and make a practical effort to restore the country’s economic system.
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