Pakistan’s economy remains unstable since its inception. From the very beginning, Pakistan is facing economical issues which are still prevailing. So here in this article, I will explain a few steps to stabilize Pakistan’s economy. Let’s discuss some of the current scenarios first.
Stabilizing Economy of Pakistan
Federal Minister of Finance Miftah Ismail confirmed the agreement with the IMF and shared the statement with the IMF on Twitter. While the statement issued by the IMF said that Pakistan must maintain the continuity of the exchange based on demand and supply, along with prudent monetary policy and improving the performance of government institutions.
Global inflation and important decisions. As Pakistan’s foreign exchange reserves dwindled due to the delay, the economy grew so fast due to excess demand that there was a large deficit in external payments.
Undoubtedly, the bankruptcy of the Pakistani economy is now out of the question, and the agreement with the IMF will play an important role in managing the Pakistani economy. On the other hand, if Pakistan’s name is removed from the gray list, Pakistan will not have to undergo strict monitoring of international aid, loans, and investments, which will facilitate foreign investment and have positive effects on the country’s economy.
Apart from this, Pakistan’s access to the global market will become easier. The country at this time needs an independent economic policy including an independent and neutral foreign policy. During the past three months, Pakistan’s economy has been facing severe difficulties, the current government’s narrative is that the former government signed a six billion dollar bailout package agreement with the IMF in 2019.
However, the deal stalled due to the government’s failure to significantly improve subsidy controls and tax collections. As the country’s economy suffers, it should be borne in mind by the leaders of political parties that in the presence of unfavorable external factors, reducing energy prices, giving tax cuts and exemptions, or artificially depreciating the exchange rate of the rupee.
The country’s economy cannot be stable. We cannot deal with external liabilities without IMF support, so it is in everyone’s interest to at least agree on an agenda for macroeconomic stability. Sri Lanka’s experience tells us that populist measures can lead to the destruction of the country’s economy.
The present government wisely knocked on the door of the IMF without delay while Sri Lanka went to the international body after bankruptcy. Some of our economists and analysts are comparing the economic situation of Pakistan with that of Sri Lanka, although the economic comparison between Sri Lanka and Pakistan does not make sense, the size of the Pakistani economy is much larger than the Sri Lankan economy.
Sri Lanka’s economy was entirely dependent on the tourism industry, then on foreign exchange remittances from overseas Sri Lankans. The two-year ban during the outbreak of the Corona epidemic has badly affected Sri Lanka’s tourism. Foreign exchange from abroad also decreased, then on the occasion of the war between Russia and Ukraine, Sri Lanka’s foreign policy was not satisfactory. Sri Lanka’s economy collapsed.
Pakistan largely meets its food needs domestically, while Sri Lanka has to import food from abroad at a cost of foreign exchange, although common elements in both economies include current account deficits and rampant external debt. While in Pakistan, the biggest bill is the import of wheat and oil. Pakistan has friends like Saudi Arabia, Qatar, the United Arab Emirates, and China, who help in difficult times, while Sri Lanka is at the bottom of this issue.
Among the problems that Pakistan’s economy is currently facing, the main reason is the political instability in the country, which has delayed the agreement with the IMF. If you look at the countries, one thing is seen in common and that is the foreign policy revolving around political stability and the interests of the state. All those countries which have suffered from political instability have not been able to develop economically. Take the example of Europe, America, Canada, Russia, and China, all of them have stable political systems.
Underdeveloped and poor countries lack political consensus and strong political systems, which is the reason why they cannot develop. Pakistan needs political stability and consensus for development. The manifesto of democracy is more important to fulfill the purpose of the manifesto of the economy. Political stability and consequently economic prosperity require dialogue between all institutions.
Pakistan’s economy has got a chance to breathe due to the progress in the right direction with the IMF. If the funds deposited in the Pakistani banks of China, and Saudi Arabia double, the situation will improve further. However, to stabilize Pakistan’s economy, we have to rely on our own resources to advance economically. Our geographic location and geo-economic strength is our asset and if utilized optimally, they can be strategic for our economic recovery.
Promoting industrialization, opting for aggressive privatization, increasing export targets, channelizing foreign remittances, promoting agriculture and agri-businesses, economizing service sectors, and investing in human development are essential for the country’s development. . Education, especially technical and vocational education, is the most important and should be prioritized to achieve 100% literacy rate in ten years.
So, to stabilize Pakistan’s economy, primary health care is another neglected area that needs to be prioritized. Our ranking in the Human Development Index can be improved to achieve the Sustainable Development Goals as a national priority and obligation. Global resources need to be used for this noble cause.
Pakistan needs an economic transformation policy framework to improve its economy through incentives for economic growth along with redefining and restructuring its resources. This policy framework is essential for achieving sustainable development goals by improving social and human capital indicators.
The macroeconomic transformation framework will revolve around some of the key initiatives such as promoting investment, public-private partnership, infrastructure development, mass manufacturing, increasing exports, and ensuring energy and food security.
In Pakistan, the government has more power and control over the economy, which is the country’s gross national income (twenty-two percent of GDP), which is why government spending is high and many public institutions are burdensome on the coffers.
About 200 state-owned enterprises account for about 67 percent of Pakistan’s economy. The present government is keen to stimulate the economy and reduce the burden of institutions on the public exchequer. The main question is whether the current government will be successful in this effort. Unless the government partners with the private sector, the burden will continue to increase.
To stabilize Pakistan’s Economy, agriculture is the backbone of Pakistan’s economy. 67.5% of the population is directly or indirectly engaged in farming occupation. These are the people who collect foreign exchange for the country with their blood and sweat under the open sky in the hot summer and under the starlight in the freezing cold, producing raw materials for the country’s industry. An increase in agricultural production can improve the state of the country’s economy.
Currently, the government is fully relying on the IMF and the World Bank for the country’s economy, but if the agriculture sector is worked on an emergency basis, Pakistan can be freed from all kinds of debts.
Conclusion
Pakistan’s economy is growing at a slow pace, while there is a need for acceleration in order to control unemployment and improve the efficiency of public institutions with better utilization of national revenue resources. Corruption also has a profound effect on national growth and the size of the national economy. We all have to play our part to eradicate corruption from the country. A long-term planning document defining the economic model for the future is needed to determine where Pakistan should be in the next ten years.
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