economic problems of pakistan and their solutions essay

CARBS Business Review

Pakistan’s economic crisis: unveiling the causes, impacts, and remedies, dr. ali sajjad, 30 october, 2023.

Pakistan has been grappling with an economic crisis in recent years, which is marked by high rates of inflation, a declining currency, and an increasing debt load. The country’s population has been significantly impacted by this crisis, with many people finding it challenging to meet their financial obligations. This blog will cover the reasons behind the current economic crisis, its effects on the nation, and potential solutions to the problem.

Causes of Crises

1 – external debt.

Pakistan’s current economic crisis is primarily caused by its external debt, which amounts to $126.3 billion. The country owes this debt to a wide range of creditors, including multilateral organizations, Paris Club nations, private and commercial lenders, and China. The growth of this debt load can be attributed to several factors such as excessive borrowing, slow growth, weak exports, and currency depreciation. Pakistan’s foreign exchange reserves are currently around $4 billion, which is insufficient to pay for even one month’s worth of imports.  As a result, there is a significant chance that the nation will not be able to pay its debts in full

2 – Inflation

Pakistan is currently facing a decline in the purchasing power of its populace and an increase in poverty due to a record-breaking inflation rate of over 25%. The rising costs of food, fuel, electricity, and imported goods are the primary causes of this inflation.  The government’s expansionary fiscal and monetary policies, which were implemented to boost the economy in the face of the COVID-19 pandemic, have further exacerbated the inflationary pressure.

3 – Energy Crises

Pakistan is currently dealing with a persistent energy crisis that has seriously hampered its ability to produce goods and expand its economy. The country relies heavily on imported petrol and oil, which are expensive and prone to price volatility. Unfortunately, poor management, corruption, and a lack of investment in renewable energy sources have resulted in insufficient and inefficient domestic energy production. As a result, Pakistan frequently experiences load shedding and power outages, which negatively affect millions of homes and businesses. The country’s GDP has decreased by up to 4% recently as a result of energy shortages.

4 – Political Instability

Pakistan’s financial instability is significantly impacted by its political instability. Frequent changes in government, governance, and political unrest have weakened foreign and domestic investor confidence. This has led to a decrease in foreign direct investment (FDI), causing capital flight and lowering the likelihood of economic growth. Exchange rate volatility, caused by political unrest, harms businesses that depend on stable exchange rates for international trade. Inconsistent economic policies and budgetary constraints lead to budget deficits and increased borrowing, elevating the risk of sovereign debt crises. Insecurity issues related to political instability, including terrorism and civil unrest, disrupt economic activities, deter foreign investment, and damage infrastructure, collectively contributing to economic and financial instability in Pakistan. The political uncertainty has undermined the confidence of investors, creditors, and the public in the government’s ability to address the economic challenges.

Consequences of Crises

1 – social unrest.

Due to the economic hardships the Pakistani people have experienced, there is a great deal of unhappiness and frustration, which has taken many different forms, including protests, strikes, riots, and violence. The social fabric and confidence in the government have been damaged by the rising cost of living, unemployment, inequality, and insecurity. The nation’s stability and unity are in danger as a result of the economic crisis’s escalation of ethnic, sectarian, and regional tensions.

2 – Security challenges

Pakistan’s current economic crisis has significantly weakened its capacity to address both internal and external security challenges. The country is currently grappling with a resurgence of terrorism perpetrated by various militant groups. These groups have exploited the economic crisis to further their nefarious activities, posing a significant threat to Pakistan’s stability and security.

3 – Regional implications

Significant effects of Pakistan’s economic crisis on regional stability and growth. Pakistan, a nuclear-armed nation with a population of more than 200 million, is very significant from a geopolitical standpoint. The potential collapse or instability of Pakistan’s economy could have significant repercussions for its neighbors and the global community.

Solutions to the Crisis

To address the economic crisis in Pakistan, the government and international community must act urgently and comprehensively. The following are some possible solutions:

1 – Debt relief

Pakistan may think about asking for debt relief from its creditors to lessen payback pressure and spend resources for growth. The government can negotiate a favorable debt rescheduling or restructuring with its creditors. Pakistan might also receive crucial financial aid and policy direction by asking the International Monetary Fund (IMF) for help in restarting the halted bailout program.

2 – Structural reforms

It is essential to put structural changes into place to address the underlying causes of Pakistan’s economic problems. To lower inflation, the budget deficit, and the national debt, the government should implement responsible fiscal and monetary policies. To increase revenue production and boost efficiency, it is essential to improve tax collection and expense management. Additionally, expanding export markets and encouraging the export sector can increase foreign exchange revenues. Reduced reliance on imported oil and gas can be achieved by making investments in the energy sector and the development of renewable energy.

3 – Political dialogue

Pakistan must resolve its political crisis through constructive dialogue and consensus-building. The government and the opposition should engage in a peaceful and productive dialogue to end their confrontation and find a mutually acceptable solution to their differences. The government and the opposition should also work together to address the economic challenges and implement the necessary reforms. Both parties must respect the rule of law, the constitution, and the democratic process to ensure the legitimacy and stability of the political system.

4 – International collaboration

By enlisting the aid of its allies and partners, including China, Saudi Arabia, Turkey, Iran, and the United States, Pakistan can improve its international collaboration. This may result in financial support, business opportunities, easier commerce, and technological breakthroughs. The government should also improve ties with its neighbors, especially with India and Afghanistan, to promote regional peace and cooperation. By taking part in regional initiatives, Pakistan can gain from regional connection and integration.

Guidelines to Write a Blog

Readers Also Viewed These Items

International Conference on Management Research

Sustainable tourism – challenges and opportunities for pakistan.

CARBS Industrial Insights

Exploring the trends and innovation shaping the future of business in pakistan.

Dr. Ali Sajjad is currently working as an Assistant Professor at Chaudhary Abdul Rehman Business School, Superior University. From the University of Utara Malaysia, he obtained a PhD in Banking and Finance. Moreover, he is a researcher having years of teaching and research experience. He has several publications and his area of research is accounting, finance, entrepreneurship and Islamic finance.

Please note that all opinions, views, statements, and facts conveyed in the article are solely those of the author and do not necessarily represent the official policy or position of Chaudhry Abdul Rehman Business School (CARBS). CARBS assumes no liability or responsibility for any errors or omissions in the content. When interpreting and applying the information provided in the article, readers are advised to use their own discretion and judgement.

If you are interested to write for CARBS Business Review Contact us !

Recommended For You

Navigating the Landscape of Corporate Social Responsibility (CSR): “Building a better Future Together”

Navigating the Storm: Climate Consequences and Its Impact on Economic Activities

Power of Influencer Marketing; Trigger to consumer behaviour and Brand Recognition

Connect with us, quick links, information about, newsletters.

©2024. All Rights Reserved. Developed and Maintained By Office of Research, Innovation & Commercialization ORIC, The Superior University Lahore

• Superior University
• Soar to Roar
• Our Research Ecosystem
• 3U1M Program
• Fee and Scholarship
• Sports and Fitness
• Employer Registration
• Contact Details

Information For

• Prospective Undergraduates
• Prospective Postgraduates
• Current Students
• International Students
• Exchange Students
• International Partnerships
• Academic Partnerships
• Get in Touch
• Convocation 2024
• Superior Employability Center
• Giving to Superior University
• Our Campuses

Office of Research, Innovation & Commercialization (ORIC)

©2023. Superior University. All Rights Reserved.

Programs submenu

Regions submenu, topics submenu, africa's oil economies amidst the energy transition: nigeria, china's rise, russia's invasion, and america's struggle to defend the west: a conversation with david sanger, the axis of upheaval: capital cable #95, adopting ai in the workplace: the eeoc's approach to governance.

• Abshire-Inamori Leadership Academy
• Aerospace Security Project
• Africa Program
• Americas Program
• Arleigh A. Burke Chair in Strategy
• Asia Maritime Transparency Initiative
• Asia Program
• Australia Chair
• Brzezinski Chair in Global Security and Geostrategy
• Brzezinski Institute on Geostrategy
• Chair in U.S.-India Policy Studies
• China Power Project
• Chinese Business and Economics
• Defending Democratic Institutions
• Defense-Industrial Initiatives Group
• Defense 360
• Defense Budget Analysis
• Diversity and Leadership in International Affairs Project
• Economics Program
• Emeritus Chair in Strategy
• Energy Security and Climate Change Program
• Europe, Russia, and Eurasia Program
• Freeman Chair in China Studies
• Futures Lab
• Geoeconomic Council of Advisers
• Global Food and Water Security Program
• Global Health Policy Center
• Hess Center for New Frontiers
• Human Rights Initiative
• Humanitarian Agenda
• Intelligence, National Security, and Technology Program
• International Security Program
• Japan Chair
• Kissinger Chair
• Korea Chair
• Langone Chair in American Leadership
• Middle East Program
• Missile Defense Project
• Project on Critical Minerals Security
• Project on Fragility and Mobility
• Project on Nuclear Issues
• Project on Prosperity and Development
• Project on Trade and Technology
• Renewing American Innovation Project
• Scholl Chair in International Business
• Smart Women, Smart Power
• Southeast Asia Program
• Stephenson Ocean Security Project
• Strategic Technologies Program
• Transnational Threats Project
• Wadhwani Center for AI and Advanced Technologies
• All Regions
• Australia, New Zealand & Pacific
• Middle East
• Russia and Eurasia
• American Innovation
• Civic Education
• Climate Change
• Cybersecurity
• Defense Budget and Acquisition
• Defense and Security
• Energy and Sustainability
• Food Security
• Gender and International Security
• Geopolitics
• Global Health
• Human Rights
• Humanitarian Assistance
• Intelligence
• International Development
• Maritime Issues and Oceans
• Missile Defense
• Nuclear Issues
• Transnational Threats
• Water Security

An Economic Crisis in Pakistan Again: What’s Different This Time?

Photo: AAMIR QURESHI/AFP/Getty Images

Critical Questions by Daniel F. Runde and Ambassador Richard Olson

Published October 31, 2018

Pakistan’s newly-elected government is already dealing with a balance of payments crisis, which has been a consistent theme for the nation’s newly elected officials. Pakistan’s structural problems are homegrown, but what is different this time around is an added component of Chinese debt. Pakistan is the largest Belt and Road (BRI) partner adding another creditor to its already complicated economic situation.

Pakistan’s system is ill-equipped to make changes which would avoid future excessive debt. A bailout from the International Monetary Fund (IMF) is probably the safest bet for the country although it is unclear whether the United States will support the program. How Pakistan decides to handle its debt crisis could provide insight into how the U.S., IMF, and China will resolve development issues in the future. Beijing is a relatively new player in the development finance world so much is to be learned from how it deals with Pakistan and how it could possibly maneuver in other developing countries in Asia, Africa, and Latin America.

Q1: What is Pakistan’s current financial and economic situation?

A1: Pakistan held its most recent elections in July 2018. The Pakistan Tehreek-e-Insaf party gained over 100 seats in the parliament, and its founder Imran Khan , a famous cricket team captain, was installed as prime minister. Prime Minister Khan has inherited a balance of payments crisis , the third one in the last 10 years. By the end of June 2018, Pakistan had a current account deficit of $18 billion , nearly a 45 percent increase from an account deficit of $12.4 billion in 2017. Exorbitant imports (including those related to the China-Pakistan Economic Corridor (CPEC)) and less-than-projected inflows (export revenues and remittances) have led to a current account deficit widening, with foreign currency reserves levels covering less than two months of imports—pushing Pakistan towards a difficult economic situation .

Part of Pakistan’s financial crisis stems from the fact that 2018 was a poor year for emerging markets. Global monetary tightening, increased oil prices, and reduced investor confidence have negatively impacted the country’s already precarious economic situation. But the country’s deep structural problems and weak macroeconomic policies have further exposed the economy to an array of debt vulnerabilities.

Pakistan has had an overvalued exchange rate, low interest rates, and subdued inflation over the last few years. This loose monetary policy has led to high domestic demand, with two-thirds of Pakistan’s economic growth stemming from domestic consumption. An overvalued exchange rate has led to a very high level of imports and low level of exports. Pakistan’s high fiscal deficit was accelerated even further in 2017 and 2018 because elections have historically caused spending to rise (both of the most recent fiscal crises followed elections). Perhaps the greatest financial issues facing Pakistan are its pervasive tax evasion and chronically low level of domestic resource mobilization. Taxes in Pakistan comprise less than 10 percent of GDP , a far cry from the 35 percent of countries that are part of the Organisation for Economic Co-operation and Development (OECD). Pakistan also suffers from impediments in the energy sector through frequent and widespread power outages that hurt its competitiveness.

In Western media, Chinese investment is often cited as the main driver of Pakistan’s debt crisis. This is somewhat true as China’s BRI makes Pakistan a key partner through the shared CPEC. The CPEC is a $60 billion program of infrastructure, energy and communication projects that aims to improve connectivity in the region. CPEC infrastructure costs have certainly placed a greater debt burden on Pakistan, but the current structural problems are homegrown; the root cause of the energy shortages is now less a matter of power generation, and more of fiscal mismanagement of the power sector .

Q2: What are Pakistan’s options?

A2: Pakistan appears to be in perpetual crisis-mode, and for too long the Pakistani government has been overly reliant on U.S. bilateral assistance. While it may not be the first choice of the Pakistani government, an IMF bailout is the most likely outcome of this financial crisis because it is probably the only path for Pakistan to regain its macroeconomic stability. Any “bailout” from a bilateral donor (meaning China or Pakistan’s Gulf State friends, including Saudi Arabia which has recently provided Pakistan $3 billion for a period of one year as balance-of-payment support) will not get at the root issues that Pakistan faces—its loose macroeconomic, fiscal, and monetary policies. Pakistan needs to get its house in order and remedy many of its domestic economic issues. 18 out of Pakistan’s 21 IMF programs over the last 60 years have not been completed despite obtaining over $30 billion in financial support across those programs. Just like today’s current financial crisis, Pakistan’s last two IMF packages (in 2008 and 2013) were also negotiated by incoming governments.

Q3: Would the U.S. support a new IMF Pakistan program?

A3: The current U.S. administration and Congress would not be supportive of additional bilateral funding to Pakistan—meaning money coming directly from the United States. Since 2001, Pakistan has been the beneficiary of the U.S. Coalition Support Fund (CSF), which reimburses allies for costs incurred by war on terrorism. The CSF is used to reimburse Pakistan for U.S. military use of its network infrastructure (e.g., ports, railways, roads, airspace) so that the United States can prosecute the war in neighboring Afghanistan, as well as certain Pakistani military counter-terrorism operations. The CSF for Pakistan has been as high as $1.2 billion per year, and, in recent years, $900 million per year. With nearly $1 billion in CSF distributed every year, along with $335 million in humanitarian assistance, it will be difficult to convince Congress to appropriate more funds for a Pakistan bailout yet. However, due to inaction on the part of Pakistan to expel or arrest Taliban insurgents operating from Pakistani territory, the United States has recently cut another $300 million from the CSF, bringing the total to $850 million in U.S. assistance withheld from Pakistan this year. In fact, all security assistance to Pakistan, whether it is international military education and training, foreign military financing, or the CSF, has been suspended for this year according to one State Department official.

An IMF program for Pakistan faces resistance from some members of Congress. A group of 16 senators has already signed a letter to President Trump that outlines their opposition to bailing out Pakistan because the IMF package would, in effect, be bailing out Chinese banks.

The Trump administration has also taken a hardline stance towards assisting Pakistan with its financial crisis. Secretary of State Pompeo stated this past July that he would not support an IMF bailout that went towards paying off Chinese loans. In September, Secretary Pompeo visited Pakistan, and there were indications that the United States would not block an IMF program. If an IMF program is enacted, there is no doubt that it would have stronger conditionality and a greater insistence on full transparency of Pakistan’s debt obligations.

Q4: Would an IMF package be a bailout of the Chinese?

A4: The terms of Pakistan’s loans with China are currently unclear and multiple news outlets have reported that Pakistan has refused to share CPEC information with the IMF. However, it is not unreasonable to presume that the terms in those contracts would be more demanding than terms typically asked by the IMF. Unless the terms between Pakistan and China and its state-owned enterprises (SOEs) are disclosed and made clear to the IMF, then it is unwise for the IMF to proceed with a bailout package.

The IMF’s focus is not in projecting power and influence; rather it seeks to help struggling nations get back on their feet. The same cannot be said for China. China appears to be most interested in spreading its influence and gaining valuable assets for its military and expanding economy, while at the same time exporting its surplus capacity for infrastructure building. In its annual report to Congress, the Department of Defense reiterated this concern, “countries participating in BRI [such as Pakistan] could develop economic dependence on Chinese capital, which China could leverage to achieve its interests.”

Of Pakistan’s nearly $30 billion trade deficit, 30 percent is directly attributable to China . If China were concerned about the economic crisis in Pakistan, it would make immediate concessions which Pakistan Finance Minister Asad Umar says China is working on . To help with the crisis, China could readjust its trade surplus with Pakistan in different ways. For example, China could buy Pakistani cement and other purchases in the short term to illustrate that they are aware of and swiftly responding to the economic turmoil in Pakistan. Other nations have struggled with debt obligations to China. For instance, in July 2017, Sri Lanka signed over a 99-year lease for Hambantota Port to a Chinese SOE because of Sri Lanka’s inability to pay for BRI costs. Malaysia took a different path and decided to cancel major infrastructure projects with China in August 2018 due to worries that they would increase its debt burden .

Q5: What are the consequences if there is no IMF package?

A5: It is likely that China will provide even more assistance to broaden Pakistan’s dependency. Chinese banks and SOEs have already invested heavily into Pakistan, so much so that state bank loans have not been fully disclosed to the global community. In fact, Pakistan’s Status Report for July 2017 through June 2018 shows that Chinese commercial banks hold 53 percent of Pakistan’s outstanding commercial debt. However, that percentage may be even higher than the report depicts. While China and Pakistan have agreed to make all CPEC projects readily available to the public, the information is scattered and often left blank on essential financial reports (see July-June 2017 document ), and so it is difficult to obtain a full sense of the degree of Pakistan’s indebtedness to China. Again, much of the loan information provided by the Pakistani government, especially concerning China, is not entirely transparent.

If China chooses to follow through and become the “point person” for an assistance package, the pressure will be taken off the IMF. But, if the United States does not support an IMF package, it will forego major geopolitical potential in the region to its main competitor, China.

Pakistan represents a litmus test of all future cases in which the IMF, United States, China, and any emerging market country are all involved. Depending on how Beijing chooses to navigate Pakistan’s financial crisis, China may soon find itself responsible for rectifying the debt burdens of Zambia and many other BRI countries.

Q6: What are U.S. geopolitical “equities” in Pakistan?

A6:  The United States is invested in Pakistan because of its significant geopolitical importance.

• Pakistan is an important component of the balance of power in South Asia. Both India and Pakistan have nuclear weapons capabilities. Moreover, China, India, and Pakistan have been in dispute over the Kashmir region since 1947. Regional stability is in the interest of the United States.
• Despite its ambiguous stance on militant groups, Pakistan is ostensibly an ally of the United States because of its proximity to Afghanistan. Since the War on Terror began in 2001, Pakistan has been an active partner in the elimination of core al Qaeda within Pakistan and has facilitated aspects of the U.S. military campaign in Afghanistan.
• The United States now seeks a negotiated settlement to the conflict in Afghanistan. To accomplish this, perhaps the United States will come to Pakistan with a simple offer: “deliver the Taliban, and we will give you the IMF.”
• Whereas previous administrations may have tried to “play nice” with Pakistan, under the Trump administration, there is a chance that the U.S. government will push the IMF to adopt stricter terms for a Pakistan bailout, citing the Pakistani government’s failures of the last two programs.
• Other than strategic military importance, one of the most important national security challenges to the United States is Pakistan’s demographic trends. Currently, over 64 percent of Pakistanis are under the age of 30—the largest percentage of youth in the country’s history. Over the next 30 years, Pakistan’s population will increase by over 100 million, jumping from 190 million to 300 million by 2050 . The spike in youth population presents an opportunity for the U.S. government and private sector to increase investment in Pakistan. Pakistan’s economy must generate 1 million jobs annually for the next three decades and GDP growth rates must equal 7 percent or more per year to keep up with the population boom. Were Pakistan’s economy to collapse, the world would see the first instance of a failed state with a substantial arsenal of nuclear weapons.
• An economically healthy Pakistan could be a large market for U.S. goods and services. If the U.S.-Pakistan relationship is strained as a result of this financial crisis, it will not only harm the United States militarily but will also harm U.S. businesses and Pakistani consumers.

Q7: Should the U.S. support an IMF package to Pakistan?

A7: Given the geostrategic importance of Pakistan for the United States, we should support a package but with stronger conditionality than in 2013 along with full transparency and disclosure of its debt obligations.

Daniel F. Runde is senior vice president, director of the Project on Prosperity and Development, and holds the William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Richard Olson is a non-resident senior associate at CSIS. He is the former U.S. ambassador to the United Arab Emirates and Pakistan; most recently he served as the U.S. special representative for Afghanistan and Pakistan during the Obama administration. Special thanks to CSIS Project on Prosperity and Development program coordinator Owen Murphy and intern Austin Lucas for their contributions to this analysis.

Critical Questions   is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2018 by the Center for Strategic and International Studies. All rights reserved.

Daniel F. Runde

Ambassador richard olson, programs & projects.

• Project on U.S. Leadership in Development

• Work & Careers
• Life & Arts

Become an FT subscriber

Try unlimited access Only $1 for 4 weeks

Then $75 per month. Complete digital access to quality FT journalism on any device. Cancel anytime during your trial.

• Global news & analysis
• Expert opinion
• Special features
• FirstFT newsletter
• Videos & Podcasts
• Android & iOS app
• FT Edit app
• 10 gift articles per month

Explore more offers.

Standard digital.

• FT Digital Edition

Premium Digital

Print + premium digital, ft professional, weekend print + standard digital, weekend print + premium digital.

Essential digital access to quality FT journalism on any device. Pay a year upfront and save 20%.

• Global news & analysis
• Exclusive FT analysis
• FT App on Android & iOS
• FirstFT: the day's biggest stories
• 20+ curated newsletters
• Follow topics & set alerts with myFT
• FT Videos & Podcasts
• 20 monthly gift articles to share
• Lex: FT's flagship investment column
• 15+ Premium newsletters by leading experts
• FT Digital Edition: our digitised print edition
• Weekday Print Edition
• Videos & Podcasts
• Premium newsletters
• 10 additional gift articles per month
• FT Weekend Print delivery
• Everything in Standard Digital
• Everything in Premium Digital

Complete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.

• 10 monthly gift articles to share
• Everything in Print
• Make and share highlights
• FT Workspace
• Markets data widget
• Subscription Manager
• Workflow integrations
• Occasional readers go free
• Volume discount

Terms & Conditions apply

Explore our full range of subscriptions.

Why the ft.

See why over a million readers pay to read the Financial Times.

International Edition

• EXPRESS NEWS
• URDU E-PAPER
• ENGLISH E-PAPER
• SINDHI E-PAPER
• CRICKET PAKISTAN
• EXPRESS LIVE
• CAMPUS GURU
• EXPRESS ENTERTAINMENT
• FOOD TRIBUNE

Pakistan demands Afghanistan to hand over TTP terrorists involved in Besham attack

Interior minister asks Afghan interim govt to act against terror network on its soil

Gandapur, Centre to ‘jointly address’ K-P power woes

55% of govt scheme pilgrims in Saudi Arabia

Panic in Bishkek

City under siege

Doctors ‘arm-twisted’ into discharging PTI’s Yasmin Rashid

PM lauds Norway’s landmark decision to recognise Palestine

Loss of Raisi, Abdollahian truly tragic and irreparable: COAS

Hamas fires missiles at Tel Aviv, prompting first sirens in months

Army officer, soldier martyred in Peshawar IBO: ISPR

Kuwait, Qatar emirs to visit Pakistan on PM’s invite

FIR registered against 400 suspects in connection with Sargodha violence

Police have arrested over 28 individuals in connection with the mob violence so far

Talat Hussain, celebrated Pakistani actor, passes away at 83

Veteran star breathed his last in Karachi after prolonged illness

Cyclone hits Bangladesh as nearly a million flee inland for shelter

Experts recorded maximum wind speeds of 90 kilometres from the severe Cyclone Remal so far

More than 670 feared dead in Papua New Guinea landslide

Only five bodies retrieved from rubble so far, remoteness and tough terrain are slowing rescue and aid efforts

55% of capacity of major sectors couldn’t be traced

It leads to evasion of income tax, sales tax and federal excise duty

Experts back soilless crop growing technique

In hydroponics, crops can be produced in any season with less input, output

Deep reforms agenda proposed

PIDE for dismantling outdated institutions that hinder research, tech advancement

Pakistani rupee beats Asian peers

Declared best performing currency in region as RDA inflows surge beyond $8b

PSX cheers IMF loan, UAE investment

KSE-100 index jumps 641 points, or 0.85% WoW, settles at 75,983.04

LIFE & STYLE

Another of the greats gone: Tributes pour in as Pakistan bids farewell to acting titan Talat Hussain

Icon passed away at 83 on Sunday in Karachi after prolonged illness

Remembering Talat Hussain: Five performances that left a mark

Veteran actor passed away at the age of 83 in Karachi

‘Anora’, a raucous comedy about an exotic dancer, wins Cannes top prize

Sean Baker directorial beat 21 other films, including Francis Ford Coppola’s ‘Megalopolis’, to clinch Palme d'Or

Five times Nancy Tyagi recreated celebrity looks to perfection

From Alia Bhatt to Taylor Swift, these fashion icons inspired some of the best work by the Indian influencer

Decision would send strong message of hope and solidarity to brave Palestinian people, says Shehbaz

Lawyer claims neither legal counsel nor family permitted to visit hospital

GPS system being used for first time to track Pakistanis going from Madinah to Makkah

Tarar condemns PTI’s ‘malicious’ SIFC attack

SIFC, economy are Pakistan’s lifeline, minister tells party

Safe City Project launched in Dasu, Chilas to protect foreign nationals

Committee formed, directed to submit its final recommendations within 15 days

Gen Munir expresses deep condolences over sad and unfortunate incident of helicopter crash on May 19

PTI MPA-led protesters storm Peshawar grid station

Demonstrators turn on feeders; PESCO seeks FIR against lawmaker

The final 15

Regulating AI

UAE’s largesse

Poverty in Pakistan

Humpty Dumpty had a great fall

New ‘axis of evil’ and Global North

Skincare 101

The Home Edit

7 Wardrobe Colour Schemes to Embrace This Spring

Israeli military say eight projectiles were identified crossing from the area of Rafah

Twelve injured as Qatar Airways Dublin flight hits turbulence

The turbulence incident lasted less than 20 seconds and occurred during food and drinks service

US expected to lift ban on sale of offensive weapons to Saudi Arabia, FT reports

Saudi Arabia, the biggest US arms customer, has chafed under those restrictions from previous US administrations

Fire at entertainment venue kills at least 24 people in western India

With rescue efforts continuing in Rajkot district of Gujarat province, local mayor says death toll is expected to rise

Fire kills six newborns at baby hospital in India's capital

Fire department says six more children were rescued and taken to a different hospital, with one on a ventilator

Astronomers develop new observation technique to mitigate asteroid risks

The new rotating-drift-scan (RDS) charge-coupled device (CCD) technique, allows asteroid as a point source

Tesla's ‘milestone’ Shanghai battery factory breaks ground

Mass production is set to start in Q1 2025, with an initial capacity of 10,000 Megapack units annually

Elon Musk plans xAI supercomputer, The Information reports

The supercomputer will power the next version of AI chatbot Grok in late 2025

Chinese scientists 'successfully' undertake world's 1st liver xenotransplantation surgery for human

7 days after surgery, 71-year-old patient can move freely without acute or hyperacute rejection reactions

NASA, Boeing clear two technical hurdles for Starliner's debut crew flight

Starliner's first crewed flight is final test mission before NASA can certify spacecraft for routine astronaut trips

1st PNSC Inter-Provincial Women Softball Championship kits unveiled

The event is a great opportunity for softball players to make it to the international level, Ronak Lakhani

Ruud dreams of French Open title

World number seven beat 44th-ranked Czech 7-5, 6-3 in Saturday's final to add to Geneva trophies won in 2021 and 2022

Marchand continues Olympic build-up with 100 fly win in California

Five-time world champion secured the 100m butterfly title with a time of 52.56 seconds

Osaka, Alcaraz bring curtain up on French Open

Japanese star meets Italy's Lucia Bronzetti, while Alcaraz faces J.J. Wolf

PSG win French Cup final on Mbappe's farewell appearance

Goals from Ousmane Dembele and Fabian Ruiz led the team to 2-1 victory against Lyon

ENTERTAINMENT

Bethenny Frankel furious over denied entry to Chanel

Returns in designer attire and gains access.

Bradley Cooper joins Pearl Jam for surprise performance at BottleRock

Bradley Cooper joined Pearl Jam onstage at BottleRock for a surprise acoustic duet of "Maybe It's Time".

Princess Charlene poses with twins before joining Prince Albert at Monaco Grand Prix

Princess Charlene celebrated Mother's Day with her twins before joining Prince Albert at the Monaco Grand Prix

George Floyd biopic titled "Daddy Changed the World" is officially in the works

George Floyd biopic "Daddy Changed the World" with his daughter's involvement aims to explore his life and legacy.

Elsa Hosk stuns in double dose of retro glamor at Cannes film festival

Elsa Hosk wows Cannes in retro glam: Marilyn Monroe vibes in Prabal Gurung & Saint Laurent halter.

AI: A friend or a foe?

For Pakistan, this power, if harnessed responsibly, could be a game-changer; but it can also be a missed opportunity.

Punjab: Revolutionising healthcare and youth engagement

The Punjab govt, under CM Maryam, is investing heavily in the healthcare sector across 36 districts of the province.

Combatting agricultural fraud

This alarming trend not only undermines the economic sustainability of farming but also exacerbates food insecurity.

DHA and JBS partner to equip students with cutting-edge tech skills for future career

With this program, students are well prepared to cope with the ever-changing digital landscape

RECENT BLOGS

Updated May 22, 2024

Updated May 20, 2024

Punjab's plastic ban: A commendable step for the future

This is not just about banning plastic bags; it is about fostering a culture of responsibility and sustainability.

The future of Pak-Iran relations after Ebrahim Raisi

The death of Ebrahim Raisi injects a substantial degree of uncertainty into the future of Pakistan-Iran relations.

IMF's tax demands leave PM in a bind

Updated May 25, 2024

No dice with foreign lenders unless all exemptions are axed first, PM briefed

Poverty is costing the country on socioeconomic, political, technological and developmental fronts

By calling ISI official, IHC judges making a point

Usually superior courts avoid summoning serving military officers

Western media calls Russia-China visit a part of ‘a partnership against the West’

Pakistan seeks $17b from China

Proposes ambitious plans to expand CPEC, requests funding for nine key projects

Updated 14 hours ago

Malik Riaz says under immense pressure, 'will not allow anyone to use me as pawn'

Updated 16 hours ago

I've been punished for contributing towards the progress of the country, says Bahria Town chairman

Gandapur-COAS interaction limited to pleasantries

Updated 22 hours ago

K-P CM says Imran open to negotiation for country’s sake

Police thwart another Jaranwala-like tragedy

Cops rescue Christian man in Sargodha before mob lynches him over allegation of blasphemy

Pakistani students who returned from Kyrgyzstan share harrowing stories of the mob violence they faced last week

Former Sindh governor decides to return home

To take active part in national politics without any pressure

Missing Algerian man found alive from neighbour's cellar after 26 years

Missing since 1998, now 45 years old Omar B was found being held by neighbour 200 metres away from home

Sindh vows to provide up to 100 units of free electricity

Updated May 24, 2024

Will leave country, but won’t become slaves to establishment: Fazl

JUI-F chief announces initiation of nationwide movement, with a public rally scheduled for June 1 in Muzaffargarh

Third ‘Congo virus’ case reported in Attock

Authorities confirm presence of virus in first two patients after their deaths

6 NATO countries to create ‘drone wall’ for border protection: media

Lithuania, Latvia, and Estonia, as well as Poland, Finland, and Norway, will join initiative

E-Publications

Khurram Manzoor Predicted 4 Semi Finalist Of T20 World Cup 2024 | Pakistan News

Pakistani Spent Millions Of Dollars On Tea | Kosmopolitan | Pakistan News

Dost Ki Biwi Say Chakar - Jan Le Gaya | Pakistan News | Express News

PTI take Big decision | News Headlines 3 AM | Pakistan News | Latest News

Mirza Akhtiyar Baig Gives Big News regrading Car Manufacturers in Pakistan | KosmoPolitan

Pakistan Sab Sy Dil kash Mohalla Sethiya Ki Tareekh | Mustansar Hussain Tarrar | Pakistan News

Saim Ayub Ki Chutti Babar Azam bhe Mushkil Mein !Khurram Manzoor Bari Khabar Le Aye| Pakistan News

Jail Janay Ka Shauq Mehnga Par Gaya | Sansi Khez Dastan | Pakistan News

PM big announcement | News Headlines 1 AM | Pakistan News | Latest News

How China Beat Pakistan in Car Manufacturers ? | Syed Nabeel Hussain reveals | KosmoPolitan

• Life & Style
• Prayer Timing Pakistan
• Weather Forecast Pakistan
• Online Advertising
• Subscribe to the Paper
• Style Guide
• Privacy Policy
• Code of ethics

This material may not be published, broadcast, rewritten, redistributed or derived from. Unless otherwise stated, all content is copyrighted © 2024 The Express Tribune.

Economic Crisis in Pakistan: Challenges and Remedies

• Bilal Ahmad
• November 26, 2022
• Daily Write-Ups , Economy of Pakistan
• 40868 Views

The following article is written by Bilal Ahmad , a student of Miss Syeda Saba and Miss Iqra Ali . For years, Miss Syeda Saba has been known for her Grammar teaching methodology, and Miss Iqra Ali for being a top-notch writer and a writing coach.

The decade of the 1960s is considered the golden age of economic growth in Pakistan. Due to the policies of the Ayub Khan regime, economic growth was so impressive that it was seen as a model of economic development by many developing nations. Unfortunately, things continued getting worse thereafter and have now reached a point where most economists think that Pakistan is heading towards bankruptcy. The economic situation of Pakistan is at a critical stage. Today, the country faces serious economic challenges, the first one among which is the ballooning trade deficit. Pakistan is an import-driven country where imports surpass exports. Another challenge is the fiscal deficit, when the expenditure of a government is greater than its total revenue collection. Resultantly, the government has to borrow money from international and national financial institutions such as the World Bank, International Monetary Fund, and Asian Development Bank so that it can enable higher spending without having to increase taxes. The shortage of power and water is also a gigantic economic challenge. The prevailing energy crisis in Pakistan is eating up two percent of the economy; it is because all sectors of the economy are heavily dependent on power consumption. Frequent power outages have immensely damaged the industrial production and overall performance of all the other sectors of the economy. The water crisis is also the biggest issue for economic growth. The water crisis is hampering agricultural production, which has a significant share of the economy. The high cost of doing business is another challenge that needs to be addressed urgently.

Numerous problems and hurdles in the way of starting a business, such as a delay in communication, centralized decision making, lack of loyalty, lengthy registration procedures, and lack of skilled labour force, make it expensive and unaffordable for investors to start a business in the country. This is a serious barrier to economic growth. Another serious challenge Pakistan’s economy is faced with is poor governance, which has stymied smooth and sustainable development. Good governance comes through strong, independent state institutions. A country cannot grow unless the issue of poor governance is resolved. Political instability is like the sword of Damocles for our economy. There is no denying the fact that the political environment of a country has a profound impact on its economy. In a stable political environment, the government does not have to strive for its survival and is able to pay full attention to the economic well-being of the nation by devising long-term policies. Unfortunately, the political conditions of Pakistan have never remained stable. History reveals that since its inception, the country has been longing for a stable democratic government. The law and order situation has also taken a heavy toll on our national economy. Peace and progress are both intertwined. Peaceful conditions are crucial for attracting foreign and local investors.

First and foremost, Pakistan needs to ensure an environment conducive to investors so that foreign direct investment in the country can be increased. The government should offer tax incentives for the establishment of industrial units in various sectors as such units will provide employment to the youth and will also add to the government’s revenue collection. Second, the domestic investment must be encouraged through more flexible tax policies, particularly for small and medium enterprises. Such measures would stabilize the economy and reposition Pakistan on the international stage as an attractive destination for foreign investment. Third, Pakistan needs to focus on building up its domestic industry to expand its exports. All the hindrances to the development of domestic industry must be removed. Fourth, Pakistan must modernize its industrial and agriculture sector. New plants and equipment must be installed for the purpose of enhancing the quality and quantity of industrial production. Fifth, Pakistan needs to broaden its tax base. Currently, the agriculture sector is not being taxed, while large businesses are also often given a big tax break. The tax base can be widened by taxing the agricultural sector and undue tax amnesties to large businesses. Also, there is a dire need to introduce tax reforms and strengthen tax collection coordination at the national and provincial levels. Last but not least, advancement in the field of science and technology is the key driver for the acceleration of economic development. Pakistan needs to invest in the field of science and technology as it will have a positive influence on the agricultural and industrial output.

Taking everything into consideration, it can be said that the country’s severe economic challenges can be tackled if effective strategies and policies are devised and implemented. The country can revive its economy through institutional, educational, industrial, and agricultural reforms. In this way, it can be hoped that Pakistan will become a model of economic development for developing nations around the world.

Are you looking to learn English communication skills to qualify for the CSS and PMS English essay & Precis papers? Let’s join Sir Syed Kazim Ali and learn how to give your ideas and thoughts words, fluently and confidently. CSS & PMS 2024 Extensive English Course

Want to read CSS Pakistan Affairs Solved Past Papers and learn how to attempt them to score high? Let’s click on the link below to read them all freely. All past papers’ questions have been attempted by Sir Kazim’s students, who scored the highest in the subject. CSS Solved Pakistan Affairs

More Essays

Click on any to start reading the essay.

Want to read General Science & Ability Solved Past Papers to learn how to attempt them to score high? Let’s click on the link below to read them all freely. All past papers have been solved by  Miss Iqra Ali  &  Dr Nishat Baloch , Pakistan’s top CSS GSA coach having the highest score of their students.  General Science & Ability Solved Past Papers

Articles Might Interest You!

The following are some of the most important articles for CSS and PMS aspirants. Click on any to start reading.

Recent Posts

Top Categories

Cssprepforum, education company.

cssprepforum.com

Welcome to Cssprepforum, Pakistan’s largest learning management system (LMS) with millions of questions along with their logical explanations educating millions of learners, students, aspirants, teachers, professors, and parents preparing for a successful future. 

Founder:   Syed Kazim Ali Founded:  2020 Phone: +92-332-6105-842 +92-300-6322-446 Email:  [email protected] Students Served:  10 Million Daily Learners:  50,000 Offered Courses: Visit Courses  

More Courses

Basic English Grammar and Writing Course

Extensive English Essay & Precis Course for CSS and PMS

CSS English Essay and Precis Crash Course for 2023

Subscribe to our mailing list to receives daily updates direct to your inbox.

• CSS Solved Essays
• CSS Solved GSA
• CSS Solved PA
• CSS Solved Islamiat
• Current Affairs
• All Courses
• Writers Club
• All Authors
• All Members
• All Teachers
• Become an Author
• Who is Sir Syed Kazim Ali?
• Privacy Policy

CssPrepForum is Pakistan’s largest and greatest platform for CSS, PMS, FPSC, PPSC, SPSC, KPPSC, AJKPSC, BPSC, GBPSC, NTS, and other One Paper 100 Marks MCQs exams’ students. It has become Pakistan’s most trusted website among CSS, PMS students for their exams’ preparation because of its high-quality preparation material.

@ 2023 Cssprepforum. All RightsReserved.

• Monday, 27 May 2024

Navigating Economic Challenges in Pakistan: A Comprehensive Analysis and Roadmap for Solutions

• February 16, 2024

Pakistan faces a myriad of economic challenges that hinder its growth and development potential. From persistent fiscal deficits to high unemployment rates and low human capital investment, the country grapples with a complex array of issues. In this article, we examine the key economic challenges confronting Pakistan, analyze their underlying causes, and propose potential solutions to chart a path toward sustainable economic progress.

One of the most pressing economic challenges in Pakistan is its chronic fiscal imbalance. The government consistently struggles to contain its expenditures while generating sufficient revenue to meet its obligations. High levels of debt servicing, coupled with subsidies and inefficient public expenditure, exacerbate the fiscal deficit, putting strain on the economy.

To address this issue, Pakistan must focus on revenue mobilization efforts, including broadening the tax base, improving tax administration, and reducing tax evasion. Additionally, rationalizing expenditure priorities, enhancing public financial management, and implementing fiscal consolidation measures are crucial steps toward achieving fiscal sustainability.

The high rate of unemployment and underemployment poses a significant barrier to Pakistan's economic growth and social stability. Despite its large and youthful population, the country struggles to create sufficient job opportunities to absorb new entrants into the labor market. The informal sector predominates, characterized by low productivity, inadequate wages, and limited social protections.

To tackle unemployment, Pakistan needs to prioritize policies that promote inclusive growth, entrepreneurship, and skills development. Investing in education and vocational training programs tailored to the needs of the labor market can enhance employability and productivity. Furthermore, fostering a conducive business environment, promoting innovation and technology adoption, and encouraging private sector-led job creation are essential for stimulating economic dynamism and job growth.

Inadequate investment in human capital development is another critical economic challenge facing Pakistan. Despite significant gains in primary education enrollment, quality remains poor, with high dropout rates and substandard learning outcomes. Moreover, access to healthcare services is limited, particularly in rural areas, resulting in poor health outcomes and productivity losses.

To address this challenge, Pakistan must prioritize investments in education, healthcare, and social protection programs. Enhancing the quality and relevance of education, expanding access to healthcare services, and promoting nutrition and sanitation are essential for building a skilled and healthy workforce. Additionally, targeted social safety nets can help alleviate poverty and inequality, enabling marginalized groups to participate more fully in economic activities.

Inadequate infrastructure, including energy, transportation, and water supply, constrains Pakistan's economic competitiveness and productivity. Power shortages and unreliable utilities disrupt industrial operations, while inadequate transportation networks impede the movement of goods and people. Furthermore, water scarcity and inefficient irrigation systems exacerbate agricultural productivity challenges, threatening food security and rural livelihoods.

To address infrastructure deficiencies, Pakistan must prioritize investments in critical infrastructure projects, including energy generation, transportation networks, and water management systems. Public-private partnerships can help mobilize financing and expertise for infrastructure development, while regulatory reforms and transparent procurement processes are essential for ensuring project efficiency and accountability.

Overcoming Pakistan's economic challenges requires a comprehensive and concerted effort by government, private sector, and civil society stakeholders. By addressing fiscal imbalances, promoting job creation, investing in human capital, and improving infrastructure, Pakistan can unlock its growth potential and create a more inclusive and resilient economy. With strategic reforms and prudent policy interventions, Pakistan can navigate its economic challenges and chart a path toward sustainable development and prosperity for all its citizens.

By: Qurat Ul Ain Sabir

Member Legal Awareness Program

[email protected]

Comment / Reply From

You may also like.

Policing as Torture in Pakistan

Principal problems with pakistan and india's separation, the supreme court of pakistan: unveiling the unrivaled authority of judicial review, the rise and fall: the landmark trial of zulfikar ali bhutto, take action: how child protection laws in pakistan can make a difference, rape cases in pakistan: unveiling the disturbing reality, protecting the innocent: navigating the complexities of child protection legislation in pakistan, authorities and duties of the courts and police in pakistan, popular posts.

PRINCIPLE OF NATURAL JUST...

• Post By Ata Ur
• March 27, 2021

Comparative study of Cons...

• Post By Muhammad
• April 23, 2024

Powers of High Court unde...

• Post By Pakistan
• May 4, 2023

UK Law Degree in Pakistan

• March 2, 2022

Stay Connected

Subscribe to our mailing list to get the new updates!

PRINCIPLE OF NATUR...

Comparative study..., powers of high cou....

Subscribe to our newsletter

• Privacy Policy
• Our Authors
• Subscribe Us
• Google Plus

Economy of Pakistan – Challenges and Prospects (CSS Essay)

Table of Contents

1. Introduction

Pakistan today, confronts multiple challenges which vary in intensity. Some of the challenges appear to be multi-dimensional and complex in nature which certainly will take many years to overcome. Interestingly, a few of the problems and challenges have been self-inflicted by the powerhouses that have caused a widespread socio-economic damage to this country. This way, the poor economy of Pakistan remains the chieftain among the challenges since the country’s birth. The weak and fragile structure and the picture of the economy of Pakistan are what inevitably produce other inter-linked social challenges, such as poverty and corruption.

One gets to know that ever-rising inflation, increasing unemployment, shrinking GDP and diminishing exports level are the major obstacles which restrict the ability of Pakistan to have a well-developed and flourishing economy. According to the Economic Survey of Pakistan 2016-17, the inflation rate in Pakistan grew to 5.02% from 4.78%; GDP growth rate went up to 4.71% from 4.04%; unemployment rate declined to 5.9% from 6%; interest rate is 5.75% which remains the same. Although the economic indicators are, by the large, not appreciable but a slight increase in GDP seems to be the positive development.

2. An Overview.

In 1947, Pakistan had 30 million people with per capita income of 100$. Agriculture accounted for almost 50% of economic output with hardly any manufacturing, as all industries were located in India. Therefore, it was unable to feed 30 million people and was dependent on PL-480 imports from the USA. From thereon, Pakistan has come a long way. Today with 170 million people, our per capita income in 2008 was 1000$ which was ten times more. Pakistan is the third largest exporter of rice in the world and producing enough food grains to feed its people. 3 million tons of rice is exported every year by Pakistan which is surplus to our requirements. Pakistan is also one of the five major textile producing countries in the world. So if we measure in relation to where we were vis-à-vis structure of economy, agriculture has come down from 50% to 20%. Therefore, out of total national income, agriculture’s contribution is just 20%, but instead of being deficient in food production, we are actually surplus and that is what productivity means i.e. by using the same land you produce more from the same inputs, that is how economic growth takes place. Agriculture is not only crops, within agriculture there has been a significant change. Livestock, dairy, mutton, beef, poultry and similar other products is 50% of agriculture output in Pakistan. Pakistan also produces third largest quantity of milk in the world. So within agriculture sector, there is a change i.e. major crops are only 36% of agriculture value added and 14% are minor crops, fisheries, orchards, fruits and vegetables. Thus, we are moving in a direction where the same land and same resources are being used more efficiently in order to produce more. As a contrast, agriculture is only 2.5% in the US having a population of 300 million, out of which they not only feed the entire population, but also export to the rest of the world. Therefore, it is important to understand that when it is said that agriculture is producing/contributing more, it is the productivity of agriculture rather than the share of agriculture in GDP. Manufacturing and industry now account for 25% of the income; when we recall there was not even a single industry worth its name at the time of partition. So if we look where we were and where we are, I think the justification for Pakistan in terms of betterment of economic conditions of Muslims in this part is very strong. But where we have failed is that we have not lived up to our potential. In 1969, Pakistan exports of manufactured goods were higher than the combined exports of Indonesia, Malaysia, Philippines and Thailand. In 1960’s Korea emulated Pakistan in its five years planning process. The tragedy is that even a country such as Vietnam which was completely devastated by the war has now overtaken Pakistan. Ten years ago, India which was way behind Pakistan (till 1990’s) is now way ahead. As an economist and student of globalization, the biggest challenge is: how can we organize ourselves to reach that position where at least we can be running not at the nine second a mile but at least ten second a mile race which is going on in the global economy.

3. Challenges to Pakistan’s Economy

(a) we consume more and save less..

People in Pakistan save only 14 pc of their monthly salary generally while worldwide, the average standard of savings is 27 pc. This is the contrast as to why we are in serious difficulty because as a nation this is a problem which we have to recognize. We have to at least double on savings rate otherwise we will remain dependent on foreign sources.

In Pakistan educated people are also more likely to keep their savings at home instead of in the banks.

This was disclosed by Standard Chartered Bank’s study ‘Emerging Affluent Consumers in Asia – The Race to Save’. This survey was conducted in 8 countries including China, Hong Kong, Singapore, India, Taiwan, Korea, Kenya and Pakistan. The survey further said that emerging affluent consumers in Asia could boost their savings by an average of 42 per cent if they move from a basic savings approach to a low-risk wealth management strategy.

(b) We Import More and Export Less.

Pakistan’s trade deficit has hit a record level of 30 billion US dollars in the first 11 months of 2016-17, showing a jump of 42 per cent as compared to the same period in the previous financial year. Exports have declined by three per cent to 18.5 billion US dollars while imports have gone up by 21 per cent to 48.5 billion US dollars. As a nation we prefer to use even the basic commodities of foreign countries rather than locally manufactured goods. Unless we do not change this attitude of preferring the imported goods we have to keep on relying on outsiders to fill in this gap b/w our imports and exports. Relying on outsiders’ means that there are cycles, ups, and downs i.e. when things are good, one gets financing, and when things are bad one starves for financing. No nation which strives to preserve its honour must go through this particular route. The lower is this gap between our export earnings and expenditure on imports – and that can be achieved only by expending our exports; our reliance on external sources would be reduced.

(c) Government spends more than it earns as Revenues.

Fiscal deficit is the difference between the revenues which are collected in a year and the total expenditure incurred by the Government. Pakistan’s government takes away 20% of national income as its own. 80% is left in the private sector and 20% in the hands of the government is spent on defence, debt servicing, development on education, health, general administration etc. Country’s budget deficit, a gap between expenditures and revenues, was recorded at 5.8 percent of the GDP during FY2017 as against the target of 3.8 percent of the GDP. In expenditures, the government had spent Rs888.1 billion on the country’s defence. Similarly, a massive amount of Rs1348.4 billion was spent on paying the country’s interest on domestic as well as foreign borrowings. The government had earmarked Rs.1,360 billion in annual budget for paying interest on domestic as well as foreign loans during fiscal year that started from July 2016 and ended in June 2017. The revenue generated is only 15% of the GDP at best, and in the worst days it is 12 to 13%. Out of the every rupee of income received by a Pakistani, on average, tax paid is only 9 paisas and 91 paisas remain with the individual. In 2007-2008, Pakistan’s fiscal deficit was more than 7% which means its income or revenues were only 13% of GDP whereas, expenditures were 20%. Therefore, fiscal deficits have to be financed from somewhere, so how do you finance them; you either go again begging the external donors, or to the State bank of Pakistan. The financing provided by the State bank of Pakistan is dangerous because it creates high inflation in the economy, which is injurious to the middle class, those earning fixed wages and salaries, and the poor. Therefore, there is an uproar in the country if the inflation rate goes up. Continuing large fiscal deficits year after year may plunge the country into debt trap again.

(d) Our Share in the World Trade is shrinking.

In 1990, Pakistan’s share was 0.2% of the world trade. After 20 years it has come down to 0.12% in a very buoyant world economy. World trade has been growing faster as compared to the world output. India in the same period had doubled its share from 0.7% to 1.4%, while Pakistan is going the other way and that is the reason why exports/imports imbalance is increasing. We are not taking advantage of the opportunities which a buoyant world economy is providing. Pakistan is stuck with only a few commodities – textiles, leather, rice, sports, goods and the surgical goods. We have not entered the markets for more dynamic products. All our exports are to a few markets – the USA, EU and the Middle East. So this narrow export base and very limited geographical spread are not allowing us to expand our share. Unless we improve the quality of our products, go out and do the marketing abroad, invest in research and development, the prospects do not look promising. That is why we are lagging behind other countries which from way back are over taking Pakistan.

(e) We Badly Lag in Social Indicators.

One of the most glaring weaknesses is that a country like Pakistan that should have had best indicators in literacy, infant mortality, fertility rates, in access to water supply, in primary enrolment ratios has social indicators which are more comparable to Africa rather than to the countries of similar per capita income. Even Tajikistan, which is a very poor country, has better literacy rate and primary enrolment ratios than Pakistan. What does it means? It means that if we had literacy rate of 100% instead of 55%, then in 2009-2010 our per capita income would have been 2000$ rather than 1000$. Instead of 30 million middle class in Pakistan we would have 60-70 million middle class people; we would have poverty reduced to 15-20%. We have committed to achieve the millennium development goals by 2015 i.e. we will be able to reach 80-85% literacy rate, but it is doubtful that this will happen. Why do we have regional inequalities? Why Baluchistan is lagging behind other provinces? It is because of literacy rates and primary enrolment ratios. There is a direct correlation between regional inequities and backwardness with the level of education.

(f) We Face Energy and Water Shortages.

Another challenge we face today is energy and water shortages, and that is not because we are not generating enough electricity or we are not having enough water. With the losses of KESC from the point it has generated to the point they realize the billing is 45%, so 55% people are paying for those who are stealing the electricity. Government of Pakistan out of its own limited resources is paying 200 billion rupees every year as subsidies for electricity. Our industry is at a disadvantage that they get the orders from foreign countries but they cannot execute the orders because there are electricity outages. In addition to economic losses it also creates inconvenience for pursuing normal life. We have silting of our dams, but no additional dams have been constructed since Tarbela in 1974. We have water course losses of about 20-25%. Even after these losses, the water is inequitably distributed. The influential land lords are able to take greater share of water from the canals as compared to poor farmers. Therefore, the productivity of poor farmer is only one ton per acre as compared to 3 tons by large holders. If we provide the water equitably to the small farmer, he would also be able to increase the productivity from one to at least two tons resulting into additional income, increase in exports of food grains, cotton and fruits and vegetables which will add to export earnings of Pakistan. With the climate change taking place with all the glaciers in Himalayas which are going to melt, we are going to have difficulties in future due to global warming.

(g) Cost of Doing Business is High.

Pakistan has slipped three places on the Word Bank’s Ease of Doing Business Index 2017 and is now ranked a lowly 147th among 190 economies, denting the government’s pro-business image ahead of next general elections. The index is mostly used as a guide by foreign investors to learn more about a country, aiding decisions on pouring in money in the economy. Pakistan, however, slipped from its last year’s rating despite the introduction of some reforms in areas of starting a business and making international trade relatively easier. If one government department is to be blamed for the overall poor performance, it is the Ministry of Finance, as the country’s ranking nosedived on the indicators of paying taxes and getting credit. Pakistan lost 16 positions on the indicator of paying taxes, standing at 172, according to the 2018 report. Last year, Pakistan’s ranking was 156. One of the reasons behind the dismal performance was the increase in overall tax rates that surged to 33.8% of total profits. Lack of coordination among various government agencies, innumerable laws and regulations that are antiquated and outdated have proved to be serious impediments. Labour laws, inspections by multiple agencies, the delays in the court system, infringement of intellectual property rights and evasion of taxes by competing firms in the informal sector have rendered some of the well-established firms unprofitable, or the feasibility of starting near ventures questionable.

(h) Crisis of Governance and Implementation Weaknesses.

If we glance on policy documents of various governments on education, agriculture, health, trade policy etc, and look at the same policy forty years ago and the problems, there is hardly any significant record of implementation of those policies or plans over this period. We produce five years plans and all kinds of medium term frameworks, but it is the poor governance and implementation that are the weak links in getting things done. Unless we strengthen civil services and bring about a merit based system of recruitment, promotion, performance evaluation, compensation, disciplinary action, etc, we will not be able to see any difference in the quality of governance. Orders are given by the higher ups but they are not carried out; summaries are approved, but they remain buried in the files and therefore; whether it is education, health, water supply, revenue or law and order, you can pin down the problem to the governance issues. Unless we fix the governance issue, the economy is not going to take off at the speed which is required.

(i) Uncertainty and Unpredictability due to Lack of Continuity.

Every government whether military or civilian starts with a clean slate, as if nothing happened before them and nothing will happen after them. This is not the way the real world works. You take the projects and programmes which were initiated by the previous governments, evaluate them as to what the strengths and weaknesses were, fix those weaknesses and carry them forward. It will take only few years to bring these inherited projects to completion and the country will benefit from new motor ways, new ports, highways, educational institutions etc. But the blame game of successive governments results into abrupt termination of all such projects and programs. When these are resumed the cost has escalated three times and it takes several additional years to complete them. In the meanwhile the people of Pakistan suffer because of this lack of continuity. When faced with such unpredictability about the future, the investors are pondering whether they should invest in this country as they are uncertain whether the new government when comes in would stop or alter what the previous government was doing, or adhere to the commitments made to them. Take the example of Higher Education Commission, which was sending 1700 students for PhDs abroad but the new government comes in and suspends the funding of those programmes. This solved down the process of faculty development for our universities at a time when we should have been sending twice as many scholars.

(j) Political Stability, Law and Order/Security.

The overall arching theme is that for a robust economy we should have political stability, law and order and security. The Armed Forces of Pakistan deserve gratitude for what they have done in Malakand Division to bring about stability as far as the law and order situation is concerned. The sooner the country is gotten rid of this image of political instability, poor law and order situation and insecurity, whereby investors from all over the world hesitate in coming to Pakistan and invest, we will not be able to make any progress in this country. In 2007, Pakistan was one of the most favorite countries among the international investor community. A thirty year piece of paper was floated, which was a bond for Pakistan to be paid in 2037 and Pakistan got four times over subscription at a price which was only 300 basis points above the US treasury. Very few countries can claim to have that kind of credibility with international fund managers. However, in two years’ time we have missed that boat. Therefore, it is imperative that we resume the journey which has been interrupted by nurturing a stable, secure and peaceful political environment.

4. Prospects/Solutions to Improve Economy

How can we overcome these challenges and problems and improve our economy? A lot has been written and talked about, but I will focus on only a few action points.

(a) Change in National Psyche and Mindset.

We as a nation are too much negative oriented and too much cynical where we find everything wrong in this country. Unless we change our mindset and unless everybody who is doing what he is supposed to do, carries out his or her task with sincerity and honesty, we are not going to go anywhere. We should not expect any Messiah to come and fix our problems we have to do it ourselves individually and collectively. There are no short cuts available. Media is muddying the water by their sensational stories and inviting so called experts who contribute in projecting negative thinking and negative national psyche. Unless we have a positive “can do” mentality, it will be difficult to progress. Unless each one of us changes our mindset rather than blame the government and the system, we are not going to go anywhere in this race for global economic survival. This is easier said than done. But I expect our younger generation to be more responsive and responsible.

(b) Building up of Human Capital.

There is no substitute to building up human capital. Private sector, public sector, NGOs, local communities, philanthropists etc, all here to put their hands on deck and participate in making sure that every child goes to school. Every high school graduate has some technical and vocational skill or goes for higher education. Unless we build up human capital, we are just going to be left behind because the world economy is going to be a knowledge based economy. It is not an economy where you memorize material or reproduce that in the exam and forget about it – that is no longer the case. One has to acquire the knowledge and use it in order to apply to problem solving. This is a new paradigm where human capital is as important as machinery and equipment. Pakistan lags behind other countries in the institutions, infrastructure and incentives for human capital formation. We have no choice but to accelerate the pace to catch up with others.

(c) Use of Technology.

The technology is spreading like a wild fire. How many people five years ago could have thought that even in a small towns and villages of Pakistan, one would access to mobile telephones. 95 million Pakistanis have mobile phones today. You can use this technology in order to provide those banking services, information on climate/weather, agriculture extension, health, education etc. It is a powerful tool which can leapfrog a lot of time which we have wasted. Using technology particularly the information/communication technology for the betterment of social and economic problems of Pakistan is something which needs to be done but it cannot be done the way we have compartmentalized this into different ministries. A more holistic and comprehensive approach that deploys technology for poverty reduction has to be put in place.

(d) Young Labour Force.

Pakistan is one of the few countries which has a young labour force which can be harnessed for its own and global economy. Pakistan’s youth cohort makes up over 60 per cent of the population , providing Pakistan an opportunity to leverage their strategic position in order to enhance the country’s economic growth Japan, Europe, USA and after 2050 China are going to have aging population where the ratio of old to young people is going to increase. India and Pakistan are two countries where the ratio of younger people to the older ones is going to increase. If we tool these young men and women properly, we increase the female labour force participation, give them skills and knowledge, they can become the labour force for the rest of the world. This will give a big boost to Pakistan’s own economy. In 2001, worker remittances were less than a billion dollars; today we have almost 7-8 billion dollars. Now this can be multiplied by three or four times if we have educated labour force i.e. skilled labour force going for overseas employment. This is also a way to create employment opportunities because if you have large number of younger people coming to labour force and you don’t have job opportunities for them you can have social upheaval. Therefore, it is imperative to create employment opportunities for them and one of the avenues is to train them in the kind of the skills which are needed not only by the national economy but also by the international economy.

(e) Governance, Devolution and Decentralization.

As the population is increasing, one cannot govern Pakistan sitting in Islamabad, Karachi, Lahore, Peshawar or Quetta. One has to devolve powers, decentralize and delegate authority, provide resources to the local/district governments so that they can take decisions at their own. Those decisions would be very much in accordance with the requirements and the needs of those communities. Sitting in Islamabad one cannot visualize what is needed in Chaghi or Loralai, but the people in Loralai and Chaghi know exactly whether they need water, fertilizers or fruit processing industry. Let us devolve powers to the people at the grassroots level and there would be much better allocation and utilization of resources. There must, however, be accountability of the local governments by the provincial governments and of provincial governments by the federal government but not interference or usurpation of powers. If we do that, then a lot more can happen with same amount of resources which are being wasted today, and the economic growth rate can be raised from 6-7 percent average to 8-9 percent annually.

Check our Collection of English Essays specially for CSS

• Essay Outline: Electoral Reforms in Pakistan: Necessity and Challenges
• Health for All | Essay Outline for CSS PMS
• Exploring the Economic Potential of BRICS Countries: Opportunities and Challenges

Art and Morality Essay Outline

• Instruction in Youth is Like Engraving in Stone | Complete Essay with Outline

Public Office is a Public Trust | Complete CSS Essay

• Essay Outline “Good Governance is deeply rooted in Human Development”
• CSS Essay Outline | The Importance of Water Conservation and Management

How to Write Effective Essay for CSS Exams

• How to Write Effective Essay on Economy? 7 Steps

About the author

Shahzad Faisal Malik is the administrator of CSSTimes.pk and is responsible for managing the content, design, and overall direction of the blog. He has a strong background in Competitive Exams and is passionate and sharing information with others. Shahzad Faisal Malik has worked as a Graphic Designer/Content Creator at CSSTimes in the past. In his free time, Shahzad Faisal Malik enjoys watching Cricket, writing blogs for different websites and is always on the lookout for new and interesting content to share with the readers of this website. As the website administrator, Shahzad Faisal Malik is dedicated to providing high-quality content and fostering a welcoming and engaging community for readers. He looks forward to connecting with readers and hearing their thoughts and feedback on the website.

You may also like

Essay Outline: Electoral Reforms in Pakistan:...

Exploring the Economic Potential of BRICS Countries:...

Instruction in Youth is Like Engraving in Stone |...

Leave a Comment X

I am highly indebited of you The CSS Times team you are doing matchless work for the candidates. I am the aspirant and highly appreciate you. May you remain blissful and happy always.

Pakistan: Five major issues to watch in 2023

Subscribe to the center for middle east policy newsletter, madiha afzal madiha afzal fellow - foreign policy , center for middle east policy , strobe talbott center for security, strategy, and technology @madihaafzal.

January 13, 2023

1. Political instability, polarization, and an election year

Politics will likely consume much of Pakistan’s time and attention in 2023, as it did in 2022. The country’s turn to political instability last spring did not end with a dramatic no-confidence vote in parliament last April that ousted then Pakistani Prime Minister Imran Khan from office. Instability and polarization have only heightened since then: Khan has led a popular opposition movement against the incumbent coalition government and the military, staging a series of large rallies across the country through the year.

The struggle for power in Pakistan continues into 2023. While the incumbent government has not ceded to Khan’s demand for early elections, country-wide elections are constitutionally mandated to be held by October this year. It benefits the government politically to hold them off as long as it possibly can as it tries to dig itself out of Pakistan’s urgent economic crisis and its lackluster domestic performance (its diplomatic foreign policy approach has fared better, but that may not matter for elections). The last year has cost it precious political capital, and Khan’s party did very well in a set of by-elections held in July and October. The state has tried to mire Khan and his party in legal cases, relying on a familiar playbook used against opposition politicians in Pakistan, albeit to limited effect, with the courts’ involvement.

Khan’s party still controls two of Pakistan’s four provinces, Punjab and Khyber Pakhtunkhwa (KP), and the incumbent federal government’s (extra-legal) efforts to try to wrest power from it in Punjab, the largest province, have been unsuccessful (thanks to the courts). The year is off to a dramatic start, with Khan’s party initiating the process to dissolve the Punjab and KP assemblies this month to pressure the federal government into early elections.

For politics-obsessed Pakistan, the biggest question remains who will win the next general election. Will former Prime Minister Nawaz Sharif (brother of current Prime Minister Shehbaz Sharif) return to Pakistan to run as the head of his party, the PML-N? Can Imran Khan win on the strength of his popular support, despite his confrontation with the military? Regardless of the outcome, we can say this much given the histories of the main contenders: The direction of the country is unlikely to change.

2. A precarious economic situation

Pakistan’s economy has been in crisis for months, predating the summer’s catastrophic floods. Inflation is backbreaking, the rupee’s value has fallen sharply, and its foreign reserves have now dropped to the precariously low level of $4.3 billion, enough to cover only one month’s worth of imports, raising the possibility of default.

An economic crisis comes around every few years in Pakistan, borne out of an economy that doesn’t produce enough and spends too much, and is thus reliant on external debt. Every successive crisis is worse as the debt bill gets larger and payments become due. This year, internal political instability and the flooding catastrophe have worsened it. There is a significant external element to the crisis as well, with rising global food and fuel prices in the wake of Russia’s war in Ukraine. The combination of all these factors has spelled perhaps the greatest economic challenge Pakistan has ever seen. Yet the government has been mired in politicking, and the release of a $1.1 billion loan tranche from the International Monetary Fund (IMF) remains stalled as Islamabad has pushed back on the IMF’s conditions. The government has now resorted to limiting imports and shutting down malls and wedding halls early, small measures that fail to adequately address the problem.

Related Books

Madiha Afzal

January 2, 2018

Stephen P. Cohen

November 4, 2011

August 9, 2006

Pakistan may end up avoiding default for the time being with IMF help and loans from friendly countries, especially Saudi Arabia and other Gulf nations. But those won’t address the clear underlying malaise of the economy – and the fact that something fundamentally will need to change, in terms of how much the economy produces versus how much it spends, to avoid default down the road. But none of Pakistan’s political parties seem to have the political will or ability to bring about such change.

Pakistan must reportedly pay back $73 billion by 2025; it won’t be able to do so without debt restructuring.

3. Flood recovery

A “ monsoon on steroids ” – directly linked to climate change – caused a summer of flooding in Pakistan so catastrophic that it has repeatedly been described as biblical. It left a third of the country under water – submerging entire villages – killed more than 1,700, destroyed homes, infrastructure, and vast cropland, and left millions displaced.

More than four months after the worst of the flooding, nearly 90,000 people are still displaced from their homes, and the floodwater is still standing in some areas. It would be enormously difficult for any country to recover from such a disaster and rebuild lost infrastructure, including roads and schools, let alone a government dealing with a cash crunch like Pakistan’s.

But the Pakistani government – in particular the foreign minister Bilawal Bhutto Zardari, who has visited the United States twice since the summer, and the minister for climate change, Sherry Rehman – has done an admirable job bringing awareness of the flooding catastrophe to the world stage. A donors’ conference Sharif co-hosted with the United Nations Secretary General Antonio Guterres in Geneva this month raised pledges for more than $9 billion for flood recovery over the next three years (the money is mostly in the form of project loans). Pakistan has also played an important role in discussions about the devastating effects of climate change on developing nations, spearheading the effort to place loss and damage on the agenda at COP27 for the first time, and pushing for COP delegates in Egypt to agree to a loss and damage fund.

With billions of dollars in help promised, the government has passed one hurdle. But the road for recovery ahead will be tough: Displaced people are still sleeping under open skies in Sindh province. Implementing a sustainable recovery will require enormous capacity, resources, and transparency in a country already mired in other troubles.

4. Mounting insecurity

The Pakistani Taliban (or TTP), the terrorist group responsible for killing tens of thousands of Pakistanis from 2007 to 2014, have been emboldened – predictably so – by a Taliban-ruled Afghanistan, and once again pose a threat to Pakistan, albeit in a geographically limited region (for now). The group engaged in at least 150 attacks in Pakistan last year, mostly in the northwest. Because the TTP have sanctuary in Afghanistan, the Pakistani state increasingly finds itself out of options when it comes to dealing effectively with the group. The state’s negotiations with the TTP have failed repeatedly, as they are bound to, because the group is fundamentally opposed to the notion of the Pakistani state and constitution as it exists today. The Afghan Taliban have, unsurprisingly, also not proved to be of help in dealing with the TTP – and Pakistan’s relations with the Afghan Taliban have deteriorated significantly at the same time over other issues, including the border dividing the two countries.

At this point, Pakistan’s first preference will be to strike kinetically at TTP targets within its borders, but that will be limited by TTP movement across the border into Afghanistan. That movement is what leaves Pakistan with the difficult-to-resolve TTP issue and complicates things beyond the military operation it launched against the group in 2014. Still, the Pakistani Taliban at this point is not the biggest threat Pakistan faces, given the country’s major political and economic challenges – but left unchecked, it could morph into a significant crisis.

5. Civil-military relations

Pakistan has a new chief of army staff as of November 29 last year. General Asim Munir replaced General Qamar Javed Bajwa, who had held the all-powerful post for six years (due to a three-year extension). The appointment of the army chief was a subject of considerable political contention last year; a major part of the reason Khan was ousted from power was his falling out with the military on questions over the appointments of top army officials.

All eyes are now on how civil-military relations shape up under Munir. Under Bajwa, the military solidified its control over all manner of policy behind the scenes. Bajwa presided over a close “same-page” relationship with Khan; when that frayed, the PML-N was eager to take Khan’s place as the military’s ally and head of the civilian government. Bajwa left office saying the army would no longer be involved in political matters; few in Pakistan believe him. With politics set to dominate the agenda this year and an election imminent, Munir has a chance to show the country whether he will follow in his predecessor’s footsteps, or chart a new course for civil-military relations in Pakistan. Pakistan’s history indicates the former.

Related Content

May 20, 2022

Bruce Riedel, Madiha Afzal

April 22, 2022

February 11, 2022

U.S. Foreign Policy

Foreign Policy

Afghanistan Pakistan

Center for Middle East Policy

April 3, 2024

Online Only

10:00 am - 11:00 am EST

May 26, 2023

Pakistan Grapples with Economic Challenges in 2022–23 Budget

By G.B. Sahqani

In fragile economies, a small political shake-up can disturb a country’s entire development process, slowing down the pace of economic activity, creating a sense of insecurity in the financial sector, and diverting the nation’s progress toward economic security. All of this can result in another set of problems. This is exactly what happened in Pakistan almost three months before the announcement of the federal budget for 2022–23.

Economic and Political Background to the Budget

The coalition government faces mountainous issues: spiraling inflation, massive devaluation of the Pakistani rupee against major world currencies, increasing fuel prices, and the drying-up of foreign currency reserves. Surrounding all of these challenges is the fear of a debt default.

According to recent data from the State Bank , Pakistan has:

• Net reserves of $8.8 billion;
• Commercial bank reserves of $5.67 billion;
• A current account deficit for the financial year 2021–2022 of $17.41 billion and for July 2022 of $3.13 billion; and
• A balance of trade defici t for the financial year 2021–2022 of $44.71 billion and for July 2022 of $3.35 billion.

In July 2022, national Consumer Price Index inflation increased to 24.9% (from 21.3% in the previous month). So far this year, GDP has grown at a rate of 5.97% (against a target for 2022–2023 of 5%).

Much of Pakistan’s political history consists of decisions that were made without considering the economic consequences. Moreover, many previous governments could not succeed in the economic realm because they did not have a good team of economists who could formulate sustainable economic policies. Governments relied mostly on bankers or chartered accountants to run the Ministry of Finance and failed to put the country on a sustainable development track.

The continuing economic problems have been caused by inconsistent economic policies, pursuit of the wrong priorities, and bad governance. This is why Pakistan has not significantly developed over the last 75 years. Fiscal policies have also lacked consistency—subsequent governments changed policies to prioritize certain sectors, resulting in unstable economic conditions.

Some of these facts were highlighted by the new finance minister in his budget speech :

“Every year, a different person used to present budget and every year … economic policies of the government would change due to which confidence of investors and development partners was shaken.”

“In emerging market countries, tax-to-GDP ratio is around 16%, but in Pakistan it is 8.6% at the moment.”

Each new government has blamed the previous one for the bad economy, but none of them has been serious about pulling the country out of the economic crisis. Governments have joined the International Monetary Fund program to overcome fiscal problems and reduce the budget deficit, but they then spend more (and earn less), using most of their revenue to repay the national debt.

In the fiscal year 2022–23, Pakistan’s total debt servicing payment is estimated to be 3.95 trillion Pakistani rupees ($17.9 billion). Public debt (as of March 2022) was 4.44 trillion rupees (72.5% of GDP).

Pakistan’s tax governance remains weak. The state has never been able to create an iron will to collect revenue through good governance, better policies, and a strong tax culture. There is no serious documentation initiative to register retail businesses, even in large cities, and tax them according to their income.

Total tax collected in financial year 2021–22 is 6.125 trillion Pakistani rupees. The revenue target for the year 2022–23 is 7 trillion rupees. Most of the time, the Federal Board of Revenue meets the revenue targets, but that does not mean that the collected amount is the tax due from a nation of 220 million. According to an estimate, tax theft has amounted to around 3 trillion rupees.

Successive governments have failed to improve tax governance, despite funding from the World Bank and other international institutions established to help reform and restructure tax systems. Instead of stopping tax evasion and increasing the number of taxpayers, the government has increased taxes on those who already pay them. This has further burdened businesses and slowed down economic activity. Less than 2% of Pakistan’s population of 220 million people file tax returns.

Fixed Tax Regime for Retailers

This year, the government proposed introducing a special fixed tax regime for retailers, through the Finance Bill 2022, whereby retailers, other than tier one and specified service providers, would pay fixed amounts of income tax, ranging from 3,000 to 10,000 Pakistani rupees, through their commercial electricity bills.

The coalition government estimated that more than 30 billion rupees of tax would be collected from retailers through these measures. Millions of retailers operate in Pakistan and successive governments, despite several attempts, have failed to bring them under the tax net. Various schemes, including fixed tax schemes, have been tried, but every time retailers have threatened strike action that would shutter businesses until the disputed tax laws were withdrawn. Consequently, the government has withdrawn every tax scheme that would have applied to small retailers.

However, this time the government, after initially postponing the proposed fixed tax levy, then decided to reduce its tax impact. Now, tax on retailers other than those falling in the tier one category is chargeable at the rate of 5% where the monthly electricity bill does not exceed 20,000 rupees, and 7.5% where the monthly bill exceeds 20,000 rupees.

Sector-Based Relief

The 2022–23 budget contains a number of measures designed to relieve various sectors of the economy. They include:

• Energy: exemptions from sales tax for the import and local supply of solar panels, to encourage the use of renewable energy;
• Agriculture: exemptions from sales tax for the supply of tractors, agricultural implements, and various seeds including wheat, rice, maize, sunflowers, canola, and rice;
• Health: exemptions from sales tax for imports or donations to charitable hospitals and local supplies, including electricity to charitable/non-profit hospitals with 50 or more beds;
• Agri-based industry: exemptions from customs duties for agricultural machinery for irrigation, drainage, harvesting/post-harvest handling and processing, greenhouse farming, plant protection equipment, and machinery, equipment and other capital goods for agri-based industries;
• Industry: reduced duties for various industrial manufacturing sectors;
• Textiles: decreased tariffs for synthetic filament yarn;
• Pharmaceuticals: exemptions from customs duties for over 30 active pharmaceutical ingredients;
• Oil: reduced minimum tax on turnover of oil marketing companies (from 0.75% to 0.5%).

Revenue Measures

The budget contains various proposals. They include:

• The rate of advance tax will be increased from 1% to 5% of the fair market value of any immovable property purchased by persons who are not active taxpayers.
• The rate of advance tax on registration of vehicles for non-filers will be increased by 200%.
• Advance tax rate on private vehicles with engine capacity of 1600cc and above will be increased.
• On the direction of the Federal Board of Revenue, gas and electricity distribution companies will discontinue the supply of gas and electricity of any person, including tier one retailers, not registered for sales tax or, in the case of notified tier one retailers, registered but not integrated with the Board’s computerized system.
• The Board has already started the integration of the point of sale system to document the retail sector. A total of 4,563 tier one retailers are now connected to the Board and a number of point of sale computerized lucky draws have been held. Prize money of 318 million Pakistani rupees has been paid out to 6,042 winners.
• The petroleum levy will be increased to 50 rupees per liter on several petroleum products, including high speed diesel oil, motor gasoline, superior kerosene oil, and light diesel oil. On locally produced/extracted liquefied petroleum gas, the levy will be increased to 30,000 rupees per metric ton.
• For the 2023 tax year and onward, the income of banking companies earned from investment in federal government securities will be taxed at 55%, 49% and 39% if the gross advances to deposit ratio is up to 40%, 40–50%, or above 50%, respectively.
• For the 2022 tax year and onward, a super tax ranging from 1% to 4% (based on graduated income slabs) will be levied on persons earning more than 150 million Pakistani rupees. The top rate of 4% applies to income exceeding 300 million rupees. However, for the tax year 2022 only, where the annual income of a person engaged wholly or partly in the business of airlines, automobiles, beverages, cement, chemicals, cigarettes and tobacco, fertilizer, iron and steel, liquefied natural gas terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar, and textiles exceeds 300 million rupees, it will be taxed at a rate of 10%.
• For the 2023 tax year, banking companies will pay 10% super tax if their income for the year exceeds 300 million Pakistani rupees.
• For the 2022 tax year and onward, a resident person will be treated as deriving income equal to 5% of the fair market value of any capital assets situated in Pakistan on the last day of the tax year. Such income will be chargeable to tax at the rate of 20% provided certain exclusions (for example, self-owned property) do not apply. Also, where the fair market value of the capital assets in aggregate does not exceed 25 million Pakistani rupees, the tax will not be imposed.
• The whole amount of any capital gain arising on the disposal of immovable property will be subject to tax at rates ranging from 0% to 15%, depending on the length of time that the property has been held.
• For the 2023 tax year and onward, capital gains arising on the disposal of securities acquired after July 1, 2022, will be taxed at graduated rates ranging from 2.5% to 15%, depending on how long the securities were held. Gains resulting from securities acquired on or before June 30, 2022, will continue to be taxed at the flat rate of 12.5% (regardless of the holding period).
• Poverty Alleviation Tax: Tax has been imposed on higher earning persons for poverty alleviation for tax year 2022 and onward.
• Tax has been imposed on income from unutilized property above 25 million rupees, including luxury farmhouses but excluding one self-occupied house.
• Tax exemption on income payment plans invested out of pension/annuity account/plans has been withdrawn.

Pakistan’s economy is under pressure due to a current account deficit of around $10 billion and principal repayments on its external debt of around $24 billion. From April to July 2022, the rupee devalued by more than 10%. Due to the political uncertainty, demand for US dollars increased, the money markets fluctuated, and reserves decreased day by day. Inflation also rose, due to the increases in fuel and energy prices. The government is clearly in a bind; how should it meet the multiple challenges facing it, including the trade and current account deficits and inflation?

In April, the State Bank of Pakistan took some extreme measures by imposing 100% cash-margin requirements against 177 import items to minimize the gap between imports and exports, and requiring the bank’s prior approval before automobiles, mobile phones, and machinery could be imported. However, after four months, it relaxed such requirements. Currently, if the terms of payment for imports are 91 to 180 days, the cash margin requirement will be 25%. It will be 0% if the terms exceed 180 days. The cash margin requirement measures have had a positive impact on the import bill. It decreased from $7.9 billion Pakistani rupees in June 2022 to $6.1 billion in July 2022.

The International Monetary Fund ’s 23rd program for Pakistan has been approved and the first tranche of around $1.2 billion has been received. Bearing in mind the country’s foreign exchange reserves position, Pakistan needs extra support of $4 billion. A funding arrangement is being planned from different sources, including loans from friendly countries.

In view of the economic problems of developing countries such as Pakistan, effective and sustainable policy making and reform can only be done on the basis of proper data analysis. If Pakistan’s economy is not growing at the required pace, then policy makers must find out the causes and prepare a comprehensive development plan to implement sustainable growth without political interference. On the administrative front, there are various issues which need to be addressed; implementing the best policies will not work if there is weak enforcement—that is one of the biggest problems in Pakistan.

At the same time, Pakistan needs stability. Political instability ruins the process of economic development and creates bad governance, which ultimately takes over all the civil institutions, resulting in recurring financial crises.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

G.B. Sahqani is an international trade and tax consultant.

The author may be contacted at: [email protected]

Learn more about Bloomberg Tax or Log In to keep reading:

Learn about bloomberg tax.

From research to software to news, find what you need to stay ahead.

Already a subscriber?

Log in to keep reading or access research tools.

Pakistan’s economic crossroads

The socialist idea of central planning, which leads to a closed economy, has been followed by neoliberalism and laissez-faire in the evolution of the global economy. Public-private partnerships (PPPs) are the most beneficial idea to have been devised yet, and many nations have chosen to privatise their state-owned businesses.

Economists who support capitalism, where the private sector assumes leadership and the state takes on the role of regulator, are the main owners and proponents of these ideas. The bigger and most crucial dilemma for nations like Pakistan is whether to pursue privatization or PPPs alone or combine the two in order to achieve economic progress.

In its 76-year existence, Pakistan has seen many fascinating events, such as the private sector taking the lead in growth, a push for nationalization, and the private sector eventually taking over development. While political parties had a significant role in the establishment of public-sector organizations (PSEs) for employment-related objectives, the private sector operated independently to get a considerable portion of its earnings via monopolization and cartelization.

In Pakistan, governmental institutions are involved in a mutually exclusive manner of operating that allows the public and private sectors to operate freely. However, the reality remains that Pakistan, despite its potential for rapid expansion and its potential to become an Asian tiger, has failed to live up to the hopes of its people.

Pakistan has had significant challenges in attaining strong development due to its mixed political system, given its predominant reliance on foreign loans, assistance, and support programmes from Western nations. As a consequence, the economy is heavily indebted, and the government is working non-stop to stabilize things. Pakistan finds itself in a precarious situation where it must make difficult choices in order to prevent default.

The PPP Chairman, Bilawal Bhutto-Zardari, has criticised the government’s plan to privatise PIA and other SOEs. Hence, there is criticism directed at the government’s desire to eliminate SOEs via privatization. He believes that rather than completely privatising, the government should pursue public-private partnerships. The issue still remains as to whether the approach — privatisation, hybrid mixes, or the PPP model—is the right one for Pakistan.

The hybrid model appears to be a promising solution. Pakistan can benefit from the government’s plan to privatize state-owned enterprises (SOEs) like PIA to eliminate financially unsound businesses. However, the risk of crony capitalism, which often underpins such privatization processes, looms large in countries like Pakistan. Allegations of selling PSEs like MCB to close friends and investors for personal gain were rampant during the final privatization phase of the first Nawaz Sharif regime.

It is a reality that wherever privatization occurs, particularly in developing nations, the governing class is invariably the target of similar accusations. However, given the weight of these accusations, it is crucial to take precautions against falsehoods. Transparency should be a hallmark of every process.

The private sector is thriving in the majority of industrialized nations, supporting economic growth and improving social indices. Their governments don’t operate the companies; instead, they serve as regulators. However, the situation is different in China. The economic growth model adopted by the Chinese government is a mixed one. It has chosen the PPP model for the majority of its business organizations, even though it allows the private sector to expand.

While owning the bulk of the shares, the government has floated share for private investors to invest in businesses and industries. Instead of being diminished, the state’s involvement in decision-making has been strengthened via a variety of consultative procedures. China’s economic improvement is impressive, making this a success story.

After eliminating its loss-making SOEs, Pakistan must embrace the PPP model for its future economic growth. The Public-Private Partnership Act, 2017 was previously enacted by the federal government, and after consultation, the cabinet has officially approved the PPP policy, also known as the P3 Policy. The government’s adoption of the PPP model and its intention to carry out development projects by enlisting the private sector under the PPP method is welcome news for Pakistanis.

Resources for the private sector to invest in should come from the government. In the oil and gas industry, where E&P businesses get concessions, we test this strategy. There is a win-win outcome here. Companies in the electricity industry can be another area of worry.

DISCOs have to operate in PPP mode. These electricity distribution firms have a great deal of financial potential. In order to finance further expansion, these businesses may offer their shares in P3 mode to individual investors. It’s conceivable that privatizing these businesses won’t be feasible or advantageous for our economy.

As seen in the instance of PTCL, private investors would be more than delighted to get shares and management. In order to attract further investment in this sector, the government should provide electricity distribution firms to potential investors. Pakistan can only adhere to the P3 model as an alternative.

By drawing foreign direct investment (FDI) into sectors such as mining, oil and gas, ports, aviation, agriculture, and minerals, Pakistan may develop significantly. In order to maintain economic stability, the SIFC (Special Investment Facilitation Council) is already aggressively pursuing these initiatives. In order to discuss B2B and G2G initiatives, Saudi investors have also travelled to Pakistan and met with representatives of the government and the commercial sector.

This is a positive beginning that will encourage investors and common Pakistanis to support further company growth. The government must prioritize this way of operating and making investments for future initiatives. The federal government must put the P3 policy into effect in its entirety. The PPP program is already being implemented by the provinces on a long-term basis.

Law and order, security, and investor trust are among the many challenges we face, all of which require immediate attention. In an environment of fear, anarchy, and uncertainty, no policy can thrive. The loss of faith in the system by many young people due to various circumstances underscores the need to rebuild people’s confidence and offer them hope for their future contributions. There’s never a perfect time to work here.

The government must step up its efforts to foster optimism and attract potential investors to Pakistan, emphasising the importance of these issues for the country’s economic progress.

Copyright Business Recorder, 2024

Dr Muhammad Fahim Khan

The writer is the Director of ORIC and an Assistant Professor at the Department of International Relations, MY University, Islamabad

Comments are closed.

Public assets: Ministry seeks data to share it with IMF

Previous flawed decisions hampering improvement in power sector, pm, ppp team take stock of situation, cabinet approves rules for speedy disposal of tax cases, major changes in tax laws expected thru finance bill 2024, gandapur apprises naqvi, leghari about issues facing his province, 11 ttp militants held for ‘killing’ chinese engineers, 18,371 shopkeepers enrolled under tajir dost scheme, governor says won’t sign defamation bill without consultation, malik riaz says has refused to become ‘pawn’, talat hussain passes away, read more stories.

Most Popular

• Past 3 Days

NJLI Sarmaya Growth Fund Rates

The solar net metering debate.

No super tax payable on income falling under FTR: Karachi ATIR

Net-metering: turning up the heat on Pakistani people instead of IPPs

Govt decides to do away with subsidised gas for fertilizer industry

Veteran actor Talat Hussain passes away in Karachi

Neelum-Jehlum breakdown, again

Privatisation of SOEs: SIFC stresses need for meeting timelines

PPP delegation meets PM Shehbaz to discuss budget 2024-25

Share under NFC Award: Govt may explore option of sharing debt servicing, power circular debt with provinces

Fuel prices likely to decline again

‘Carbon Tax’ on POL products: PM rejects major FBR budgetary proposals

Country borrows $7.142bn during Jul-Apr

K-Electric seeks Rs10.69/unit hike in base tariff for 7 years

IMF, Pakistan make ‘significant progress’ towards staff-level agreement, lender says

Many zero-rated items: FBR proposes standard rate of 18pc sales tax

Rupee marginally gains against US dollar

Properties of Pakistanis in Dubai

KSE-100 closes shy of 76,000 after gaining on UAE’s announcement, ‘progress’ on IMF front

This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy .

• AEA Papers and Proceedings

The Unreasonable Effectiveness of Algorithms

• Jens Ludwig
• Sendhil Mullainathan
• Ashesh Rambachan
• Article Information

Additional Materials

• Author Disclosure Statement(s) (114.45 KB)

JEL Classification

• H43 Project Evaluation; Social Discount Rate

The future is equal

• Press releases

Gaza Crisis

6 months of the humanitarian catastrophe in Gaza

Oxfam is calling for a permanent ceasefire, the return 

of all hostages and the release of unlawfully detained 

Palestinian prisoners and unfettered humanitarian aid 

access. Countries must immediately stop supplying 

arms to Israel and Palestinian Armed groups.

Looking for your nearest Oxfam

Oxfam is a global organization with affiliates in 20 countries. To see the information that is most relevant for you, visit your local Oxfam.

Six Months of Violence and Siege for 2.3 Million Palestinians in Gaza

After the atrocities committed on October 7, 2023, Israel’s escalation in Gaza is the most brutal onslaught of violence carried out against Palestinians during the 57-year-long Israeli occupation. Before the latest escalation of violence, over 80% of the population in Gaza relied on some form of humanitarian aid for survival, and life in the Gaza Strip was characterised by the almost total restriction on travel and trade, and the absence of social safety nets and livelihood opportunities. However, life for the 2.3 million Palestinians trapped inside Gaza has turned into an unprecedented humanitarian catastrophe.  

Open Call for an Immediate Ceasefire

#CeasefireNow: Open Call for an Immediate Ceasefire in the Gaza Strip and Israel to Stop the Humanitarian Catastrophe and Further Loss of Innocent Lives

Wealth of five richest men doubles since 2020 as five billion people made poorer in "decade of division," says Oxfam

The world’s five richest men have more than doubled their fortunes from $405 billion to $869 billion since 2020 —at a rate of $14 million per hour— while nearly five billion people have been made poorer, reveals a new Oxfam report on inequality and global corporate power. If current trends continue, the world will have its first trillionaire within a decade but poverty won’t be eradicated for another 229 years.

Oxfam reaction to the G7 communiqué

In response to the communiqué published following today’s meeting of G7 Finance Ministers and Central Bank Governors, Oxfam International’s Tax Policy Lead, Susana Ruiz, said: “That conversations about taxing the super-rich are happening at the G7 and G20 is historic. A majority of people, across party lines and across countries, support proposals to fairly tax the rich.  

Reaction to ICJ court ruling on South Africa seeking an emergency halt to Israel’s offensive in Rafah

In reaction to today’s order from the International Court of Justice to South Africa’s case, which demands Israel halt its offensive in Rafah, Sally Abi-Khalil, Oxfam’s Regional Director for the Middle East said:  " Oxfam welcomes the ICJ’s order as a critical intervention to stop Israel’s military onslaught on Rafah, which has displaced more than 800,000 people, and an affirmation of the right to life of the Palestinian people."

Recognition of the State of Palestine by Spain, Ireland and Norway “a landmark decision” that must transcend symbolism - Oxfam

In reaction to Spain, Ireland and Norway recognizing the State of Palestine, Sally Abi Khalil, Oxfam Regional Director for the Middle East and North Africa said: “This recognition is a landmark decision and other countries must follow suit. It is a crucial step in affirming the Palestinian people's inalienable right to self-determination, but it must transcend beyond symbolism into concrete steps towards ending the Israeli occupation and achieving full sovereignty for the Palestinian State.

Oxfam is a global movement of people, working together to end the injustice of poverty. That means we tackle the inequality that keeps people poor . Together, we save, protect and rebuild lives when disaster strikes. We help people build better lives for themselves, and for others. we take on issues like land rights, climate change and discrimination against women. And we won’t stop until every person on the planet can enjoy life free from poverty.

Our impact at a glance

Looks like you're in the USA

Please confirm your location so we can give you the best experience.

• United States
• Outside the US