Pakistan Economy: The choices we have!

Posted on January 06, 2025 by Sheikh Hammad Amjad, One of Thousands of Business Coaches on Noomii.

March 04, 2023

Every person associated with Pakistan either resident or nonresident is asking one major question: What happened that brought us to the brink of default?

As per Dr. Miftah, below are the key deep-rooted challenges and issues carried forward from 1947 that need to be addressed immediately with collective political and social wisdom.

1. IMF Review 2021: During COVID-19, a lot of relaxation was given by IMF and we entered into three reviews where the loan was granted however we couldn’t keep up with IMF rules and agreements through politically friendly budgets creating trust deficit and adding more to their concerns. Later, after April 2022 IMF tied the extension of the fund facility with the budget review.

2. Tax Collection: After the NFC award, the major revenue goes to provinces leaving less cushion for the federal govt to pay its financial obligations. The revenue from tax collection is around PKR 7000bn where PKR 4500 bn is transferred to provinces while the remaining PKR 3000bn is not enough for debt servicing of more than PKR 5000bn resulting in a debt trap – which means govt has to borrow more to repay its interest. Out of 2.2 mn shops, only 30,000 pay tax.

3. Education: Most of the Pakistani top positions in the public and private sectors are acquired by two major schools which indicates the huge gap that exists within the system with the elite getting access to quality education. In Pakistan, the average score out of 100 in science and math is 27 and 31 consecutively.

4. Malnutrition: causing hindrance in the child’s growth ultimately leading to the child’s inability to contribute and add value to the social and economic ecosystem.

5. Population & Infant Mortality: 5.5 mn children are born every year putting Pakistan in a tie position with China after India which is leading the scoreboard. 40 out of 1000 children die within their first 28 days which is equal to the statistics in South Sudan. The iron deficiency in women due to lack of awareness and resources adds more to infant mortality and child growth.

Structural Reforms required for takeoff:

1. Population Planning: Bangladesh, Indonesia, and other Islamic countries have successfully implemented population control mechanisms.

2. Living with what we have! The current account deficit needs to be controlled as in previous years Pakistan imports stood at USD 80bn against exports of USD 31bn. Bangladesh’s foreign reserves are USD 40bn as compared to Pakistan’s USD 4bn.

3. Subsidy: The government should not provide gas at subsidized rates to fertilizer companies rather the subsidy should directly be provided to the farmer for greater transparency and efficiency.

4. Exports and Tax Collection should be 15% of the GDP.

5. Agriculture: The per hector yield was equal to India at one point where both countries were producing 19 bn bales of cotton compared to the current production of only 5.5 million bales pushing Pakistan to import cotton from China.

6. Local Government: Healthy competition must be promoted among governments with the authority to collect taxes and spend money for the benefit of the local population. This is only possible with the devolution of power and taking it to the lowest level to resolve day-to-day issues.

7. Privatization: PIA losses are PKR 90bn which means we can build 3 more top-level universities in Pakistan.

What are the options?

The hot topic in every drawing room is what to do. Should we stay in Pakistan or move out? We see many of our peers applying for Canadian immigration, Golden Visa for Dubai, etc. However, we should remember only in Pakistan we are treated as first-class citizens. The nation needs to think about either they do:

2. Boom and Bust (current situation with 2 percent growth, hiccups, risk of default)

3. Become a failed state

The choice is ours!