Pakistan-A shaking Economy

May 19, 2021 blogs 40

Pakistan: shaking economy 

As the pandemic crossed the red line in Pakistan, the growth of country turned negative. The market restricted the economic activities containing reduction in import and export, counter trade, as the result of the foreign freight forwards limited the mobility. Labor market suffered. CPI recorded 8.2 % by august 2020. Not only this but victimized the micro and medium size enterprises also. Financial deficit laid 8.1 to 9. As per the 2021 Index, our economy stands on 152nd freest economy in freedom. Because of unsustainable level of external debts, Corruptions, monopoly of few industries. The economy was further dragged down because government and corporate sectors failed to adjust in new environment, aging population, and transition to post agricultural society.

Traditionally, Pakistani market has large network of SMEs. However, Govt. introduced many schemes of low-cost borrowing from banks. But this is ineffective as public has insufficient awareness about how to borrow for startups and what are the measures, a small business can be scaled-up. Manly SME`s are the prime factor of Pakistan`s economy which don`t consider to be registered. A large number of businesses are using tax evasion which is challenging State to accumulate tax.

Corruption is another obstacle which is hard to measure in Pakistan. It discourages investment and limits economic growth. Pakistan has ranked 124 out of 180 countries with a score of 31 on the 2020 Corruption Perceptions Index. — Transparency International. As per the World Bank indictor 2019, Country`s FDI reached at 0.8 % which is comparatively lower than Neighbor country India having 1.8%. 

The bureau of Statistics reported that CPI based inflation increased by 11.1 % in April 2021 highest of 8 months as compared to April 2020 8.5% because of higher prices of food items, clothing, footwear. Consequently, investments fall down by private sector. The prerequisite to decline in government spending and increase the revenue to reduce the deficit.

Pakistan was granted GSP+ in 2014 and the EU is one of its biggest trading partner. The EU’s GSP permits products to come into the EU market from vulnerable developing countries without import duties. The scheme slashes tariffs to zero per cent for vulnerable low and lower-middle income countries that implement 27 international conventions related to human rights, labor rights, protection of the environment and good governance. More worryingly, European Union considering to abolish Pakistan status of GSP+ it will directly harm the more than 78% of Pakistan’s exports enter the EU at preferential rates. Around 80% of the textiles and clothing imported to the EU from Pakistan.

 There’s also a grave issue at hand: the trade deficit has widened by 20.1% to 23.562 billion during first 10 months (July-April) FY 2020-21 from $19.613 billion. The SBP`s foreign exchange reserve dipped by USD830mn as USD 1.0bn commercial loan was paid off. Import declined by 5.1 to 3.3.

The agricultural productivity current Pakistan’s average yield of wheat, cotton, rice, maize and sugarcane is 70, 53, 61, 82 and 60%, respectively lower than the average yields obtained internationally. Major constraints include agronomic, irrigation management, environmental, technological, institutional and socio-economic constraints. As a result, the shortage of 5,00,000 tones production and import of sugar in an agricultural state as well increase in prices for availability of domestic use.

Additionally, Country also cracking down the hidden enemies of oil smuggling across Iran border which is widely available in whole country through the southwestern Province “Baluchistan” illegal retail fuel channels. Unfortunately, under the vigilance of Anti-Smuggling personnel’s, goods containers enter in the country except the proper checking. This distracted the earning volume from duties and services sector.

Pakistan is now aiming for the electric vehicles which means it has to establish the assembly plants to meet the target within the country. To become a significant Exporter, Pakistan must invest in local production. Set minimum prices for goods to support domestic production. Production efficiency and modify productivity for other countries` requirement. Combined with dedication to produce high quality products, Pakistani Industrialists should develop their own raw material and finished goods instead to export only cotton, sugar cane. By value adding goods we can promote country`s export. 


Understanding the importance of growing economy, there is need to get done the economic survey through policy reforms. In this manner International Experts must be hire for rendering their services. Initiate the qualified export counselling. For the manufacturers capacity building. As an investment to yield a return for those countrymen who are unable to run a small business, New small Industries can be introduced where we can adapt value adding strategy for exporting goods. This will create employment and allocate domestically produced resources for economic growth.

The agriculture workforce contributes 22 % of the GDP can be recovered from falling markets by investing in agricultural lands. While Renovating the agriculture for rural economy, Pakistan needs to preserve existing areas of agriculture sector priory. For the protection of agriculture, reduce land prices. As an investment to yield a return for those countrymen who are unable to run a small business, New small Industries can be introduced where we can adapt value adding strategy for exporting goods. Update small business tax rules / filing obligations such as tax burdens. Increase subsidies for agriculture and labor. This will create employment and allocate domestically produced resources for economic growth.

Moreover, creating choices for overseas agents /distributors to increase FDIs. Generate Revenues by expanding tax collection, Synergies among FBR, NADRA, For FBR automation and digitalization for small business (retailers) etc., Exclude the subsidies on beyond means items and doing Agricultural land reforms, Pakistan will be able to diminish serious drags on economic dynamism.   

Write: Iqra Javed

 Student of Finance, Writer


Iqra Javed | Writer

Joined: June 17, 2020

Leave a Comment