From its creation Pakistan remained predominantly an agricultural country and for five decades 1947-1997, it registered an average growth rate higher than the world’s despite relatively unstable pseudo-democracy, sectarian violence, and religious extremism. The Gross Domestic Product (GDP) in 1960s, 1970s, and 1980s, stayed respectively at 6.8 percent, 4.8 percent, and 6.5 percent but declined in the second half of the 1990s due to globalisation where Pakistan lacked foreign investment and as such, its trade gap had widened resulting in imports outstripping exports.
Currently, the country is in a debt trap, about to become a defaulter of foreign loans and other liabilities, which started much earlier in 2008-2012 when it was characterised as unstable and highly vulnerable to face the situation internally and externally. Several factors of the time and earlier had contributed a lot in putting the country in a delicate situation which include the Asian financial crisis, economic sanctions, global recession, severe drought which lasted four years, post-9/11 military action in Afghanistan, influx of large number of refugees from Kabul and terrorism.
Before these, Pakistan was considered by the World Bank as the top reformer country of the region and number 10 reformer globally because it had made it easier to start a business, reduced the cost to register a property, increased penalties for violating corporate governance rules and provided many facilities to traders and licence holders.
The economic scenario of Pakistan has worsened in last five years and global financial institutions like, World Bank and International Finance Corporation’s flagship has gave red alert to the country under the Ease of Doing Business Index where it was getting a lower rank gradually, from 108 in 2020 among 190 countries to 136 in 2021. Regionally too, in economic freedom it ranked 153rd in 2022, and 34th among 39 countries of the Asia-Pacific region. It showed that the five-year downward trend of Pakistan’s economy went deep further.
The economic difficulties of Pak people are growing by leaps and bounds mainly due to repayment and servicing of external debt, which is also faced by 52 other countries. In previous decades, this issue has hit the country most, making the curtailment of public facilities a compulsory option for the government of the day.
In the country there is an environment of chaos and uncertainty as a result of organised crime, corruption, a weak regulatory atmosphere and subversion of the legal system. To improve Pakistan’s economic condition, the IMF in 2022 urged the elimination of subsidies on basic foods as well as on electricity and gas, but in contrast, the budget of 2022-2023 has not entirely eliminated these subsidies. Thus, the Shehbaz Sharif government is facing a tough time on several issues, the economy being at the top with no near solution in sight.
In today’s context, Pakistan has a large population and as a result, is considered as the hub of a large labour force and manpower resources. It has the sixth largest accumulation of manpower according to the CIA World Factbook in 2017, which estimated a 57.2 million labour force where 43 percent was engaged in agriculture, 20.3 percent in industry, and 36.6 percent in services.
There is the issue of child labour which has been raised by several trade unions as it extensively supplies its child labour to other countries including in the Persian Gulf and the Middle East. In terms of purchasing power it is the 23rd largest country of the world and the 42nd largest in nominal GDP as the phase of rapid economic reforms remained for a while from early to the middle of 2000s when the government raised development spending and reduced poverty level by 10 percent with an increase of 3 percent in GDP, but as the inflation increased by 25 percent in 2008, Pakistan became bound to obey the fiscal policy backed by the IMF to avoid further complications in the country’s foreign trade.
The downward slide in Pakistan’s economy continues further and especially since 2013 serious deficiency was recorded in two sectors, rail transportation and electrical energy, which marred overall development. The economy is largely considered semi-industrialised which also holds the features of a diversified economy and co-exists with less developed surrounding areas. During 2015-16 the gap between imports and exports became more than double with exports at $20.81billion while imports were $44.76 billion which produced a negative balance of trade of $23.96 billion.
The persistent borrowing of foreign debts cast a long negative impact on economic growth and in many cases the influence became more fatal as the debt increased. That year, a World Bank report ranked Pakistan’s economy 24th -largest in the world by purchasing power and South Asia’s second largest economy with about 15 percent of regional GDP.
The major source of foreign remittance in Pakistan is Pakistani diaspora and Pakistanis in UAE, Saudi Arabia, the Gulf states, Australia, Canada, Japan, UK, Norway and Switzerland who contributed a significant amount of foreign currency in 2015 Agriculture contributed only 20.9 percent which also provided 43.5 percent of the employed labour force and is the largest source of foreign exchange earnings.
Pakistan today is on the verge of economic disaster due to the external public debt of over $90 billion. An ADB estimate says its GDP is expected to remain at 4.0 percent in 2022 and 4.5 percent in 2023 while it also forecasts the inflation rate at near 11.0 percent in 2022 and 8.5 percent in 2023 but per capita GDP growth of the country is hoped to be at 2.0 percent in 2022 and 2.4 percent in 2032. The ADB analyses economic and development issues in developing countries in Asia with the help of various data and prevailing indicators to rank the country in spheres of population, poverty, annual growth, inflation and government finance in Asia and the Pacific. Earlier, in 2018, Imran Khan assumed office and promised to create new jobs, new housing, and economic reforms. However, remaining in office till early 2022, he failed to fulfil these commitments.
In the country there is an environment of chaos and uncertainty as a result of organised crime, corruption, a weak regulatory atmosphere and subversion of the legal system. To improve Pakistan’s economic condition, the IMF in 2022 urged the elimination of subsidies on basic foods as well as on electricity and gas, but in contrast, the budget of 2022-2023 has not entirely eliminated these subsidies. Thus, the Shehbaz Sharif government is facing a tough time on several issues, the economy being at the top with no near solution in sight.
