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KARACHI: Vice President of the Pakistan Businesses Forum (PBF) Ahmad Jawad has said there is an urgent need for all stakeholders to take note of political instability in the country and play their part in solving the problem so that the nation’s economic managers could refocus their efforts on improving the economy.

“There is a need to declare an economic emergency (and) to take urgent steps to arrest the currency slide and (stop) widening of current account deficit. In the long term, structural changes to enhance industrial productivity and exports is de rigueur along with measures to promote inclusive growth, to discourage elite capture of state resources,” he said.

Mr Jawad said economic growth and political stability were deeply connected. On the one hand, uncertainty associated with an unstable political environment might reduce investment and the pace of economic development, and on the other, poor economic performance could lead to political unrest.

According to the PBF, Pakistani economy was actually gaining growth momentum when Imran Khan assumed office. After a relatively tepid growth performance in the 10 years ending 2015 – compound annual growth rate (CAGR) of GDP growth was 3.8% in the period between 2005 and 2015 – GDP growth rate increased every year between 2015 and 2018. Annual growth rate of GDP was 5.5% in 2018, the year Imran Khan assumed the office of prime minister.

However, the rate fell sharply to just over 2% in 2019. The shocking Covid-19 pandemic made things worse, leading to an annual contraction of 0.5% in 2020. The economy jumped above pre-pandemic levels in 2021 with a growth rate of 3.9%.

Similarly, the per capita income data, which is a better measure of living standards than GDP growth rate, paints a poor picture of Pakistan’s economic performance. The PBF data on real per capita GDP shows that there has been a stagnation on this front in the last few years.

The PBF’s vice president said Consumer Price Index has been increasing since September 2021. The annual growth in inflation was 9.2% in October 2021, and it increased to 12.7% in March 2022. Core inflation, which excludes volatile food and energy items, increased from 18.9% in October 2021 to 21.7% in March. And the rupee has depreciated in value by 45% since Imran Khan came to power.

Mr Jawad said one of the biggest problems facing the Pakistani economy has been a low investment rate, which basically means that the fruits of present growth are diverted instead of supporting future growth. “The combined effect of extremism and an unproductive rent-seeking elite is that Pakistan has one of the lowest investment rates in the world. Pakistan invests only 15% of its output compared with 30% for the rest of South Asia,” he said.

Copyright Business Recorder, 2022

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