ISLAMABAD: Pakistan’s economy is facing a three-pronged challenge that includes soaring prices of essential commodities internationally, the Afghanistan situation, and the rapid depreciation of Pakistan rupee value.
This was stated by former governor State Bank of Pakistan (SBP), Syed Salim Raza, while addressing an event organised by the Pakistan Institute of Development Economics (PIDE), here on Monday.
He said that the increasing prices of essential commodities such as oil, gas, wheat, and sugar along with unusually high shipping charges are putting serious pressure on Pakistan’s foreign trade as compared with other countries of the region.
He said that only way to strengthen rupee without a negative impact on exports and foreign exchange reserves is to, somehow, increase the supply of dollars. This can be done by raising export earnings, inducing foreign direct investments, securing foreign loans and increasing flow of remittances.
He added that the economy of Pakistan was also grappling with the economic and financial fallout of an extremely volatile situation in Afghanistan; while domestically, it is trying to come to grips with a falling rupee value and the lack of resources to keep the prices of electricity, gas and oil in check.
Moderating the event, Vice Chancellor PIDE Dr Nadeem Haque said that investment rate in Pakistan has stayed below 20 percent of GDP since 1991 and has fluctuated around 15 percent over last 10 years. In recent years, public investment has been around four percent and private investment around 11 percent of GDP.
Raza said that after several experiments in economic restructuring, Pakistan currently operates mixed economy in which state-owned enterprises account for a large portion of GDP. Country has experimented with several economic models during its existence.
Economy, which was primarily agricultural at the time of independence, has become considerably diversified. Agriculture, now no longer the largest sector, contributes roughly one-fifth of the GDP, while manufacturing provides about one-sixth.
Fundamental structure changes are must instead of temporary solutions, which include strengthening the private sector, the plans made by the Planning Commission must completed on time it will not only save money but will put the country on the right track of economic growth, he maintained.
Raza said that Pakistan’s teetering economic growth is projected by the International Monetary Fund (IMF) at four percent this fiscal year through June and slightly faster during next financial year. That is just about only silver lining in the dark clouds of fiscal and external crises gathering over nation’s economic horizon.
In terms of structure of its economy, Pakistan resembles the middle-income countries of East and Southeast Asia more than poorer countries of Indian subcontinent. Pakistan is borrowing 80 percent through banks which is quite high as compared other economies of 40-44 percent. State policy must be aimed at developing agriculture markets from farm to value added. Pakistan is importing syntactic items spending huge amount and this can be produced locally with the help of china which is the biggest producer of syntactic products.
Digital exports must be encouraged and this has a great potential in Pakistan, saying India was exporting $130 billion IT products per annum and if Pakistan was achieving only 10 percent of that within next five years it will be a great success as it can count for $13 billion per annum.
Copyright Business Recorder, 2022
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