Depressing economy of Pakistan and its revival

Pakistan is a developing country and faces a host of socio-economic problems including political instability as a major burning current issue that aggregates the problems further.

Currently, one of the big social problems for Pakistan is poverty. 70% of the population of Pakistan still lives in villages and agriculture encompassing livestock sector, is a major source of economic development of Pakistan. Therefore still we can establish the narrative that Pakistan is an agro based economy and agriculture and livestock should be given a pivotal importance and holistic strategy should be chalked out to upgrade the standard of living of farmer. It is a failure that successive regimes could not reward these key important sectors of Pakistan. The following are the major issues which are creating impediments to economic development. 

•           Political Instability

•           Poverty & Illiteracy

•           Economy Crisis  & Energy Crisis

•           Corruption, Overpopulation,  Inflation and Unemployment

•           Govt. decides to withdraw Rs. 146 billion subsidy being given to domestic consumers

•           Power Ministry proposes up to Rs. 20.70 per unit increase in price of electricity to fulfill key IMF demand

The government is currently holding talks with the IMF delegation for securing a bailout package to stave off a possible balance of payment crisis. The government believes that it does not have the resources to finance the subsidy being given to domestic consumers. According to reports, distribution companies have been asked by the Power Ministry to chalk out a uniform power tariff for domestic consumers of different categories. The tariff for the consumers consuming up to 50 units per month has been sought to be determined at Rs. 2 per unit while the Rs5.7 tariff has been sought for consumers consuming up to 100 units every month. The power tariff for consumers using 100 to 200 units every month has been recommended at Rs. 8.11 while tariff for the consumers using electricity from 200 to 300 units per month has been sought at Rs10.70 per unit. The tariff

For consumers using 300 to 700 units per month would go up to Rs17.07 per unit and consumers using more than 700 units per month would have to pay Rs20.70 for per unit power. IMF has been dissatisfied over the performance of the power sector whose losses and recoveries are reported to have gone down rather than improving since the last IMF programme was completed in September 2016, leading to build up of circular debt beyond Rs1.2 trillion and creating supply-side constraints.

In order to appraise the aforesaid issues as pointed out by IMF, a consortium of most bona fide economists should be constituted, which should be within from country and not foreign residents. This consortium can deliberate the ongoing economic crises of Pakistan at length and chalk out the holistic strategy with compulsory ownership from all stake holder political parties and that should initiate a broader based strategic recommendations and resolution of the issues.

Subsidies to Farmers, Domestic Consumer and Entrepreneur

The decision of present regime to withdraw subsidies on macro level is not advisable. The whole taxation and whole subsidies to domestic consumer as well as to industry should be recommended by this group of economists.

Political Stability as a key issue:    

The standard definition of political instability is the propensity of a government collapse either because of conflicts or rival attitude of the government towards other political parties. Economic growth and political stability are deeply interconnected. On the one hand, the uncertainty associated with an unstable political environment may reduce investment and the pace of economic development.  On the other hand, imposing taxes upon vulnerable poor classes may further decline macroeconomic performance and it may lead to government collapse and political unrest. Political stability can be achieved through keeping political parties in place and through a broader dialogue.

When political stability comes with having one party or a coalition of parties in office for a long time, it may eventually be detrimental. It must encompass the whole political metaphors from all provinces and across the country. The economy may do well in terms of attracting foreign direct investment because stability means a predictable political environment. However, other issues of the society like gratification, lack of competition, and opacity should also be taken care of during the course of taxation decisions on the economy. Ownership and ratification of decisions from all stake holder political parties and military establishment is foremost mandatory. If political stability and broader ownership of decisions are honestly established, the economy of Pakistan will unquestionably be revived. 

Brief Introduction of writer

The writer is member of Pakistan Society of Development Economists (PSDE) PIDE Islamabad and of World Economic Association (WEA) Bristol UK.

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