PAKISTAN’S new coalition government recently presented its first Budget of Pakistan for FY 2024-25 in parliament, and it has garnered mixed reactions from the public. Opinions about the budget are diverse, reflecting the complexity of Pakistan’s economic situation. The government’s efforts to balance growth, stability, and relief measures will continue to be closely scrutinized by the public. The Pakistani economy has been navigating a complex landscape, with several key indicators revealing both progress and challenges. The Gross Domestic Product (GDP) has surged to approximately Rs. 80 trillion, marking a significant increase. However, the growth rate remains modest at 2.38%. This suggests that the economy isn’t expanding rapidly enough to drive substantial improvements.
Individual prosperity has seen a slight uptick, reaching US$1,680. While this is positive, there’s room for further growth as it is among lowest in many developing countries. Despite a decrease from last year, inflation remains high at 24.5%. Policymakers need to address this persistent challenge to stabilize prices. Encouragingly, the deficit has improved, shrinking from $3.9 billion to $9.48 billion this year. This reduction signals reduced reliance on foreign borrowing. Exports continue to lag behind, standing at $25.7 billion. Meanwhile, imports remain high at $43.4 billion, resulting in a trade deficit. Pakistan must find ways to boost exports and manage imports effectively. The nation faces a significant public debt burden, totalling Rs. 67.5 trillion. Of this, domestic debt accounts for Rs. 43.4 trillion, while external debt stands at Rs. 24.1 trillion. Addressing this debt challenge is crucial for sustainable economic growth. Pakistan’s economic landscape is a mix of progress and caution. Policymakers and stakeholders must work collaboratively to address the existing imbalances and foster a more resilient and prosperous economy.
The government aims to collect Rs. 8,155 billion in revenue. This includes taxes, fees, and other income sources. The effectiveness of revenue collection mechanisms will be critical for funding essential services and development projects. Total planned expenditure stands at Rs. 18,777 billion. A significant portion of this allocation is directed toward debt servicing (repaying loans) and defense. Balancing expenditure priorities while managing fiscal constraints remains a challenge. The estimated budget deficit is Rs. 7,283 billion. This deficit represents the gap between revenue and expenditure. To cover this shortfall, the government will likely resort to borrowing, which has implications for long-term fiscal stability. Taxes have been increased, particularly for salaried individuals. This move aims to enhance revenue streams and reduce the deficit. Public response to these tax adjustments varies, with concerns about affordability and fairness. Despite the critical importance of education and health, spending in these areas remains low as a percentage of GDP. Pakistan’s budget reflects a delicate balancing act between revenue generation, expenditure priorities, and social welfare considerations. Public discourse will continue to shape policy decisions in the coming fiscal year.
If we look into overall structure of the economy, Pakistan is relying heavily on agriculture, which can pose challenges for any economy. Its time of industrialization, value addition, and information technology. While agriculture is essential for food security and livelihoods, over-dependence can lead to several issues. Agricultural production is sensitive to climate conditions. Droughts, floods, or extreme weather events can disrupt crop yields. Over-reliance on agriculture makes an economy susceptible to these fluctuations. Agriculture often has lower productivity compared to other sectors. This can limit overall economic growth. Farmers’ income levels may remain stagnant, affecting rural development. An economy heavily dependent on agriculture lacks diversification. Diversified economies are more resilient to shocks. Diversification into manufacturing, services, and technology sectors is crucial for sustained growth. Outdated farming practices, lack of technology adoption, and inadequate infrastructure hinder agricultural development.
Imagine Pakistan thriving, not just surviving. This vision hinges on a critical choice: prioritizing education and healthcare. A healthy, well-educated population is the engine that drives long-term economic growth. When people have the skills, knowledge, and well-being to reach their full potential, the entire country flourishes. This path to prosperity also requires a sharper focus on exports. Think of it like a two-way street. By selling more goods and services internationally, Pakistan earns valuable foreign currency. This strengthens the economy and improves its standing in the global marketplace. Right now, Pakistan relies heavily on debt to finance its everyday needs. However, relying heavily on debt is like building on sand. It’s just not sustainable. The answer lies in finding new ways to finance the country’s future. The government needs to explore alternative options, striking a delicate balance between fiscal discipline and essential investments. Think of it as tightening our belts while still investing in the tools we need to succeed. To unlock Pakistan’s full potential by investing in infrastructure, technology, and innovation. These are the building blocks of a modern and productive economy. By harnessing our own domestic resources and fostering a spirit of innovation, Pakistan can create a resilient and competitive economy that thrives for generations to come.
—The writer is Editor-in-Chief, Inverge Journal of Social Sciences (IJSS), Islamabad.
