Where our economy is going
A huge network of interconnected production, consumption and trade activities that contribute in defining how finite resources are allocated is referred to as an economy.
The supply, purchasing and distribution of its products are utilized to meet the requirements of those who live and work in the economy, also known as an economic structure.
An economy covers all activity in a region that is related to the supply, purchase and exchange of goods.
Market transactions and cooperative or hierarchical goal setting are used to make these decisions.
This process involves everyone, from individuals to organization’s like as families, enterprises and governments.
The economy of a specific country or area is influenced by its culture, traditions, heritage and location, among other variables and it evolves as a result of the participants’ choices and actions.
As a result, no two markets are same. Pakistan is a developing country and like many other developing countries it has a semi industrialized economy and basically comprises of textiles, chemicals, food processing, the agricultural sector and various other industries.
It is a surprising fact that Pakistan’s economy is the 27th largest growing economy in the world when measured in terms of Purchasing Power Parity (PPP).
The economy has suffered from political instability, rising population growth rate and a war of words with the neighbouring country India which has proved to be very costly for Pakistan’s economy.
There is worldwide financial crisis and rising inflation due to which Pakistan’s economy is suffering from a balance of payment crisis.
In order to prevent a BOP crisis, the IMF initially borrowed Pakistan $7.6 billion in 2008.
This amount was then extended to $11.3 billion in 2010, and so on. The middle of the 2000s turned to be the most profitable decade for Pakistan’s economy, with an average GDP growth rate of 7% between 2003 and 2007.
Pakistan was able to significantly boost its foreign reserves in 2007 to reach roughly $16.4 billion.
Pakistan was capable of attracting deposits up to $8.4 billion while the country’s exports surged above $18 billion.
However, in 2008, as Pakistan’s participation in the “War on Terror” came under heavy criticism, the country’s expanding economy took a significant hit.
The country lost a significant portion of its FDI as it decreased from $8 billion to $3.5 billion as a result of the rising unpredictability and instability.
Pakistan’s position does not appear to be getting better after 2008. The economy is hampered by significant trade deficits, high inflation rates, and a decline in the value of the Rupee, which in 2012 plummeted from 60 to 90 and to 215 to one US dollar today.
Additionally, power rates were increased in the beginning of 2021, but more is to come due to pressure from the IMF.
Given that international prices are still rising and that the government is getting ready to impose additional taxes on gasoline as a way to strengthen its fiscal position, energy costs have also seen record increases, and it appears that the worst is yet to come.
The pressure on the currency rate is still present, and if the cost of imports grows, the situation will only become worse.
Pakistanis are quite fearful and anxious about the economic climate in their country.
The majority of Pakistanis are striving and anxious due to steep increases in fuel prices, soaring inflation and the rupee’s persistent depreciation.
Everyone is curious about the present and what lies ahead. Is worst yet to come? Pakistan’s trade imbalance is expanding as a result of the country’s inability to reach a large number for imports as its economy expands.
The economy of Pakistan has not altered dramatically and still largely depends on the same commodities so that it did in the 1980s, which is why exports from Pakistan lag well behind imports.
In the 1980s, Pakistan mostly exported cotton and items made of cotton. The principal exports of the nation are still cotton and goods made from cotton.
Compare this to India, for instance, which effectively increased its exports. India’s exports of goods, pharmaceuticals, medicines and other goods increased quickly.
India is perhaps the only nation in this period to successfully navigate such an economic change.
Many other nations adopted a similar strategy, promoting investment in emerging industries and focusing their economies on satisfying international market demand.
The trade structure flaws were faced and overcome by those who did so successfully. As the world joined together in a world market, where competitiveness was a country’s greatest asset, those that were unable to make such a shift stayed in the same industry and lagged behind.
The economy is already on the verge of collapse due to the escalating security fears. Pakistan has suffered from militancy for the past couple of years.
Foreign direct investment has decreased as a result of the economic and political uncertainty that has produced in the nation.
Since many people don’t feel comfortable in the nation, skilled labour from Pakistan is relocating to other industrialized countries.
They do not need to put their time & expense at risk in an unreliable economy where they believe they will not be compensated fairly for their abilities.
Overseas investors are reluctant to make investment in Pakistan’s economy since the returns are insufficient to justify the risk of doing so in a country with a fragile economy.
In addition to this, they believe that their lives are at risk because they could fall victim to terrorist organisations present in the nation.
Despite Pakistan’s economy is now experiencing severe issues, it still has the ability to bounce back and thrive, but doing so will take significant efforts from both the public and policymakers.
—The writer is an entrepreneurial journalist. He is the founder & CEO of Pak Affairs.