Economic Crisis and their Solutions
Pakistan’s economy had been suffering, dwindling and withering gradually because of the disorganised, unimplementable, flawful planning & idea generation by its ministers and concerned individuals that were definitely not in the interest of the country. Pakistan has been facing this scenario even before the actual global recession that lamed the titans of the business sector, began to occur, resulting in the bankruptcies and chapter eleven’s of various tycoon and blue chip companies of Europe etc.
At the moment Pakistan is holding a bucket full of different diversified challenges, problems and crises in almost all the reasonable fronts i.e. the political front, the adverse law and order situation as well as unavailability of infrastructure for economic growth.
When the global financial crisis further deepened after 2008, with the American insurance group (AIG), Lehman brothers and such other top financial institutions of USA surrendering themselves to the flow of the severe recession, refused to provide their respective financial services and in fact opted for chapter 11, it certainly did put a strong impact on the country’s insurance and some other sectors, especially those sectors dependent on USA based investment. The indicators at that moment were highly depressive showing a truly negative picture i.e. GDP fell down to 2.0 per cent, inflation touched at all time high i.e. at 20.08 per cent, export target slipped by .3 billion, and rupee devaluation occurred at the rate of 35 per cent.
With this brief introduction let us come to the core of this article. What are basically the major hurdles in the economic recovery of Pakistan?
Well now at least every citizen knows the answer to this question since they are the 1st one to experience the impact or the effect of any governmental decision lead crises, i.e. load shedding of electricity & gas (including natural, compressed and liquefied etc), extremely exorbitant back breaking prices of gas & electricity (important to mention a further increment in the prices of electricity on the directives of IMF is still under consideration), higher interest rates, continuous increase in fuel prices and thus increased cost of doing business, poor and adverse law and order situation even placing its impact on the foreign investors and their investment in the country, in addition to the above Rs116 billion circular debt is also a major problem along with others, faced by the country.
In the current energy deficiency scenario, among its other impacts the most significant effect that it places on any country’s economy is the hampering of its export targets and when this problem is summed up with the wrong, unprofitable and unfavourable export policies factor it will certainly devastate the economy at least from the export side e.g. take Pakistan’s case wrong export policies along with energy deficiency resulted in the near paralysis of cotton yarn, and raw cotton value added textile sector so much so that the local investors started to pack up their investment and shifted it to different neighbouring countries ONLY because they offered a relief based policy.
Similarly higher interest rate and input costs adding up with the above two factors only hurts the export of any sector and not just the major sectors. During the last 9 months, cement export reduce by 14.72 per cent, leather manufacturing sector dropped down by 23.24 per cent, surgical goods by 9 per cent, and basmati rice, value added textile, engineering goods and different other sectors showed a sheer negative growth.
About 39 per cent increase in import of food group items, significant import of transport equipment and heavy oil import bill just adds to the severity of the scenario and creates a further pressure on rupee as compared to dollar hence devaluation is seen. With the exports decreasing and imports increasing how is it possible to reach an economic level i.e. termed as recovered. A country must keep a balance in its trade and payment making way to the concept of balance of payment and trade demanding effective, efficient policy making.
Further in upcoming budget imposition of Value added Tax and increment in electricity charges on the directives of IMF and pricy electricity from the recently hired rental power plants will just add to the misery of the investors eventually discouraging industrialisation in Pakistan. Recent notification of 2 off days per week by the state will effect the economic cycle of the country no doubt that’s a fact BUT the closure of banks will increase the negative impact of the decision hence worsening the economy of the country to another level. Since transactions especially port related are vital for the economy of Pakistan, being the exporter and the importer of different goods and services, therefore the decision just requires a bit amendment not ALL but some branches should be closed at least providing the investors the ease in conducting their business in their own way.
Last but not the least it is must for the government to rely on its own resources in order to get rid of these alarming challenges and obstacles in the recovery of economy.
It has always been said that Pakistan is one of the most resourceful country in the world it is for the government to effectively and efficiently exploit its resources in accordance with a profitable, giving, beneficial, problem solving, lucrative PLAN.
Also it’s now time for bringing a consensus among the masses on the construction of dams and efficacious utilization of coal resources to over come this electricity crisis once and for all. Government should ease its fiscal policy, increase spending on development project and should cut down their non development expenditures. It should ease the tax policy “do not impose new taxes enhance and expand the tax base” should be the policy of the government for this purpose new sectors should be explored.
Emphasis must be placed on direct taxes rather than indirect taxes. Discount rate and inflation must be in single digits. State bank should make regulations for commercial bank keeping banking spread about 2-3 per cent.
Encourage saving by increasing the rate of return on saving bonds etc resulting in the appreciation of the Pakistani rupee value.
In addition to the rupee appreciation high saving rate also enables the government to raise long-term capital for their infrastructure development projects as well as in coping up the current budget deficit.
Term finance certificates and public private partnership should be encouraged in fact prioritised to enhance the infrastructure growth and this will give certainly fruitful results since in the case of public private partner ship the public’s interest is at stake they are involve din the decision making process which gives them the insight causing them to be responsible for the acts of the company,
In a nut shell proper, effective, efficient up to the theoretical extent construction and implementation of the PLANS along with the usage of current up to dated technology in order to bring innovation and development in the country is the necessity at the moment in order to overcome the current crises whereas this all is being hampered and obstructions are created when improper policies made by inexperienced individuals along with a touch of corruption and last but not the least the non or wrong implementation of the PLAN occur hence causing none other than chaos in the economic chapter of the country.
A sub editor in a reputable financial newspaper
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