What is the current economic situation in Pakistan

 

 

Introduction

The current economic situation in Pakistan is a challenging and uncertain environment due to the rapidly changing times, rapid change, and an unstable political and social climate. This may lead to severe economic distress. However, it also offers opportunities to transform a weak economy into one which can grow exponentially due to technological advancement and an increase in income from exports. With globalization becoming more relevant, emerging markets are being identified as potential growth contributors, especially for developing countries like Pakistan. Some of these emerging economies now have emerged as major trading hubs with high GDPs like China and India. As much as this can be seen as an opportunity, there are still many threats that pose risks to the country’s stability and development. To deal with such problems, government intervention is required where necessary, for example by providing finance or helping in reducing poverty and achieving sustainable economic growth. It is only through effective planning that Pakistan’s long-term viability can be assured.

What has happened in recent years?

Since the end of 2015, the Imran Khan administration in Pakistan initiated several reforms mainly aimed at improving the federal government, enhancing transparency and accountability of public sector players, encouraging private investment, promoting digital economy and ensuring ease of doing business across all the sectors. A range of other initiatives such as Naya Pakistan (Pakistan Digital Economy Strategy) and National Investment Policy 2018 has been implemented. These programs aim at supporting growth through technology transfer and innovation. Since then, significant improvements have been made in healthcare delivery and socio-economic conditions. Moreover, the pace of financial inclusion is increasing as well, which can have a huge impact on the future growth prospects of the country.

This was evident when the World Bank started working with the state government to implement the ‘Evolving Livelihoods and Climate Change Project (ELCM)’ in 2017. Under this project, the bank had allocated $10 billion for making Pakistan ready for action against Covid-19. Pakistan has so far received approximately $7 billion in international assistance for fighting coronavirus, along with another $3 billion for creating capacity so that they could provide medical aid and support needy families and individuals. Although this was meant as temporary relief and aimed at curbing the spread of the virus, it has turned out to be a permanent initiative. This program will provide funds that are sufficient to cater for health services and support the overall socio-economic needs of millions of people until the crisis subsides. Another positive indicator is that according to the IMF, some $6 trillion has been allocated for pandemic response and recovery plans. According to them, most of this money will go towards purchasing vaccines and treatment for the infected.

It is estimated that under this scheme, 50 million people in rural Pakistan could get access to vaccination. In cities, around 3.4 million families may receive food subsidies through MGNREGA whereas around 2.1 million children may benefit from school meals under PDSR (Public distribution system in Rural Areas Scheme). Apart from this, 6.8 million youths are estimated to receive housing benefits. On the same note, 4.1 million rural households will have access to electricity, whereas the number of women who are able to register their own businesses is projected to rise from 1.9 million in 2016-17 to nearly 2 million in 2021-22. Additionally, over 80% of energy consumption is projected to be reduced in Karachi, and Karkhana, Lahore. This means that even though we are living in the second wave of the epidemic, our lives can function normally once the lockdown is lifted and we return back to normal life. Nevertheless, we must ensure that the economy recovers soon and that livelihoods are restored.

According to statistics provided by PBS, up to the year ending August 2020, Pakistan’s economy contracted by 5.5%. In contrast, during the first quarter of 2020, the economy grew by 14.9%, showing how badly Pakistan is affected by the Pandemic. By June of 2021, its GDP stood at $581 billion. This figure represents a 5.7% decline compared to the same period last year. Despite this, Pakistan continues to experience an unemployment rate of 24.6%, which is relatively high considering the high number of people who are left jobless. Around 7 million jobs were lost, and a similar amount was lost to different types of employment such as agriculture, mining and transport, manufacturing, construction and retail. There has been no official date set to start easing lockdowns at the moment, but it is expected to occur when the number of cases falls under control. From what the Ministry of Tourism & Civil Aviation (MoTA) has said, only after two months the borders would reopen to allow tourism and business activities to resume.

As of July 2021, Pakistani airlines resumed passenger flights back to major cities while the Airports Authority of Pakistan continued work on the feasibility of resumption of domestic passenger flights as early as possible but has to remain patient about the approval process. The authorities are yet to launch commercial operations for foreign carriers. For commercial cargo, Pakistan suspended imports and ordered export of rice and tomato products; it ordered the import of oil, gas, and fertilizers. Unfortunately, all these exports were halted due to the sudden surge in prices. The Government of Pakistan is currently trying to find ways to contain the rising inflation but without much success. According to the International Monetary Fund, due to the ongoing trade imbalance with the US, European Union, and the UK, the price of goods has increased, leading to higher inflation rates and greater difficulty for consumers to pay for basic consumer buys. According to data, Pakistan’s unemployment rate rose from 16.2%. Poverty rate fell. According to a report published by Fitch Ratings, the GDP reduced by 0.7% in Q3 2020 compared to 3.6% in Q 3 2019. Overall, around 2 million jobs were lost in 2020 in Pakistan. Of these employment losses, 1.8 million were linked to agriculture while agriculture contributes to roughly 90% of domestic production.

Currently, Pakistan is facing a double whammy of the COVID-19 outbreak and the upcoming elections as well. During the past few weeks, Pakistan’s government has been imposing stringent restrictions on citizens to stem the spread of the outbreak. Such measures include restricting people from meeting others outside their homes and limiting access to public spaces. People have been observed flocking in large numbers with little regard for physical distancing. Schools too are closed as they cannot host students and teachers for online classes. Many non-essential businesses and recreational venues have also been closed to prevent the further spread of the infection. Now that schools are open again, we should continue to observe regular distancing and wearing of masks to reduce the transmission risk. If no vaccine has been available yet, Pakistan can wait till next year to get any vaccine doses, which will then hopefully help us regain control of the disease. We hope that once the time comes when the world might be safe enough to enjoy the outdoors again, we can finally begin to relax the restrictions. I am hopeful that Pakistan will reach a better place, and it will be a wonderful new beginning in our nation where every citizen can take part in rebuilding it and contribute to a prosperous nation and economy.

While there has been progress in terms of securing vaccines, Pakistan will need to do everything possible, both administratively and financially, to bring death and suffering in this critical stage. At the same time, we need to maintain adequate social security programs to make sure that everyone is adequately cared for and protected within the framework of the National Socio-Economic Cushion Scheme.

The COVID-19 pandemic has severely impacted Pakistan’s economy. While the government has taken a pragmatic approach to the situation to avoid the third wave, it seems they still need to adjust their policies to fit the circumstances. Pakistan, therefore, will face additional challenges as it adjusts its strategies to achieve a balance between protecting the vulnerable population and preserving the economy.

Poverty has remained high throughout Pakistan despite having ample land and plenty of resources providing employment opportunities. All these factors have led to extreme inequality in the country and worsened agricultural production and agriculture-based industries. Given this scenario, there has been great concern regarding the issue of poor education, healthcare, and sanitation in the country. Currently, the educational systems are marred by significant deficiencies, with millions of boys dropping out of school due to numerous reasons ranging from lack of interest, bullying, and bullying among others. According to a report released by the Human Rights Commission, around 17 million girls drop out of school every year due to various factors.

The fact that young girls are left uneducated could be a bigger threat than the males and if not addressed immediately, we are likely to see more numbers of girls dropping out of schools in the coming few decades. This ultimately will lead to another vicious cycle where girls lag behind boys as they get educated and then drop out. This will further affect Pakistan’s youth who are already falling behind as they are unable to join top universities or colleges. Furthermore, given the prevailing gender imbalances, Pakistan, is one of the most unequal societies in the world. Women have fewer rights and rights to protect themselves. They have also earned significantly less compared to men in Pakistan.

In Punjab, the literacy level stands at 73.5%. Roughly 90% of eligible adults and 35% of children are literate while 65% of women complete primary schooling. Similarly, the lowest tertiary institutions in the province have an enrollment ratio of just 30,000. Pakistan ranks fifth lowest among nations with respect to child survival and is ranked 26th in terms of median infant mortality. Girls’ education is crucial in eliminating this disparity.