Current situation of Pakistani Politics & Business
What is the current situation of Pakistan? The political and business situations have deteriorated and the country has become unstable. It is a developing country that has witnessed rapid industrial development in past decades but currently it faces many issues due to which its economy and politics are not able to cope up with the pressure that arises from abroad and within.
Political background, economy, governance, social welfare, investment in education, health, security, natural resources, etc., all these aspects are critical for any nation as they determine the future of such countries. In Pakistan, politics also plays an important role in determining the economic growth and performance of the country. Due to this fact, our country has been struggling heavily for financial aid for its development.
Our economic growth of 20 per cent a year in recent years is not enough anymore. Our exports account a maximum 40% part of national GDPs. Despite being one of the best developed countries across the world, our gross domestic product is $20,049 billion lower than India’s $1.25 trillion.
The government faces several challenges like weak institutions, corruption, unemployment, poor governance, inflation of Rs.7.2 lakh to Rs.7.6 lakh annually is very alarming. There is a severe shortage of jobs, with no clear solutions in sight.
The number of unemployed people is more than four times the working age population with an estimate of about 1.5 million people (which includes women and children). This can be seen as the largest single-time fall since 1947. Unemployment also leads to falling productivity which further increases costs. As per the World Bank, Pakistan’s fiscal deficit (GDP is Rs.8,931 billion) stands at 7.6% of GDP (Rs.8,569 billion). It has also experienced slow growth over the last two and half years. Fiscal deficit means spending that should have come from taxes but did not. Fiscal deficits can also lead to other problems like high interest expense. But it can only happen when there is a big budget deficit or a negative balance of payment. Thus we must solve this issue at once. These numbers will be revised later according to latest data and scenarios. Pakistan needs fiscal stimulus because if things get better they will be able to make growth and development successful.
This is what makes us worried about our future, our society, our economy and our people. According to IMF, Pakistan’s fiscal deficit is 3.5 percentage points higher than its 2015 target. We need fiscal assistance now only to save ourselves from economic distress.
Pakistan’s fiscal deficit and debt-to-GDP ratio are both extremely high which put it in danger. To fix this problem, Pakistan needs fiscal stimulus.
Pakistan’s main problem now is its foreign debt. And our biggest source of financing at present is bilateral loans as well as foreign grants. Bilateral loans are a major cause of increasing our debt, especially compared to international lenders. So, this can be resolved by increasing tax exemptions on loan repayments, reducing external borrowing, decreasing public borrowing, cutting interest rates but this may not be possible. One way to deal with this is by privatizing state owned enterprises, raising non-interest income by decreasing corporate rates, and making laws to limit tax breaks provided to private companies. Privatization is necessary to reduce reliance on state financed banks for funding. Non-interest income helps create jobs and boosts the economy of Pakistan but at the moment it cannot be increased dramatically due to high corporate rates so it can be reduced by privatization or raising them gradually by tax exemption for loan repayments. The increase in net private sector income is essential in boosting employment.
Pakistan’s internal issues too need attention right now. Many sectors like agriculture, housing, education, healthcare and infrastructure have failed to improve their status in terms of finance. So, the immediate priority is to build affordable housing projects, provide quality education at low cost, improve healthcare facilities and address the issues of environmental pollution, for example roads. If we solve these issues quickly we will be able to boost investments.
When we talk about the economy, it is often forgotten about the impact of the US dollar and a few countries, for example Russia, China and Turkey, that are also members of NATO, yet, Pakistan is not one. The value of the Afghan rupee is much smaller than US $. The exchange rate is not very stable. You need a currency that reflects the global market where currencies are priced as per their weight of commodities. When you are talking about the value of the Afghan rupee, it does not take into consideration the current trade situation.
There is a massive potential of growth in Afghanistan and Pakistan should support its efforts to develop its economy. Recently after the Taliban in Kabul announced an inclusive government, Pakistanis have started rethinking their expectations of a peaceful Afghanistan. They see hope in the Biden administration’s ability to engage in meaningful negotiations with the Taliban, restore peace, and end the war. Pakistan could be a valuable partner to facilitate trade between the United States and Afghanistan, especially in agricultural products. Pakistan is looking for engagement with Kabul on all matters related to Afghanistan, including the Afghan peace process. The United States has expressed concern that they remain committed to continuing dialogue with the government of Afghanistan to achieve permanent peace and prosperity. The Pakistan government will continue to maintain close diplomatic communication with the United State and Kabul’s administration to pursue constructive progress towards the mutual interests of Pakistan and Kabul, including finding a safe settlement and ensuring that Afghanistan remains a safe haven for the international community.
The Pakistan government under Prime Minister Imran Khan must initiate concrete steps to reduce the debt burden by reducing public sector borrowing, streamlining the bureaucracy on the board, and focusing on reforms and modernization of government. Governmental accountability processes, policy formulation and execution, policy monitoring and implementation, and effective review mechanisms are the focus areas of urgent reform. Reforms and modernisation of federal structure are imperative for a more cohesive Federal Executive Authority (FEO) and efficient functioning of the executive branch that serves Pakistan to promote transparency and integrity in policies and processes. The FEO should enhance efficiency and ensure efficiency and effectiveness of government. This would enable efficient coordination with various provincial governments and allow for effective control of the different agencies of Pakistan’s civil service and other public sector entities. Reforms and modernization would make the country self-reliant and competitive internationally, as well as encourage greater participation in economic and political affairs of Pakistan and Afghanistan.
In order to strengthen Pakistan’s geopolitical stability, the International Security Assistance Force (ISAF) and the National Commanding General of Pakistan’s army are actively promoting peace building. ISAF and NCAOG have done great work and have played an important role in building peace in both countries. Both forces are contributing to peace building in the region. The partnership between government and military leadership has helped bring stability in many places including Afghanistan, Balochistan and North Korea (Kim Jong Un-North Korean peace initiative). This project demonstrates Pakistan’s commitment to helping the whole world to prevent chaos, protect human rights and freedom of expression, and contribute to resolving violent conflicts peacefully.
We are aware of the strong relations that exist among us. Pakistan and Afghanistan are strategic partners who share similar goals, namely economic stability, rule of law, democracy and the protection of fundamental freedoms. Now I think it is time to move forward together, towards strengthening bilateral ties so that we can overcome our differences and achieve our full potential.
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