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ECONOMIC CRISIS IN PAKISTAN

An economic crisis is a situation in which the economy of a country experiences a sudden


downturn brought on by a financial crisis. An economy facing an economic crisis will most
likely experience a falling GDP, a drying up of liquidity and rising/falling prices due to
inflation/deflation. An economic crisis can take the form of a recession or a depression.

Since the day Pakistan became an independent state she has suffered from an economic crisis.
Although the crisis experienced at the beginning was not due to the fault of its government, the
fact that Pakistan is still suffering from it is very much the government’s own fault.

At the time of independence Pakistan was dealt an unfair hand with the distribution of the
industries in the subcontinent. Bulk of the industries was given to India whereas Pakistan got
almost nothing. Agriculture provided employment for the large majority of the population as
industry was still in its infancy with few services and almost no infrastructure. In the first few
years Pakistan’s main concern was one of survival, where unfavorable international conditions
and an unstable domestic situation, with millions of refugees, made the provision of very basic
necessities the primary task of the government. Attempts to restructure the economy and to
ensure that it was on a strong footing could be undertaken only after the initial political and
economic shocks had been dealt with.

The first decade of economic policy and planning witnessed the attempts of a bureaucracy to
keep Pakistan on its feet. The heroic task of building an economic base was left to the state
sector as the private was still in developing form and did not have the funds to lead an industrial
revolution in the country. In 1952 a proper foundation of industry was laid, which the public
sector developed and then handed over to the private sector. 50 percent of its GDP arose from the
agricultural sector with the contribution of the manufacturing sector being just over seven
percent. Pakistan’s per capita income in 1948 was around US $50, compared to a per capita
income in India of US $70-80. Since agriculture accounted for as much as 60% of GDP, the
GDP grew slowly and exhibited sharp fluctuations. The manufacturing output (no more than five
percent of GDP) was mainly generated by the informal and small-scale sectors. Share of formal
sector was negligible, as there were only three large-scale manufacturing units in the areas,
which became part of Pakistan.

In spite of having a very weak industrial base Pakistan has always been rich in natural resources
such as chromite, coal, gemstones, petroleum. Responsible development and care of these
resources could provide Pakistan with the opportunity of becoming financially self-sufficient and
overcoming the crisis to some extent.

Unfortunately to overcome the crisis engulfing Pakistan the government took very high loans,
overspent irrationally and adopted the wrong policies. Moreover Pakistan could not give proper
attention to other sectors such as education, health and industries since 80 % of Pakistan’s GDP
was spent on defense. In addition to all this governments handling the affairs of Pakistan have
almost all been corrupt and not sincere in their efforts.

Till last year Pakistan was going through a very bad economic crisis. Prices of essential
commodities such as fuel, wheat, sugar etc were soaring high. But things have started looking
better this year. The growth rate for the economy approved by the National Accounts Committee
for the current fiscal year is a very healthy 4.1 per cent, considerably higher than the original
highly optimistic targets of three and 3.3 per cent which were released at various times
throughout the year. Compared to the original two per cent growth rate for the last fiscal year
2008-09, this is an impressive improvement of over 100 per cent. If the proper policies are
adopted by the government and if the needed effort is put in by the government and the people
Pakistan can, if not completely put an end to this crisis at least, bring it to a minimum level.