Pakistan’s economy is in a state of paralysis with every indicator showing a drastic decline.

Income-
expenditure gap has increased at an alarming rate. The rising import-export gap has stifled progress. In
fact, the agriculture and manufacturing sectors (backbone of our economy) are declining. All these
factors culminate in the form of distorted policies by the state.

The performance of the economy is usually defined by numbers and unfortunately even high growth
rates are aspired to at the cost of inflation, but still it is a jobless economic growth. Question raised why
economic growth not sustained. But the right question should be is the economic growth of Pakistan
sustainable, or not?

The external economy lies at the heart of Pakistan’s staggering financial affairs. Perhaps, the most
shocking aspect is that our manufacturing sector is dependent on imported raw materials, throwing
local materials out of the question. This is a structural hindrance in our system. Moreover, Pakistan’s
service’s deficit is negative and it is most of the foreign direct investment (FDI) in the country is in the
service sector. The Pakistani rupee continued to depreciate against the US dollar, FDI was heading in the
wrong direction, with negative flows of $30.4 million in March, and fiscal and current deficits growing.
The relief package was not well thought and right targeted.

Challenges for the government

The present government faces multiple challenges. . Foremost among those is the political uncertainty
overlapping with economic uncertainty without a reform agenda. This government also has to negotiate
with the IMF, when the political cycle is about to complete. Going forward, the annual budget will define
the stability of the government, depending on whether it is a people’s budget or an election budget.
Another challenge that this government faces is the strengthening of the social contract between the
state and citizens.

Pakistan first-politics second

There is extreme political polarisation in Pakistan, political parties are playing blame games without
focusing on solutions. The lack of political will to take hard decisions and resolve structural problems
persists. Economic thinking resides with the electoral gains. No political party thinks in the long run. A
broad framework for economic reforms in this country has been floating around since 2011.

Light at the end of the tunnel

Pakistan needs an inclusive economic system free from political interference. Prosperity should not be a
matter of party affiliation but a common task for all political actors who want to see a better Pakistan
not new or old.

A charter of economy is direly needed to create a stable economic base. The charter will help in
identifying the nature of problems or constraints before solutions or reforms are proposed. Capital
accounts are not used for speculative measures. There needs to be a clear understanding of what
remittances mean for Pakistan. Over reliance on remittances in Pakistan may lead to Dutch disease.
Economy is a combination of statistics and sentiments, both are essential for economic prosperity.
Positive sentiments come from political stability and certainty that in turn induce investor’s confidence
and deter capital flight.