Pakistan’s economy is a mess: What can be done?

Currently, Pakistan is facing several problems which include the crisis of the balance of payments, mounting debts, increasing inflation, and persistent budget deficits to name a few.

Presently our fiscal line is totally out of line with our expenditure. It is the need of the time to improve our revenue on war footing.

Current problems

The first problem faced by Pakistan’s economy is our tax-to-GDP ratio. It is too low. If we plan to increase our economy by 6.8% the tax ratio should increase by 20%.

We need to increase the number of taxpayers by bringing more people into the tax net. If we increase the number of taxpayers to 10 million in the next five years then we certainly stand a chance.

Rate of sales tax

Secondly, the rate of sales tax should also be decreased from 17.5%. Overall we should reform our tax system in a way that there should be more taxpayers included in the tax net instead of increasing the taxes of the salaried class which is already overburdened.

The public sector companies

Our public sector companies are a big burden on our national exchequer.  These companies like steel mills in Karachi, PIA, and power distribution companies have been generating huge losses for many decades and are a source of a big dent in our already dismal economy.

PIA has almost reached its demise as its over 500 flights got canceled due to the lack of payments to fuel companies. To reduce the burden on taxpayers such institutions should be privatised as early as possible in a very transparent way.

Shortage of dollars

On the external side, we always run short of dollars. It affects our balance of payments very badly.

To control it we must keep a balance between the export and import. We must curb the habit of importing frivolous and extravagant goods and should strive to increase our exports.

Issue with exports

The issue with our exports is that they are agriculture-based. We do not pay attention to increasing the value-added products to our exports.

For this companies need consolidation with foreign investors. For this purpose, the government must play its role in developing SEZs (special economic zones), following the pattern adopted by China.

The government should also facilitate the exporters to have access to the international markets.

Foreign currency reserves should also be beefed up through remittances by attracting the diaspora to the investment opportunities.

The whole process of reviving the economy needs a strong political will and stability, a decrease in bureaucratic red-tapism, and administrative transparency and consistency in policymaking. Only then we will be able to overcome our economic woes and be able to revive our dooming economy.

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