By: Waqar Haider and Muhammad Mehdi
Pakistan’s economic freedom score is 51.7, ranking it 152nd in the 2021 Index of Economic Freedom. Its total score has dropped 3.1 points, owing mostly to a deterioration in fiscal health. Pakistan is placed 34th out of 40 Asian countries, and its total score is lower than the regional and world averages. Pakistan’s economy is expected to decline to levels not seen in more than a decade, with inflation and unemployment both reaching ten-year highs. And this is only the start. With the government recently signing on to yet another IMF program, it is critical to emphasize that the IMF is not to blame for Pakistan’s current economic situation, as Pakistan is surrounded by many problems one main problem is the current account deficit until 2003 for every 100$ of goods exported, Pakistan imported goods and services worth $125, this means Pakistan had a trade deficit of 25% there were some remittances some were capital income and borrow some debts and we borrow enough to offset the deficit.
Now for every export of $100 our imports are $230 in 2020 the deficit of 25% and now increased to 130%, this deficit can now neither be offset by remittances nor can any other capital influence do wonders. Now things have changed. Our exports are extremely bad, and I do not believe we will be able to achieve much with our current exports. Our exports are doomed we haven’t diversified and have been reliant on the same export mix for the past 50 years with our present exports, there is nothing we can do. We only have kinoos, dates, and a few textiles. We have very little worth that can be exported to increase foreign exchange. We have to seek debts by compulsion, as you go to any supermarket in Pakistan you see food for cats and dogs and you can also find shampoos for your pets all these things are coming from imports one-third of Pakistani children are malnourished and we are importing cats and dogs food and the most important thing is we are importing these things from dollars we borrowed from lenders.
The solution is government should ban all the unnecessary imports increasing duties on these products doesn’t work just simply ban them, we are importing apples from New Zealand, chocolates from Switzerland, some 5 % of the population can afford such luxuries and the rest hardly get by with three modest meals a day so ban all those unnecessary items this include consumer cars and many products which are unnecessary, The question is why are we allowing the import of these products when it is already being produced in Pakistan, The government needs to support local manufacturers and discourage imports through non-tariff barriers so that imports of products being manufactured in Pakistan are reduced. The current GST on the industrial sector is 17% and they cannot survive, bringing it down to 5% helps industries to develop and perform healthy. This will also increase employment opportunities and exports to generate a genuine surplus and we government has to implement austerity measures to reduce unnecessary expenses.
Another thing is when the government borrows loan from IMF they invest in those projects which are not generating more profit like building roads, bridges, or infrastructure this will not generate surplus profit this will not help is the domestic capacity to produce goods and services, Government invests the borrowed money on unnecessary things to show people development but this is an artificial development until you have money after that economy is also getting slower when the inflow of money stops then you go back to IMF again and again. The growth model of Pakistan is unsustainable we have to make new policies. The government has to focus on domestic productivity growth build its own capacity in public, Increase Education, invest in people, invest in service industry like health and IT sector, Implement rule of law and create a good environment where people learn and polish their skills make them invest in their own county, and compete globally. Today, less than 1% of Pakistan’s population pays income tax, and most of them do so unwittingly because their taxes are deducted at source. The government should pursue and collect money from tax defaulters.
