At present, Pakistan’s economy is experiencing one of the worst economic conditions called as ‘stagflation’ characterized by the stagnant economic growth and high inflation rate. This economic malady also can be termed as ‘economic cancer’. US experienced such stagflation following the 1973 oil crisis and decades before during the Great Depression. In Pakistan, crippling energy crisis, terrorism, financial corruption and economic mismanagement by the last government are said to be the primary reasons for this economic state in the country. Before resorting to any economic strategy, the government should address these issues on a war-footing, otherwise, all efforts, to put economy on back on track would be fruitless. For this purpose, we have to improve the economic growth by boosting the economic activity in the country and mobilising all the potential sectors of the economy. First of all, government has to take some positive and tangible measures to restore the trust and confidence of both foreign and local investors in the economy, so as to attract Foreign Direct Investment (FDI) and stop capital flight from the country. All this can be ensured by efficiently resolving the energy crisis, introducing some proactive and pragmatic trade, industrial, agricultural and export policies and mobilising the banking sector. On the monetary side, the State Bank of Pakistan should reduce the inflationary pressures on the economy through some institutional measures and enforcing an effective and independent monetary policy in the country. Besides this, rule of law and public sector transparency and efficiency is also important. Having done all this, government should focus on revenue side to improve the tax to GDP ratio by documenting the economy, improving tax collection mechanism, making a shift from indirect to direct taxation and broadening the tax base. Likewise, a comprehensive export-oriented and value added manufacturing policy, based on the ingenuous raw material should also be introduced by the government. This will, ultimately, help in overcoming the current account deficit and getting rid of the chronic issue of balance of payment thereby enabling us not to beg from IMF. The short-term and myopic measures taken by the present government like increasing the GST and others will not help the economy in coming out of the predicament it is in. So, by ensuring a significant and substantial economic growth, we can only get the country rid of the pressing problems of rising and remnant unemployment, poverty and hunger. In the long run, it would also help in overcoming the chronic issues of the fiscal deficit and heavy public debts. Without doing so, only fiscal consolidation or any other measure taken by the government would be counterproductive and rather disastrous. Therefore, government should take some long-term drastic and bold decisions regarding the economy instead of taking short-term popular, political and cosmetic measures.
Posted on: Sun, 23 Jun 2013 20:25:32 +0000
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