Before dip dive, we must know about the current economic position of Pakistan.
Before dip dive, we must know about the current economic position of Pakistan. The country has been suffering from severe inevitable economical crises since Political instability and Post Covid Effects. Jeoparadised Loan payment defers, inflation, and expedite decrease in foreign reserves led to extreme challenges for Pakistan. Curtailed imports and grounded exports cause economic instability.
Pakistan’s total gutting GDP is $292bn compared to regional competitors Bangladesh’s $400bn and India’s $3000bn, respectively. This is a woeful dramatic situation that instead of getting an IMF bail-out of around $7bn we may not be able to stand out on our feet. This temporary relief deems good for the time being but what ultimately other parameters do we need to take to solidify our economic path?
The total $292bn GDP of Pakistan can be identified into three fundamental categories;
1. 58% of the total GDP of Pakistan earns from Service Sectors, namely wholesale, transport, retail, and storage. For instance, it includes IT services. It augments around $2.5bn in the country’s total GDP compared to India, earning $150bn from the same sector. Services Sector is one of the most low-cost foreign export that can augment a massive part of the GDP of a country in comparison to commodities exports that cost a massive manufacturing budget too — for illustration, Selling IT services, software, e-commerce, and providing virtual assistance online worldwide. India is doing the same in IT Services. It has also become a second hub of technology in the World because all major IT and Software offices have been opened up in India e.g Google, Amazon, Apple, and Microsoft.
On the other hand, Overseas Pakistani also play a pivotal part in Paksitani GDP. They support with an unprecedented $31bn to GDP. Without overseas remittances, the Pakistani economy may collapse so its value cannot be mitigated.
2. Industrial manufacturing sector. It augments around 20% of the total GDP of the country. But the gutting fact in this sector is subsidizing the favorite businesses and exporters on a large scale. It breaks the bone of the actual framework of tax collection, bluntifying the system. Big fishes took advantage of subsidies from the incumbent government and in return pay nothing showing a downfall in business. Such reasons lead to IMF packages and borrowing loans that ultimately are paid off by imposing a reasonable tax on the public.
3. Agriculture is considered to be the backbone of Pakistan. According to the Pakistan Bureau of Statistics, It adds up to nearly 24% of GDP and accounts 65–70% labour force directly or indirectly attached to the agriculture sector. It includes Textile, fertilizers, agricultural machinery, and other organic eatables. But the confrontative turmoil is, that there is no tax on this sector which is totally unjustifiable. The taxation system is the backbone of countries economy which seems to be unaffected in this domain. Even a fully mandated government cannot do reforms in this sector due to inevitable circumstances. So what actually should a framework be to come out of economical crises?
As a matter of fact, this is not a unitary process instead, it is a combined effect where all political parties and stakeholders should sit together and do something for the sake of the country instead parlimenting and addressing their own interests.
A proposed framework based on my analysis and literature review to improve the economy should be as follow;
1. Coalition of all stakeholders and Policy Makers
It a good time to formulate new policies for long-term goals by taking on board all political parties and other stakeholders in the country as PDM is incumbent so 14 ruling coalition Governments should take measures to initiate this step for the sake of the country, make policies and pass necessary legislations for the betterment of the country. This coalition Government accompanied by the country’s stakeholders may be presaged economical growth in Pakistan if they work with true intentions.
2. Justifiable important appointments in Public offices
It is a dilemma that all the appointments in public offices is made on a favouritism basis, eroding the competency and meritocracy of the right candidate for the right position. This leads to a disaster when all essential appointments are purely based on political interests instead of country. Such appointments should be curtailed so that relevant competent personalities full of relevant caliber should be appointed for the relevant position.
3. Stopping Unjustifiable Subsidies
This is unfortunate and woeful for the country that favorites always benefitted in the name of subsidy. They take away more in the name of subsidy compared to what they actually pay as a tax. This happens only when government prioritizes its short-term political interests over the long-term countrie’s interests.
4. Imposing agricultural income tax
As already discussed, Being the backbone of countrie’s labour force, it must also be the backbone of countrie’s GDP by paying appropriate tax. Agriculture should be brought into the tax net and new policies for the tax system for the agriculture sector should be introduced.
5. Equal opportunities for all enterprises
This is another fact that mostly blue-eyed enterprises are favoured by incumbent political party exploiting right enterprise for the right project. This usually happens to get kind of back-channeled commissions.
6. A quick justice system
According to (World Justice Project) WJP-Rule of Law Index report 2022, the Pakistani Justice system has been ranked globally the worst justice system positioning at 130th country out of 139 countries. While Denmark, Norway, and Finland still stood at the top three positions in the World, respectively. The worst Justice system badly impacts on start-ups and the business community seeking insecurity to work in Pakistan.
7. Improving Services Export Sector
The services exports sector can prove one of the best economic pillars because of its low cost and high export rate with the potential of generating handsome revenue.
8. Reforms in Taxation Department
This is another vast chapter to discuss what kind of Taxation reforms can be brought. But definitely, there are loopholes in the existing framework. It should be as easier and show benefits in reward for everyone so that one should pay it considering as duty.
9. Institutional Unbiasing and construction of Centralized Coordinating System
State institutions always remain a criticism arena. Apparent biasing of institutes leads to wrong decisions, which ultimately cause destruction to the country.
There must be an authoritative centralized system for monitoring institutional progress and performance.
10. Lowering Imports and Boosting Local resources Utilization
Shifting towards renewable energy resources is the need of the hour. Pakistan imported petroleum worth $18bn in FY21. Replacing and utilizing local renewable sources can be a fruitful addition to lowering imports.