In 1992, Carville, a strategist in Bill Clinton’s campaign for Presidential elections, used the phrase “IT’S THE ECONOMY, STUPID” against the then incumbent George H. W. Bush. It was primarily used to highlight the unguided policies of Bush which were more focused on the military combat than on the restructuring of the economy. The same is the case with Pakistan. The policies of the incumbent government are misguided and require redirection towards restructuring the economy.
The recent history has witnessed a new low in the politics of Pakistan wherein blame game, names calling, and body shaming have become the constants. The government is not doing enough to fix the economy. The economy of the country was already under stress when Covid-19 wreaked havoc on it.
The current figures of the economy sketch an abysmal picture that needs a complete overhaul. The trade deficit has ballooned around 97 percent which shows the incapacity of the policies to deal with the economic conditions. The government has always taken credits for shrinking the trade deficit which was an air-filled balloon claim and got burst with the rise in imports. The recent import of vaccinations, machinery, wheat, Soya bean, Mobiles, petroleum, and other materials has multiplied the trade deficit manifold. Not to speak of trade deficit, spiraling circular debt is even out of the government’s control. The current circular debt has crossed whopping figure of two thousand billion rupees. The exports of the country are stagnant and icing on the cake is that the government is thinking to import sugar and cotton from India. Being an agrarian country, it is a stigma that will smear the face of the country’s claim of being an agrarian one. These are just a few highlights of the fledgling economy that may jolt the souls of those who are wielding the reign of the government and taking it in the wrong direction.
Embracing innovation in the 4th Industrial age is the key to deal with economic crisis and Pakistan really needs to do that.
The economy of the country needs a complete fixation. Several measures are at disposal of the government which may be taken for this development. Firstly, the women of the country constitute around half of the population. The contribution of women to the country’s economy is not more than peanuts as they form only 30 percent of the work force let alone the entrepreneurs. The ILO study expounds that if participation of women in the national economy is improved by 25%, the GDP of the country will increase to 9%. For this, micro-financing for women should be initiated to incorporate them in the national life as happened in Bangladesh through Grameen Bank.
Secondly, Exports of the country should be enhanced rather than curtailing the imports to minimize the trade deficit. David Ricardo’s theory of Comparative Advantage can help enhance the exports by diversification and sophistication of the products. This can help the country to find new markets and allow the country’s exports to compete the international products. Innovation is the key to meet this standard.
Thirdly, instead of excessive taxation, the tax net should be widened. The former leads to higher cost of production and lower profits. This is the reason why out of 900 industries in Faisalabad, 200 have shifted to Bangladesh. Indirect taxation should be replaced with direct taxation to stretch the economic muscle of the country.
Fourthly, the credit constraints on SMEs can be minimized to produce value added products. For example, Badin holds the potential to produce the largest yield of tomatoes in the South Asia. These tomatoes can be turned into Ketchup and later be exported across the region. The value-added products can add multiple figures in the exchequer the country.
Fifthly, the farmers of the country are suffering due to higher cost of expenditures and low profits. Subsidies in the country have always been given on the losses which should be changed. Subsidies should be given on establishing new businesses and on the raw material. It will help reduce the cost of production and the profits will enhance. The farmers in the south Punjab are reluctant to grow the cotton crop. This has trickle down impact. Pakistan will have to import cotton to run its textile industry which will result in expensive manufacturing of textile. Again, the products of Pakistan will lose their competition in the international market due to expensive finished products. Regional trade is good only when the market of Pakistan is India and China, not otherwise.
Last but not the least, the service sector needs to undergo some revolutionary changes. Taking Tourism, the country’s tourism industry is really very expensive. Notwithstanding the tourism potentials of the country, this industry of ours contributes only around 6-7 percent in the national economy. For this, cutting-edge communicational infrastructure along with visa-easiness must be ensured. The expenses of the tourism must be minimized to attract the tourist from within and outside the country. The rising tourism industry of Turkey bears witness to this very fact that inexpensive tourism not only contributes to the economy but also promotes soft image of the country. Pakistan needs to take it to 30 percent of the GDP so that the country may extricate itself from the shackles of the internal and external loans.
Above are some, among many, of the measures that can be taken by the country to redirect its policies towards the economy. Defense of the country is important. However, strong defense sans strong economy is just an illusion. The world has realized the fact that geo-economics has supplanted the geo-politics. Now, the later revolves around the former. Putting the country on the right track requires policy vision and optimism. George Bernard Shaw has rightly said, “we are made wise not but the recollection of our past, but by the responsibilities of our future.” Now is the time to embrace the future responsibilities.
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