Economics problems of Pakistan Essay

ECONOMICS PROBLEMS OF PAKISTAN
AND THERE SOLOUTION

Pakistan is one of those developing countries which are facing through the economic problems which are hindering the success and the growth of the country. There are so many economic problems in Pakistan which are getting threatening and devastating day by day and if they are remained unattended than the conditions might even get to worse.

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Here are few crucial economic problems which are present in Pakistan and with their proper solutions through which these problems can be resolved;

1.Energy crisis:
Energy crisis is the most important and crucial economic problem which has affected the growth of the state adversely, the load shedding of Electricity, petroleum, CNG and Natural Gas has caused various problems and has resulted in the closure of several and numerous industries which has increased unemployment. The best solution to this problem is to find other alternatives of generating energy which might include solar energy, coal energy and even thermal and wind energy which might reduce the load on these available resources. 2.Personal savings:

Out of every 100 rupees of our country’s income we spend 85 and save only 15. Our personal consumption ratio is 85% and saving ratio is 15% which is very low. If we do not save more our domestic investment will be low and by that we face low economic growth. We need at least 24-25% savings for 6% economic growth rate. Our personal consumption should be low. We have to at least double on savings rate otherwise we will remain dependent on foreign sources. 3.Import and exports:

Our exports ratio in the years before 2009 was 80% as compare to the imports. In 2013 it is come down to the 50% it might go up to 60% but that 40 % of gap in financing needs in imports still exist. Our basic commodities are made up by other countries we don’t want to use local commodities. Unless we do not change the attitude towards locally manufactured goods we are going to rely on the outsiders to fill in this gap b/w imports and exports. We need to cover up the gap b/w our exports so we could reduce external resources. 4.Government spending’s:

Fiscal deficit is the difference between the revenues which are collected in a year and the total expenditure incurred by the Government. Pakistan’s government takes away 20% of national income as its own. Out of the every rupee of income received by a Pakistani, on average, tax paid is only 9 paisas and 91 paisas remain with the individual. In 2008 Pakistan s income was 13% whereas its expenditures were 20%. There was a fiscal deficit of 7% exist. And fiscal deficit has to be financed from somewhere. Either go for outside finance and aids or by the state bank of Pakistan. Financing provides by the state banks creates high inflation which effects middle class of Pakistan. Many people say that our defense takes away a large part of GDP but it is only 4% of the GDP. Whereas our debt servicing every year takes away large part of the GDP. Our government 40 % expenditure is on debt servicing which is more than 7% of the GDP. We have to control the debt servicing expense and it should be brought down year by year. Also imposing some tax on agriculture will help the government to maintain its fiscal deficit. 5.Our Share in the World Trade is Shrinking-

In 1990, Pakistan’s share was 0.2% of the world trade. After 20 years it has come down to 0.12% in a very buoyant world economy. World trade has been growing faster as compared to the world output. India in the same period had doubled its share from 0.7% to 61.4%, while Pakistan is going the other way and that is the reason why exports/imports imbalance is increasing. We are not taking advantage of the opportunities which a buoyant world economy is providing. Pakistan is stuck with only a few commodities – textiles, leather, rice, sports, goods and the surgical goods.

We have not entered the markets for more dynamic products. All our exports are to a few markets – the USA, EU and the Middle East. So this narrow export base and very limited geographical spread are not allowing us to expand our share. Unless we improve the quality of our products, go out and do the marketing abroad, invest in research and development, the prospects do not look promising. That is why we are lagging behind other countries which from way back are over taking Pakistan. 6.Terrorism

‘’Economic development is the only way forward, but terrorism and extremism are badly hampering the economic turnaround in Pakistan. The country is passing through difficult times and we are evolving a consensus strategy to sort out all issues confronting the nation.’’PRImE MINISTER NAWAZ SHARIF

The government and army should take full initiative altogether with the help of local and federal inelegancies to eliminate the terrorist and terrorism out of the Pakistan. The terrorist activities are creating such bad envoirment that does not help either investors or economy. They should create free envoirment for the investors.

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