Analysing Pakistan’s economic decline

Pakistan, a nation with vast po­tential, witnessed a signifi­cant economic downturn in 2023. This article aims to illuminate the key events and shortcomings con­tributing to this decline, reveal­ing a mix of internal and external challenges hindering the coun­try’s progress.

Political instability emerges as a leading factor in Pakistan’s eco­nomic decline. Frequent changes in government and an absence of a stable policy framework disrupt long-term economic planning. The resulting inconsistency and lack of transparency in policies have eroded investor confidence, lead­ing to decreased foreign and do­mestic investments. This uncer­tainty impedes crucial economic reforms, exacerbating Pakistan’s economic struggles. To address this, considering alternative solu­tions like obtaining loans for eco­nomic development and investing in the financial sector could miti­gate dependency on consumerism.

Another significant challenge is the persistent energy crisis, caus­ing shortages in electricity and gas supply. This crisis leads to fre­quent power outages, disrupting industrial operations and nega­tively impacting manufacturing and services. Relying on expensive imported energy burdens foreign exchange reserves, straining the overall economy. The energy crisis creates a damaging cycle of power outages, reduced productivity, and increased production costs, mak­ing domestic companies less com­petitive globally.

The unpredictable energy sup­ply introduces uncertainty and risk into business operations, af­fecting GDP growth, fiscal deficits, and the trade balance. While ef­forts to address the energy crisis are underway, a comprehensive strategy is needed, spanning infra­structure development, policy re­form, and capacity enhancement. This crisis highlights the crucial link between energy security and economic stability, emphasising the consequences of neglecting this foundation.

Addressing the energy crisis in­volves leveraging renewable re­sources, improving electrical sup­ply companies’ efficiency, and promoting eco-friendly products at competitive prices.

Pakistan’s inefficient tax sys­tem also contributes to the eco­nomic downfall, marked by tax evasion, ineffective enforcement, and a narrow tax base. The gov­ernment struggles to generate sufficient revenue for public ex­penditures and essential infra­structure projects, hindering eco­nomic growth. Progress in tax reforms is essential to overcome budgetary constraints and stimu­late economic growth.

Addressing these issues de­mands a long-term commitment to political stability, energy and tax reforms, and strategic economic planning. By focusing on these es­sential areas, Pakistan can gradu­ally create a more favourable busi­ness environment, boost investor confidence, and lay the foundation for sustainable economic growth. While progress may be slow, the pace can be accelerated by imple­menting the suggested solutions.

MUHAMMAD SAAD BAJWA,

Lahore.

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