The economy of Pakistan is likely to turn around this year due to various positive indicators in business, trade and industrial sectors. The Chinese investment is pouring in, the Export and Import Bank has been set up to arrest the falling exports and incentives for the industrial sector are expected to augur well for overall performance of the economy. However, one should not forget the inherent faults in policies and the government will have to launch crash programmes for capacity building of the government officials. The country has so far been regarded as the frontier economy and prudent policies are required to break this barrier to enter the emerging economy. Keeping in view the government’s lack of interest in introducing the structural reforms in its taxation system, business and trade policies as well as creating a conductive investment climate, the achievement of the cherished goal of emerging market seems to be years away. The economy of Pakistan is resilient and is able to absorb internal and external shocks. But policies are the driving force not only to increase foreign investment, but also make the country as the best destination for business and trade.
The International Monetary Fund, World Bank and various other world agencies have predicted that the economy of Pakistan will grow fast this year. They project the GDP growth to around $300 billion this year to push Pakistan into the group of emerging markets. However, it will be up to the country’s policymakers how to deal with the emerging situation. Experience show they are very bad in doing homework and are always caught in the middle of crisis. According to reports, the foreign direct investment this year will cross $1 billion mark and remittances, sent by expatriate Pakistanis will reach $20 billion a year. However, dark side of the situation is that the volume of foreign loans has crossed $73 billion mark and debt-to-GDP ratio has reached nearly 65 percent. The only panacea for the situation is to stimulate industrial growth and push the exports of value added goods. Attracting the foreign direct investment is the need of the hour as foreign investors can be invited to reap the benefits of industrial zones along the China Pakistan Economic Corridor.
The Chinese investment in the Pakistan Stock Exchange is a good omen, but the government will have to ensure that it should not have negative impact on the economy. In Malaysia’s case, the foreign investors had siphoned off half of the wealth of that country from the economy during Asian crisis. But the strong leadership of that country revived the economy within a year. May be we have to take extra care in this regard.
