It was in the year 2007 when Pakistan was rated as one of the four leading emerging economies of Asia together with China, Vietnam and India all achieving a remarkable GDP growth of over 7%. While China, India and Vietnam continued on the path of growth, Pakistan lost track and slid into a state of political instability leading to its economy being rated as unstable. In the next five years that followed. The local and foreign investors started pulling out and by 2012-13 the GDP growth dropped to less than 2% and Foreign Direct Investment below US $1 billion. Economy was not the priority of the last government; hence no efforts were made to salvage it.
In the latest 2015 World Economic Outlook report, the International Monetary Fund (IMF) has once again included Pakistan in the ranks of emerging market economies. In the meantime many other countries have joined this fraternity like Mongolia, Central Asian states, Myanmar and many others.
By 2014, Pakistan’s GDP started to inch up and reached 4.0% in FY2014, 4.2% in 2015 and is projected to reach 4.5% in 2016.The IMF projects that Pakistan’s real GDP will continue to grow modestly reaching 5.2% by 2020. With the growing population of over 2.5%, with a young and growing middle class, a GDP growth of around 5% is a bare minimum to keep the nation’s economy afloat. The IMF statistics show that consumer prices in Pakistan increased to 8.6% in 2014 but reduced to 4.5% in 2015. The prices are projected to rise to 4.7% by 2016 and to 5% by 2020. Pakistan’s current account balance has improved from minus 1.3% in 2014 to minus 0.8 in 2015 and is projected to improve to minus 0.5 in 2016.
Although the figures appears better, for the first time since 2007 and the IMF has scored Pakistan somewhat positive; yet, the country is far from being rated as a stable economy. It continues to suffer from many inherent weaknesses. Pakistan’s economy is sustained through IMF funding – a source which Pakistan abandoned in 2005-06. There are no realistic signs that Pakistan will be able to walk out of the IMF programme in the next five years or more. The 9th review with IMF has been recently concluded under which $502 million tranche under $6.6 billion extended fund facility will be realised next month.
Foreign Direct Investment (FDI) in Pakistan declined to its lowest in 2015 to just a few million dollars. The global investments tend to flow to countries where there are greater certainty to the business and political environment and where there are limited political and regulatory barriers and the gap between state policies and its implementation is manageable. The strategic FDI is not happening in Pakistan. In fact, the strategic FDI is moving out of Pakistan especially from the US, the UK and the EU. Most of the investment moving into Pakistan is project business, related to energy and infrastructure projects from China and Turkey.
There are other serious gaps denting our economy. Accumulated losses incurred by state-run business entities such as PIA, Pakistan Steel Mills, Railways, state-operated utility companies and others have crossed Rs 1000 billion mark. The financial discipline in the energy sector remains messed up with the circular debt once again soaring – this time touching an all time peak of Rs 661 billion.
The ranking of Pakistan in ease of doing business, as per the latest World Bank report, has slipped from the global ranking of 128 to 138 which is a significant slippage and is a matter of serious concern for the nation. This will further dent the local and foreign investments in Pakistan.
Pakistan’s real hope for economic revival lies in the success of the China-Pakistan Economic Corridor (CPEC) largely driven by energy and infrastructure projects planned under its fold. Significant is the Thar coal project which has been placed under the CPEC. It is reported that the Thar coal project for power generation is set to achieve the financial close by December 2015 after remaining dormant for many years. The 660MW mine mouth project is being established by Sindh Engro Coal Mining Company (SECMC). This is a significant step forward.
Political uncertainty is one factor which harms the economy the most. The new rulers undo the good deeds of previous rulers and hardly give credit or take the ownership of the previous work; nor do they encourage continuity. Whereas, the government in power and those in opposition hardly complement each other on economic policies on account of lack of trust and point scoring to gain political mileage. In the process, the nation suffers. Like many of the developed nations the economy needs to be delinked from politics. All political parties much show maturity in owning the economy of the nation. But it appears that the politics of Pakistan is far from this maturity.