Pakistan’s policies do not support economic growth

The Express Tribune

Pakistan’s policies do not support its economic growth and the country must institute widescale reforms as growth can be achieved by ensuring a robust macro-economy, policies that stimulate investment and better governance, said a report launched by the Institute for Policy Reforms (IPR) on Monday.

Economic growth is the key to creating more jobs, providing better living standards and reducing poverty.

An increase in economic gap with other countries could affect Pakistan’s regional position, the report said, explaining how high-growth economies transformed their nations through favourable policies.

In 1960, South Korea had a gross domestic product (GDP) per capita three times that of Pakistan. Today, its per capita income is 22 times more.

“Business as usual is no longer an option. Each year an additional two million people enter the job market and by 2030, Pakistan’s population will touch 260 million, more than half of which will be in cities,” the report said.

According to the findings, Pakistan does not generate enough savings for investment in future growth. There is major infrastructure deficit and low private investment, while spending on worker skills, education and other human needs is paltry.

The macro-economy does not support growth. These factors have locked the economy in a low or moderate growth trap. Pakistan’s small manufacturing sector produces low value-added goods and contributes just 14% to the GDP. Governance often burdens businesses, political economy favours the influential and resource allocation is inefficient.


The report also offered a plan for reforms. To begin with, Pakistan must increase government revenue to enable it to provide public goods and reduce external borrowing. Steps are needed to increase domestic savings.

High growth economies consistently invest over 25% of GDP, including 7% in infrastructure. They spend another 8% on health and education.

Pakistan too must aim for investment of at least 25% from the present 15% of GDP. It must increase the share in GDP of export-oriented manufacturers to become part of the global value chain.

Public investment must focus on high-priority projects in the areas of power supply, transmission, distribution and water storage and efficiency.

It must also strengthen agriculture research and extension services. Investment in skills and education must increase, the report said.

Urban centres are important drivers of growth, hence, to promote economic activity, they must have reliable power, gas and water supply, mass transit systems as well as high-class Wi-Fi. Air, sea and dry ports must be brought up to global standards.

The report said an export-oriented trade policy would stabilise the external account. Of special importance are transit trade and border facilitation.

“The tariff structure must support export-led growth. We need to attract FDI in export sectors.”

The IPR report suggested that the government should review its power policy to improve the energy mix and the generous incentives to investors.

It must also reduce line and billing losses. Businesses need to have reliable power supply at competitive rates. Acquisition of land for productive purposes must be made easy for businesses and development organisations.

Availability of trained workforce is the difference between a firm’s success and failure, stated the report, adding the government must cooperate with the industry for skills development.

It should set aside the needed financial and organisational resources. Present set-up needs a complete overhaul.