According to census 2017, the current population of Pakistan is 208 million, 55% of which live in rural areas and 45% live in urban areas (Ministry of Finance, Government of Pakistan, 2018). Almost 50 million (24%) of the population live below International poverty line of Rs. 250 a day (World Bank , 2019). 104 million (50%) live below Rs. 500 a day and almost 166.4 million (80%) live below Rs. 1,000 a day.
These 80% people lack basic entitlements towards economic assets and factors of production in Pakistan. The rest 41.4 million (20%) are the moneyed classes of which there are 10.4 million (5%) super rich which according to researches, owe more than 95% of the entire resources of the country. The middle income group with income between Rs. 1,000 and Rs. 10,000 a day) and upper middle-income group with income more than Rs. 10,000 a day are 31.2 million (15%) of the population that own, and live off less than 5% of the resources of the country.
In June 2018, the growth rate of GDP of Pakistan was 5.2% while in February 2019 the growth rate of GDP of the country is 4.5% or a decrease of 0.7%. In 2018, Agriculture’s share to GDP was 19%; share of manufacturing sector was 13.6%, out of which large-scale industry (LSM) contributed 10.8% to GDP; Small-scale manufacturing contributed 2.8% to GDP.
In other words, Agriculture and Manufacturing sectors together contribute only 32.6% of the GDP of the country while the rest 67.4% comes from Service sector. Which in turn means that jobs opportunities for those with less skills or less education levels are being limited when the share of both job creating and labor-intensive sectors is continuously decreasing every subsequent year.
Most of the growth in Pakistan over the years came from import substitution industry rather than export oriented industry. GDP growth came from pharmaceuticals, motor cars, and cement in the industrial sector, as well as retail, doctors, lawyers, banking and IT in the services sectors of Pakistan. The service sector employment requires high skills and highly educated people graduating from the public and private sector universities of the country leaving the less skilled and less educated or those that graduated from the public sector schools and colleges living in poverty or working for low paid employments.
The current economic crisis of Pakistan comes from two sources
(1) The Fiscal deficit that is direct result of over spending of subsequent governments where the Rs. 4 trillion tax revenue (50% of which had to be collected from direct taxes and another 50% from indirect taxes) is not collected each year. There are serious shortfalls of about Rs. 1.5 trillion in tax collection, because the rich and the powerful do not contribute their share of the direct taxes and the FBR is too incompetent to collect what should be collected and therefore rely on indirect taxes for revenue, putting the burden on the salaried middle classes and the poor.
On the spending side almost 50% of the revenue is spent on debt servicing, another 30 % on defense need, leaving only 10% for salaries, perks and federal current and development expenses and another 10% for provinces economic and social sector’s needs. Thus new debt (local and foreign) is generated every year in order to pay back old debts and to run the governments colossal development and current expenditures, leaving the future generations to pay for the needs of the current governments spending.
(2) The Balance of payments deficit – which is the cause of the decline in Pakistan’s exports due to internal productivity inefficiencies as well as shrinking of demand for Pakistani goods in external markets. Pakistan’s exports stand at Rs. 287.8 Billion in January 2019. In addition, there is an increase of Pakistan’s imports, mainly petroleum products, edible oil, machinery, raw materials and luxury consumable items. Pakistan’s imports stood at Rs. 624.6 Billion, resulting in a trade deficit of Rs. 336.8 Billion (Trading Economies, 2019).
In addition, over the years, Pakistan’s remittances for overseas Pakistanis declined from Rs. 2.7 Trillion (US $ 19 billion) to Rs. 1.8 Trillion (US$ 13 Billion). (Rehman, 2019). Subsequently Pakistan’s debt liabilities in 2018 was Rs. 31 Trillion. In September 2019 Pakistan’s external debt was Rs. 13.3 Trillion (US$ 95 billion) and in January 2019 is Rs. 13.6 Trillion (US$ 97 billion). With each Pakistani indebted by Rs. 127,000 ( Farooq Baloch, 2019).
Pakistan’s Public sector spending on social sectors, health, education, women, children, clean water, housing and environment pollution etc. is one of the lowest in the world (less than 10%) resulting in poor health of the population, environmental degradation, deforestation, pollution of water channels, climate change, drop outs in the school systems. Child mortality and low participation of women in economic life.
In 2015 Pakistan achievement on Millennium Development Goals (MDG’s;) was only 10% and Pakistan has as yet to comprehend the importance of Sustainable Development Goals (SDG’s) and Climate Change. The issues of Law and order, extremism, terrorism and extra-judicial killings and terror financing has eroded the credibility of the country’s seriousness as international economic partner with pathetic human right record at all levels of the society and government.
In short, 80% of Pakistan’s poor have no contribution to or from the country’s growth models. The super-rich do not pay their share of taxes. The industry and agriculture sectors are shrinking, so are Pakistan’s exports and remittances receipts. On the other hand, Pakistan’s imports and debt liabilities are increasing, so is the countries’ fiscal deficit and unproductive expenditures.
The country’s profile on the social, health, education, human rights and environmental indicators as well as ease to do business are among the lowest in the world and Pakistan falls at 41 in GDP growth in the world. The country needs serious educational, bureaucratic, technological, structural and legal reforms in order to put itself into the list of progressive, developing countries for a rapid growth model.
The government, the private sector as well as the general population have to restructure themselves for drastic changes in attitudes, behaviors, lifestyles and productivity for entering the economic fronts of the 21st century, which would need a long-term, enduring scientific policy planning taking all its federative units on board for sustainable economic development and growth. Otherwise the world fast changing behaviors will leave us far behind to grope in the darkness of the past, away from the light of the future economic, social, political and technological gains that should come by year 2030.
Farooq Baloch. (2019). Every Pakistani to pay Rs127,000 as national debt rises 21% in a year. Retrieved from SAMMA: https://www.samaa.tv/news/2019/01/every-pakistani-to-pay-rs127000-as-national-debt-rises-21-in-a-year/
Ministry of Finance, Government of Pakistan. (2018). Economic Survey of pakistan 2017-2018. Retrieved from Poverty in Pakistan: file:///D:/economic%20survey%202017-2018/Annex_III_Poverty.pdf
Rehman, S. U. (2019). Oversease Pakistani workers emittances up 12.22pc in Jul-Jan. Retrieved from Business Recorder: https://www.brecorder.com/2019/02/11/473061/oversease-pakistani-workers-remittances-up-12-22pc-in-jul-jan/
Trading Economies. (2019). Pakistan Balance of Trade. Retrieved from Trading Economies: https://tradingeconomics.com/pakistan/balance-of-trade
World Bank . (2019). Poverty & Equity Data Portal – Pakitan . Retrieved from The World Bank Group: http://povertydata.worldbank.org/poverty/country/PAK