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Pakistan's economy is poised for positive growth

Ishtiaq Ali Mehkri
Filed on March 23, 2017
Pakistans economy is poised for positive growth
Pakistan has the required space to expand and reinvigorate its economy

Reform-centric policies and improvement in law and order is buoying growth


Pakistan's economy is out of the woods. It is now on a winning streak. Irrespective of inherent weaknesses, its private and public sectors have made great strides. The country's GDP is forecast to grow at 4.7 per cent, which is quite a healthy trend, keeping in view the economic turmoil on an international stage since 2008. In terms of purchasing power, Pakistan's economy is ranked 24th in the world. Its 200 million population, with an enterprising youth, are the decisive factors for social mobility, growth and productivity.

Some of the most positive indicators as Pakistan struggles to overcome poverty are sustainability, political stability to a great extent and viable economic reforms. Moreover, low oil prices and an improvement to law and order has buoyed the economy to a great extent. The country is poised to have a prosperous economic growth as a couple of regional factors are coming to its rescue. Progress in the trans-regional energy networks and the international commitment to build a viable road infrastructure is acting as light at the end of the tunnel. Pakistan's geo-strategic location is unavoidable, and thus with peace settling in Afghanistan and relations normalised with Russia, India and Iran, Islamabad is set to reap benefits. 

The China-Pakistan Economic Corridor is a game-changer, which is undisputedly acting as the biggest driving force spurring foreign investment. An investment to the tune of $50 billion from Beijing is unprecedented in the country's history, and has come at a time when it was in dire need of it. This new relationship has also strengthened strategic understanding between both countries, as it is now no more military-centric, or one that was meant to browbeat regional adversaries. The Chinese-led initiative will churn out a network of roads, railroads and energy infrastructure, including ports and dry docks, across the length and breadth of Pakistan. More than 40 projects have been identified under the $51 billion CPEC framework, out of which a staggering $35 billion will go to energy projects. 

Likewise, the corridor that is being built from Kashgar to Gwadar will usher in renewed development and work opportunities for a country that is still underdeveloped in the realms of infrastructure, industry and communication. This is why CPEC is more of a nexus to which every country in the region wants to join, in an attempt to harvest the fruits of development and economic amalgamation in the region for the next generation. 

At the macro-economic level, Pakistan has made immense progress irrespective of bottlenecks. Inflow of capital in the last few years has helped in the development of infrastructure, especially in the sectors of health, education and civic amenities. Foreign direct investment (FDI) has risen by five per cent, taking it to more than $800 million. China, the US and European Union are some of the major FDI stakeholders in the economy. The UAE is one of the most promising investors in Pakistan, pouring in more than $125 million. But taking into consideration the vastness of the country and disparity at hand, there is much that needs to be done in alleviating the poor. 

Incapacity of market forces to support the creation of socio-economic institutions and broker a linkage between industry and agriculture is hampering across-the-board development. The country, primarily an agrarian society, has a weakened industrial base. This is where the government has to focus its synergies in order to bring at par all the sectors of economy. The downturn in the steel manufacturing sector, and poor performance in aviation, railways and other logistical areas is a real challenge. The government will have to not only pump in money in these mega projects to develop them, but also have to ensure that they are run on a turnkey basis with professional managements respectively. 

While the World Bank forecasts Pakistan's economy to rise through to 2019, significant risks remain. The government will have to keep a close eye on global downslide, and not let allocations in the micro-economic sector slump. Austerity measures in the non-development sectors are indispensable, and budget allocations need a dramatic boost in education, health and infrastructure sectors. 

Farm-to-market concept is still in quandary, and Pakistan needs a new deal in accelerating the pace of development for the sixth populous country of the world. Some essential sectors that need immediate attention are electricity supply, power generation from conventional and solar and nuclear sources, boost tax reforms, and encourage banks to fund the private sector as well as small and medium scale industries.

Pakistan has the required space to expand and reinvigorate its economy. Its workforce is one of the best and industrious in the world. All it needs is the vision and the conviction for nation building - and that too in real time. Big-ticket projects such as overhauling the airline and railway industry cannot be delayed any further.

The confidence of the market can be judged from the performance of the stock market, which has done a commendable job in the year 2016, rising 46 per cent over the last year. Foreign remittances of $20 billion per annum is the lifeline of economy. The present boom in the retail sector and leap growth in real estate are indicators that people have confidence in the economy, and look ahead for a robust future. Nonetheless, inflation is still a major problem and now estimated to be again in double digits. This has to be addressed through corrective measures in micro and macro sectors through prudent state regulations. 

Pakistan, the world's 40th largest economy, presently has a staggering international debt of around $80 billion. But the most promising aspect is that it is afloat and hasn't defaulted like South America and the European Union beleaguered economies. The fact that Pakistan is growing and enjoys the trust of the lender agencies will go on to act as a catalyst in redoubling its successes in the years to come.

- mehkri@khaleejtimes.com





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