A vibrant economy is the essential component for development
Pakistan has experienced several economic cataclysms since its inception. Inheriting chiefly a biomass-based economy, the country indeed pursued industrialisation and accumulation of human-plus-manufactured capital, but regrettably the growth of the industries soon fell prey to slogans like equality and development of the social sector. Today, the economy is in need of policies whose implementation will lay groundwork for the creation of an emerging economy because donor-driven pills have little efficacy.
In this regard, a stable, flexible and a long term exchange rate policy is the indicator of sound monetary management. It is a fact that developing countries are severely hit by energy shortage and unstable domestic security, which lead to depreciation of currency and they therefore increase inflation and decrease national income. Hence, we need measures for appreciation of our currency.
Today, the economy of the world is transforming from an industrial economy to an information based economy
For one thing, future economic collapses can be avoided by banning fractional reserve banking and investment with borrowed money in the stock market. A true bull market can only be promulgated by expanding the national economy with employment friendly investment and continued production. In its recent report about the stock market crash of 2008, the Security and Exchange Commission of Pakistan (SECP) put forward recommendations for the revamping of existing broker regime, development of a strategic capital market development plan and a procedure for improved coordination between the SECP and the State Bank. For a fruitful outcome of these recommendations, the echelons of power may like to take some practical steps.
Today, the economy of the world is transforming from an industrial economy to an information based economy. In order to keep pace with the trendy cosmopolitan culture, the government needs to evolve a strategy to lay a solid base for booming hardware and software industry. Establishment of a separate organisation for research and development of information based economy under the ministry of science and technology would be a great step forward. This new arrangement would acquire the services of prominent and efficient computer and information technology specialists. The proposed organisation shall establish a network of research laboratories and production units in the field of information technology. Pakistan received nearly $83.12 billion in aid from the United States between 1948 and 2014. The culture of dependence on international aid and unilateral transfers for catapulting national income needs to be squeezed and a policy of “trade not aid” is needed instead. The country would require free trade agreements with its neighbours to take full advantage of the booming free market firms. Measures should also be taken for creation of Special Economic Zones (SEZ) on Chinese style. For attracting foreign direct investment (FDI), Pakistan should improve its internal security situation, promote rational beliefs and cultural flexibility for assimilation of foreign investors. The Chinese investment under the China-Pakistan Economic Corridor (CPEC) is a good sign of economic creativity, however it needs to channelise energy projects on build-operating basis to meet the energy crisis on emergency basis.
In the present circumstances, what is really important is the domestic savings rate
Realisation of the best financial management demands the initiation of a shock therapy trial. In the present circumstances, what is really important is the domestic savings rate. For this purpose, the government should reduce its yearly expenditure. The operating leverage of each and every institution should be fixed during every fiscal year and the external brought to zero. An atmosphere of free market economy should be promulgated and the privatisation of the white elephants like Pakistan International Airlines (PIA), Pakistan Railways and Pakistan Steels should be carried out as soon as possible. A campaign against corruption and embezzlement would also help in minimisation of extra expenditure. Policies need to be shaped to make this land a current account surplus country. Without previously accumulated foreign wealth, Pakistan is importing present consumption and exporting future consumption and in this regard, measures are required to bring a fair balance between exports and imports.
Lastly, the practice to use GNP as a primary measure of national economic activity should be instituted because according to Paul R Krugman and Maurice Obstfeld, national welfare depends more directly on national income than on domestic product. Furthermore, the Human Development Index (HDI) constructed by United Nations Development Program (UNDP) may be adopted as a standard tool for measuring the standard of living. A vibrant economy is the essential component for development. Unless the economy is revived, there are dark times ahead for the country.