Analysis of one of South Asia’s most fluctuant economies | Pakistan Today

Analysis of one of South Asia’s most fluctuant economies

At the heart of South Asia lies a sleeping economic giant. A country founded on the basis of religious freedom by an outstanding group of men that put their people and their religion before themselves.

A country stacked with economic potential, from the coast of Karachi to the peaks of Swat.

However, despite being rich in natural resources, and having potentially one of the most strategic locations in terms of neighboring countries and access to water, Pakistan’s economy has recently crippled.

A number of socio-political factors can be held responsible for this issue.

The problems plaguing Pakistan’s economy are a culmination of corruption and inefficiency. From embezzlement of funds to tax collection and custom revenue, widespread dishonesty and theft have led to a number of administrative issues.

One particular consequence is the resulting budget deficit. This is when government expenditure exceeds government revenue, and with a tax system as incompetent as our own, that is bound to happen.

In 2018, the government budget deficit was equal to 6.6% of the country’s GDP, despite the ERR of 2004 stating that the deficit should not breach 4.2%.

Ideally, taxes should be convenient to collect, and there should be severe repercussions for those who fail to pay their taxes. Although due to a lack of strictness and accountability, a vast high-earning majority evade taxation, which leads to a fall in revenue for the government.

A large part of the Pakistani economy also comprises black markets (underground economy).

Naturally, with these transactions taking place in the dark, the government and other taxation bodies are unable to scrutinize those engaged in them, and another group of economic agents who could have been a potential tax source are lost.

Custom duties also play an important dual-role in strengthening, by improving the balance of trade as well as generating steady revenue for the state.

Recurring dealings under the table and misuse of public office has also led to a number of individuals as well as businesses staying completely off the state’s records, again resulting in the government losing a valuable revenue stream.

Continuous misallocation of the government budget has also led to the economy finding its way into a deadlock.

After partition in 1947, Pakistan inherited only one-third of the British-Indian army, which it divided between its east (now Bangladesh) and west wings.

Although the Pakistani military stabilized over the next 25 years, the second partition in 1971 saw Pakistan’s Army divided once again.

This continuous division and destabilization, coupled with a constant threat from political arch-rival and neighbor India, led to a massive chunk of the government budget being spent on defense, with a total of $12686million being spent in 2018.

This is an extremely hefty amount for a country in an economic position like ours, where spending should ideally be focused on different supply-side policies.

More effective allocation of the budget is needed if the country is to move forward, and spending on education and training, as well as administration, must increase.

Pakistan must also concentrate on developing its natural resources. For example, the North, which is dotted with some of the highest peaks in the continent and filled with lush forests, has massive, untapped potential for tourism.

Along the border with Iran lies Pakistan’s most neglected, yet largest and most resourceful province, Balochistan. Coal, sulphur, iron and marble are just some examples of the diversity of untapped resources that are available in the region; developing and tapping this province could certainly bring about unimaginable economic success.

It is high time that these problems are highlighted and discussed, and potential solutions are worked upon, because if not now, when?