Economic Challenges of Pakistan

Definition of Economy

Economic Challenges for Pakistan

We can define the economy as a state of a country or a region by making and trading things of value. It may be physical things or services as done by people. It may also define as careful management of sources which are natural reservoirs or human skill development of a country. Basically it is used to measure how states use their resources in order to fulfill their commodities and how they trade them to other states or societies.

Economic Challenges for Pakistan 

  • We export less and import more. We prefer the use of imported goods from foreign countries rather than locally made goods. Unless we don’t change our attitude regarding this gap we will not be capable of decreasing the gap between export and import ratio. The lower the gap is, the more we will be able to become economically strong as we have not to rely on other country’s goods. 
  • We also face water and energy shortage resources. And it is not because we are not producing enough electricity but it is because only 45% is billing while the other 55% of people are those who are stealing electricity. Also, the government of Pakistan is paying 200 billion rupees for electricity subsidies.
  • For water shortage, there are only available constructed dams like Tarbella since 1974ut additional dams have not been constructed. Watercourse losses of 20-25% this year and due to this reason water is distributed unevenly.

Factors Affecting Economy:

The economy depends on the following factors

Human resources

Human resources mean the skills of that specific state. Their creative abilities, training, and education. Human resource management works on two areas that is the selection and recruitment. The unemployment rate is 5%.human resource department is not fulfilling its responsibility. It should determine how much percent of people should be encouraged in business. How much in IT, in arts and also other departments accordingly. So by training and improving their skills, we would be able to contribute to our economy. The literacy rate also contributes to the state’s economy.

Natural reservoirs 

Natural reservoirs are also the main source of stabling the country’s economy. The resources beneath the land or underground resources like oil, copper, coal, gas, metals, non-metals, and minerals, etc. Pakistan needs to focus on natural resources to earn by exporting the resources like other developed countries are exporting as Saudi Arabia.

Capital formation

Capital information includes land, building, machinery, power, transportation, etc. Producing all these man-made products and acquiring is termed as capital formation. Capital formation helps in increasing the labor or capital ratio as required to produce these products. So increasing the input and output growth of the economy. Thus also decreasing the rate of unemployment.

Technological development

In Pakistan, its setup is 3.5 billion$ and in contrast to India is 150 billion$ setup and accordingly, the export of software is 700million$ per annum and in India it is130$ dollars.

We should take steps in IT to improve our economy.

Role of Democracy in building Economy

The political factor is also an important factor in determining the economy of a country. If a country is stable politically then investors urge to invest there so it helps in improving the economy. Hence, Pakistan is not stable in this sense as the government is still unstable for making the country corruption-free and also to unite the political parties together. So there is no situation of law and order so foreign investors are reluctant to invest. 

Democracy can be defined as the government elected by the majority of the people of a state. People may run it directly or by the elective representatives. In a democratic government, there is a higher GDP rate due to civil liberties and a very reduced social conflict. Democracy also helps in eradicating various programs that are not beneficial for the people of a state or country and the most important advantage is that it is responsive, legitimate, and there will be accountability for every action of the government. There will be a reduced poverty rate and unemployment. When people are satisfied with the government then the economy will eventually boost up. 

The Supremacy of Law

All people have equal rights according to the constitution of 1973, article no.25. It ensures that all are equal before the law and there shall be no discrimination on the basis of sex alone. So if law practiced on every level from poor to the middle class and middle class to elite class then there will be no air of injustice and people will be aware of the rules and regulations of law.  

International Relations

International relations are the relations of a country with other countries or states of the world. It includes cooperation, sharing of resources and technology while also helping each other in pandemics, terrorism, etc.

So a country should develop good relations with neighbors and also with the whole world. Good International relations help in the growth of the economy. It is the need for a country to have good international relations. A country cannot be isolated from other countries. The whole world is dependent on each other for the sharing of resources. 

National Branding

It is very important for a country to market on a global level in order to grow its economy. National branding can be done in various ways is marketing the products of a country on the international level, presence on social media presenting the culture and heritage in vlogs, good governance, a better trading system, and improving tourist attractions and showing it to the world. All these factors if presented well on the global level then more nations, societies, and people would attract that specific state. It also helps in improving the image of a state or country to the whole world. And also a major factor in economic growth. 

Political Agendas

Politicians run many campaigns in order to win elections. If the politicians are loyal and sincere to the state then these agendas urge the nation to support the politicians. The promises during campaigns turn into reality one time and which in turn improves the economic conditions of the state. The economy grows by increasing employment opportunities, business, and academic facilities, improving international trade, etc.

Elimination of Poverty

Different employment opportunities will be created When politicians play their roles very well. Poverty can be eliminated by improving the education system, providing jobs to people, improving fiscal conditions and also having good governance. These following factors help in eliminating poverty which in turn will improve the economic conditions of the state. 

End of Terrorism

A strong political setup is needed to deal with chaos, civil war, and terrorism. Nations have won the war on the table. Terrorism exploits the economic state of a country very badly. Sound political conditions can overcome the war of terrorism. 

Eventually, the economic conditions of the state can be improved.

GDP Rate

GDP worth is 313 billion and we stand at 41st at world ranking and GDP growth rate was 3.3% in June 2019 but expected to be 5.5% at the end of the current year. GDP growth rate is very low in Pakistan as it is in developed countries. To explain the GDP rate I will share the example of the neighbor country India. India increases its GDP rate by providing foreign investors to invest.

  • Labor should be cheap
  • Law and order rate should be maintained
  • Corruption free culture
  • No terrorist activity and blast
  • Politically stable
  • Pakistan is in this state due to these above factors are not present here. And these act as repulsive forces for investors to invest. Foreign investors search for an economically stable country.

Inflation rate 

The inflation rate becomes 10% in 2019 as it was 5% lesser in the previous year. Thus how the value of rupee devalues. Our per capita income is 1600$. So the dollar rate increases and the government has to pay itself and by increasing taxes on people.


  • Some are the indicators for the economy.
  • Pakistan has 42% engaged in agriculture but only 19% contributing to the economy. 
  • The industry engages 23% and shares in the economy is 21%
  • In services, engaged people are 35% and contribution is 60%
  • Another indicator is people under the poverty line
  • The yardstick for determining poverty is 1.25$
  • The average percentage of the poverty line is 30.
  • Another important thing is about loans which are 92-100 billion dollars. The government has to pay installment monthly or quarterly based. The government collects dollars from banks. Thus the value of the dollar rises and rupee devalues. And the government imposes taxes as conditioned by countries from which the government took the loan or IMF.
  • The IMF also looks for austerity measures so how can you return the loan then conditionality imposed. By increasing taxes and also by increasing fares that are under government control. So how this economy gets poor.


To create a very conducive environment in Pakistan for doing ease of business and creating an environment for foreign investment because that is going to create jobs and economic activity will begin so the government can collect revenue from this activity. That’s how the government can spend it in different ways like welfare projects for people. 

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