Home Editorial Editorial: Hurdles for Pakistan’s Economic Growth

Editorial: Hurdles for Pakistan’s Economic Growth

Without first tackling persistent issues of corruption and militancy, the incumbent government cannot hope to attract much-needed foreign investment

by Editorial

File photo. Rizwan Tabassum—AFP

Ahead of the incumbent government unveiling the federal budget for fiscal year 2024-25, Pakistan continues to teeter on the edge of economic stability, with almost all policymaking aimed at fulfilling demands of the International Monetary Fund (IMF) to secure an extended facility. While recent economic indicators have trended upward—inflation is on the decline, foreign exchange reserves have stabilized—years of pressure have pushed millions below the poverty line and the purchasing power of the majority is significantly constrained. The harsh measures advocated by the IMF are likely to trigger another round of inflation, raising fears of civil unrest that the government of Prime Minister Shehbaz Sharif is ill-equipped to tackle, especially when coupled with the political turmoil threatened by the Pakistan Tehreek-e-Insaf.

A key concern for Pakistan going into the next fiscal year is the increasing amounts of the budget that must be allocated for debt servicing, with the country trapped in a never-ending cycle of needing to secure fresh loans just to repay old ones. Among the country’s biggest creditors is China, where the premier is undertaking an official visit this week to “attract investment.” Ties between the “brotherly” nations remain positive, but were dented by militants targeting Chinese nationals in Pakistan. Each such attack prompts vows of “foolproof” security, but militancy emanating from across the border with Afghanistan continues to hamper any attempts at the same. This situation, naturally, makes it difficult to attract fresh investment.

Another issue is that of corruption in the form of bribery, smuggling and embezzlement, distorting market mechanisms and stifling entrepreneurial activity. The incumbent government’s aim to secure economic growth through direct investment may be laudable, but it is unlikely to bear any fruit so long as these core issues remain pending. The topmost priority must be to fix Pakistan’s internal concerns; investment and growth will inevitably follow.

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