Pakistan’s economic-trajectory inculcates usually an episodic-boom followed by a bust, the resultant high-intense contraction then rejuvenates boom, which further gets deteriorated by a bust. This cycle is going on for a last few decades with full-throttle. During this vicious-cycle the nominal-increase in economic-variables makes the ruling-party always happy while the real-decrease in the same economic-variable erodes the disposable-income of a common man. For instance, inflation plays a duo-role, firstly eroding the purchasing-power of a person, secondly on the other hand playing with economic-variables such as inflating of GDP and tax-revenues etc. this makes the government happy to appreciate the revenue-authorities while it saddens the poor simultaneously. The ruling party brags this percentage-increase, while the poor has to shrink his or her expenses due to inflation, as a termite in his or her budget.
Looking at Pakistan’s strong, crystal-clear and splendid economic-fundamentals, it doesn’t require a scientific-law to infer that Pakistan can easily record an annual GDP growth-rate up to 5% sustainably onwards. Recent forecasts by our national-institutions and multi-lateral agencies attest this range of growth-tendency for current fiscal year.
Surprisingly, economic-experts opine a bit differently. A working-paper titled ”Why Pakistan’s Economic-growth continues to be Balance-of-payments constrained” was published in December 2019 by economists at Asian Development Bank which had concluded that Pakistan’s GDP growth-rate is Balance-of-payments (BOP) constrained at 3.8%.
Similarly, an economic-expert at State Bank of Pakistan had authored a paper in February 2021 titled as, “Balance of Payments Constrained Growth in Pakistan – Implications for development policy”. This paper has estimated that Pakistan’s GDP growth-rate is Balance-of-payments (BOP) constrained at 4.2%.
Although these are not the official-communiqués of these prominent institutions and so do not necessarily represent institutional-opinions however they still carry significance in policy-making circles, as these routine working-papers are deemed as expert-opinions of researchers in their individual-capacity and are published by these institutions themselves periodically after a rigorous round of editing and supervision.
The crux of these working-papers is that after attainment of a certain growth-rate, Pakistan’s imbalance of payments begins to swell. Exemplifying this to current economic-scenario, when pro-growth policies were promulgated amid and post pandemic, a strong demand of imports rose, which caused primarily the dollar to spike up against rupee, as Current Account Deficit (CAD) had started to widen. This was happening because dollar-outflow was doubling the pace of dollar-inflows for that period.
Although aggressive ‘import-curtailment’ always seems appropriate in such situation and has been tested several times but usually our import-mix has much inelasticity to allow this curtailment as our imports mainly comprise of fuel, essential-goods, capital-goods, raw-materials for export-oriented industries etc. So the only culprit is the ‘export’ which must match the imports at least to balance our looming trade-deficit. Fundamentally, import-substitution must remain a priority at policy-level.
Apparently, this ‘growth-rate’ depicts an ideal-situation where constituents of economy are speedily growing owing to a base-effect which was the logical-result of double-compressed economy, firstly pre-pandemic stabilization-phase under IMF and secondly the dawn of pandemic which decelerated and brought things to stand-still. But this situation is painfully predated upon by inherited structural-imbalances.
It has been empirically tested by our own national and multi-lateral agencies that Pakistan’s exports base is very much narrower as compared to her regional-competitors. Delving into this thesis, Firstly, Pakistan needs to widen her export-base in the current market-place because we have stuck with a conventional list of small number of exportable items for decades, many of which are even at verge of obsolescence as cheap substitutes are grabbing the market-share. Secondly, in 21st century and after pandemic, sticking to a few export-destinations is purely an absurd idea. Still regions such as African-continent as a whole and MENA-region precisely are still less-explored.
At the moment each and every exportable product in Pakistan which is also a recipient of an incentives-package comprising of energy-tariffs at preferential-rates or subsidies etc. is prone to a severe global-competition, which categorically attests, that in absence of such incentives our exports could come to a stand-still. This is a very unsustainable situation which must alarm the concerned quarters entrusted to strengthen Pakistan’s economic-regime.
Pakistan has been advised several times by the economists of all camps, to broaden her export-base and specialize it to remain competitive in exports-marketplace. Fortunately, this time coincides with hundreds of global-instances of Asian-countries which had already embarked this trajectory and are consuming the ripen-fruits, thus creating an archive of ‘best-practices’ and ‘failed-experiences’ to be considered in policy-inputs by our experts.
Pakistan’s economy, could be exemplified as a garden of low-hanging fruits each invites a serious attention providing an opportunity to turn a lackluster product to a blockbuster product thus optimizing our production and export-potential simultaneously.
Pakistan’s productive-sectors are massively undervalued with respect to optics and potential which dampen her earning-ability. This bleak picture is however a silver-lining, that looking forward these valuations will jump at par with their regional-peer, thus bolstering her earning-potential.
Lastly, I’m very much pleased to see that this structural-imbalance somehow seems to get minimized in near-future because since the current fiscal-year (2021-22) kicked off, our exports have picked-up tremendously and as per the market-estimates, if this trajectory sustains with constant-assumptions, then inevitably our exports could hover around 31 USD billion or more. Technically, this figure would be much lower than our imports-bill but still it would be a silver-lining manifesting Pakistan’s export-potential ahead.
