Challenges to Pakistani economy

Challenges Pakistan economy is facing ahead of 2017; CPEC is crucial

The economy of Pakistan is the 25th largest in the world regarding purchasing power parity (PPP), and 38th largest concerning nominal gross domestic product. Pakistan has a population of over 190 million (the world’s 6th-largest), giving it a nominal GDP per capita of $1,550, which ranks 132nd in the world. However, Pakistan’s undocumented economy is estimated to be 36% of its overall economy, which is not taken into consideration when calculating per capita income. Pakistan is a developing country and is one of the Next Eleven, the eleven countries that, along with the BRICS, have a potential to become one of the world’s large economies in the 21st century.

However, Pakistan is facing extreme issues like electricity and Gas shortage, terrorism, unemployment, and poverty.

Fiscal consolidation is one of the most significant reform challenges facing Pakistan today”, said Enrique Blanco Armas, World Bank Lead Economist for Pakistan.

In October 2016, the IMF chief Christine Lagarde confirmed her economic assessment in Islamabad that Pakistan economy was ‘out of the crisis.’ The World Bank predicts that by 2018, Pakistan economy growth will increase to a “robust” 5.4% due to a greater inflow of foreign investment, namely from the China-Pakistan Economic Corridor (CPEC).

Economics south asian countries
Source: Asian Development Bank

Following chart is a trend of gross domestic product of Pakistan at market prices estimated by the International Monetary Fund with figures in millions of Pakistani Rupees. One can witness the inflation index and per capita income in Pakistan economy.


In 2016 the Atlantic Media Company (AMC) of the United States has ranked Pakistan economy as a relatively stronger in the South Asian markets and expected that it will grow rapidly during days ahead. AMC said that during the period January–July this year, Indian 100 point index was 6.67% while Karachi Stock Exchange (KSE) had achieved 100 point index of 17 percent.

It is worth bearing in mind that the promise of the moment owes itself almost entirely to fortuitous circumstances. The biggest stroke of luck came in the form of sharply dropping oil prices, which stabilized the current account even as exports and FDI fell. It also contributed in no small measure to the decrease in inflation.

The absence of big ideas to manage the changing circumstances has been this government’s most significant constraint thus far, and 2017 will test this weakness to the maximum.

This is the year when the promise of CPEC has to take shape, but thus far CPEC projects are being executed without an overarching planning and coordination body (notwithstanding the attempts of the Planning Commission to perform that role) and without any serious transparency. Power sector reforms do not appear to be advancing, and privatization seems to be stuck in limbo.

Written by Zohaib Zahid

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