Consequences of squeezing economy and decreasing per capita income in Pakistan
The economy of Pakistan has been facing significant challenges in recent years, leading to a squeeze in economic growth and a decrease in per capita income.
The economy faced a significant decline in its GDP, growth rate, and per capita income during the 2022-23 fiscal year. It reflects a considerable mismanagement by the coalition government led by the PML-N, with the overall economy growing by only 0.29pc, a sharp drop from the previous year’s rapid 6.1 percent growth under the PTI government. The economy’s size in dollar terms decreased to $341.554 billion in FY23 from $375.449 billion in FY22. The decline can be attributed to the highest-ever depreciation of the rupee in any year, indicating the challenges faced in maintaining a stable currency value.
Pakistan’s per capita income in dollar terms also fell to $1,568 in FY23 from $1,766 in the previous year and $1,677 in FY21. This decline highlights the deterioration of the standard of living and well-being for almost all segments of society, as personal incomes witnessed a sharp decline. The decrease in disposable income limits individuals’ ability to afford goods and services, save, or invest. The provisional growth rate of GDP for the year 2022-23 is estimated at 0.29 percent, with varying growth rates across different sectors. The agricultural sector is projected to experience a positive growth of 1.55 percent, while the industrial sector is expected to face a decline of 2.94 percent and the services sector a modest growth rate of 0.86 percent. These estimates provide insights into the performance and dynamics of the economy, emphasizing sector-specific trends and their potential impact on overall economic growth.
The squeezing of the economy has resulted in a decline in economic growth, hindering the nation’s development. The reduced economic output has affected multiple sectors, including agriculture, manufacturing, and services. With limited resources and declining investments, the country faces challenges in providing employment opportunities, improving infrastructure, and promoting innovation.
A consequence of the economic downturn is the rising unemployment rate in Pakistan. When the economy experiences a slowdown, businesses struggle to grow and create job opportunities. As a result, individuals, particularly the youth, find it challenging to secure stable employment. The increase in unemployment contributes to a rise in poverty levels, making it difficult for people to meet their basic needs and improve their quality of life.
A squeezed economy also affects the government’s ability to allocate funds for public services and welfare programmes. With limited financial resources, it becomes challenging to invest in education, healthcare, and social welfare initiatives. This, in turn, hampers the overall development of the population and widens the socio-economic disparities within the country.
The decreasing per capita income has a direct impact on the purchasing power of individuals. When people earn less, their ability to buy goods and services diminishes. This decline in purchasing power affects consumption patterns, leading to decreased demand for products, which further affects businesses and the overall economy. A decline in per capita income negatively affects the quality of life for individuals and households. It becomes challenging to afford essential commodities, such as food, housing, and healthcare. As a result, living standards deteriorate, impacting people’s well-being, health, and overall happiness. It also limits opportunities for personal and professional growth, further perpetuating the cycle of economic challenges.
The decrease in per capita income is often accompanied by rising inflation rates. As the cost of living increases, the purchasing power of individuals diminishes even further. Rising prices of essential goods and services put a strain on households, especially those with lower incomes. This inflationary pressure further exacerbates the economic challenges faced by the population.
The consequences of a squeezed economy and decreasing per capita income can have significant socio-political implications. Economic hardships often lead to social unrest, as frustrated individuals express their dissatisfaction through protests and demonstrations. The resulting instability can negatively impact the overall peace and harmony within the country.
When the economic conditions deteriorate, individuals may seek better opportunities elsewhere, both within the country and abroad. This can lead to increased internal migration as people move from rural to urban areas in search of employment. Additionally, a decrease in per capita income may also result in brain drain, as skilled professionals seek better prospects in other countries. This talent outflow further hampers the country’s ability to foster innovation and drive economic growth. The emigration rate among Pakistanis has seen a significant increase in recent years. Official numbers reveal that in 2021, approximately 225,000 Pakistanis left the country. However, this number nearly tripled to 765,000 in the following year, highlighting a concerning trend.
Among the emigrants in 2022, a notable portion consisted of highly educated professionals, including doctors, engineers, information technology experts, and accountants. Around 92,000 individuals from these fields chose to leave Pakistan. Some opted for Western countries, while others sought opportunities in Middle Eastern nations such as Saudi Arabia and the United Arab Emirates. Regrettably, this trend shows no signs of abating in 2023. Recent data indicates that within the first three months of this year alone, nearly 200,000 people have already left the country. The continuous outflow of individuals seeking better prospects elsewhere raises concerns about brain drain and its implications for Pakistan’s development and economy.
The reasons behind this significant emigration wave are multifaceted. Factors such as limited job opportunities, economic challenges, political instability, and inadequate infrastructure contribute to the decision of many Pakistanis to seek greener pastures abroad. The allure of higher wages, improved living standards, and better professional growth prospects in foreign lands often attract skilled individuals who may find more favorable conditions for their talents and expertise. The departure of highly educated professionals has adverse effects on Pakistan’s workforce and overall development. It not only depletes the country’s talent pool but also hampers sectors that rely on these skilled individuals for progress and innovation. The loss of doctors, engineers, IT experts, and accountants can lead to a strain on the healthcare system, hinder technological advancements, and impact the financial sector’s stability.
Furthermore, the emigration of a significant number of individuals poses challenges for the country’s economy. It can result in a reduction of tax revenues, as highly skilled individuals contribute significantly to the tax base. This, in turn, puts additional pressure on the government to meet the growing demands of its citizens with limited resources.
To address this issue, Pakistan needs to focus on creating a conducive environment that retains skilled professionals and encourages them to contribute to the country’s growth. This requires comprehensive efforts to improve the business climate, promote entrepreneurship, provide attractive job opportunities, and invest in education and skill development. Enhancing the infrastructure, ensuring political stability, and offering competitive salaries and benefits can also play a crucial role in encouraging talented individuals to stay and contribute to their homeland.
The significant increase in emigration rates among Pakistanis, especially highly educated professionals, is a cause for concern. The ongoing trend of individuals leaving the country in search of better opportunities abroad poses challenges to Pakistan’s workforce, economy, and overall development. It is essential for the government and stakeholders to prioritize measures that create an environment conducive to talent retention, investment, and economic growth, ensuring a brighter future for Pakistan and its citizens.
In conclusion, the consequences of a squeezing economy and decreasing per capita income in Pakistan are multifaceted and far-reaching. The economic downturn has resulted in reduced growth, higher unemployment rates, and increased poverty levels. Budgetary constraints have limited the government’s ability to invest in essential public services, further impacting the well-being of the population.
Moreover, the declining per capita income has diminished purchasing power, leading to decreased consumption and rising inflation rates. Individuals and households are facing challenges in affording basic necessities, thereby affecting their quality of life and living standards. The socio-political implications include social unrest, migration, and brain drain, all of which contribute to instability and hinder the country’s progress.
Addressing these consequences requires comprehensive measures that prioritize economic revival, job creation, and social welfare. It is essential to attract investments, promote entrepreneurship, and provide access to quality education and healthcare. Additionally, implementing policies that mitigate inflationary pressures and ensure equitable distribution of resources can help uplift the economy and improve the standard of living for the people of Pakistan.