There is a consensus of opinion among experts that Pakistan’s economy has immense potential for growth which needs to be utilised in a more organised manner than has been the case so far.

Pakistan is the fifth most populous nation, rich in mineral and other resources, geographically well-positioned and has a 990km hot water coastline. But despite these natural endowments, we have not progressed as much as other nations. Pakistan ranked a low 129th amongst 193 UN member states in the 2021 Sustainable Development Report, slipping 14 steps in five years since 2016. Currently, 8.5 million people are unemployed and around 40 per cent live below the poverty line, which is evidence of our poor economic performance.

Many reasons are cited for our failure to achieve the optimum growth level. These include weak state institutions, rampant corruption, a culture of patronage, a faulty legal framework, incompetent political and corporate leadership and absence of a stable and consistent economic policy framework.

Successive political governments failed to turn around the economy. Each left the economy in a worse shape than it had inherited. All three major political parties — the Pakistan Peoples Party (PPP), the Pakistan Muslim League-Nawaz (PML-N) and the Pakistan Tehreek-i-Insaf (PTI) — have broadly similar positions on the economy though they have approached the problems from their narrow party angles. They are all committed to a market-based economy for capital formation and promise to limit the government’s role to guarantee a level playing field in a conducive business environment. They also pledge to ensure rule-based governance and achieve distributive justice and environmental sustainability. But in practical terms, the performance of all previous governments has been below par. The PTI government took some social welfare steps to help the weaker sections of society but still they were not enough.

Available figures indicate very low levels of investment in both physical and human capital by businesses despite earning high profits. The 1990 PML-N government relaxed the rules for transferring foreign exchange abroad that continue to date, meaning national wealth continues to fly abroad. Besides, as recent sugar and other scandals showed, various mafias control and manipulate output and prices for reaping monopoly profits and evading taxes.

Pakistan’s economic problems are structural in nature and impact. A serious fault has been the inability of economic managers to understand market fundamentals. It is no secret that Pakistani businesses can’t access huge markets next door, while the sources of imports move within a narrow range. As such, our industries are not competitive, make low profits and do not invest in technology or innovation.

Until our policies become market-oriented, our economic growth will remain sluggish. Political instability and the failure of state institutions to develop a consensus on fundamental reforms of the governance system and the economy are other factors impeding economic growth. Double-digit growth in India and China were unimaginable 40 years back. It was only when they finally embraced the market economy and opened up for international trade, the pace of development gained momentum. Pakistan’s economy too has to break free of the political shackles for the sake of the future of the teeming millions, according to a leading expert.

At the same time, tax policy needs to be revamped. Under the present system, the powers of tax collection, investigation, prosecution and adjudication are all centered in the Federal Board of Revenue (FBR). It is a regressive regime and breeds corruption and sloth.

There are several other factors, such as the absence of long-term national planning, fragmented decision-making, outdated regulatory environment, a civil service that mistrusts business, gross mismanagement of agriculture and knee-jerk changes in policies for short-term revenue objectives that distort the economic picture. On the one hand, fragmentation of authority between the federation and provinces and between various federal ministries, on the other, have created new complexities and slowed down decision-making. Investment, especially in new sectors, has been thwarted by lack of policy consistency. Hence, exports have suffered from low value-addition. Over half of our exports are in categories for which global demand is declining. Weak economic diplomacy and lack of free trade agreements stand in the way of export growth.

The neglect of agriculture has also damaged our economic growth potential and prospects. With Pakistan now a net importer of food, the mismanagement of agriculture has become a matter of food security and unbearable inflation. Textile, the major export sector, is also denied adequate supply of cotton — its principal input. Needless to say, without addressing the fundamental flaws, our economy will remain moribund and sluggish, resulting in low GDP growth and wide-spread unemployment.