Wednesday April 24, 2024

Too many deficits

November 27, 2022

Although Pakistan has been blessed with a strategic location at the intersection of major trade routes, a youthful and talented population and many natural resources, our place among the major economies of the world has been on a downward trajectory. As per the IMF, Pakistan has a GDP of $376,493 billion, the 68th largest among countries for which data is available. Singapore, a country with less than a tenth of our population, is the 42nd largest. Forget India, in terms of per-capita income, even Bangladesh is leaving us in the dust.

Our reliance on imports and debt to fuel economic growth is what holds us back. We consistently import more than we export and send more money abroad than we bring in, leading to a chronic balance of payments (BOP) problem. In addition, we spend more than we raise in tax revenues, leading to a chronic budget deficit. Debt is the pair of crutches that keeps us from falling apart. But, as evidenced by recent spending cuts and tax increases, foreign loans will not save the day. To turn around our economic situation we need a BOP and budget surplus.

Abdul Razzaq