A freer economy

Pakistan has been ranked at 32nd place among 43 countries in the Asia Pacific region on the basis of economic freedom within it. The increase by 0.6 points on the Index of Economic Freedom, an annual ranking created in 1995 by The Heritage Foundation and The Wall Street Journal, is due essentially to better scores for judicial effectiveness and property rights. These factors have surpassed the decline in monetary freedom and fiscal health.

According to this rating, Pakistan’s economic freedom score is 55.0 on a scale of 0 to 100, making its economy the 131st freest in the 2019 index. The index evaluates rule of law, size of government, regulatory efficiency and the openness of markets to determine the points awarded to a nation. It notes that internal political disputes and low levels of foreign investment are the main factors holding back economic freedom and contributing to underdevelopment. It also pinpoints excessive state involvement in the economy and inefficient regulatory authorities as a hurdle in the way of economic growth and economic freedom. The large informal sector, especially in the textiles and apparel section of the economy, also hold back earnings from exports. Crucially, the index points out that poor protection of rule of law, the vulnerability of the judiciary to influence, and the complex tax system hold back economic performance. Rising public debt and only a modest improvement in regulatory efficiency are also identified as factors which impinge on economic welfare.

At the present time, Pakistan’s economic conditions are a major talking point in the country as inflation in various sectors hits tens of thousands of people, combined with the threat of unemployment and underemployment. The observation in the index about factors which hold entrepreneurship, including lack of access to bank credit and financial isolation from the outside world, is a reality that the government needs to consider while devising its economic policies for the coming five years. Poor security and corruption also need to be addressed. The report does not comment on CPEC, though it refers to it in its overall assessment of Pakistan. Reports such as this of course provide only a one-dimensional perspective on the economy. It is up to policymakers in Pakistan to take a broader look at the problem and find ways to boost economic growth so that the people of the country can benefit in terms of finding work, improving earning power and thereby uplifting their quality of life.