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May 21, 2020

Shrinking economy

Editorial

 
May 21, 2020

Pakistan is the fifth largest country in the world in terms of population. Ideally, it should be at least in the top ten countries of the world in various indicators of economic, human, and social development. It has been a matter of grave concern not only for the citizens of Pakistan but also for friends and observers of Pakistan that we are far behind in nearly all indicators of economic growth, human development, and social cohesion. From 2015 to 2018 there was progress in many directions but during the past two years, even before the coronavirus hit the country, we started sliding down again.

According to the latest estimates, this year the nominal GDP of Pakistan is likely to shrink to around $265 billion. This cannot be blamed on Covid-19 alone if we look at the data from the past five years. Our nominal GDP was somewhere between $265 billion and $270 billion in 2015, depending on various calculation methods. In just three years to 2018, there was remarkable progress and when the PTI-led government came to power the GDP was around $315 billion. This was nearly a $50 billion improvement or increase in GDP, which was appreciated by most independent observers. Then within one year from 2018 to 2019 we experienced a rapid slide in GDP of around $25 billion and it came crashing down to nearly $290 billion in just one year. Now this year, due to the added problems created by Covid-19, we are slithering down to reach the level of 2015. If Pakistan’s economy shrinks to the expected, or rather feared, level of just $265 billion it will push us back at least five years in terms of economic growth. Of course, now Covid-19 has added to our economic woes but even more puzzling is the reduction of $25 billion in the GDP in just one year before the coronacrisis emerged. Similarly, the GDP growth rate falling to less than minus 0.4 percent is the worst performance in the past seven decades. The same applies to declining per capita income.

Now amid all this, the government is making efforts to roll back the autonomy of Pakistan’s provinces which may snowball into another crisis of social cohesion. As mentioned earlier, economic growth, human development, and social cohesion all should go hand in hand. There have been serious apprehensions from the provinces who have criticized the recently constituted National Finance Commission (NFC). The commission is tasked with dividing country’s resources between the federal government and other administrative units. No less controversial is the nomination of commission members from Balochistan and Khyber Pakhtunkhwa. If the economy has been shrinking for the past two years, neither the provinces nor the 18th Amendment can be blamed for it. The federal government should take stock of its own achievements and failures in the past two years and set its house in order by appointing a competent economic team; but for that you need to listen to sane advice and not insist on proving yourself right, even if it nobody believes you.