Pakistan's Economic Problems and Solutions

Economic Problems Of
Pakistan And Their
Solutions
Hafiz Dabeer
INSTITUTE OF BUSINESS ADMINISTRATION, PUNJAB UNIVERSITY,
LAHORE.

Economic Problems Of Pakistan And Their Solutions 1
Economic Problems of Pakistan and Their
Solutions
Table of Contents:
1. Introduction: ............................................................................................................................ 3
2. An Overview: .......................................................................................................................... 3
3. Challenges to Economy of Pakistan:....................................................................................... 5
3.1. War on terror:................................................................................................................... 6
3.2. We consume more and save less:..................................................................................... 7
3.3. Poor academic set-up: ...................................................................................................... 7
3.4. Energy crisis:.................................................................................................................... 8
3.5. Inadequate exports:. ......................................................................................................... 9
3.1. Inflation:......................................................................................................................... 10
3.2. Lack of tourism: ............................................................................................................. 10
3.3. Government spends more than it earns as revenues:...................................................... 11
3.4. Our share in the world trade is shrinking:...................................................................... 13
3.5. Corruption: ..................................................................................................................... 13
3.6. Kashmir issue:................................................................................................................ 14
3.7. We badly lag in social indicators: .................................................................................. 14
3.8. Trade: ............................................................................................................................. 15
3.9. Investment failing:.......................................................................................................... 16
3.10. Political stability, law and order:................................................................................ 17
3.11. Poor use of natural resources:..................................................................................... 18
3.12. Poverty:....................................................................................................................... 18
3.13. We face energy and water shortages: ......................................................................... 19
3.14. Poor governance: ........................................................................................................ 20
3.15. Uncertainty and unpredictability due to lack of continuity:....................................... 20

4. Recommendations and solutions to Improve Economy: ....................................................... 21
4.1. Technology:.................................................................................................................... 22
4.2. Taxation:......................................................................................................................... 23
4.3. Governance, devolution and decentralization:............................................................... 23
4.4. Energy crisis:.................................................................................................................. 24
4.5. Private sector:................................................................................................................. 24
4.6. Government should utilize the resources well: .............................................................. 25
4.7. Stakeholders in the Pakistani: ........................................................................................ 25
4.8. Possible solutions of Energy Crisis in Pakistan: ............................................................ 25
4.9. Impacts of law and order situation on economy: ........................................................... 26
4.10. Natural resources:....................................................................................................... 33
4.11. Lack of tourism:.......................................................................................................... 33
4.12. Illiteracy:..................................................................................................................... 34
4.13. Change in national psyche and mind set: ................................................................... 34
4.14. Inflation: ..................................................................................................................... 34
4.15. Low export and high Import:...................................................................................... 34
4.16. Technology:................................................................................................................ 35
4.17. Energy solutions and climate change: ........................................................................ 35
5. Conclusion:............................................................................................................................ 40
6. Bibliography:......................................................................................................................... 41

1. Introduction:
There are many issues of Pakistan in the current scenario but there are many such issues
which are just because of our negligence we are not delivering our best that’s why we are facing
many problems we are not utilizing our resources properly .in this topic I am privileged to
discuss this important issue . I am very glad to discuss this issue which is of vital interest for our
country.
2. An Overview:
Let me give you a brief overview in simple terms as to what the arrangement of this
economy is? In 1947, Pakistan had 31 million people with per capita income of 100$.
Agriculture provided us only 50% of output and the other industries were not in Pakistan.
Therefore, it was difficult to feed 31 million people and was relying on PL-480 imports from the
USA. From thereon, Pakistan has arisen a long way. Nowadays with 170 million people, our per
capita income in 2008 was 1001$ which was ten times more. Pakistan is the third biggest
exporter of rice in the world and producing enough food grains to feed its people3 million ton of
rice is exported because it is surplus. Pakistan is also one of the five major textile producing
countries in the world. So if we measure in relative to where we were vis-à-vis structure of
economy, agriculture has come down from 50% to 20%. Therefore, out of total national income,
agriculture’s influence is just 20%, but instead of being deficient in food production, we are
actually surplus and that is what production means i.e. by using the identical land you produce
more from the same inputs, that is how economic growing takes place. Agriculture includes
livestock, crops and other items. Pakistan also produces third largest quantity of milk in the
world. So inside agriculture sector, there is a change i.e. major crops are only 36% of agriculture

value added and 14% are slight crops, fisheries, fruits and vegetables. Therefore, we are moving
in a direction where the same land and same resources are being used more efficiently in
direction to produce more. As dissimilarity, agriculture is only 2.6% in the US having a
population of 301 million, out of which they not only feed the whole population, but also export
to the rest of the world. Therefore, it is important to recognize that when it is said that agriculture
is producing more, it is the productivity of agriculture relatively to the share of agriculture in
GDP. Manufacturing and industry now explanation for 26% of the income; when we recall there
was not even a single industry worth its name at the time of partition. So if we look where we
were 1969.pakistan exports more than other countries like Malaysia and Vietnam altogether. The
problem is that Vietnam now a day is ahead of Pakistan. A decade before India was behind us
but now India is ahead of other challenges faced by Pakistan are written below. This writing will
further tell us an overview about Economic Problems of Pakistan and Their Keys. Pakistan is one
of those evolving countries which are facing through the economic problems which are delaying
the success and the growth of the country. There are consequently many economic problems in
Pakistan which are getting hostile and overwhelming day by day and if they are remained
unattended than the conditions might even get to worse. Production of wheat was 4.0 million
tons in 1947. Nowadays we are producing over 23-24 million tons - almost 6 times more.
Production of cotton was approximately 1.0 million bales in 1947. Nowadays we are producing
close to 13.0 -14.0 million bales. Production of sugarcane was 10 million tons in 1947.
Nowadays we are producing over 55-60 million tons. Out of 14,569 industrial formations in
British India in 1947, only 1406 units (less than 10%) were positioned in the areas that
comprised Pakistan. At the time of independence, Pakistan had a fine industrial base with 34
units of textile, sugar mills and some cement factory. The share of agriculture in GDP was 60%

in 1947. Today, it contributes 22% and 78% influence comes from industry and services. In 1947
there were 177,000 bars in Pakistan. Today we have 9.3 million spindles. There were 4801
looms in 1947; today we have approximately 3.0 million power looms. Pakistan used to produce
35,000 tons of sugar and today we are manufacturing more than 3.5-4.0 million tons of sugar. At
the time of independence Pakistan was manufacturing 270,000 tons of cement. Today we are
now making over 28 million tons of cement. Pakistan hereditary very weak infrastructure at the
time of independence. Pakistan hereditary 22,100 km road and today we have a road network of
258,351 km...
3. Challenges to Economy of Pakistan:
Economy of any state is very critical and it governs that how stable and how strengthen
the state. So it is very much significant for ever country to make sure that the economy of the
state is stable and is strong enough to go through the ups and downs in the country internally and
externally. Pakistan is sole of the countries which have seen so many variations in the economy
of the state because of so many internal and external circumstances which have eventually
affected and delayed the growth and the stability of the state.
The head office of only One Pakistani owned bank was located in Pakistani territory.
After a long battle India released a much smaller amount than the legitimate share of Pakistan.
(StudyFind, 2013).
I was pleasantly surprised to learn that even in the worst of circumstances the Pakistani
economy had been raising at 5.2 percent annually during 1960-2010. The condition is bad since
then but there are some impressive growths. Pakistan is performing better than even Bangladesh

when it comes to microfinance while private initiative is helping education go forward
significantly (Ahmed, 2013).
Not with standing numerous challenges that we faced finished the last 65 years, Pakistan
has done reasonably well on economic forward-facing. Pakistan’s economy has grown at a
normal rate of 5.0% per annum over the previous 65 years (StudyFind, 2013).
Bulleh Shah said:
Panj rukan Islam de te cheyaan tukk/Cheyaan jai na hovey te panje jaande mukk.
(Islam comprises five pillars of faith, but the sixth is food/If the sixth is not
available the five pillars crumble.)
3.1.War on terror:
After the incidence of 9/11, Pakistan is the country which was greatly affected by the
terrorism. Pervez Musharraf’s poor governance and bad policies of war on terror lead Pakistan
towards great disaster. As Pakistan is connected to Afghanistan geographically and is an ally of
America in war on terror, therefore facing great threats and terrorism. A huge part of budget is
spent on war on terror and other security measures.
War against terrorism is another very important reason behind the economic problem.
War is distressing the world’s economy and is triggering problems like lack of fuel, lack
of funds, rise in health problem etc. War welfares none, someone is offended badly and
someone is destroyed completely (jalil, 2013).

3.2.We consume more and save less:
When government spends more on non-development activities .the government spends
more on unnecessary things and it lead to bad economic conditions.
The influx of refugees from India created insurmountable problems as the country had no
resources to meet this challenge (StudyFind, 2013).
We get more income then we start utilizing the money in excess of unnecessary needs.
We start utilizing expensive things. When we start buying expensive things then we are left with
less money.so when we start wasting money then we are left with less money.
3.3.Poor academic set-up:
Other major issue of our country is that we have a poor academic set-up. The education is
compulsory in our constitution but we as a nation do not practically implement this rule. The
primary education is given to the students then when they enter the universities then they came to
realize that our academic set up is such that there are no such opportunities to accelerate.

3.4.Energy crisis:
Energy crisis is the most important and critical economic problem which has affected the
growth of the state unfavorably, the load shedding of Electricity, petroleum, CNG and Natural
Gas has produced various problems and has resulted in the conclusion of several and many
industries which has increased unemployment (StudyFind, 2013).

3.5. Inadequate exports:.
Check-out 2007-2008, 80% of our imports were financed by our export earnings. This
ratio has come down to only 50%, it may go up to 60% but a gap of 40% of financing needs in
order to keep with the import level still occurs. As a nation we desire to use even the basic
commodities of foreign countries rather than nearby manufactured goods. Except we do not
change this boldness of favoring the imported goods we have to keep on trusting on outsiders to
fill in this gap b/w our imports and exports. Relying on outsiders’ means that there are
sequences, ups, and downs i.e. when things are upright, one gets financing, and when things are
bad one starves for financing. No nation which strives to preserve its honor must go through this
specific route. The lesser is this gap between our export earnings and expenditure on imports -
and that can be achieved only by expending our exports; our reliance on external sources would
be reduced.
Pakistan is an agro based country in which its 75% of the total economy is directly linked
with the agricultural productions; in such a scenario unfortunately Pakistan has being hit with
several devastating natural disastrous including heavy flooding and earthquakes. Such tragedies
have tumbledown and destroyed huge amount of cultivating lands which has ultimately left
many farmers helpless. For the improvement of the economy of the country and to get the
progressive run Pakistan should seriously and honestly has to work on its political stability and
its Law and Order situation to improve their economic conditions (Liaqat, 2014).

3.1.Inflation:
Inflation rate in Pakistan is very high and it is one of the most adverse problems of
Pakistan these days... The average inflation rate of Pakistan is 8.03. . In January of 2014 the
inflation rate was 7.90. The devaluation of Rupee is creating problems for our country.
The imports have increased in a significant manner and the exports are falling daily this
major reason why the country like Pakistan is unable to keep the inflation rate down.
3.2. Lack of tourism:
Terrorism is on the top of the slant, as Pakistan is facing problems of terrorism for such a
long time now and fronting the religious radicalism and the ruthless activities of Taliban and
other agencies. This factor has totally eradicated the international investment in the country, so
the exchange of external currency is being stationary. This has exaggerated in adverse manner
that the economy is completely based on what the country is producing the moment because no
foreign help in exchange is being done (Liaqat, 2014).
3.6
4.4
3.5 3.1
4.6
9.3
7.9 7.8
12
20.8
11.7
13.9
11
0
2
4
6
8
10
12
14
16
18
20
22

Pakistan is a country in which there is extreme scenic beauty and in the recent times the
tourism industry in Pakistan has donated immensely in the economy of the state, but due to the
natural tragedies and the law and order situation of the state, the terrorism has abridged the
tourism of the state and that has unfavorably provoked the economy of the country for this
reason the country has to work on the law and order situation of the country (StudyFind, 2013).
3.3. Government spends more than it earns as revenues:
Fiscal deficit is the difference between the revenues which are collected in a year and the
total expenditure incurred by the Government. Pakistan’s government takes away 20% of
national income as its own. 80% is left in the private sector and 20% in the hands of the
government is spent on defense, debt servicing, development on education, health, general
administration etc. The revenue generated is only 15% of the GDP at best, and in the poorest
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
GDP

days it is 12 to 13%. Out of the every rupee of income received by a Pakistani, on average, tax
paid is only 9 paisa’s and 91 paisa’s remain with the individual. In 2008-2009, Pakistan’s fiscal
deficit was more than 7% which means its income or revenues were only 13% of GDP whereas,
expenditures were 20%. Therefore, fiscal shortages have to be backed from anywhere, so how do
you sponsorship them; you either go again begging the external contributors, or to the State bank
of Pakistan. The supporting provided by the State bank of Pakistan is dangerous because it
makes high inflation in the economy, which is harmful to the middle class, those earning stable
wages and salaries, and the poor. Therefore, there is uproar in the country if the inflation rate
goes up. In 1998, our Debt to GDP ratio was 100%, which means that the entire national income
was pledged as debt. Every single penny was promised to the creditors. This ratio was abridged
progressively over next six to seven years and brought down to 50%, an average for all the
economies. Nevertheless, the way the things are successful for the last two years, it has moved
from 50% in last two yrs. to 58%, and with all the borrowings it may go to 60%, while the Fiscal
Responsibility Law 2006 says, that the government should not surpass the debt GDP ratio more
than 60% and is required to reduce it by 2.5%; and that is not happening. The reason the fiscal
shortage is widening is low revenue collection. How can you suppose that only nine paisa’s out
of every rupee of income generated by Pakistani population suffices to meet the necessities of
defense, development, debt repairing etc. This is just not possible. In India, tax GDP ratio is 15%
and still they have fiscal shortage. So Pakistan is way below the norm for emerging countries.
Numerous people say that defense takes away a lot of government expenditure. However, the
fact is that defense expenditure is only 20% of government expenditure. It is only 4% of GDP,
and is not such a large expenditure as compared to debt servicing which is 7-8% of GDP and
almost 40% of government expenditure. Hence, government has to contain its fiscal deficit by

raising revenues. Agriculture incomes are exempt, professionals, retailers; wholesalers, transport
owners and many other service providers evade taxes by paying a small fraction of what is due.
Ongoing large fiscal shortages year after year may plunge the country into debt trap again.
3.4. Our share in the world trade is shrinking:
In 1990, Pakistan’s share was 0.2% of the world trade. After 20 years it has come down
to 0.12% in a very floating world economy. World trade has been mounting faster as compared
to the world output. India in the same period had doubled its share from 0.7% to 1.4%, while
Pakistan is going the other way and that is the reason why exports/imports imbalance is
snowballing. We are not taking advantage of the opportunities which a floating world economy
is if. Pakistan is stuck with only a few commodities – textiles, leather, rice, sports, goods and the
surgical goods. We have not arrived the markets for more active products. All our exports are to
a few markets – the USA, EU and the Middle East. So this narrow export base and very limited
geographical spread are not allowing us to enlarge our share. Except we improve the quality of
our products, go out and do the marketing overseas, invest in research and development, the
prospects do not look promising. That is why we are casing overdue other countries which from
way back aired over taking Pakistan.
India refused to release allotted share of cash balance of undivided India to the tune of Rs
75 crore (Rs. 750 million) for running the civil administration (StudyFind, 2013).
3.5. Corruption:
Corruption is the other major problem of Pakistan. In the Pakistan corrupt people have
achieved high ranks in the country. The do not work honestly and it has increased the problems.

The corrupt people instead of doing work diligently they only work for their own self and in this
way they also do some bad works. They promote less energetic persons and because of the less
energetic persons them sare creating problems for our country.
3.6.Kashmir issue:
Due to Gurdaspur Award India get the access towards the Kashmir. After Indian claims
over Kashmir due to accession of the Hindu Maharaja, clash was broken out. Kashmir’s
border was shared by the N.W.F.P and Punjab also. Tribal sardars of N.W.F.P and
Balochistan a civilian armed struggle started. Indian troops arrived on 27 October 1947 to
defend Kashmir by air (jalil, 2013).
3.7. We badly lag in social indicators:
One of the most glaring weaknesses is that a country like Pakistan that should have had
best pointers in literacy, toddler mortality, productiveness rates, in access to water supply, in
primary acceptance ratios has social indicators which are more comparable to Africa rather than
to the countries of alike per capita income. Even Tajikistan, which is a very poor country, has
better literacy rate and primary enrolment ratios than Pakistan. It means that if we had
literateness rate of 100% instead of 55%, then in 2009-2010 our per capita income would have
been 2002$ rather than 1001$. Instead of 31 million middle class in Pakistan we would have 60-
70 million middle class people; we would have poverty reduced to 15-20%. We have committed
to achieve the millennium development goals by 2015 i.e. we will be able to reach 80-85%
literacy rate, but it is unsure that this will happen. Why do we have regional inequalities? Why
Baluchistan is covering behind other provinces? It is because of literacy rates and primary

recruitment ratios. There is a direct correlation between local inequities and backwardness with
the level of education.
3.8. Trade:
The trade now of Pakistan is .12% in 2014 before it was .2% the trade is declining by .1%
monthly because of poor economic conditions of Pakistan. The trade is decreasing day by day
because we are not focusing greatly on it. We instead of doing things according to pour trade
increase we sare doing it not for the betterment of country but for our own personal interests.
The Karachi Port was unused and most of Pakistan’s trade running scared through the
Indian ports of Bombay and Calcutta (StudyFind, 2013).
With respect to the prospects for Indo-Pakistan trade, Hafiz a Pasha and Muhammad
Imran declare that the potential for joint benefit is simply enormous. Some important steps have
been taken by both countries to facilitate trade but as long as Pakistan does not discuss MFN
status on India (which the latter has done in 1995), there are problems of discovery export items
since many products are similar and India certainly has a clear advantage but such difficulties
can be overawed. Besides the concerns of Pakistani industrialists who have enjoyed defense in
the past, Indian textile and clothing manufacturers may also have objections to free trade. Then,
of sequence, right-wing forces in both countries would do anything to obstruct trade between the
two countries (Imran, 2013).

3.9. Investment failing:
However, investment has fallen drearily. Consequently, the investment climate and the
constraints imposed by a woefully bad energy crisis have to be tackled with determination in
order to attract foreign and internal investment. The article on energy is severe and informative,
but the need to tap alternative renewable energy sources is not adequately emphasized. Pakistan
should be preferably suitable for solar energy technology. Unnecessary to say, familiar
corruption and mismanagement of our meager resources are a great disgrace. Defense
expenditure has to be condensed. It is a huge gutter on national resources. A very strong
emphasis is laid by the specialists on the rule of law, clearness and institution building. Equally,
a very powerful disagreement is developed in favor of inclusive growth by Kamal Husain
(Ahmed, 2013).
237
554
443
643
1532
1307
950
823
403
543
182
475
820
922
1677
3875
8428
5475
2665
2086
1979
708
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
7000
7500
8000
8500
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12

3.10. Political stability, law and order:
The overall curving theme is that for a robust economy we should have political stability,
law and order and security. The Armed Forces of Pakistan deserve thankfulness for what they
have done in Malakand Division to bring about stability as far as the law and order situation is
worried. The sooner the country is gotten rid of this image of political instability, poor law and
order situation, whereby depositors from all over the world hesitate in coming to Pakistan and
invest, we will not be able to make any progress in this country. In 2007, Pakistan was one of the
most preferred countries among the international investor community. A thirty year piece of
paper was drifted which a bond for Pakistan to be paid in 2037 and Pakistan was got four times
over subscription at a price which was only 300 basis points above the US treasury. Very few
countries can privilege to have that kind of credibility with international fund managers. Though,
in two years’ time we have missed that boat. Consequently, it is imperative that we resume the
journey which has been interrupted by development a stable, secure and nonviolent political
environment. The political unpredictability is the other major problem of Pakistan the political
parties which come in power the instead of doing well for the whole country they good for their
own particular areas that’s why Pakistan is fronting with political instability. When the new
government comes it instead of carry on the projects started by the previous party starts
implementing their new ideas and they want to get their name instead of the previous one .they
accomplish the tasks just to show off. They do not want to see the success of others. The political
parties just do well for their own people and they do not do it sincerely for the whole nation as a
whole.

The political instability is also playing its role in making the conditions of economy even
worse, as such variation in political and governing bodies, corruption, and continuous and so
vigorous change and amendments in the policy of trading and producing has been continuously
creating hurdles in the way of progress and success of the economy (Liaqat, 2014).
3.11. Poor use of natural resources:
In Pakistan due to poor administration we are facing the problem of improper utilization
of natural resources .the coal reserves are abundant in the different regions of Pakistan but we
are not exploring them. The copper, gold, silver and coal reserves are abundant in our beloved
country but we are not exploring them because of poor leadership qualities of our leaders. The
politicians of our country instead of exploring these reserves concentrate on the activities which
are not of interest.
The other major problem of Pakistan is that our government is not utilizing the resources
properly. They government know this thing that we have abundant resources in Baluchistan but
we are not exploring them. The government because of clashes with the people of Baluchistan is
not paying attention to the development of Baluchistan.
3.12. Poverty:
The other major problem faced by the Pakistan is that the poverty rate is very high. The
amount of money the government has is less than to cater the needs of poor people. Poor
administration is the other factor which has resulted into the high poverty rate .the government is
not spending wisely on poor people that are why it has high poverty rate. The people are not able
to earn handsome amount of money because of the poor governmental policies.

3.13. We face energy and water shortages:
Additional challenge we face today is energy and water scarcities, and that is not because
we are not causing abundant electricity or we are not having adequate water. Through the losses
of KESC from the point it has generated to the point they realize the billing is 45%, so 55%
people are paying for those who are stealing the electricity. Government of Pakistan out of its
personal limited resources is paying 200 billion rupees every year as subsidies for electricity.
Our industry is at a drawback that they get the orders from overseas countries but they cannot
implement the orders because there are electricity outages. In addition to economic losses it also
creates inconvenience for chasing normal life. We have silting of our dams, but no additional
dams have been constructed since Tarbela in 1974. Cost of doing business is high. India
has become the most important factor in the creation of the water problems for Pakistan. India
during the summer season does not allow the water to enter the Pakistan and it to the water
shortage in Pakistan. India is creating problems for the Pakistan as it does not allow the water to
enter Pakistan when Pakistan is in need of the water. The water shortage in Pakistan is not due to
the natural reason but actually it is artificially created because of India. India does not want the
Pakistan to stabilize its economy.it is creating problems for our country. The water is blocked by
the India and it is creating problems for our Pakistan.
The countries internal manufacturing is also being impacted in adverse manner because
due to the power crisis and load shedding of all the basic resources including electricity, Gas and
petroleum has delayed the processing units and forced the people to either shut down their
producing units or even take those units out of the country to the head-to-head countries. This
has again stamped the economy of the country in dreadful manner (Liaqat, 2014).

3.14. Poor governance:
If we look quickly on policy documents of numerous governments on education,
agriculture, trade policy etc., and appearance at the similar policy forty years ago and the
problems, there is hardly any meaningful record of implementation of those policies or intention
over this dated? We vintage five years plans and all kinds of medium term frameworks, but it are
the poor governance and application that are the weak links in getting things done. Unless we
support civil services and bring about a merit based system of recruitment, promotion,
performance evaluation, incentive, corrective action, etc., we will not be able to see any
alteration in the quality of governance. Orders are given by the developed ups but they are not
carried out; summaries are allow something, but they remain buried in the files and therefore;
whether it is education, health, revenue or law and order, you can jot down the problem to the
governance issues. Nevertheless we fix the governance issue; the economy is not working to take
off at the speed which is required.
3.15. Uncertainty and unpredictability due to lack of continuity:
Every government whether military or civilian starts with a clean line up, as if nothing
happened before them and nothing will occur after them. This is not the technique the real world
works. You yield the projects and programmers which were initiated by the previous
governments, calculate them as to what the strengths and faintness were, fix those weaknesses
and transmit them forward. It will take only few years to bring these inherited projects to
finishing and the country will benefit from fresh motor ways, new ports, highways, educational
institutions etc. But the criticize game of successive governments results into abrupt finish of all
such projects and records. When these are sustained the cost has sensitive three times and it takes
numerous added years to complete them. In the temporarily the people of Pakistan suffer because

of this lack of continuity. When faced with such impulsiveness about the future, the investors are
thoughtful whether they should invest in this country as they are uncertain whether the new
government when comes in would stop or alter what the previous government was doing, or
adhere to the pledges made to them. Take the sample of Higher Education Commission, which
was sending 1800 students for PhDs abroad but the new government comes in and hangs the
funding of those programmers. This resolved down the process of faculty development for our
universities at a time when we should have been sending twice as many scholars.
4. Recommendations and solutions to Improve Economy:
How can we overwhelmed these challenges and problems and improve our economy? A
lot has been written and talked about, but I will focus on only a few action points.
(StudyFind, 2013) Found the following:
Newly Selected Government must bring a strong economic team
Political Leadership must offer full support to the team
No Room for Business-as-usual Policy
Extraordinary situation Demand Extraordinary Actions
Financial Discipline is the key to triumph
Bring Budget Deficit down to 3.1 – 3.6 percent of GDP in the next 3-5 years.

 Undertake wide-ranging structural improvements
Taxation side
Expenditure side
Accelerating Privatization
Power Sector Reform
Circular Debt Issues
Correcting the Manufacturing faults of the NFC Award
Strengthening of Infrastructure
Strong Linkages with Private Sector
Road show in major capital markets
4.1. Technology:
Pakistan is one of the few countries which has a young labour force which can be yoked
for its own and global economy. Japan, Europe, USA and after 2060 China are going to have
elderly population where the ratio of old to young people is standard to increase. India and
Pakistan are two countries where the ratio of younger people to the older ones is going to
increase. If we tool these young men and women appropriately, we increase the female labour
force contribution, give those skills and knowledge, they can industrialize the labour force for the

rest of the world. This will give a big increase to Pakistan’s own economy. In 2002, worker
transfers were less than a billion dollars; today we have almost 8-9 billion dollars. Now this can
be multiplied by three or four times if we have cultivated labour force i.e. skilled labour force
going for overseas employment. This is also a way to create employment opportunities because
if you have large number of younger people coming to labour force and you don’t have job
opportunities for them you can have social disturbance. Therefore, it is imperative to create
employment opportunities for them and one of the avenues is to train them in the kind of the
skills which are needed not only by the national economy but also by the international economy.
4.2. Taxation:
The taxation system can be improved if we make it reliable, if we after collecting the data
insert all the data in the computer then we can improve our taxation system. The computerized
system will pinpoint the persons who are not paying tax properly and in this way we can improve
the attitude of other people.
4.3. Governance, devolution and decentralization:
As the population is swelling, one cannot govern Pakistan sitting in Islamabad, Lahore,
Karachi, Peshawar or Quetta. One has to devolve powers, disperse and delegate specialist,
provide resources to the local/district governments so that they can take decisions at their own.
Those decisions would be very much in harmony with the requirements and the needs of those
groups. Sitting in Islamabad one cannot visualize what is needed in Chaghi or Loralai, but the
people in Chaghi and Loralai know exactly whether they need water, fertilizers or fruit
indulgence industry. Let us devolve powers to the people at the grassroots level and there would
be much better allocation and utilization of resources. There must, however, be accountability of

the local governments by the provincial governments and of provincial governments by the
central government but not interference or usurpation of powers. If we do that, then a lot more
can happen with same amount of resources which are being wasted today, and the economic
growth rate can be raised from 6-7 percent average to 8-9 percent annually.
4.4.Energy crisis:
The best determination to this problem is to find other changes of producing energy
which might comprise solar energy, coal energy and even current and wind energy which might
lessen the load on these available resources (StudyFind, 2013).
4.5.Private sector:
Having alternated between the ascendency of the state and the private sector for decades,
the country needs to settle into a mutually supportive relationship between these two components
of the economy. The private area should play the leading role in all economic activity but within
a well-functioning controlling environment developed by the government. The government’s key
role should be to deliver social and physical substructure, support for leading-edge research, and
inexpensive social protection and safety nets for the poor. Having lived in Singapore for three
years (2008-2011) I am witness to the Singapore miracle in specific and the South East Asian
wonder in general. Peace within the ASEAN region and a local compact between the state and
the private sector in these countries to work complementarily have transformed them into the
famous Asian Tigers. (Ahmed, 2013).

4.6. Government should utilize the resources well:
The government should give them the opportunities to utilize the resources well. The
government should give talented students the chance to compete with the students of other
foreign universities.
4.7.Stakeholders in the Pakistani:
The overall message Pakistan: Moving the Economy Forward conveys to the
stakeholders in the Pakistani state project is to seize the historical moment: history does not wait
incessantly. Now is the time for free-thinking pragmatists to step forward while those lost in the
heady mist of delusional shortcuts to greatness through warfare and delirious utopianism should
be sent into retirement. This is exactly the moral of the story I express in my new book, Pakistan:
The Garrison State, Origins, Evolution, Consequences (1947-2011). This cannot simply be
coincidental: it has to be a self-evident truth that has eluded the ruling class because of its flawed
priorities and choices (Ahmed, 2013).
4.8.Possible solutions of Energy Crisis in Pakistan:
The very basic explanation of the energy crisis is to develop new ways and sources of
making energy in Pakistan. Pakistan is a country which is existence sanctified with many
minerals and resources which might be very useful in emerging the energy. The very powerful
source which is being adopted in many of the developed countries is over the solar energy. The
solar panels are used which alters the direct sunlight emitted from the sun and converts it in to
the electrical energy which might be used to run several other procedures. Sunlight is one
foundation which will never come to an end so it could be an ultimate source of energy if it is
being utilized properly.

Wind energy is also a very suitable source of generating energy and once the setup is
being well-known than it can produce very economical energy. The only obligation is to create
the series of wind mills on such areas where the average wind speed is high and there are so
many ideal places for this setup to get constructed. Nuclear energy is also a very much
commanding and capable source for generating the power and for solving the power crisis in
Pakistan. At current age Nuclear energy is being used as the major source of making energy in
many of the countries of the world which includes Russia, USA, China, and even UK.
Issues & Analysis
4.9.Impacts of law and order situation on economy:
(Tehmas, 2013) Found the following:

Economy always follows politics and politics remains the byproduct of law
and order situation prevails in a country.
If law and order situation runs smoothly, the politics play smoothly and
therefore the stable economy of the country - universal truth.
The law and order situation arises when there is insecurity, threat of violence
or violence arising due to a host of factors disturbing the ordinary conduct of
life and businesses in a society.
It may be a product of one or more of the following:
Factors/components:
External aggression
Internal upheavals
Religious/sectarian extremism
Labor unions' strikes, boycotts, lock outs, and similar activities
Ethnic/racial/linguistic cleavages
Economy fact sheet
Pakistan: Decades of internal political disputes and low levels of foreign
investment have led to slow growth and underdevelopment in Pakistan. (CIA
Facts Sheets-Pakistan)
Agriculture accounts for more than one-fifth of output and two-fifths of
employment. Textiles account for most of Pakistan's export earnings, and
Pakistan's failure to expand a viable export base for other manufactures has left
the country vulnerable to shifts in world demand.
Official unemployment is 6%, but this fails to capture the true picture, because
much of the economy is informal and underemployment remains high.
Over the past few years, low growth and high inflation, led by a spurt in food

prices, have increased the amount of poverty -
The UN Human Development Report estimated poverty in 2011 at almost 50% of
the population. Inflation has worsened the situation, climbing from 7.7% in 2007
to more than 13% for 2011, before declining to 9.3% at year-end. As a result of
political and economic instability, the Pakistani rupee has depreciated more than
40% since 2007. (UN Human Development Report, 2011)
The government agreed to an International Monetary Fund Standby Arrangement
in November 2008 in response to a balance of payments crisis. (International
Monetary Fund, 2008).
Economic growth and recommendations: Selective macroeconomic indicators to
determine the state and growth of economy like GDP growth rate, poverty
incidence, and per capita income growth rate over a specific period of time, and
level and nature of investment.
To control rise of inflation, the administration should take initiatives for enabling
consumers to form their effective consumer associations supplementing already in
place monitoring mechanisms.
Despite very high inflation, the possibility of reducing the discount rate by further
1-2 percentage point may be explored at operational so that the costs of borrowing
from the banks are reduced.

During the period of economic problems, the government should take the lead and
start more public investments to provide a jump start to the economic activities.
Primarily, it is the domestic investors who have to be encouraged and motivated
to take the lead for the investment. The administration of governmental incentives
to them should be more business-friendly. Once, domestic investors start
flourishing, it will encourage foreigners to invest in Pakistan as well.
There is a need to improve business environment in the country, including the
availability of educated and skilled manpower, ancillary industries and utility
services. Continuous rise in the prices of petroleum products, electricity, gas and
other utilities are also adversely affecting the business environment...
We need to improve our infrastructure facilitations to make the Business
environment more conducive to foreign and local investments.
Power shortage has already resulted in closure of many units which is deplorable
and needs to be rectified at the earliest.
The main stake of our economy is agriculture and facilitation and incentives to
develop the cottage industry need special attention. In order to boost up
investment particularly in livestock, poultry, fisheries, and associated value added
production facilities like financing, development of services infrastructure, and
manpower development should be part of government plans and programs.

So far, most of FDI has been in the services sectors which are non-tradable and
adversely affects the balance of payment. Taking into account the unfavorable
balance of payments problems of the country, we need to prefer further FDI in the
foreign-exchange-earning sectors in future.
Pakistan has a record of economic growth in sixties as well as in the recent past.
However, the aphorism, and poor implementation of policies have been distorting
the system. In order to stimulate investment and revitalize our economy, we have
to ensure continuity of economic policies coupled with political stability.
In order to boost up further investment in the home grown manufacturing like
textile industry the system of one-door operation need to be activated and
extended. (Head Fast, 2011)
Organized crime and terrorism are usually viewed as two different forms of
crime, increase of which directly deteriorates law and order. Organized crime is
generally held to focus mainly on economic profit (but not always limited to it),
while terrorism is said to be motivated chiefly by ideological aims and by a desire
for political change.
Factors instrumental to private and foreign investors:
Risks of doing business and; Expected returns of the investment.
Four major challenges to Pakistan's socio-economic growth including:

Regaining macroeconomic stability; poverty reduction; fiscal retrenchment and;
Weaknesses in the external account.
The ongoing war on terror has cost billions of rupees to Pakistani economy.
The soft image indeed is a pre-requisite for attracting high ratios of foreign high
investments
Brightens the possibilities of joint ventures;
Political instability, law and order to hit economy: Besides, the global financial
crisis dented foreign investor's confidence and forced our economy to pass on the
impacts of increase in global oil and food commodity prices to consumers.
There is no second opinion that the government met all such challenges to some
extent with the help of external financing and macroeconomic stabilization
program, initiated under an IMF-stand-By Arrangement.
However, the fresh spell of political instability and poor law & order situation
would not only reverse the course of economic recovery and growth, but would
also hurt the short to medium term outlook of the real sector in 2010, which is
already under severe crisis due to unabated power outages.
Law and order situation Vs. Pakistan economy: After 9/11, the US/NATO forces
invaded and bombard the Afghan nation, sometimes indiscriminately, which led
to the desired goal of destruction of Taliban rule in Afghanistan, but in addition,
gave rise to a lot of internal and external problems for Pakistan: (Pakistan society
of criminology) The economy, internal security environment and social tranquility

jolted badly due to such problems.
An overview of Pakistan's economy 2008-09 by Ministry of Finance has reported
that the macroeconomic environment of the country is affected by intensification
of war on terror and deepening of the global financial crisis which penetrated into
domestic economy through the route of substantial decline in Pakistan's exports
and a visible slowdown in foreign direct inflows.
Pakistan's participation in the international campaign has led to an excessive
increase in the country's credit risk. Due to which recently, the World Bank has
lowered our credit rating further. Pakistan's economy continues to remain
exposed to the vagaries of international developments as well as internal security
environment.
Pakistan not only lost precious lives and infrastructure but a very
conserveActive estimate has placed economic cost of this war for Pakistan at
around US$ 35 billion since 2001-02. Rehabilitation of IDPs and their livelihood
will require more than $ 5 billion in Malakand and FATA alone. All this
expenditure is not going favorably for Pakistan as they are the unsustainable
burden on the meager resources of Pakistan.
Terrorism is a great hurdle in our socio-economic prosperity, political stability,
geo-strategic sustainability and energy security. Development activities are halt in

these areas.
The rule of ignorance, stagnation, fanaticism, and destruction is spreading like a
wild fire especially in NWFP and FATA.
The government should initiate three-pronged policy i.e. dialogue, development
and deterrence. Let us hope that our soil will be freed from the terrorism and there
will be no more bloodshed in the days to come.
4.10. Natural resources:
The natural resources can be used in the benefits of Pakistan if the country will make
best use of the resources by exploring them then the economy of Pakistan can be increased. If the
natural reserves of our country can be explored on time then we can attain huge amount of
money.
4.11. Lack of tourism:
They should regain the peace and should attract the international tourists so that they can
bring the foreign currency in the state so that the economic situations of the country should be
enhanced and Pakistan should be made run on the way of success. (StudyFind, 2013)
The real solution is to kill the root of Terrorism and systematically change the attitude of
those peoples who are involved in terrorism Military operations against terrorists are
also very ncessary.Education, Justice, Pour politics can stop the Terrorism (jalil, 2013).

4.12. Illiteracy:
The other major problem of illiteracy can be increased by making child of our country
literate .if we educate our children then the problem of illiteracy can be solved and these children
can do for the betterment of the country.
4.13. Change in national psyche and mind set:
We as a nation are too much negative oriented and too much cynical where we find
everything wrong in this country we are made in such a way that we always consider this thing in
mind that we will not be able to grasp all the opportunities and we will face problems in our
daily routine. We are oriented in such a way that we are unable to perform our Use of
technology.
4.14. Inflation:
The inflation rate will automatically can be controlled by making good fiscal policy>by
exploring reserves it can be decreased. If the Good policies are being made by the Pakistan then
we can control the inflation rate.
4.15. Low export and high Import:
The best solution to this problem is that to decrease the import and for that purpose they
should rely on their own manufactured products and should increase the export so that the
shortfall should be reduced. (StudyFind, 2013)

4.16. Technology:
The technology is dispersion like a rough fire. How many people five years ago could
have thought that even in a small towns and townships of Pakistan, one would access to mobile
telephones. 96 million Pakistanis have mobile phones today. You can use this technology in
instruction to provide them banking services, information on climate, agriculture extension,
health, education etc. with the use of technology we can perform our tasks easily with little
effort . If we gain advancement in technology then we can achieve our goals easily the need of
the time is that we have to focus on the best use of the technology for the betterment of the
people... the technology is increasing readily that the other countries are making best use of the
technology and by using tis technology they have performed significant work with least effort.
4.17. Energy solutions and climate change:
(Gauhar, 2015) Found the following:
It is well known that the ravages of climate change and environmental
degradation are most keenly felt in the poorest parts of the world.
The untold suffering of Pakistan’s vulnerable communities in the wake of
devastating floods remains a bitter indictment against successive
governments that have palpably failed to address a recurring human
catastrophe.
Dramatic changes in weather patterns caused by global warming have
unleashed monsoon rains of biblical proportions upon Pakistan.

Amid the countless predictions, estimates and statistics.
The exacting human toll claimed by the climate change onslaught is often
all too easily forgotten. In 2010, torrential rains affected 14 million people,
resulting in a massive humanitarian disaster.
In 2014, vast swathes of the Punjab and Kashmir were inundated in the
wake of violent downpours resulting in a death count running into the hundreds as
swollen rivers swallowed entire villages, leaving livelihoods displaced and homes
destroyed.
An overwhelmingly agrarian economy, Pakistan’s precious agricultural
future must be fortified against the grave implications of catastrophic weather
patterns.
In this year’s budget, the government set a growth target of 5.1 per cent
for the agriculture sector for fiscal year 2014 – 2015. However, lessons still have
not been learnt from the apocalypse of 2010 as the 2014 disaster grimly
demonstrated.
Accounting for 70 per cent of the Earth’s surface, oceans are the primary
recipient of all inbound solar energy. During the 20th century, water levels rose
each year by 1.88mm.

However in the last two decades, the rate of increase has risen to 3.3mm
per year.
Though this may not seem much, this incremental yet unrelenting rise
foreshadows a major climatic shift, the early consequences of which have already
manifested in Pakistan over the last few years.
Scientists predict that a further increase would completely devastate
islands like the Maldives and archipelagos in the Pacific as well as vast tracts of
coastline across South Asia.
The International Energy Agency has estimated that investments of a
trillion dollars a year in clean energy will be required to meet climate safety goals.
As water levels continue to escalate at an accelerated rate, the looming risks for
countries like Pakistan cannot be ignored. The Global Climate Risk Index 1993-
2012 has ranked Pakistan as the 12th most affected by extreme weather events.
Throughout the ages, the course of the Indus and her tributaries has shaped
our lives and determined our existence. The sudden collapse of the Mohenjo-Daro
and Harappa civilizations, widely attributed to flash flooding, is a haunting
reminder of just how deeply intertwined our fates are to this great river system.
In fact, the Indus Valley civilization is believed to have been the largest of
the four ancient civilizations of Egypt, Mesopotamia, India and China.

Pakistan’s overweening dependency on fossil fuels has not only hemorrhaged the
economy but has also inflicted considerable damage in terms of environmental
degradation.
Since compelling evidence directly links rapidly rising water levels to the
burning of fossil fuels, it is essential for Pakistan to implement alternative energy
solutions on an urgent basis.
Recognizing the enormity of the challenge, several developing countries have
surpassed the developed nations in implementing alternative energy solutions,
most notably India and China. This has attracted significant international investor
interest.
Indian Prime Minister Narendra Modi has asserted that the 300 million people in
India who currently have no access to any power source will be provided
electricity in the form of solar energy.
Similarly, Pakistan’s rural electrification strategy must be premised on clean,
sustainable energy solutions including wind and solar.
The unmet energy needs of the country can no longer be addressed
through fossil fuels which not only exact a heavy toll on the national exchequer
but also threaten our future generations.

Denmark has emerged as a clear leader in adopting alternative energy solutions in
its strategy against climate change. By 2020, the country aims to produce 70% of
its energy from renewable sources and to make the shift to renewable energy
completely by 2050, definitively abandoning coal, oil and gas.
In addition the Danish government has made significant investments in research
and development as well as energy-efficient technologies. Denmark’s success has
attracted the attention of several other countries including China.
Pakistan must strive to emulate such ambitious targets and use Danish
policy as a blueprint for transforming its own energy matrix.
This must include a favorable taxation regime for the renewable energy
sector, subsides on imports to attract private capital as well as the utilization of
the country’s abundant geographical advantages: plentiful sunshine throughout
the year and wind corridors.
In November last year, Spain’s ambassador to Pakistan, Javier Carbajosa
Sanchez, outlined potential areas of collaboration between the two countries in the
field of renewable energy.
Also in November, Germany’s Chancellor Angela Merkel signaled investor

interest in Pakistan’s energy sector conditional upon improved stability in the
country.
Such collaboration would be immensely beneficial to Pakistan,
particularly in light of Germany’s decisive shift away from nuclear energy
towards renewable energy sources.
The wind project at Gharo financed by the US Overseas Private
Investment Corporation (OPIC) is a promising start to realizing Pakistan’s wind
energy potential.
Further Investments by China and FFC in wind energy indicate the level
of local and international investor interest. Now it is up to the government to
ensure that a conducive environment and enabling framework are put in place to
secure Pakistan’s future.
5. Conclusion:
 There is no such place in the world which is cisis-free, actually each and every country
has some problems and issues according to its geographical location and weather
conditions. There is no such place which is heaven so the need of the hour is improve the

techniques and deliver your best in each and every field so that our country can attain
high rank. We should deliver our best and in spite of challenges we should deliver our
best to make best use of the resources. Serious Challenges for the economy in the next
two years
Issues are not insuperable
These challenges can be addressed in a three year agenda.
We need a solid economic team.
There is no dearth of decent people in the country.
What is required is honest, capable and loyal leadership providing full support to
economic team.
We have the volume to turn around the economy in three years.
The country has tackled serious challenges in the past but we recovered
We have the capacity to recuperate from the ground zero once again.
IN SHA ALLAH.
6. Bibliography:
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Lahore School of Economics,2013.

Gauhar, M. ( 2015, January). Energy solution and climate change. p. 5.
Imran, H. A. (2013).
jalil, h. (2013). Kashmir issue.
john. (2013).
Liaqat, A. (2014).
selfstudy. (n.d.).
StudyFind. (2013).
StudyFind. (2013, Sep 29).
Tehmas, A. (2013, October). p. 16.
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http://sekho.com.pk/educational-articles/economic-problems-of-pakistan-and-their-solutions/
http://sekho.com.pk/educational-articles/economic-problems-crisis-in-pakistan/
http://www.pakissan.com/english/issues/energy.solutions.climate.change.shtml
http://www.pakissan.com/english/issues/impacts.of.law.and.order.situation.on.economy.shtml
http://lahoreschoolofeconomics.blogspot.com/2013/08/pakistans-economic-challenges-and.html

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