Pressing Economic Problems of Pakistan

While going through the current turmoil of governance and law and order, Pakistan economic problems are yet to see an end. The new government successfuly negotiated an IMF deal but it too came at a cost, yesterday there was an increase of around 5% on Month to Month basis, which on yearly basis is more than 60% of increase) in oil prices. However the real price hike bomb was this time dropped in the form of increase in Electricity Tarrif which went up from 40% to 80% depeding upon the consumption of an household. Being the main inputs of virtaully every produced goods and as well as services, this increase will have its repercussion to come in the coming days. Inflation specially the food prices are going to go up which coupled with the losing value of PKR are going to contribute to the poor masses of the pure land. SBP governor recently told senate committee that capital flight amounting to 25 million USD is taking place in Pakistan on daily basis which is putting the already fragile currency of Pakistan under immense pressure. Few days back PKR hit to record low of 110 againt the dollar adding to the vows of ordinary man takng home a meagure salary. Governmet borrowing from Central Bank during the first quarter of the current fiscal year shooted to recod high of over 600 billion which is show of immense fiscal indiscipline and mismanangment. In the long run even a layman can predict further ownfall of PKR eroding purchasing power of a common man. Beside this devaluation some major areas of concerns for the time being are:

Continouse shortage of energy and consequently supply shortages leading to demand pull inflation
Ailing Public secor enterprises which are loosing a whopping 5-6 billion USD per year which is 25% of the overall export earning of Pakistan.
Low taxation and invesment ratio: Pakistan has a dismal tax to GDP ratio which is around 10%, far below the optimum rate of 30% of GDP
Massive corruption and misuse of authority by politician, civil servants and armed forces which are eroded even basic moral fabric of the society. Now everyone tries to fulfil his/her wish in an illegal way. For an ordinary man getting an NIC will be a nightmare unless he has some good connection or he greases the palms of the officials.
High Defence and current expenditures and low development budget, the latter also ends up not being utilized.

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Monday April 17, 2017

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