Economist Nauraiz Rana sheds light on the complex web of factors contributing to Pakistan's economic woes and offers a roadmap for the nation's economic future.
Rana begins by delving into Pakistan's economic history, pinpointing a critical turning point in the 1950s. At the time of its creation, Pakistan was on the cusp of great economic potential. However, over the decades, the country shifted towards becoming an import-oriented economy, choosing to buy goods rather than invest in building productive capacities.
This shift in strategy had far-reaching consequences. While the world experienced a significant increase in global trade volume, Pakistan found itself unable to capitalize on this growth. Rana highlights that between 1950 and 2022, global trade volume increased by over forty-five hundred percent, more than forty-five times the value in 1950. Yet, Pakistan's inability to boost its exports and enhance productive capabilities left it lagging behind.
To underscore the impact of this shift, Rana draws parallels with India and China. In 1978, China adopted an open and reform policy, opening up its economy and embracing liberalization. This strategic move allowed China to become a global economic powerhouse. Since then, China has lifted 800 million people out of poverty and maintained an average GDP growth rate of over nine percent per year.
Similarly, in 1991, India adopted economic liberalization, gradually opening up its economy. Although facing challenges similar to Pakistan's, India implemented significant reforms and focused on building its productive capacities. Today, India boasts foreign reserves of 600 billion dollars. Rana's comparison underscores that Pakistan's struggles are not due to insurmountable obstacles but stemming from a failure to adapt to global economic trends effectively.
One of Pakistan's recurring themes in its economic history has been its reliance on the International Monetary Fund (IMF). Rana acknowledges that while the IMF's short-term loans can provide much-needed liquidity, they should be seen as a temporary solution to address liquidity constraints, not as a long-term economic strategy.
Pakistan's frequent IMF engagements have raised questions about the effectiveness of these programs. Critics argue that Pakistan's reliance on the IMF has not yielded sustained economic growth. The nation has returned to the IMF for loans twenty-three times, suggesting that previous programs failed to address root issues effectively.
Rana points out that Pakistan's dependency on the IMF reflects its loss of autonomy and capacity to pay. When an economy loses competitiveness and becomes heavily dependent on bilateral and multilateral loans, it faces a growing debt burden and a challenging path to economic sustainability.
While economic reforms are crucial, Pakistan also faces the challenge of managing complex foreign interests. Rana acknowledges that the nation must navigate a delicate balance between competing foreign powers like China, Saudi Arabia, the UAE, and the United States. Each has its own set of interests and priorities within Pakistan.
On a similar note, China's significant investments through the China-Pakistan Economic Corridor (CPEC) have raised questions about Pakistan's ability to manage its foreign relationships effectively. Rana highlights that Pakistan should utilize its strategic location as a conduit for trade, transportation, and regional connectivity, allowing it to engage positively with multiple foreign stakeholders.
Essentially, to address Pakistan's economic challenges and foster sustainable growth, Rana advocates for a multifaceted reform approach. This includes formalizing the informal sector to increase tax revenue, implementing technology-driven taxation reforms, privatizing state-owned enterprises operating at a loss, improving the investment climate by reducing bureaucratic obstacles, and shifting incentives towards productive sectors such as manufacturing, technology, agriculture, and export-driven industries. These reforms aim to create a conducive environment for economic stability, job creation, and long-term growth.
It is crucial for Pakistan to recognize that it holds the power to reshape its economic destiny. The interview underscores that Pakistan's challenges are not insurmountable; they are opportunities for transformation and growth. The nation's journey toward economic stability and prosperity may be challenging, but with the right strategies and determination, it is certainly achievable.