Acceleration of GDP needed
Soon after independence, Pakistan economy grew at a fairly astounding rate of 6 percent per annum through the first forty years. The satisfactory economic performance was maintained through civilian and military governments in 1950s, 60s, 70s and 80s until the decade of 1990s. The GDP growth indicates that Pakistan has experienced high economic growth in 1961-65 (7 percent), 1966-70 (6.5 percent) and 1981-85 (6.5 percent). Pakistan became one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7 percent per annum for most of this period. As a result of strong economic growth, Pakistan was successful in reducing poverty by one-half, reducing a large amount of the country's debt burden, raising foreign exchange reserves to a satisfactory level and the country's exchange rate remaining stable, fixing investors' confidence. It is observed that growth has been slow during the civilian rules; while the three long periods of military rule have seen phenomenal recovery. This must be taken as fact and not ignored.
Pakistan's economy now continues to struggle hard with its low annual GDP. Its economic growth is likely to hover around 4.1 percent in the fiscal year 2014. The economic growth slowed to 3.7 percent in the fiscal year 2013 from 3.8 percent a year earlier. Saudi Arabia gifted $1.5 billion to Pakistan to increase its foreign exchange reserves, meet debt-service obligations and undertake large energy and infrastructure projects. The Saudi assistance has contributed to a sharp recovery of the Pakistani rupee, which rose to a nine-month high of 97.40 from 105.40 against the dollar between March 4 and 12, its strongest rally in 30 years. Pakistan raised more than $1.1 billion in its long-delayed auction of next-generation telecommunications licences, snapped up by the country´s four existing mobile network providers. Global rating agency Moody's upgraded the outlook of Pakistan's economy to stable from negative. Moody's said the country's foreign exchange reserves had significantly improved and its current account deficit was also under control. Pakistan has the potential to become 18th largest economy of world by 2050, leaving behind many strong economies, according to Jim O'Neill, a British economist. According to his projections for 2050, Pakistan would become the 18th largest economy in the world by 2050 with a GDP of US$ 3.33 trillion (almost the same size as the current German economy).This means that, if O'Neill's projections are correct, Pakistan's economy would grow 15 times in the next 35 years or so.
Pakistan is now facing the worst economic crises of its whole history. These crises are caused by many direct and indirect factors like; energy crises, political instability, terrorism, less FDI etc. No investors want to invest in Pakistan due to the instable conditions. Inflation though slowing down but is still high in Pakistan and basic necessities of life are expensive. Tax to GDP ratio at 9 percent seemed to be somewhat of a permanent feature and the lowest in the region. No tax on agriculture sector, leakages in the collection machinery; subsidies on electricity, fuel, and agricultural commodities is increasing to the government's fiscal burden. The current level of PSEs, corruption and wastage and politicized unions in the PSEs is putting hurdle to the growth in the economy of Pakistan. Pakistan Steel Mill is on the verge of closing soon. The economy has been badly mismanaged, not just in recent years, but also over a long period of time. This has considerably hampered its economic performance and reflects poor economic decision-making, uncoordinated responses, lack of implementation, rampant corruption, and poor governance.
Bold aggressive steps needed to address electricity shortages, a major constraint to growth, would also help to raise the sustainable pace of growth. Efforts to bring deficits under control will also need to involve efforts to broaden the tax base, which is extremely narrow in particular, in Pakistan where a very small percentage of affluent citizens pay income tax. Pakistan has all potential to increase tax to GDP ratio through making the system public-friendly and equitable. Widening of tax net is required but in a systematic and realistic way. Improving governance, eradicating corruption and pursuing equitable tax policies are required. Collectors should collect taxes without any harassment. There should be a free and fair taxation policy in order to raise revenues, broadening and simplifying the tax collection procedures. The stability and growth of industrial sector is very important for Pakistan. Energy sector could become stronger and efficient with the Chinese investment, when there will be no energy crises, the industrial sector will grow and the industry turnover will stop.
There is great amount of human capital in Pakistan at cheaper cost, when there will no issues of energy; the foreign investors will be attracted to provide Pakistan Foreign direct investment, the existing companies will perform more better and efficiently, unemployment will decrease, more opportunities will be available to entrepreneurs to explore themselves. When all these factors come along it will be a blessing on Pakistan with respect to current situation. After the passage of the National Finance Commission Award and the 18th Constitutional Amendment, a much greater responsibility falls on the federating units. The provinces will now have to play a major role in economic management and improving the welfare of the people. This will require their greater participation in overall macroeconomic management as well as close coordination between the federal and provincial governments in formulating and implementing development plan.