Growth & employment
What is the trajectory of economic growth in the country? Government spokesmen paint a rosy picture but that is not the whole truth. It is claimed that the country has achieved macroeconomic stability and foreign exchange reserves are at an all time high. The budgetary deficit has been contained and the fiscal position is gradually improving. The GDP growth rate has also increased as compared to previous years. The three-year IMF Extended Fund Facility which has been successfully completed has helped to stabilize the economy. The large manufacturing sector has performed well and domestic consumption is showing signs of new vigour. Inflation has also been controlled and interest rates have come down.
But this is only one side of the story. During fiscal year 2015-16 the economy put up a mixed performance. Independent economists dispute the official GDP growth rate of 4.7%. As for Inflation, it has come down not because of government policy but due to low international crude oil and commodity prices. Exports are constantly falling and the FDI inflows have shrunk.
No meaningful reforms have been introduced in the tax system with the result that the government continues to rely heavily on indirect taxation such as GST, customs and withholding tax. According to economic experts, the government has placed too much emphasis on stabilization as opposed to growth which has led to a state of economic stagnation.
This, in turn, has affected the pace of job creation due to which the educated youth is getting increasingly frustrated.
Unemployment has always been a big problem for every government but the situation has become more acute during the last three years.
According to official data, the unemployment rate rose to 8.3% during fiscal 2015, the highest level in 13 years. The unemployment rate has continually risen over the last two years, and the number of unemployed people is now 1.5 million higher than when the present government took office in 2013. Past records show that the last time the joblessness rate was so high was in fiscal 2002, when it stood at 8.3%, during the early years of the Musharraf regime.
During the five years of Zardari regime, the unemployment rate rose by only 1%, from 5.2% in 2008 to 6.2% in 2013. By contrast, the rate rose by more than twice that much in the first two years of the Nawaz government.
At the end of fiscal 2014, which was the first year of the PML-N government, the unemployment rate jumped to 7.3%, as 800,000 more people joined the ranks of the unemployed due to a slow economic growth rate of only 4%. The pool of unemployed people increased to 4.6 million by June 2014. In 2015, another 700,000 people were added to the unemployed population.
The pool of unemployed people grew to 5.3 million people, as the government again missed its economic growth rate target of 5.1%. The ranks of the unemployed are said to have risen by another 400,000 people in fiscal 2016, taking the additional number of unemployed people during the PML-N government to 1.9 million. The unemployment rate is said to have jumped to 8.6%, or even higher as the growth rate of 5.5% for fiscal 2016 was missed.
A major reason behind growing unemployment in the country is the fact that the pace of economic growth is not sufficient to create more jobs.
According to various independent and official studies, Pakistan needs an annual growth rate of at least 7% to create enough jobs to absorb new entrants into the labour market. In the given circumstances the government needs to devise a comprehensive strategy to stimulate growth in order to tackle the challenge of rising unemployment.