View from right-wing India:
Pakistan’s Political Economy Is Changing – And India Must Take Note
Monica Verma
- Mar 30, 2017, 8:35 pm
https://swarajyamag.com/world/pakistans-political-economy-is-changing-and-india-must-take-note
Pakistan, according to experts, can now be classified as a stable economy in view of its comparatively strong macroeconomic indicators.
The country’s economic performance, along with China’s investment into the CPEC initiative, has encouraged investors to look at the country in a new light.
Such is the dominance of geopolitical narratives in South Asia that any positive news from the neighbourhood does not reach us. While thinking about our neighbours, especially Pakistan, images of a country whose economy is in shambles and polity unstable strike us.
Not that these images have changed completely, nor has Pakistan moved on to become a developed economy overnight, but the changes in the neighbourhood are significant. The country now has the potential to transform itself into a stable polity and healthy economy pending a good deal of caution.
The positive signs
In 2013, Pakistan’s economy was on the verge of a collapse. The foreign exchange reserves were drying up, and fiscal deficit was mounting even as the rate of economic growth was slowing down. It was during this turbulent time that International Monetary Fund (IMF) extended a loan of $7.6 billion to help the country stabilise its economy and protect the vulnerable sections of its population. This three-year IMF-supported programme not only helped the country stave off a foreign exchange crisis, it also laid the foundation for macroeconomic and financial stability in the country.
Pakistan, according to experts, can now be classified as a stable economy in view of its comparatively strong macroeconomic indicators. The economy witnessed a 4.7 per cent real gross domestic product (GDP) growth rate in 2016, the country’s highest in the last eight years. Fiscal deficit has also come down to 4.6 per cent from 8.8 per cent. Another sign of revitalised economic activity is the stock market that rose by almost 50 per cent in 2016. These figures might indicate a positive turnaround in Pakistan’s economy, but in comparison to other South Asian countries such as India, Bangladesh, Bhutan and Nepal, Pakistan’s growth rate is still miniscule. If the country maintains its fiscal prudence and executes reforms as suggested by IMF fairly, there is still light at the end of the tunnel.
Promising sectors
The construction industry has emerged as one of the sweet spots for Pakistan’s economy. Government of Pakistan considers it an important driver of economic growth, where a spurt in economic activity has the potential to positively impact growth in allied sectors as well. The boom in the industry is a result of increased infrastructural activities as well as various residential projects that have been initiated to deliver housing solutions to the people. This boom is aided by favourable fuel prices including oil, electricity and coal. The government has also given tax relief to builders to facilitate growth in the real estate sector.
Along with construction, the Information Technology (IT) sector has emerged as a promising sector for the Pakistani economy. In 2015, Pakistan’s IT sector accounted for $2.8 billion, of which services worth $1.6 billion were exported abroad. This is an almost negligible share of a $3.2 trillion global IT market, but the commitment of the Pakistani government to the IT sector signals that this share may increase exponentially.
The model followed by the Pakistani IT industry has helped it cut through problems like corruption, bureaucratic red tape and security challenges. The software professionals in the country seek clients through popular freelance hiring sites such as Elance, Upwork and Fivver. The freelance software professional community from Pakistan is now the third largest in the world. Various estimates put the number of IT companies in the country at 25,000.