The Current Economic Crisis of Pakistan

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The Current Economic Crisis of Pakistan
The Current Economic Crisis of Pakistan

So it should not come as a surprise that Pakistan is currently in one of the greatest Economic Crisis it has had to face in a long time. The economy of Pakistan has been really damaged over the years with country taking in huge amounts of loans which are getting harder and harder to pay off and on top of that the country is not to good at producing home-crafted products which they could export to earn revenue, instead the country is more better at consuming than producing as Pakistan current account balance (export-import) in a big deficit.

So what does the Chief in charge do when a country is in such a crisis well the first step is to probably restructure the economy and the country’s government can do that by establishing a better structure of taxation and in this case that has what the Imran Khan governance has done, now we cannot say that they made the situation better but one thing is for certain, the government is doing all it can to earn the much important tax revenue. Moreover the government has been able to tax people on many things one of which is property down below you can see the tax rate on the capital gains made on the sale of property:

In the table we can see that the income tax rate is increasing according to the value of the property which means that for property of higher value, a higher tax percentage is to be changed. It is pretty much like the FBR’s tax on mobile phones which are brought into the country and have to be registered, the tax rate there also increases in accordance with the value of the phone.

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The second step is, how to put this easy, completely boycott or at least limit the amount of income which is spent on imports, by doing that the export revenue will go up leading to a fall in the import expenditure which may a couple ways down the road lead to a better Current account balance, however the key issue here is as mentioned before, the country is not good at producing and considering our competition China who are the leading exporters in the world it is a pretty hard situation for those incharge. Limiting imports of care, adding taxes on phones from abroad, increasing taxation on imported products like Nutella will do no damage, if Pakistan can somehow be able to create these products at home.

Finally we move on to the talk of the century, the very high dollar rates and while some may think that the pressure on the dollar Is due to a fall in the intrinsic value of the Pakistani Rupee(which is true no doubt) it should also be noted that the previous government were running a fixed exchange rate, which means that the country’s government were putting almost there entire budget and reserves in keeping the dollar at a fixed rate so basically pretty much every loan the government took, almost every penny we borrowed was dedicated to controlling the dollar rate, hence why the dollar rate was stable for so long.

The new government here took the decision to float the exchange rate, which means that the dollar rate was decided on the forces of demand and supply, meaning the dollar which is able to be supplied in course with the dollar which is being demanded, since Pakistan does not have a lot of dollar in the state bank and the dollar is being demanded more but there isn’t much to supply the price of the dollar against the rupee has sky rocketed leading to the current rate of $1 = Pkr 164. Moreover, since most if the world trade is dependent on the dollar, that has lead to other currencies gaining value against the rupee as well.

All in all the steps taken by the government are definitely the right ones as the government is looking to achieve the sustainable development in the first 5 year tenure, Sustainable Development literally means making the present generation worse off to in turn make the future generations better off. So at the moment we will have to see through the hard times and though it may be hard, we have seen many countries do it, take China for example, to make there economy the economy it is today, China once blocked all imported cars in to the country and at that time no company in China was making cars, folks in China rode bicycles for 35 years, This is a sacrifice a nation has to take for a prosperous future and while we as a nation play our part, it is also necessary for the government to bring about a change, to bring new opportunities on the table, to make our businesses more competitive, to give a chance to small and medium startups and while taxation is very necessary, other factors should also be taken in to account.

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