Is Pakistan Capable of Achieving a 5% Growth Rate?
Given the current economic situation, Pakistan is not equipped to achieve a
5% growth rate. With dollar reserves limited, the country can only support
around a 3% growth rate. Achieving a 5% growth rate would require increased
imports, particularly of machinery and technology, which in turn would demand
additional dollars, leading to further debt. This cycle of increased borrowing
and debt accumulation traps the country in a challenging financial position.
Yet for developing nations, a growth rate of 3% is insufficient—it needs to
be at least 5% or more to lift citizens out of poverty and improve overall
living standards.
Pakistan’s Standing in South Asia’s Growth Rates
For the past 30 years, Pakistan has consistently faced a shortage of dollars, primarily due to higher imports compared to exports. Below is a historical view of Pakistan’s trade imbalance over several decades, showing consistent deficits:
Years Exports Imports Difference
1985-86 3,070 5,634 -2,564
1986-87 3,686 5,380 -1,694
1987-88 4,455 6,391 -1,936
1988-89 4,661 7,034 -2,373
1989-90 4,954 6,935 -1,981
1990-91 6,131 7,619 -1,488
1991-92 6,904 9,252 -2,348
1992-93 6,813 9,941 -3,128
Benazir Bhutto (PPP)
1993-94 6,803 8,564 -1,761
1994-95 8,137 10,394 -2,257
1995-96 8,707 11,805 -3,098
1996-97 8,320 11,894 -3,574
1997-98 8,628 10,118 -1,490
1998-99 7,779 9,432 -1,653
1999-2000 8,569 10,309 -1,740
2000-2001 9,202 10,729 -1,527
2001-2002 9,135 10,340 -1,205
2002-2003 11,160 12,220 -1,060
2003-2004 12,313 15,592 -3,279
2004-2005 14,391 20,598 -6,207
2005-2006 16,451 28,581 -12,130
2006-2007 16,976 30,540 -13,564
2007-2008 19,052 39,966 -20,914
Pakistan Peoples Party
2008-2009 17,688 34,822 -17,134
2009-2010 19,290 34,710 -15,420
2010-2011 24,810 40,414 -15,604
2011-2012 23,624 44,912 -21,288
2012-2013 24,460 44,950 -20,490
Nawaz Sharif (PMLN)
2013-2014 25,110 45,073 -19,963
2014-2015 23,667 45,826 -22,159
2015-2016 20,787 44,685 -23,898
2016-2017 20,422 52,910 -32,488
2017-2018 23,212 60,795 -37,583
Imran Khan (PTI)
2018-2019 22,958 54,763 -31,805
2019-2020 21,394 44,553 -23,159
2020-2021 25,304 56,380 -31,076
2021-2022 31,782 80,136 -48,354
Shahbaz Sharif (PMLN)
2022-2023 27,724 55,198 -27,474
2023-2024 30,675 54,779 -24,104
Values are in Million US $
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| Pakistan Trade Development Statistics |
Long-term Trade Deficit and Its Effects on Inflation
In the past 30 years, only three years recorded a dollar surplus for Pakistan, primarily due to post-9/11 US assistance.
When trade deficits increase, so does the demand for dollars, which pushes up their value and subsequently fuels inflation. To control the soaring dollar, the government often raises interest rates, slowing down economic activity.
This cycle traps the economy in a continuous loop of debt, where each loan repayment depends on further borrowing.
Pakistan’s Debt Situation
Currently, Pakistan’s debt burden is further complicated by high-interest
loans, which were hastily taken to repay previous debts. Much of this debt was
allocated to political projects that have not contributed to national
production, exports, or revenue. Over the past three years, a significant
portion of Pakistan’s revenue has been consumed solely by debt interest
payments, leaving little for development.
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| Debt situation of Pakistan |
Necessary Economic Reforms
Pakistan must make hard decisions and shift to policies that prioritize
national over political interests. The government should phase out subsidies;
for instance, in the 2021-22 budget, various subsidies amounted to Rs. 682
billion, with Rs. 1 billion going solely to metro bus subsidies. Subsidies
often distort market dynamics, leading to smuggling and dependency. Once
implemented, subsidies are hard to withdraw and disrupt natural market
operations.
Reducing Non-Essential Imports
Luxury imports should be curtailed as they unfairly burden the lower-income
population. Temporary bans on luxury items (permitted under international
balance-of-payment regulations) could save Pakistan $5–6 billion—a crucial
relief in these challenging times. Currently, Pakistan spends about $2 billion
on mobile phone imports and $3 billion on food imports, items that should be
produced domestically.
Transitioning to Sustainable Energy
Pakistan’s reliance on petroleum imports, totalling over $17 billion, must
be reduced. Immediate transition to electric vehicle technology and
restrictions on carbon-emitting vehicles in major cities would help. Shifting
from costly thermal power plants to hydropower is another urgent need to
decrease import dependency.
Boosting Exports
With imports accounting for 20% of the GDP and exports only 10%, Pakistan
must urgently focus on increasing exports to reduce the trade deficit. Other
countries are prioritizing national economic interests over political gains,
yet Pakistan’s politics revolves around short-term gains and election
strategies. Recently, subsidies on petroleum by previous governments, intended
for political leverage, have only exacerbated the financial strain. If the
state endures, so will political opportunities.
Political Instability as a Barrier to Economic Progress
Political instability is one of Pakistan’s most pressing challenges.
Economic stability cannot be achieved without political stability. At present,
the country’s largest province lacks leadership, with no chief minister or
governor. No single party holds a majority in parliament, and there’s
uncertainty in decision-making. The president, holding to his stance, and
various leaders pulling strings from London and Washington, only add to the
confusion. Political harmony seems elusive amid extremism, sectarianism, and
terrorism—a true test for Pakistan’s resilience.
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