ISLAMABAD:
The recent turbulence in the global economic landscape is ushering in a new chapter in the soft reset of the global economic order. This may be a painful and prolonged reset, with countries like Pakistan getting hard exposure to it due to heavy reliance on external factors such as exports, foreign remittances, and foreign direct investment. A slowdown is expected in all of these.
At the domestic level, fiscal pressure and declining productivity, coupled with persistent inflation and unemployment, are giving a hard time to the economic managers. While a major economic disaster has been averted in recent years, the structural risks and problems are still present. These indicators, both external and internal, warrant a redesign or reset of the economy of Pakistan, shifting towards strengthening the domestic and productive economy.
Pakistan’s economy has long been characterised by its reliance on exports, foreign remittances, and external investments. However, this has not fully translated into improved socio-economic conditions and trickle-down impact.
Moreover, while these elements have played a crucial role in sustaining economic growth, they have also made the country vulnerable to global economic fluctuations and external shocks. In the context of a changing global economic order marked by rising protectionism and high tariffs, it is imperative for Pakistan to redesign its economy to strengthen domestic foundations.
The GDP of Pakistan is reliant mainly on services, with a declining share of the industrial and agricultural sectors. The industrial sector in Pakistan has the potential to drive economic growth and create employment opportunities.
Historically, industrialisation has been considered necessary for rapid economic development. However, the sector has faced numerous challenges, including outdated infrastructure, lack of investment, and inefficient resource allocation. In order to revive the industrial sector, Pakistan must focus on modernising infrastructure, providing incentives for investment, and adopting innovative technologies.
Moreover, upgrading infrastructure is crucial for enhancing industrial productivity. This includes improving transportation networks, energy supply, and communication systems. Efficient infrastructure reduces production costs and facilitates the movement of goods, making local industries more competitive.
It is also important to embrace modern technologies to improve efficiency and productivity. This includes automation, digitalisation, and advanced manufacturing techniques. By adopting innovative technologies, Pakistan can enhance the quality of its industrial products and reduce production costs.
Agriculture is a vital sector in Pakistan’s economy, contributing around 25% to the GDP and employing a significant portion of the labour force. It provides food security, raw materials for industries, and export commodities. However, agriculture in Pakistan faces challenges such as low productivity, outdated farming practices, and inadequate infrastructure. Reviving the agricultural sector is crucial for sustainable economic growth.
Enhancing agricultural productivity requires the adoption of modern farming techniques, improved seed varieties, and efficient irrigation systems. Investing in research and development can lead to innovations that boost crop yields and reduce post-harvest losses.
Developing rural infrastructure, including roads, storage facilities, and market access, is essential for supporting agricultural growth. Improved infrastructure reduces transportation costs, minimises wastage, and ensures timely access to markets.
Providing financial support through innovative financing mechanisms and training to farmers can help them adopt better farming practices and technologies. Access to credit, subsidies, and extension services can empower farmers to increase their productivity and income.
At the macro level, reducing reliance on exports and foreign remittances requires a paradigm shift towards local production and consumption. Encouraging local production not only strengthens the domestic economy but also reduces vulnerability to external shocks. Promoting local consumption supports domestic industries and creates a self-sustaining economic cycle.
The government should implement policies that support local industries, such as preferential procurement, subsidies, and tax incentives. Encouraging the production of goods locally reduces dependency on imports and boosts domestic manufacturing.
Raising awareness about the benefits of consuming locally produced goods is essential. Campaigns that highlight the quality, affordability, and economic impact of local products can encourage consumers to choose domestic options. SMEs play a crucial role in local production and employment. Providing financial support, training, and access to markets can help SMEs thrive and contribute to the economy. Simplifying regulatory processes and reducing bureaucratic hurdles can also facilitate the growth of SMEs.
The global economic order is increasingly marked by protectionism and high tariffs. Countries are imposing tariffs to protect domestic industries, leading to trade wars and disruptions in global supply chains. For Pakistan, this trend poses significant challenges, as it relies heavily on exports and foreign investments.
To mitigate the impact of protectionism, Pakistan must diversify its trade partners and explore new markets. Reducing dependency on a few countries for exports can minimise the risks associated with trade barriers.
The government must adapt its policies to navigate the changing global economic landscape. This includes negotiating favourable trade agreements, implementing protective measures for domestic industries, and fostering innovation to remain competitive.
Resetting Pakistan’s economy to strengthen domestic sectors is essential for sustainable growth and resilience. Reviving the industrial and agricultural sectors, encouraging local production and consumption, and adapting to the changing global economic order are key steps in this process. By focusing on these areas, Pakistan can reduce its reliance on exports, foreign remittances, and investment, and build a robust and self-sustaining economy that is relatively insulated from current and future global economic shocks.
THE WRITER IS AN INTERNATIONAL ECONOMIST
#economy #reset #relapse
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