In 2018, the depreciation of the Pakistani rupee against the U. dollar alone was responsible for an excessive USD $7.9 billion increase in public external debt. The inflation rate is now touching 9.4 percent, which is a record level high over the last five years mostly due to rupee depreciation and rising energy prices.
In addition, increased defense spending and its ongoing fight against extremism only further burden the economy.
In 2018, Pakistan ranked 107th out of 140 on the Global Competitiveness Index (GCI), which measures the performance of countries in indicators such as infrastructure, ICT adoption, macroeconomic stability, labor market, skills, financial stability, innovation capacity, etc.
The low ranking signifies that the Pakistani government needs to take measures to stimulate economic growth and provide favorable business environment.
Such measures would reposition Pakistan on the international stage as stable, competitive ground for foreign investment.
Pakistan also needs to focus on building its domestic industry to expand its export portfolio and enhance its competitiveness in the international markets.
Along with a depreciating rupee that has made imports costlier, low foreign investment due to Pakistan’s security and political challenges has also severely hit its foreign exchange reserves.
Despite rising deficits, Pakistan’s tax revenue was only 13 percent of its GDP in 2018.
Indeed, 30.7 percent of Pakistan’s government expenditure is earmarked for debt servicing, which cannot be supported by its decreasing revenues.
Already on the Financial Action Task Force’s (FATF) grey list, and with the current Pakistan Tehreek-e-Insaaf (PTI) government enjoying internal institutional consensus on the national agenda, Pakistan must focus its attention on resolving its economic woes before it finds itself on the shores of bankruptcy.