Strategies of economic

The base of all economic development is investment. When private investment fails to meet a community's particular needs, public investment or public/private partnerships may be necessary. Current realities and future challenges of economic development give rise to three foundational principles on which economic development investments should be based: exports, productivity and sustainability. Exports have motivated much of economic development activity in the past, but the shift from a manufacturing service based economy and increasing global competition has emphasized the importance of productivity. A growing awareness of the need for human development and the scarcity of natural resources also highlight the need for a sustainable approach.

Challenges: 2013

We Consume More and Save Less.

Out of every hundred rupees of our national income, we consume 85 rupees and save only 15 rupees, which means that the amount of money which is available to invest for economic growth and advancement is too little. Because to grow by 6%, you need at least 24-25% investment rate - and if you want to rely on domestic savings, your saving rate should be 25%. India’s saving rate was about the same, but last year they recorded 34% saving rates. China’s saving rate is 50%, so this is the contrast as to why we are in serious difficulty because as a nation this is a problem which we have to recognize. We have to at least double on savings rate otherwise we will remain dependent on foreign sources.

We Import More and Export Less.

Till 2007-2008, 80% of our imports were financed by our export earnings. This ratio has come down to only 50%, it may go up to 60% but a gap of 40% of financing needs in order to keep with the import level still exists. As a nation we prefer to use even the basic commodities of foreign countries rather than locally manufactured goods.

Government Spends More than it Earns as Revenues.

Fiscal deficit is the difference between the revenues which are collected in a year and the total expenditure incurred by the Government. Pakistan’s government takes away 20% of national income as its own. 80% is left in the private sector and 20% in the hands of the government is spent on defence, debt servicing, development on education, health, general administration etc. The revenue generated is only 15% of the GDP at best, and in the worst days it is 12 to 13%. Out of the every rupee of income received by a Pakistani, on average, tax paid is only 9 paisas and 91 paisas remain with the individual.

In 2007-2008, Pakistan’s fiscal deficit was more than 7% which means its income or revenues were only 13% of GDP whereas, expenditures were 20%. Therefore, fiscal deficits have to be financed from somewhere, so how do you finance them; you either go again begging the external donors, or to the State bank of Pakistan. The financing provided by the State bank of Pakistan is dangerous because it creates high inflation in the economy, which is injurious to the middle class, those earning fixed wages and salaries, and the poor.

Therefore, there is an uproar in the country if the inflation rate goes up. In 1999, our Debt to GDP ratio was 100%, which means that the entire national income was pledged as debt.