Dr Bilawal Kamran
Pakistan’s economic landscape is currently marked by fluctuating growth rates, high commodity prices, and growing economic disparities. These issues, compounded by a persistent fiscal deficit and heavy reliance on internal and external debts, continue to put significant pressure on the nation’s financial stability. The weakening of the Pakistani rupee and the rising costs of imports have only deepened the crisis, highlighting the need for urgent structural reforms to ensure sustainable growth.
Despite being the fifth most populous country in the world, Pakistan’s economic progress lags behind even smaller nations like Singapore, Estonia, and Georgia. These countries have consistently ranked higher in global business assessments, thanks to their efficient regulatory frameworks, ease of doing business, and robust infrastructure. In contrast, Pakistan struggles with bureaucratic inefficiencies, high costs of business, and policy inconsistencies that hinder growth and investment.
The country’s governance system remains riddled with problems, such as delays in policy implementation, lack of rule of law, and political instability. These issues disrupt long-term economic planning and make it difficult for businesses to thrive. In addition, Pakistan’s law-and-order situation, although slightly improved, still faces challenges from sporadic insurgencies and security threats, particularly in border regions. The judiciary’s backlog of cases further complicates matters, leading to delayed justice for both citizens and businesses.
Pakistan’s taxation system is another major barrier to growth. With high tax rates, a narrow tax base, and a heavy reliance on indirect taxes, the country faces significant challenges in generating sufficient revenue. This situation contrasts sharply with countries like Estonia, which has successfully digitized its tax systems, ensuring better compliance and revenue generation. Pakistan could benefit from adopting similar digital solutions to streamline tax collection and improve financial governance.
The World Bank’s Business Ready 2024 report highlights Pakistan’s weak performance across key pillars of business readiness. The country’s regulatory framework, which scored just 59.10, reflects moderate compliance with international standards, but there is significant room for improvement. The Public Services pillar, which assesses infrastructure and digital services, scored poorly at 44.97, indicating inefficiencies in these crucial areas. Similarly, while operational efficiency was slightly better at 65.90, it still lags behind higher-ranked countries like Portugal and New Zealand.
Pakistan’s business environment suffers from cumbersome regulatory procedures, an underdeveloped financial sector, and inefficiencies in dispute resolution. The country’s poor ranking in business entry and insolvency processes highlights the hurdles entrepreneurs face. Moreover, the complex tax system and low compliance rates deter investment, further stifling growth.
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Infrastructure challenges, including unreliable electricity supply and inadequate transportation networks, continue to impede business operations. Bureaucratic inefficiencies discourage entrepreneurship and foreign investment, while limited digital adoption in government services places Pakistan at a disadvantage compared to countries like Estonia, where e-governance has significantly reduced delays and corruption.
To address these issues and promote long-term economic stability, Pakistan must implement comprehensive reforms focusing on governance, infrastructure, taxation, and business facilitation. Simplifying regulatory processes, reducing bureaucratic red tape, and leveraging digital solutions can enhance operational efficiency and attract investment. Strengthening financial institutions and improving access to credit, particularly for small and medium enterprises (SMEs), will foster economic growth and job creation.
Judicial reforms to expedite commercial dispute resolution will increase investor confidence and business predictability. Additionally, simplifying the tax structure, broadening the tax base, and achieving a better balance between direct and indirect taxation will improve tax compliance and revenue generation.
Investments in infrastructure, particularly in energy, information technology, and logistics, will provide businesses with the resources they need to operate efficiently. Encouraging public-private partnerships and fostering market competition through effective regulatory oversight will create a more dynamic economic environment.
In conclusion, Pakistan’s economic future depends on its ability to embrace holistic reforms, streamline regulations, and build a resilient governance framework. The experiences of countries like Georgia, which has successfully implemented efficient business regulations and dispute-resolution mechanisms, should serve as a model for Pakistan. With consistent policy implementation and a focus on creating a competitive business environment, Pakistan can improve its global economic standing and achieve sustainable growth. However, failure to address the current structural deficiencies will only exacerbate the country’s fiscal challenges and hinder long-term economic progress.
