Since its inception, Pakistan has gone through many a boom-and-bust cycle, with the country having been in a number of International Monetary Fund (IMF) programmes, indicating how deep-rooted its structural problems happen to be.
The main reason behind each IMF programme is the headache of current account deficit which is a direct consequence of the country’s fiscal outflows being more than the inflows. The deficit means Pakistan needs to borrow dollars from international lenders, like the IMF, in order to bridge the gap between the inflows and the outflows.
The stage of approaching the lenders comes when the current account deficit becomes too massive to be handled otherwise. But, by its very nature, this is a short-term solution. The main point of concern is our incapacity to make use of this short-term remedy to work long-term for us. Till that happens, our dependence on lenders will never come to an end.
One of the major underlying causes is the absence of diversification of exports. Pakistan has been obsessed with the textile sector. The government allocates major chunk of subsidies and incentives to this sector alone. It has not focussed on other potential sectors, like information technology (IT), services, minerals and several others.
Moreover, the textile exports have also not increased proportionate to the incentives despite the currency depreciation. Currently, the gap between Pakistan’s exports and imports is worth billions.
Pakistan cannot curb the requisite imports because the latter are also needed for economic growth both in terms of the taxes and duties collected in the process and the employment opportunities thus created.
The panacea is prioritising other sectors as well in order to have a diversified export portfolio of the country. Take for instance, the IT sector. India earns nearly $150 billion in IT exports annually, while Pakistan earns a meagre amount of $2 billion. These figures indicate how much Pakistan lacks in this regard compared to the other regional competitors despite having the fifth largest population in the world. It can exploit this potential by offering incentives and imparting digital literacy to the youth along with due facilitation of digital enterprises.
Another area that has been widely neglected is the services sector. Currently, Pakistan attracts only $30 billion in remittances despite having a colossal potential in this regard. About 65 per cent of Pakistani population (150m) is below the age of 30. Rather than being an asset, the youth have become a liability for the state due to the absence of technical education.
Pakistan can exploit its youth’s potential by imparting free technical education in line with the demand of the Gulf, European and Japanese markets. These industrial hubs, especially Japan and Europe, severely lack adult labour force owing to their growing ageing population. This provides Pakistan a perfect opportunity to send its labour force and earn the much-needed foreign exchange, especially when we lack foreign currency which forces us down the way to the lenders’ doors.
Diversifying the exports is vital for our fragile economy. Managing the current account deficit will lead to the emancipation of the state from the clutches of the various neo-colonialist masters. Without resorting to the diversification of exports, the prospects of sustainable and long-term economic growth would remain bleak.
ASAD MAJEED BRAR
KOT ADDU
