Economic Issues of Pakistan & Solutions

ECONOMIC ISSUES
OF PAKISTAN
BY M. Arsal Azam
M. Salman Mehmood
Hamza Chaudhary
M. Sohaib
Usama Zaheer
Introduction:
• A country where the average income of the people is much

lower than that of developed countries, the economy
depends upon a few export crops and where farming is
conducted by primary methods is called developing country.
• Pakistan is also an developing country.
• It is suffering from many major economic issues.
Criteria to an Under-developed Nation:
• Potential to become economically developed.
• Low or no rising trend of per capita income.
• Countries very poor in resources.
List of Major Economic Issues
1- Poverty and Low Living Standard.
2- Burden of External Debts.
3- Backward Industrial Sector.
4- Unemployment.
5- Inflation.
6- Poor Health and Diseases.
7- Political Instability.
8- Low level of Productivity.
9- Deficiency of Capital.
Poverty and low living Standard
• Condition where people's basic needs for food, clothing, and

shelter are not being met is known as poverty.
• The main causes of Poverty are:
• 1) Population Growth
• 2) Largely Uneducated Population
• 3) Imbalanced Taxes
Population Growth Rate
• According to Economic survey 2017-18 the population growth
rate of Pakistan is 2.5%.
• Pakistan’s exploding population, like its sharply declining water

resources, are red flags that can turn into existential threats.
• Pakistan’s present population of 207.8 million and annual growth

rate of 2.5% will turn it into the world’s fourth populous country
by 2030.
• A dubious distinction considering its lack of resources, its

147th ranking in Human Development Index, abysmal literacy
rate of 58 percent and fear of mass unemployment among youth,
which now constitutes 60 percent of the population.
Largely Uneducated Population
• About half of Pakistan’s population is illiterate, and 7.26
million children are out of school.
• Pakistan has the 2nd number of out-of school children in the
world after Nigeria because Pakistan spends the lowest GDP
on education in South Asian countries.
• Without education and job skills training, young people
cannot adopt the skills needed for employment.
• Existing systems fail to address the skills demanded by
employers, and this hinders economic growth and societal
development and rise out of poverty.
Imbalanced Taxes
• Pakistan’s tax system shows unfortunate proof of the
government’s corruption.
• In fact, 80% of the tax revenue comes from the poor for
services including utilities, petrol and mobile communication.
• Meanwhile, the taxes collected from the rich do not exceed
even 5%.
Economic Survey 2017-18 (DECLINE)
• Over the last decade, Pakistan’s poverty headcount has
witnessed a persistent decline both at national and regional
levels
• A Percentage of people living below poverty line has declined
from 50.4% in 2005-06 to 24.3% in 2015-16.
• Poverty in both rural and urban areas has also been on the
declining trend with poverty headcount of 12.5% in Urban
and 30.7% in rural areas in 2015-16.
Cont..
Year National Urban Rural
2005-06 50.4 36.6 57.4

2007-08 44.1 32.7 49.7
2009-10 36.8 26.2 42.1
2011-12 36.3 22.8 43.1
2013-14 29.5 18.2 35.6
2015-16 24.3 12.5 30.7
Burden of External Debts
• External Debt in Pakistan increased to 99108 USD Million
in the fourth quarter of 2018 from 96735 USD Million in
the third quarter of 2018.
• External Debt in Pakistan averaged 56337.99 USD Million
from 2002 until 2018, reaching an all time high of 99108
USD Million in the fourth quarter of 2018 and a record low
of 33172 USD Million in the third quarter of 2004.
Cont.…
Backward Industrial sector
• Industrial sector of Pakistani economy is backward since
independence.
• Pakistan got only 34 (3.7 % of total industrial units)
industrial units out of 921 units in sub-continent in 1947.
• Small and backward industrial sector is based on low level of
capital formation, technology, training and education and
over dependence on agriculture sector.
• 13.7% labor force is attached with industrial sector in
Pakistan. Its share to GDP is 25.4 % and to exports is more
than 60 %.
Unemployment
• In Pakistan, the unemployment rate is very high and the
major reason is the wastage of resources on the large scale.
It results in the decrease in the income of people.
• The Unemployment Problem in Pakistan is increasing rapidly
and due to this, many crimes are taking place.
• The current unemployment rate of Pakistan is 5.90%
CAUSES
Major causes of unemployment are as follows:
• Poor education system
• Growth in population
• High age of retirement
• Terrorism
• Lack of industries
Inflation
• Pakistan’s annual inflation rate rise to 9.41% in February of
2019 from 8.21% in the previous month. It was the highest
inflation rate since November of 2013
Effects of Inflation
• It is a huge problem for employees, taking fixed salaries.
• It generates unfair distribution of income and wealth.
• Inflation reduces the saving of the population.
• It is a cause of unfavorable balance of trade and payment.
• Inflation increases the rate of interest.
• It generates very bad effects on the poor labor force.
• Inflation reduces the living standard and purchasing power of people.
• It is harmful for creditors.
• Inflation reduces the purchasing power.
Control
• Inflation is everywhere in an economy.
• Its rate is high in developing countries and is low in poor
developed countries.
• Effective operation of monetary and fiscal policy is essential
to control the inflation.
Poor Health and Diseases
• M. P. Todaro in his “Economic Development” states, “Many
people in developing countries fight a constant battle against
malnutrition, diseases and ill health”.
• Average life expectancy in Pakistan is 65.2 year against 75
years in developed countries.
• One Doctor is for 1206 persons and one Nurse is for 2369
persons, one Dentist for 16420 persons.
Cont.…
• Number of hospitals is 972 and one hospital bed is available
for 1665 persons.
• The total expenditure on health sector is just 0.27 % (Rs.
55.12 billion) of the GDP.
Political Instability
• It is defined as:
• “The propensity of a government collapse either because of
conflicts or rampant competition between various
political parties.
• Clashes between government and the opposition.
• Cause to reduction in domestic as well as foreign investment.
• Political instability keeps low the level of economic
development.
Causes
• High inflation
• Large income inequality
• Deficit financing
• Chronic lack of expenditure for infrastructure and education.
Low level of Productivity
• It is defined as:
• “The effectiveness of productive effort, especially in industry,
as measured in terms of the rate of output per unit of
input”
• Minimum wages are Rs.8000/- per month against the
average gross salary of $3,950 (Rs.5,92,500) per month in
United States.
Causes
• Economic backwardness of people.
• Lack of skill
• Illiteracy and ill-training.
• Value of annual productivity of labor is about $ 100 while it
is more than $ 2500 in advanced nations.
Deficiency of Capital
• Shortage of capital is another serious problem of Pakistan.
• The low level of capital formation in Pakistan is due to:
• 1) The weakness of the inducement to invest
• 2) The low propensity and capacity to save.
Cont.…
• Lack of capital leads to:
• 1) low per capita income,
• 2) less saving and short investment.
• National saving is 10.7% of GDP and total investment is
12.5% of GDP in Pakistan.
• Rate of capital accumulation is very low as 5%.
• On the other hand, capital output ratio (COR) is very high
which is not desirable for economic development.
• HOW TO CURE all this?
• ANY QUESTIONS?
•THANK YOU 

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ECONOMIC ISSUES

• A country where the average income of the people is much

• Condition where people's basic needs for food, clothing, and

• Pakistan’s exploding population, like its sharply declining water

• Pakistan’s present population of 207.8 million and annual growth

• A dubious distinction considering its lack of resources, its

2005-06 50.4 36.6 57.4

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