In their desperation to claim credit for economic success, our ruling classes have a strong inclination to prescribe policies that will swiftly “fix” the broken economy, generate billions of dollars in investment, and produce hundreds of jobs. Although these short cuts might yield results right away, they are not the kinds of fixes that are likely to result in long-term prosperity and stability in the economy. The other day, a senior World Bank bureaucrat tried to make that point clear to our politicians, business elites, and other influential stakeholders by warning them not to focus only on temporary fixes like restructuring domestic debt or luring one-time investment, but also on addressing the “big picture issues” by means of reforms that would enhance the business environment, tax structure, and market conditions.Pakistan’s economy is mired in a low-growth trap, leading to subpar results in terms of human development and rising levels of poverty. Martin Raiser, regional vice president for South Asia at the World Bank, told the media that Pakistan’s economic situation makes it extremely vulnerable to climate shocks and that the country lacks the resources to finance both development and climate adaptation. “Pakistan must now choose between continuing in the same old ways and making the necessary but challenging changes for a better future.”
The “advice” is given at a time when updated national accounts reveal that, contrary to expectations of 0.29 percent growth, our GDP actually shrank by 0.17 percent in FY23.
Even though the economy had experienced a “high” growth rate of 6.17 percent the previous year, economic restructuring rather than quick-fix policy recommendations, which were the mainstay of previous economic strategies, were to blame. The current crisis in Pakistan is not exclusive. There have been comparable incidents in a number of other nations. Even though it is deeper and has persisted longer than previous crises of its kind, this one is not the first to affect us. While most countries, like Pakistan, focused on short-term stabilization through quick fixes, a few, like India and several economies in Southeast Asia, used their crises as opportunities to enact tough reforms that led to long-term recovery. Comprehensive reform programs are necessary, and long-term strategies should focus on reorganizing policy frameworks and other fundamental economic problems.
