Pakistan is a developing country and like many other developing countries Pakistan has a semi industrialized economy and basically comprises of textiles, chemicals, food processing, the agricultural sector and various other industries. It is a surprising fact that Pakistan’s economy is the 27th largest growing economy in the world when measured in terms of Purchasing Power Parity (PPP). The economy has suffered from political instability, rising population growth rate and a war of words with the neighboring country India which has proved to be very costly for Pakistan’s economy.
There is worldwide financial crisis and rising inflation due to which Pakistan’s economy is suffering from a balance of payment crisis. The IMF initially loaned Pakistan $7.6 billion in 2008 to avoid a BOP crisis and this was increased to $11.3 billion in the year 2010. For Pakistan’s economy the mid 2000s proved to be the most fruitful as the country experienced a GDP growth rate of 7% on an average from 2003-2007. In the year 2007 Pakistan was able to increase its foreign reserves substantially to about $16.4 billion. This was a period during which the country’s trade deficit was in control and there was a rise in revenue generation. Pakistan was able to attract foreign investments up to $8.4 billion and the country’s exports rose over $18 billion. However, Pakistan’s growing economy suffered a substantial blow in the year 2008 as the role of Pakistan in the “War on Terror” started facing severe retaliation. This increasing uncertainty and instability caused the country to lose a major crux of its FDI as it fell from $8 billion to $3.5 billion. After 2008 Pakistan’s situation does not seem to improve. The economy suffers from heavy trade deficits, rising inflation rates and a fall in the value of Rupees which fell from 60-1 USD to 90-1 USD in 2012.
The rising level of security concerns has furthered the economy near to a collapse. Pakistan is considered to be in a state of war and is a victim of terrorism for the past few years. This has caused economic and political instability in the country resulting in a fall in foreign investments. Many of the people do not feel safe in the country due to which skilled labour from Pakistan is migrating to other developed nations. They do not want to risk their time and resources in an uncertain economy where they feel they would not be paid a price according to their skills. Foreign investors do not feel comfortable in investing in Pakistan’s economy because the returns are not enough to match the risk in investing in a weakened economy like Pakistan. Other than this they do feel that their lives are not safe as they could also become victims of terrorist groups operating in the country.
Although Pakistan’s economy is facing severe economic problems at the moment, it still has the potential to recover and revive its economy but to do that serious amounts of efforts are required at both the governmental and individual level.