Pakistan’s current Chief of Army Staff, General Asim Munir, has vowed to fix the national economy by encouraging the business community to increase investment, enlarging the tax collection circle, controlling the exchange rate with the US dollar, and ending smuggling of oil and diesel from Iran.
Additionally, the army chief has urged the federal and provincial governments to take strict actions and send back Afghans residing illegally in Pakistan.
Pakistan is a laboratory for military generals and political leaderships. Since 1947, civil and military leadership has been attempting to fix the country in their own way. The current COAS, General Asim Munir, is also attempting to fix the deteriorated national economy.
The surrender of political forces before the Pakistani military, the damaged national image at the global level, human-rights violations, and rampant militancy are detrimental challenges for the country created by the military itself.
Fixing the economy by the army chief wouldn’t work effectively as the military has its own challenges to overcome, particularly insecurity and terrorism.
Huge challenges
Pakistan is grappling with a multifaceted economic crisis characterized by a devalued currency, declining GDP, soaring inflation, escalating taxes, and a surge in illegal activities such as smuggling.
The rampant smuggling of goods, including sugar, flour, and Iranian oil into Pakistan, has caused serious damage to an already deteriorated economy. Addressing this issue is paramount to rejuvenating Pakistan’s economy and safeguarding its long-term stability.
Pakistan’s economy is facing significant challenges, as indicated by various key indicators.
The dire economic recession is characterized by a multiple economic factors.
One prominent concern is inflation. This rise in prices erodes the purchasing power of individuals and exacerbates economic hardships.
Smuggling plague
Among the serious economic challenges, the smuggling of diesel and gasoline from neighboring Iran is prominent. This illicit activity not only undermines the government’s revenue collection efforts but also distorts market dynamics, leading to unfair competition and loss of legitimate business opportunities.
According to local smugglers, more than 6 million liters of diesel and petrol are smuggled from Iran on daily basis. The supply of smuggled oil products goes countrywide.
The smuggling activity must be categorically linked with corruption of border security forces, Pakistan Customs officials, the Frontier Corps, FIA (Federal Investigation Agency), local and district administrations as well as provincial authorities.
According to a recent report of the Federal Board of Revenue (FBR), Pakistan’s already fragile economy has suffered the loss of US$10 billion in terms of tax and levies. The International Monetary Fund (IMF) has also expressed concerns over the smuggling of oil-related products.
Another significant challenge is the outflow of dollars to Afghanistan. This implies that funds are being transferred across the border, potentially for illicit purposes or to take advantage of economic opportunities in the neighboring country. This capital flight can further weaken Pakistan’s economy by depleting its foreign-exchange reserves and hindering investment and economic growth domestically.
Moreover, the tax network in Pakistan is virtually non-existent. A robust and efficient tax network is crucial for any nation’s economic stability and development.
Former prime minister Imran Khan must be given credit for expending the tax network in Pakistan. During financial year 2021-22, the FBR collected record tax.
Without a well-functioning tax system, the government is unable to generate sufficient revenue to fund public services, infrastructure projects, and social welfare programs. This lack of tax collection exacerbates the fiscal deficit, hampers economic growth, and perpetuates the cycle of poverty and inequality.
The high unemployment rate in Pakistan is another pressing concern. This leads to a loss of productive potential, reduced consumer spending, and social and economic unrest. The combination of a lack of job opportunities and a growing population exacerbates this issue, creating a significant challenge for the government in terms of providing livelihoods for its citizens.
The value of the Pakistani rupee is depreciating. This depreciation can have far-reaching consequences for both the domestic and international economy. It makes imports more expensive, leading to higher costs for businesses and consumers. Additionally, it can discourage foreign investors and reduce the competitiveness of Pakistani goods in international markets.
Last, power prices in Pakistan are skyrocketing. This refers to a significant and rapid increase in the cost of electricity. Currently, per unit cost is around 52-53 rupees (18 cents), which is disastrous for low-income families.
Rising power prices can have adverse effects on businesses, as they increase production costs and reduce profitability. Moreover, this impacts consumers by increasing their utility bills and reducing their disposable income for other essential needs. This can further exacerbate the economic challenges faced by individuals and businesses alike.
Trade and diplomacy
The current practices on the part of Pakistan to restrict cross-border trade with Iran and Afghanistan will impact Pakistan economically. Instead, Pakistan should establish friendly relations with neighboring countries like Afghanistan, Iran, and India in order to achieve economic stability and security.
These countries can collaborate in various sectors such as technology, business, trade, oil, food, medicine, industrial machinery, and transportation to establish interconnectedness.
Collaboration with Iran and Afghanistan is of utmost importance for Pakistan’s economic revival and stability. By adopting a comprehensive approach that combines enhanced border security, intelligence sharing, legal reforms, public awareness, and economic incentives, Pakistan can effectively curb smuggling and mitigate its adverse effects.
It is imperative for the government to prioritize these issues, collaborate with neighboring countries and international partners, and implement reasonable economic strategies with determination and perseverance. Only then can Pakistan pave the way toward an economically prosperous and secure future.