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1 - Overview

Published online by Cambridge University Press:  05 May 2015

Rashid Amjad
Affiliation:
Institute of Development Economics (PIDE), Islamabad
Shahid Javed Burki
Affiliation:
National University of Singapore
Rashid Amjad
Affiliation:
Lahore School of Economics
Shahid Javed Burki
Affiliation:
National University of Singapore
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Summary

The central question that the contributors to this volume seek to answer is how to reverse the current prolonged period of low growth and high inflation—stagflation—that Pakistan has experienced over the past five years, and to suggest and implement measures that would decisively move the economy onto a higher, more sustainable growth path. Eight key messages emerge from the studies presented in this volume:

– There is an urgent need to revive investment, which has fallen dismally to 12.5 per cent of gross domestic product (GDP) in 2011/12 from its peak of 22.5 per cent in 2006/07. This could be done by improving the investment climate and removing binding constraints—especially in energy—on new domestic and foreign investment. Pakistan needs to increase its investment-to-GDP ratio to over 30 per cent over the next decade if it is to generate sufficient employment to productively employ its fast-growing labor force and compete effectively with other rapidly growing developing countries. However, in the medium term, investment may continue to be constrained by resource availability and so, in the near future, a large part of the revival of growth will have to come from exploiting unused capacity and productivity gains.

– Pakistan's economic problems are structural and not just cyclical. Deep economic reforms are needed to remove structural imbalances to increase efficiency and competitiveness, and to spur entrepreneurship and innovation in the economy. Undertaking these reforms will require political will and a carefully sequenced pace of critical reforms so as to ease the burden of adjustment.

– The binding constraints to Pakistan's growth need to be overcome to revive the economy and ensure sustainable growth. These include tackling the crippling energy shortage, increasing revenues to regain macroeconomic stability and reduce the current unsustainable fiscal deficit, and ensuring the availability of water to meet the needs of the agricultural economy.

– Exports should be made a major driver of economic growth. This will mean reversing Pakistan's past poor performance in integrating with global markets—reflected in the country's stagnant share in global exports.

Type
Chapter
Information
Pakistan
Moving the Economy Forward
, pp. 1 - 21
Publisher: Cambridge University Press
Print publication year: 2015

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