Main issues related to Political Economy of Pakistan
1. Fiscal Deficit and Debt
Burden
- Pakistan
faces a chronic budget deficit due to low tax revenue and high
government spending.
- Reliance
on domestic and international borrowing has led to a mounting debt
crisis.
- IMF
programs and conditional loans often influence Pakistan’s political and
economic policies.
2. Taxation System and Revenue
Generation
- Tax-to-GDP
ratio remains one of the lowest in South Asia.
- Widespread
tax evasion, exemptions for elites, and weak enforcement undermine
revenue collection.
- Heavy
reliance on indirect taxes increases the burden on the poor and
middle class.
3. Energy Crisis and Circular
Debt
- Power
shortages and circular debt in the energy sector remain persistent.
- Dependence
on imported fuels increases economic vulnerability.
- Political
interference and poor management weaken reforms in the power sector.
4. Dependence on Agriculture
with Low Productivity
- Agriculture
employs nearly 40% of the workforce, but productivity is low.
- Land
ownership is concentrated in the hands of a few landlords (feudal
structure).
- Water
scarcity, outdated technology, and poor policy further weaken the sector.
5. Industrial and Trade
Imbalance
- Export
base is narrow and low-value (mainly textiles).
- Heavy
dependence on imports leads to trade deficits.
- Lack
of industrial diversification reduces global competitiveness.
6. Political Instability and
Governance Issues
- Frequent
changes in government and weak institutions discourage long-term policy
planning.
- Corruption,
nepotism, and lack of accountability affect economic reforms.
- Political
instability scares away foreign direct investment (FDI).
7. Unemployment and Informal
Economy
- Large
proportion of the youth remains unemployed despite having degrees.
- Informal
economy accounts for nearly 40% of GDP, leading to revenue loss.
- Brain
drain due to lack of opportunities in the country.
8. Inequality and Poverty
- Wealth
and resources are concentrated among a small elite class.
- Regional
inequalities: urban areas (like Karachi, Lahore, Islamabad) are more
developed compared to Balochistan, FATA, and rural Sindh.
- Poverty
persists despite foreign aid and development projects.
9. Security and Geopolitical
Challenges
- Ongoing
security concerns, terrorism, and regional conflicts impact
investment and trade.
- Heavy
defense spending reduces funds available for education, health, and
infrastructure.
10. Climate Change and Natural
Disasters
- Pakistan
is among the most climate-vulnerable countries in the world.
- Floods,
droughts, and environmental degradation reduce agricultural output and
increase poverty.
- Weak
disaster management policies worsen the impact of natural calamities.
✅ Summary:
The political economy of Pakistan suffers from a vicious cycle of weak
institutions, fiscal mismanagement, political instability, and elite capture,
which prevents sustainable economic growth. Long-term reforms in taxation,
governance, industrial diversification, education, and climate resilience are
essential to address these challenges.
