How Can Pakistan Reinvigorate Its Economy?  

How Can Pakistan Reinvigorate Its Economy

The following article, “How Can Pakistan Reinvigorate Its Economy?“, is written by Shabnam Usman, a student of Sir Syed Kazim Ali. Moreover, the article is written on the same pattern, taught by Sir to his students, scoring the highest marks in compulsory subjects for years. Sir Kazim has uploaded his students’ solved past paper questions so other thousands of aspirants can understand how to crack a topic or question, how to write relevantly, what coherence is, and how to include and connect ideas, opinions, and suggestions to score the maximum.

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1- Introduction

  • ✓The economy is the lifeline of a country.
  • ✓Pakistan is struggling with its unstable economy.
  • ✓The country can reinvigorate its economy.

2- Current Situation of Pakistan’s Economy

  • ✓Pakistan is facing a severe threat of economic default as its foreign exchange reserves are depleting exponentially.

3- Pakistan can Reinvigorate its Economy by

  • Investing in Human Capital
    • Case in Point: Human capital development policy of Singapore
  • Reviving Tax Policy
    • Case in Point: The tax system of China
  • Increasing Competition among Local Producers
    • Case in Point: Competition with foreign products can improve the quality of local products and save them from extinction, Harvard Business Review
  • Developing Small-Scale Industries
    • Case in Point: Great contribution of small-scale industries in the economy of India, University of Wollongong Research Centre
  • Privatizing State-Owned Enterprises
    • Case in Point: Privatization of the energy sector in Denmark
  • Promoting Digitalization
    • Case in Point: Digital economy has the potential to radically change the social environment and economic activities of Asia, Asian Development Bank

4- Critical Analysis
5- Conclusion

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Answer to the Question


The economy is one of the most crucial factors that can make or break the foundations of a country. If the country’s economy flourishes, its international image, society, and polity will improve and accelerate positively. Accordingly, countries with strong economies, like the US, Japan, China, and Russia, are ruling the world. On the contrary, the weak economies of developing countries have never let them rise socio-politically; they always remain passive entities globally. Unfortunately, as a developing country, Pakistan has been struggling with an unstable economy for decades. Moreover, the country’s reliance on foreign assistance has proved to be a curse, as the government has never tried to strengthen its economy without the blessings of the West. Nonetheless, the country can still reinvigorate its economy and achieve the dream of sustainable growth by taking some pragmatic steps, such as investing in human capital, digitalising the economy, and privatising state-owned enterprises. In addition, the development of small-scale industries should also be encouraged to empower the local industry for economic gains. Moreover, an equity-based tax policy can help avoid exploiting people experiencing poverty. Summing up, Pakistan can revive its economy by implementing such effective measures. This article explains the methods Pakistan can apply to reinvigorate its economy.

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Current Situation of Pakistan’s Economy

Pakistan faces a severe threat of economic default as its foreign exchange reserves are depleting exponentially. In addition, the country’s exports have fallen by 9% since July. Moving further, the destructive floods of last summer have added fuel to the fire. The floods have wiped out crops from hundreds of acres of land, which has caused the country to spend $2 billion on the import of crops. To make the situation even worse, investors’ trust has declined due to political instability in the country. Besides, the depreciating rates of Pakistani currency against the US dollar have further graved the fragile economic conditions. Despite such disappointing statistics, instead of devising plans to ease the circumstances, Pakistan is looking toward foreign donors and the International Monetary Fund (IMF) for loans to restore its economy.

Pakistan can Reinvigorate its Economy by

Investing in Human Capital

First, Pakistan should focus on developing human capital so that people’s skills and knowledge can help the economy flourish. An example of Singapore is worth mentioning here as the country transformed itself from an income to a high-income developed country by spending much on human capital. Its main focus was on aligning educational standards with economy-based national interests. Consequently, human capital aids the economy to grow as quality education helps promote innovations and social well-being. Additionally, the government should promote vocational training institutes in smaller cities so that more people can access them. Besides teaching, the revival of the health sector is also necessary for sustainable growth. Boiling down the matter, the country should allocate a large chunk of public revenue to human development projects to enhance the economy.

Developing Equity-Based Tax Policy

Second, the government should devise an equity-based tax system so that everyone contributes according to his income. For example, China’s tax rate is divided into seven levels according to monthly payment, with the highest level being 45% and the lowest being 3%. Unfortunately, Pakistan’s current tax system is highly flawed, which has provided a space for the big bones and large muscles to evade taxes and exploit poor people. For this, Pakistan should reduce the tax on the necessities of life and increase taxes on luxuries to ensure the contribution of the wealthy class. Moreover, heavy taxes should be imposed on imported products to promote the consumption of local commodities. Further, policies should also be devised to expand the tax net by removing all loopholes covering tax evaders. In conclusion, reviving tax policies can help the government generate reasonable public revenue, stabilising the country’s economy.

Increasing Competition among Local Producers

Third, the competition among local producers should be increased so that the domestic producers can focus on reducing the prices and improving the quality of their products. The conducive environment for local businesses can aid people in having access to a vast number of domestic products. Consequently, increasing demand for various home-grown items will compel local manufacturers to produce more low-cost products, knocking out international commodities. According to the Harvard Business Review, a conducive business environment and competition with foreign items can improve the quality of local products and save them from extinction. In the case of Pakistan, the practice will not only protect the domestic industries from death but also help to cut down import expenses to a large extent. Besides, encouraging home industries can enhance employment opportunities and reduce the brain drain phenomenon. Thus, such pragmatic steps can help Pakistan move up the economic development ladder.

Developing Small-Scale Industries

Moreover, sponsoring small-scale industries in Pakistan can significantly develop the economy. Setting up such industries will help produce enormous working opportunities, guarantee inclusiveness, and increase export goods. Altogether, the initiative will aid the country in reducing issues like unemployment and poverty. As mentioned by Wollongong Research Centre, the contribution of small-scale industries to India’s economy has played a significant role in its flourishing. Accordingly, the Pakistani government should provide funding and incentives for supporting such initiatives and proper banking facilities, like easy loan schemes, minimal interest rates, and subsidies. Such terms for starting the business make it convenient for entrepreneurs and ensure maximum participation. In conclusion, setting up small-scale industries will help the government uplift its economy.

Privatizing State-Owned Enterprises

Furthermore, the privatisation of state-owned enterprises can be very beneficial in terms of economic growth. The practice will normalise the stressed public budget and reduce the fiscal deficit. In Denmark, the transmission grid is fully possessed by public entities, and most wind farms are community-owned, which helps the government focus on other vital areas. Likewise, in Pakistan, the government should locate the enterprises which have become white elephants for the state and make them available for privatisation through proper proclamations. Moreover, the government should also try to outsource some departments if the enterprises cannot be fully privatised. In summary, privatising state-owned enterprises is the right step towards reviving the economy.

Promotion of Digitalisation

Finally, the government must focus on the digital economy. Such enterprise has the potential to exploit local economic means along with incorporating global opportunities. It nurtures innovative mindsets, social development elements, and intracultural communication channels. According to the Asian Development Bank, the digital economy has the potential to radically change the social environment and increase Asia’s economic growth. In addition, introducing technology in governance mechanisms will revolutionise the economy at large; digital tax revenue collection methods, e-commerce, business apps, online banking, freelancing, smart cities, and the Internet of Things (IoT) all such methods can bring drastic changes in socio-economic conditions of the people and the country as well. It can reduce tedious, lengthy, and complex official procedures, bribe culture, and build people’s trust in government initiatives. Therefore, digitalisation can assist the government in achieving the target of sustainable economic growth.

Critical Analysis

In a rational diagnosis, it is not wrong to say that Pakistan is going through the menace of economic declivity. In contrast, its neighbour countries are demonstrating economic growth; meanwhile, the country is still relying on foreign aid and unwilling to come out of the vicious cycle of economic instability. Every successive government has done nothing to improve the economy. Instead, it has blamed the previous administration for the mismanagement. Long-term development plans have never been implemented, and flawed short-term policies have generated insufficient public revenue, which has not been allocated appropriately. Nevertheless, the administration, the government and the people of Pakistan should work together by developing a sense of shared responsibility and adopting robust and sustainable plans to strengthen the economy.


In a nutshell, Pakistan is facing economic downfall due to governance negligence, administration doldrums, and undirected human capital. The country’s potential to boost its economy has never been untapped genuinely. As a result, the large population of Pakistan has become a liability rather than an asset to the state, foreign enterprises are exploiting the natural resources of the nation, and the country’s sovereignty is being compromised by the administration owing to multiple foreign aid programs. Nonetheless, Pakistan can still set its way to economic progress. The government can make efficient use of its wide range of natural resources, sizeable human capital, and ideal geo-political location; these elements can help the state overcome its economic issues. For this purpose, Pakistan must adopt several rational measures: developing human capital, promoting small-scale enterprises, renovating local industries, privatising loss-making state-owned enterprises, and reviving tax policies. All such fruitful schemes can reinvigorate Pakistan’s economy in the long run.  

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