The Asian Development Bank (ADB) has expressed a note of optimism about the economy of Pakistan as security situation is improving due to military operation against terrorists in various parts of the country. In a report on Asian Development Outlook for 2015, the bank says that the rate of gross domestic product is expected to grow by 4.5 percent in fiscal year 2016 as security is gradually improving and power shortage for the manufacturing sector will be decreased coupled with continuation of low oil prices in the international market. The report assumes terrorism as the principal cause of declining trend in direct foreign investment which has contracted from over $5 billion in 2008 to $600 million in 2015. The report also hopes that the low oil prices will accelerate growth in various economies and the Pakistani economy is expected to improve as the reform introduced by the government will raise investors’ confidence in economic policies. According to the report, low tax collection is a notable risk for the budget estimates, as the tax collection body could not achieve the set target of the previous year while the provinces have failed to achieve a significantly higher fiscal surplus. It is hoped that the ongoing Economic Corridor programme will boost up manufacturing, construction and mining sectors in the country as well as private investment in the country.
The chronic issue of power shortage remains the big hurdle in the establishment of large-scale industrial units, which has severely affected the GDP growth of the country in recent years. However, the report says that purchasing power of the people has increased due to higher salaries and robust remittances, giving impetus to the development of consumption sector. The government has also introduced structural reforms in the energy sector to make it financially viable by reducing operating costs and losses in the next three years. The government has earned $1.7 billion in the sale of shares of the public sector organizations in fiscal year 2015 while efforts are being made to broaden the tax net. The federal budget for 2016 has expected a reduction in the government deficit through higher tax revenues and rationalisation of subsidies on oil and gas.
As a matter of fact, every report on the Pakistani economy pinpoints the same areas of concern which include security, energy and financial discipline. According to the ADP report, the budget deficits are filled through domestic sources, external financing and higher privatisation proceeds. However, the country needs a crash programme to overcome security and energy issues and a long term programme to boost economic growth in the country. A perfect security blanket is essential to boost the confidence of foreign investors and a transparent tax collection mechanism is a must for the local business community.