Pakistan has experienced several economic cataclysms since her inception as a country on the map of the world in 1947. Inheriting chiefly a biomass-based economy, the country must have pursued a path of industrialization and accumulation of human plus manufactured capital. The essential reforms for a fertile financial management were insufficient to save the country from the incessant pummeling of economic crises and those successful reforms which did take place in her history were mostly donor driven. Today, the economy of this country is in need of panaceas whose implementation can make a solid ground for the creation of an emerging economy.
A stable, flexible and a long term exchange rate policy is the indicator of a sound monetary management. Pakistan must understand that for a developing country under depreciation of capital due to energy shortage and unstable domestic security, the depreciation of currency increases inflation and decreases national income. For that reason, Pakistan must take steps for appreciation of her currency.
The maledictions of future economic collapse can be staved off by banning the fractional reserve banking and investment with borrowed money in the stock market. A true bull market can only be promulgated by expanding the national economy with employment made investors and continued production. In its recent report about the stock market crash of 2008, The Security and Exchange Commission of Pakistan (SECP) put forward recommendations for the revamping of existing broker regime, development of a strategic capital market development plan and a procedure for improved coordination between the SECP and the State Bank. For a fruitful outcome of these recommendations, the echelons of power are advised to take practical measures.
Today, the economy of the world is transforming from an industrial economy to an information based economy. In order to get pace with the trendy cosmopolitan culture, the government should evolve a strategy to lay a solid base for booming hardware and software industry. A separate organization for research and development of information based economy under the ministry of science and technology should be established to ferret out and explore new arenas in the field of software & hardware production and cyber warfare. The new commission should acquire the services of prominent and efficient computer and information technology specialists on piece rate. Let this organization be named as Pakistan Information Technology Commission (PITC). This commission should be tasked with establishment of a network of research laboratories & production units in the field of information technology. Pakistan received nearly 83.12 billion dollars in aid from United States of America (USA) between 1948 and 2014. The forays of economic managers of this country against the portending vagaries of economy could not pan out in spite of receiving such a gargantuan amount of aid. Therefore, the culture of dependence on international aid and unilateral transfers for catapulting national income should be minimized and a policy of “trade not aid” should be pursued. Pakistan must ink free trade agreements with its neighbors to take full advantage of the booming free market firms. Measures should also be taken for creation of Special Economic Zones (SEZ) on Chinese style. For attracting foreign direct investment (FDI), Pakistan must improve its internal security situation, promote rational beliefs and cultural flexibility for assimilation of foreign investors. The Chinese investment under the China-Pakistan Economic Corridor (CPEC) is a good sign of economic creativity in this scenario. The approval of energy projects on build operating basis must be spearheaded for specified period of time to solve the energy crisis on emergent basis. The fulfillment of the projects of Iran, Pakistan and India (IPI) or Iran, Pakistan and China (IPC) gas pipelines shall add extra piquancy to the story of solving energy shortage.
The realization of the best financial management demands the initiation of a shock therapy trial. In present circumstances, the treasure of dollars is not important. What really important is the domestic saving. For this purpose, the government must reduce its yearly expenditure. The operating leverage of each and every institution should be fixed during each and every fiscal year and the external borrowing should be brought a zero point. To reduce the debt burden, steps should be taken for debt relief through Rescheduling. Government subsidies should be cut. An atmosphere of free market economy should be promulgated and the privatization of the white elephants like Pakistan International Airlines (PIA), Pakistan railways and Pakistan Steels must be carried out as soon as possible. A campaign against corruption and embezzlement would also help in minimization of extra expenditure. Policies should be shaped to make Pakistan a current account surplus country. With no previously accumulated foreign wealth to finance current account deficit, Pakistan is importing present consumption and exporting future consumption. In this regard, measures should be taken to bring a fair balance between exports and imports.
Lastly, a practice to use GNP as a primary measure of national economic activity should be instituted because according to Paul R- Krugman and Maurice Obstfeld, the national welfare depends more directly on national income than on domestic product (Paul R-Krugman & Maurice Obstfeld, International Economics, 5th Edition, page 304). Furthermore, The Human Development Index (HDI) constructed by United Nations Development Program (UNDP) should be used as a standard tool for measuring the standard of living. Vibrant economy is the essential item for development. In order to take the nation out of claustrophobia, agoraphobia and the mentality of pipe dreams, the state must take practical steps for creation of a new Pakistan otherwise this land of pure must prepare for a dead end like Greece and USSR.