Pakistan Economic Recovery Remains a Mixed Bag

The Pakistani government remains optimistic, but foreign direct investment dropped 58 percent in 2014-15, according to the State Bank of Pakistan. Experts note that investors are beginning to regain interest in Pakistan, but the country remains on troubled waters. Chinese investment for 2015 came in at $229 million, which is three times less than the previous year.

The Pakistani government remains optimistic, but foreign direct investment dropped 58 percent in 2014-15, according to the State Bank of Pakistan. Experts note that investors are beginning to regain interest in Pakistan, but the country remains on troubled waters. Chinese investment for 2015 came in at $229 million, which is three times less than the previous year.

Finance Minister Ishaq Dar stated that Pakistan’s macroeconomic status is stable, but many economists say that Pakistan is a long way from recovery. On the plus side, LNG imports and lower oil prices are expected to promote economic growth, and progress is being made in the realm of infrastructure, particularly in regards to residential and construction projects. However, analysts point out those projects could soon lead to a housing bubble without the necessary economic growth to bolster the housing sector.

Another downside is that exports fell to a four-year low, according to Pakistan Bureau of Statistics, and Pakistan imports than it exports. Further, authorities have been struggling to maintain steady power supplies, causing the economy to expand at a meager rate in the past few years. Regardless of the gains, Pakistan finds itself struggling to maintain economic momentum, and more investors have noticed the lack of reforms.

Certain problems in Pakistan lie far beyond economics. For instance, much of Pakistan is torn between regional and sectarian rivalries, preventing the nation from pulling resources together and forming economic cohesion. Many citizens are also distrustful of institutions in Pakistan, as corruption continues to be a systemic issue. Alienation, combined with wealth inequality and lack of opportunities, are all breeding grounds for religious extremism that continues to plague Pakistan. The unstable situation causes investors to lose faith in the government, and other markets appear to be more lucrative for foreign investment, especially emerging markets in Asia and Africa.

India is one of Pakistan’s largest competitors, and Pakistani authorities will have to be more vigilant in improving the lives of everyday citizens to not only compete with its more powerful neighbor but to attract the attention of more investors. Infrastructure will need to be addressed, and there are too many poor Pakistanis without jobs or a stable income source. Pakistan has also faced pressure from the International Monetary Fund to reform the tax code. The IMF suggested delegating tax duties to provinces, but with certain regions fractured and divided, implementing such a plan would be a difficult task, especially in the face of rampant corruption. Pakistan is making progress, but no significant economic improvements can be achieved until more reform efforts are in place.