Tackling Pakistan’s pathetic economy: Is Imran Khan up to the task?
“An IMF team will visit Islamabad in the coming weeks to initiate discussions for a possible IMF-supported economic program,” IMF Managing Director Christine Lagarde said on Thursday.
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The South Asian nation, home to over 200 million people, is beset by a range of financial and structural challenges. Pakistan has long imported more than it exported. The result is a surging current account deficit — now estimated at over 5 percent of gross domestic product (GDP) — and a looming balance-of-payments crisis.
For decades, Pakistan’s real per capita income growth has underperformed many of its peers. Corruption and tax evasion remain rampant, resulting in reduced revenue for the state. Less than 1 percent of Pakistanis, for instance, pay income tax.
State resources are also often squandered. Defense spending takes a higher priority than allocating resources for more productive purposes like education and healthcare. That’s a consequence of the Pakistani military’s obsession with maintaining a military, political and diplomatic competition with neighboring India.
Furthermore, Pakistan faces a chronic energy crisis, resulting in regular power outages across the country. The economy is highly vulnerable to shifts in global crude prices, as 80 percent of its oil needs are met through imports. The recent rise in oil prices has aggravated the nation’s already fragile financial situation.