What are the roots of the economic problems in Pakistan?

Expert Solution

Pakistan is a resource-rich country with vast potential in beverage and tobacco, minerals, food and live animals etc. But it has never really realized its full potential due tot he following problems:

(1) Corruption: Pakistan has performed poorly in various corruption indexes. There are constant reports fo the top leaders of the country engaging in corrupt practices and it boils down to the poor quality institutional set up in Pakistan post-independence in 1947.

(2) Unemployment: Pakistan boasts of a massive youth population - one of the largest in the world. But the demographic boon becomes a bane when half of them are unemployed, as in Pakistan. The rate fo job creation is way lower than the what is required and this in turn lowers aggregate demand.

(3) Education: Pakistan has one of the lowest rates of education amongst the Sout Asian countries. education is key in building a strong human capital and adding to productivity. Unfortunately, schools in Pakistan alck even the basic facilities like sanitation and electricity.

(4) Constant terrorism: This is the most important reason why international investors think twice before investing in Pakistan. Terrorism has tarnished Pakistan's global reputation while at the same time costing them a lot fo money to control it.

(5) Inequality: Approximately 40% of Pakistan's population is below the poverty line while the top 5-10% enjoy a standard of living that is comparable to rich in any western country. This lowers the aggregate purchasing power as rich have a lower MPC and the economic output contracts.

(6) Lack of stable and good governance with strong cooordination of fiscal and monetary policy.

Rahul Sunny answered 2 years ago

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