What is the role does the Rule of Law play in promoting a stable economy? Why...

What is the role does the Rule of Law play in promoting a stable economy? Why is this important when considering Pakistan’s economy?

Expert Solution

Rule of law means governance and exercise of power on the basis of clearly established laws and not arbitrary rules. When there is a rule of law, businesses know their rights and responsibilities. Also, it ensures a stable legal environment which encourages firms to make investments. Political and legal risks increase in the absence of a rule of law.

Rule of law is very important in Pakistan to achieve economic growth. Pakistan has a bad reputation in the international market for its political instability, arbitrary government actions, corruption, etc. If it wants to attract investment in the country, it needs to ensure that there is rule of law and firms are protected against certain risks. In order to assure investors that their investments are safe, Pakistan has to strengthen its rule of law to project a better image as a business destination.

Rahul Sunny answered 2 years ago

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