In his opening remarks, Vice President World Bank Hartwig Schafer at the launch of a World Bank Report in the past titled “Pakistan @ 100 Shaping the future: investing in people”, he said that Pakistan’s economy has the potential to grow at 8 percent. “However, Pakistan’s economy will remain like business as usual even in 2047 unless structural reforms are introduced and implemented effectively. Over seventy years have passed since independence, but bureaucratic styles have not changed”. Age old colonial systems and procedures prevail. Bangladesh, on independence changed and simplified hundreds and thousands of procedures and their bureaucratic system. Their economic growth rate thus is higher than ours and exports are much more due to drastic changes in their public sector systems and reforms. Pakistan is currently a debt ridden country depending on foreign loans which is currently 85.6 billion dollars by June 30, 2021 and is likely to go up if product economic policies are not effectually planned and implemented in real terms.
The foreign remittances have also started falling due to various factors, which needs to be analysed. Infact special efforts are required to be made with foreign friendly countries to enhance export of skilled manpower.
The Modus Operandi
It is highly imperative that Pakistan gets rid of highly debt ridden economy and formalises realistic national economy revival policies. Competent national experts group is needed to formulate new policies and effective implementation plans aimed at real economic growth policies. Pakistan has tremendous resources to build a strong economy. Fertile agricultural lands, hardworking manpower especially the youth, good industrial resources can be utilized with realistic planning and implementation policies and can render Pakistan out of debt ridden crises.
Crisis Management is a special skill duly needed to successfully tackle the prevailing economic situation to get out of the debt traps gripping the nation. Peter Drucker, a global top management expert prescribes a four pillar formula – PDCA cycle to tackle such critical challenges leading to effective solutions. Accordingly, P stands for Planning, D means to do or implement, C says checking the same and A is to check actions for removingflaws in compliance on the ground. It is highly imperative for the government team to follow this international guideline and arrest decline in real national growth strategies.
Infact the current national growth is negative in real terms and needs to be reviewed drastically to achieve real growth of national economy in terms of quantities of production through enhancing national wealth in measurable terms. The coronavirus and Dengue waves have driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said in the following words sometimes back. “It is clear that we have entered a recession” that will be worse following the global financial crisis gripping many countries, she said in an online press briefing sometimes back.
Let us see what is real economic growth as distinct from nominal growth.
The real economic growth, or real GDP growth rate, measures economic growth as it relates to the gross domestic product (GDP) from one period to another, adjusted for inflation, and expressed in real terms as opposed to nominal terms. The real economic growth rate is expressed as a percentage that shows the rate of change in a country’s GDP, typically, from one year to the next. Another economic growth measure is the gross national product (GNP), which is sometimes preferred if a nation’s economy is substantially dependent on foreign earnings.
• The real economic growth rate considers inflation in its measurement of economic growth, unlike the nominal GDP growth rate.
• The real economic growth rate avoids the distortion caused by periods of extreme inflation or deflation.
• The real economic growth rate is used by policymakers to determine growth over time and to compare the growth rates of similar economies with different rates of inflation.
The real GDP growth rate is a more useful measure than the nominal GDP growth rate because it considers the effect of inflation on economic data. The real economic growth rate is a “constant dollar” figure and, therefore, avoids the distortion from periods of extreme inflation or deflation and is a more consistent measure. Nominal gross domestic product is gross domestic product (GDP) evaluated at current market prices. GDP is the monetary value of all the goods and services produced in a country. Nominal differs from real GDP in that it includes changes in prices due to inflation, which reflects the rate of price increases in an economy.
• Nominal GDP is an assessment of economic production in an economy but includes the current prices of goods and services in its calculation.
• GDP is typically measured as the monetary value of goods and services produced.
Since nominal GDP doesn’t remove the pace of rising prices when comparing one period to another, it can inflate the growth figure.
Likewise, if we were comparing the GDP growth between two periods, the nominal GDP growth might overstate the growth if inflation is present. Economists use the prices of goods from a base year to act as a reference point when comparing GDP from one year to another. The difference in prices from the base year to the current year is called the GDP price deflator.
To arrest decline in our national economy get out of a debt ridden economic situation, it is highly imperative to pursue real growth policies and enforce effective implementation plans.
— The writer is the
Committee Lahore Chamber of Commerce & Industry and also the former adviser Federal Inspection Commission Govt of Pakistan.
Leave a Reply