Growth with China
Pakistan stands at a critical juncture; an economy facing daunting challenges and promising opportunities which will likely chart its course for the next few years. The International Monetary Fund (IMF) has forecast a 3.5% growth in Pakistan’s economy for the fiscal year of 2024-25, indicating tentative revival despite the continuing economic instability within its financial framework. Instead, it hinges on whether the country can fix ailing energy problems at home and use key alliances abroad — such as with China — to shore up its economy. Growth with China
Forecasts of Economic Growth, Role by the IMF
The 3.5% growth rate for Pakistan’s economy in FY2025 — as estimated by the IMF — is still better than nothing, amid all this uncertainty. Latest forecast is also conjunct with an important Pakistan-IMF deal to help stabilize country’s prevailing macroeconomic situation. The plan envisages a multifaceted regime comprising fiscal and monetary disciplines, in order to contain the spiralling inflation, narrow down gigantic fiscal deficits (2.7 trillion or $21 billion) as well as provide relief for restoring investors’ demand-confidence back into Pakistan’s economy arena. Growth with China
But while this growth is projected to be strong, it does not come without its difficulties. Internal and external factors including high inflation, depreciating shield and the debt crisis has already battered Pakistan’s economy. Its fiscal situation is still fragile, and a high percentage of the budget goes for debt servicing. All of it just leaves very little fiscal space for public investment in infrastructure, education and health which are important elements underpinning long-term sustainable growth. Growth with China
Indeed, the IMF’s forecast for growth is based on successful implementation of structural reform,s including in revenue collection and public-sector efficiencies. Broadening the tax base, tackling evasion and simplifying public expenditure will be key to these growth targets being achieved. Nevertheless, these reforms are sensitive to politics and could be clog by opposition from parties which were then fundamental in the helm. Growth with China
Energy Crisis and Export Challenges
One of the most pressing issues undermining Pakistan’s economic potential is the ongoing energy crisis. The country has long struggled with chronic power shortages, circular debt, and an inefficient energy mix that has hampered industrial productivity and export growth. The energy sector’s inefficiencies are a significant drag on the economy, contributing to the high cost of doing business and making Pakistani products less competitive in international markets. Growth with China
Pakistan’s export sector, which is heavily reliant on textiles, suffers from a lack of diversification and value addition. The overconcentration of exports in low-value-added goods makes the economy vulnerable to external shocks and limits job creation. Additionally, the country’s export competitiveness is eroded by a complex regulatory environment, inefficient infrastructure, and high production costs exacerbated by the energy crisis. Growth with China
The biggest problem in the energy sector is the circular debt crisis, which has gone off scale and become unmanageable. In this type of issue the term use is called circular debt means that unpaid debts accumulate, because the government compensates less than a fuel costs to producers who pass on burden ahead into distribution companies that do not pay for power generation. This vicious circle results in low investment into the energy sector, recurrent power failures and high electricity prices. Growth with China
In order to solve the aforementioned problems, it is crucial that a holistic transformation of the energy sector be carried out. This involves, among other things: Renegotiating the power purchase agreements (PPAs) with independent power producers (IPPs), repositioning energy supply chain to enhance efficiency as well as investing in renewable energy. In addition, the government should address institutionalised thefts of gas-to-power; and lower technical losses (transmission/distribution) to enhance performance from the sub-sector. Growth with China
In addition, a comprehensive export promotion policy focusing on diversification or core carrying value added exports and enabling business environment have to be put in place. This policy will need to be aimed at diversification through expansion into new markets with more high-value products and also improved access to finance for firms exporting. Further, the spending on education and vocational training ought to see an enhancement as such measures will be necessary for improving human capital which in turn is one of most basic prerequisites for a modern market driven economy. Growth with China
China-Pakistan Economic Relations: A Strategic Partnership
As Pakistan faces its economic predicaments, the country’s strategic cooperation with China has been positioned as a lynchpin of its future. China has reaffirmed its support to Pakistan’s economic prosperity and development by investing in various projects under the China-Pakistan Strategic Partnership. A part of the multi-billion-dollar initiative by China that is one of the many projects under its ambitious Belt and Road Initiative (BRI) to link connectivity between both countries. Growth with China
CPEC — Chinese President Xi’s higher education from Pakistan, is being labeled as a game changer for the cash-strapped South Asian country with infrastructure deficits. The project provides for investments in the energy, transportation and industrial areas that could address the power crisis, reduce costs of transportation and raise productivity levels in industry. Furthermore, generation of up to 70000 jobs with completion on CPEC projects, development and one belt road will promote economic activity in remote areas also export potential of Pakistani commodities are expected to increase by improving it connectivity ti global markets. Growth with China
Nevertheless, numerous caveats have been pointed out in setting conditions for the success of CPEC such as effective execution and sequencing of projects by using two-step jump markets at The Belt Road Series here, settling security issues or sustainability of borrowing linked with these projects. Opposition parties and independent analysts have warned that increasing debt through CPEC would push Pakistan deeper in to the ‘debt trap’ with every passing day. To avoid these risks, Pakistan should make sure that CPEC projects are profitable and the benefits will be evenly distributed among all regions of the country. Growth with China
In addition, Pakistan should utilize its China relationship by exploring new economic links and reducing reliance on age old markets. It ranges from a renewed search for trade, investment and technology opportunities that push startups to innovate at home – spreading the benefits of earlier growth throughout society. Besides, it will also be important to reinforce the institutional framework in order to handle properly this bilateral relationship and fully take advantage of all benefits inherent from what needs being structured as a strategic partnership. Growth with China
Conclusion
The economic future of Pakistan is currently at a critical juncture and that there are significant problems as wellas opportunities which cannot be address only in piecemeal or myopic way. IMF is providing a more hopeful projection for FY2025 with the project growth at 3.5% but this can be achieved if structural reforms are conducted properly and issues in the energy sector solved on permanent basis. Growth with China
Addressing the energy crisis and diversifying exports are essential for boosting industrial productivity and enhancing export competitiveness. At the same time, Pakistan must strategically leverage its partnership with China to build a more resilient and diversified economy. This will require a comprehensive approach that includes policy reforms, investments in infrastructure and human capital, and the strengthening of institutional frameworks. Growth with China
Ultimately, Pakistan’s ability to navigate these challenges and seize the opportunities presented by its strategic partnerships will determine its economic trajectory in the coming years. The road ahead is fraught with challenges, but with the right policies and a commitment to reform, Pakistan can achieve sustainable growth and improve the living standards of its people. Growth with China
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