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Pakistan's Economy Nears Bankruptcy as Inequality Soars, Says Report

A Pakistani media report warns the country's economy is in dire straits with the federal government nearing bankruptcy. It highlights a critically narrow tax base where provinces collect minimal revenue compared to potential. Inefficiencies in the energy sector are crippling export competitiveness by driving up costs. The article calls for export-led growth, provincial burden-sharing, and a drastic overhaul of governance and public service delivery.

Key Points: Pakistan Economy in Dire Straits, Nears Bankruptcy

  • Federal government near bankruptcy
  • Inefficient energy sector hurts exports
  • Tax base narrow, collection minimal
  • Provincial fiscal prudence needed
2 min read

'Pakistan economy in dire straits'

Pakistan's economy faces bankruptcy with rising poverty, a narrow tax base, and crippling energy sector inefficiencies, a media report warns.

"The federal government is close to bankruptcy and requires burden-sharing from the provinces. - Business Recorder article"

New Delhi, Feb 24

Pakistan's economy is in dire straits as inequality and poverty are rising, while the Federal government is close to bankruptcy, according to an article in the Pakistani media.

The article in the Karachi-based Business Recorder pitches for export-led growth as the way ahead to uplift the masses by creating economic opportunities, along with a drastic overhaul of governance in public service delivery, especially in education.

It notes that political parties refuse to devolve power to the third tier of government, and there is little incentive to broaden taxation within municipal and provincial domains. Instead, the burden falls on the federal government, which taxes formal income heavily. At the same time, inefficiencies in the energy sector leading to high power bills are hitting the competitiveness of the country's exporters, the article pointed out.

Tax collection on land is minimal-Punjab collects less in property-related taxes than a single major city in India. Agriculture income tax and sales tax on services remain far below potential, while manufacturing is burdened by high taxation and expensive energy, the article observed.

The federal government is close to bankruptcy and requires burden-sharing from the provinces. The tax base must be broadened by bringing all stakeholders into the net. Municipalities should be empowered to collect taxes and provide amenities to make cities more livable, the article stated.

At the same time, the federal government must reduce its footprint in the energy sector. The sector's debt burden should be shared with the provinces. State-owned enterprises must be cleaned up and privatised, as has been attempted in the case of the national airline, PIA. The government must reduce its overall size. Greater fiscal prudence is especially needed at the provincial level, where new inductions into public employment are rampant. This trend must stop, the article observed.

The article blamed inconsistent government policies as major obstacles to investment, which have shrunk to an all-time low. Foreign direct investment has nearly dried up, and there is little sign of new local investment in export-oriented sectors.

- IANS

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Reader Comments

P
Priyanka N
It's sad to see a neighbor struggle like this. The common man always suffers the most in these situations. The point about Punjab collecting less property tax than a single Indian city is shocking. Their elite need to start paying their fair share.
A
Aman W
While the economic troubles are evident, we must remember this impacts real families. The focus should be on creating stability in the region. A stable Pakistan is better for trade and peace. Hope they implement these reforms. 🤝
S
Sarah B
The article makes valid points about export-led growth and privatisation. However, the political will seems missing. The comparison with Indian cities is a wake-up call about the potential of local governance.
V
Vikram M
High energy costs killing manufacturing, a tiny tax base, and a bloated government... sounds familiar? We had similar challenges. The solution lies in tough political decisions, not in blaming others. Their media is at least calling for internal reform, which is a start.
K
Kiran H
As an Indian, I feel we should view this with empathy, not schadenfreude. Millions are suffering. The proposed solutions—empowering municipalities, broadening tax net, fiscal prudence—are universal good governance principles. Hope they find stability soon.

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