Inclusive Growth in Times of Uncertainty - DEVELOPMENT ADVOCATE VOLUME 9 / ISSUE 2 | JUNE 2022
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DEVELOPMENT ADVOCATE VOLUME 9 / ISSUE 2 | JUNE 2022 Inclusive Growth in Times of Uncertainty
Disclaimer
The views expressed here by external contributors or the members of the
editorial board do not necessarily reflect the official views of the
organizations they work for and that of UNDP’s.
Development Advocate Pakistan provides a platform for the exchange of ideas on key development issues and challenges in
Pakistan. Focusing on a specific development theme in each edition, this quarterly publication fosters public discourse and
presents varying perspectives from civil society, academia, government and development partners. The publication makes an
explicit effort to include the voices of women and youth in the ongoing discourse. A combination of analysis and public opinion
articles promote and inform debate on development ideas while presenting up-to-date information.
CONTENTS
EDITORIAL THOUGHT PIECES
Changing Gears on Economic Policy 1 Womenomics: Powering the Economy 67
By Knut Ostby By DAP Team
MAIN ANALYSIS Digital Investments for Growth 73
By Jehan Ara
The Economic Journey: Muddling Through
By Ali Khizar
3 Anchoring Impact Investing for Economic Value 77
By Shehryar Hydri
LEADERSHIP PERSPECTIVE The Future is Fintech 81
By Ariba Shahid
Leaving No Stone Unturned:
Towards Sustainable and Inclusive Growth
7
By Miftah Ismail Deconstructing Data: Pakistan After COVID-19 83
Federal Minister for Finance and Revenue By Maha Rehman
INFOGRAPHICS Renewable Energy, Renewed Growth 87
By Vaqar Ahmed & Ubaid ur Rehman Zia
Pakistan Fact Sheet 9 Financing Climate Action in Pakistan 91
Federal Budget 2022-2023 13 By Kirthisri Rajatha Wijeweera & Kamal Ali
Alternate Financial Instruments 94 Beyond Borders: 95
The Economics of Regional Connectivity
DEFINING VISIONS By Saddam Hussein
Reducing Deficits through Structural Reform 19 The Hidden Gem: Leveraging Coastal Communities 99
By Dr. Hafiz A. Pasha By Naufil Shahrukh
A Shared Growth Model for Pakistan
By Dr. Ishrat Hussain
21 A Second Wind: Harnessing the Informal Economy 103
By Dr. Lalarukh Ejaz
Editorial Board A Roadmap for Inclusive Growth 25
Mr. Knut Ostby United Nations Development By Dr. Aisha Ghaus Pasha Catalysts for Change:
Spurring Informal Settlements
107
Resident Representative, UNDP Pakistan Programme Pakistan The Long Haul: Employment for All
By Dr. Pervez Tahir
27 By Hina Shaikh
Ms. Aliona Niculita
4th Floor, Serena Business Complex,
Deputy Resident Representative, UNDP Pakistan
Khayaban-e-Suharwardy, Sector G-5/1, Beyond Wishful Thinking: Building Back Better 29
Shrinking the Gap: Empowering the Second-Tier 113
Ms. Ammara Durrani P. O. Box 1051, By Dr. Sania Nishtar By Dr. Durre Nayab
Assistant Resident Representative Islamabad, Pakistan
Development Policy Unit, UNDP Pakistan Investing in Future-Ready Human Capital
By Dr. Abid Suleri
31 A Potential Powerhouse: Exploring South Punjab 117
Mr. Amir Goraya For contributions and feedback, please By Shah Muhammad Azhar
write to us at:
Assistant Resident Representative
pak.communications@undp.org
Slumps and Growth: 35
Crisis Prevention and Recovery Unit, UNDP Pakistan Addressing Economic Ambiguity The Political Economy of Minorities in Pakistan 119
By Safiya Aftab By Mary James Gill & Asif Aqeel
Mr. Kaiser Ishaque
Assistant Resident Representative Printed By:
Democratic Governance Unit, UNDP Pakistan King Faisal Multi Signs Services, Islamabad THOUGHT PIECES Levers of Economic Prosperity:
The Case of Transgenders
123
Mr. Amanullah Khan By Dr. Kanwal Zahra
Assistant Resident Representative
The Uncertain Future: A World in Crises 37
By Aarathi Krishnan
Environment and Climate Change Unit, UNDP Pakistan
Ms. Ayesha Babar Stability, Inclusion and Human 41 INNOVATION LENS
Communications Analyst Development: The Asia-Pacific Scenario
Head of Communications Unit, UNDP Pakistan By Mizuho Okimoto-Kaewtathip Rethinking Economics: 55
Provocations from Leading Economists
‘Future Thinking’ Pakistan’s SDG Investments 45 By Beenisch Tahir
Editorial Team www.facebook.com/undppakistan By Haroon Sharif
Maheen Hassan, Editor and Technical Content Analyst Democratizing Lending in Pakistan 49 DATA TRENDS
Momina Sohail, Communications Officer www.twitter.com/undp_pakistan By Dr. Asim Khwaja
Sana Ehsan, Financing for Development Analyst Nudging for Development 59 UNDP Policy Analysis on
Sri Lanka’s Economic Urgency
40
www.pk.undp.org By Dr. Fadi Makki
Meeran Jamal, Gender and Social Protection Analyst
Umer Malik, Policy Analyst Agents of Tomorrow: Investing in a Young Future 63
UN and Cambridge University:
Redefining the Equation for Inclusive
58
www.instagram.com/undp_pakistan
Hasnat Ahmed, Graphic Designer By Dr. Faisal Bari Economic Growth
ii
EDITORIAL
Changing Gears on
Economic Policy
Innovations in economic foresight point towards a
fundamental emerging need to align economic growth with
diversified development outcomes. With other vital
components impacting economic progress, it is time to look
billion, rising from 57.9 percent of the economic gaps, and promoting decent optimise the quality and structure of its
beyond GDP and reposition Pakistan’s economic model. GDP in 2013, to 74 percent of the GDP in work and gender equality, as essential economic stabilisation and growth
2021. It is experiencing soaring inflation levers to mitigate effects of inequality in policies, if it aims to be one of the top ten
(increased to 13.8 percent in May 2022 promoting sustainable development. economies of the world by 2047. It
from 12.7 percent in March 2022, the Broadening the tax-net, rationalizing needs to move towards investment-
highest in the last two years). The government expenditure, and increas- based export-led growth powered by
While a series of setbacks have affected development spending. As UNDP’s country is also facing a stubborn twin ing productivity to boost exports and renewable energy. Such growth needs
the progress on global sustainable recent policy analyses show, Sri Lanka’s burden of Current Account Deficit (USD curtail non-essential imports are viable to be supplanted by a high productivity
development during 2021-2022 – prolonged external borrowing, a 13.2 billion for FY2022 as compared to alternates to address the burgeoning services sector and a flourishing
pandemic and lockdowns, debt crises, deteriorating social sector, rising USD 543 million in FY2021), and fiscal debt crises. agriculture sector, that may help import
inflation, food insecurity and conflict – inflation, and indefinite negotiations with deficit is forecasted to increase to 6.3 substitution of essential food items.
there have also been gains in health, the IMF brought the country to the state percent of the GDP in FY22. Additionally, Leveraging alternative financing
climate change, technology, and energy, of economic default. With its gross Pakistan faces a trade imbalance, with mechanisms, including private sector This would only be possible through
among other areas. For instance, foreign exchange reserves only enough the trade deficit (July-April FY2022) investments in SDGs-aligned develop- investments in human capital and
several countries’ handling of the to procure less than 1.5 months of reaching USD 32.9 billion as compared ment projects and climate financing aligning the national economic policies
pandemic has produced significant imports, and a massive debt and fiscal to USD 22.0 billion in FY2021, and instruments such as green bonds, can to the globally accredited Financing for
health breakthroughs in vaccine crisis characterised by a unique twin depleting foreign exchange reserves help to decrease reliance on external Development paradigm. Fully utilising
development and revolutionised the challenge of illiquidity and insolvency, resulting in currency devaluation. The borrowing and avoid the current youth potential, positioning women as
world into a more tech savvy space. Sri Lanka needs an extensive systematic national tax base remains very narrow, account deficit. Provision of incentives power-agents of economic growth and
Today, one of the biggest challenges for rollout focused on mitigating the resulting in a low tax-to-GDP ratio: in to the private sector, with allowance for prosperity, and channelling marginal-
policy and thought leaders is to downward economic spiral as quickly as FY2022 (Budget estimate) taxes formed the sector to manage supply in major ised segments of society into sustain-
configure innovative ways for manag- possible. Meanwhile, moderating its only 12 percent of the GDP, depicting the industries, such as electricity, and able and community-driven social safety
ing/overcoming multiple challenges human development impacts is also huge revenue gap that is required to encouraging local investments from nets, can reduce burdens on the state
while also leveraging the many critical. Similarly, UNDP’s research on meet public expenditures. individual small-time investors is crucial and accrue overall benefits for the
opportunities they offer. Afghanistan shows that the ongoing to creating a sustainable investment economy.
humanitarian and economic emergency For developing countries like Pakistan, model. Leveraging climate financing
The domino effects of the pandemic and in the country is located in deep political stability combined with good instruments and tapping green and blue Innovations in global economic
its concurrence with the ongoing conflict structural and policy imbalances, that governance and a dynamic strategy for economies through employment and foresight point towards a fundamental
By in Ukraine have created a looming need to be corrected to preserve the managing sovereign debt and public expanding their product base, can be emerging need to align economic
global economic crisis, upending the gains made in the last two decades. An finance with support from development core pillars of a sustainable economy. growth with diversified development
Aliona Niculita world order as we have known it. The estimated 97 percent of Afghans could partners, is the minimalist formula outcomes. For decades, GDP has been
pandemic deepened the cracks of be living in poverty by mid-2022, and required to overcome these financial Pakistan offers multi-billion-dollar viewed as the sole indicator of economic
Resident Representative a.i. inequality, leading several countries with commodities pricing skyrocketing and economic challenges. There is a investment opportunities in transport growth. However, now with other vital
UNDP Pakistan down the treacherous path of borrowing globally, sustaining even basic needs dire need for home-grown solutions that and logistics, renewables and alterna- components such as environment,
to salvage economic solvency. The such as food, healthcare, and education, are centred around the principle of tive energy, healthcare, education, social sector dynamics and inclusion
global scenario appears bleak, with have become an everyday battle for sustainability and self-sufficiency. technology, and communication. The directly or indirectly impacting eco-
even developed countries now reeling locals/people of Afghanistan. country has implemented key reforms to nomic progress, it is time to reimagine
from its after-effects. UNDP's Pakistan National Human improve ease of doing business, and reposition Pakistan’s economic
Pakistan is currently facing similar Development Report 2020 on the encouraged public-private partnerships, model. This is where the transition to
In the Asia-Pacific for example, countries economic challenges. While it wit- ‘Three P’s of Inequality: Power, People, and hails a market size of roughly 220 robust economies centred on Financing
like Sri Lanka, Afghanistan and Pakistan nessed a growth of 5.97 percent in and Policy’ establishes the need for million people. for Development comes into motion,
are facing a grave ‘debt distress’ and FY2022 – the second highest in the last increasing outlays on human develop- and where social impact-led invest-
forced to make difficult decisions of 14 years – it is currently faced with a debt ment and social protection, creating With the Agenda 2030 clock ticking, ments can power economic growth.
budget cuts on critically needed excess of approximately USD 250 policies and reforms to bridge socio- Pakistan is faced with an urgency to
1 2
MAIN ANALYSIS
The Economic Journey:
Muddling Through
Pakistan has been experiencing an economic downfall
post the 1980s. With the average growth rate starting to
decline continuously, the balance of payment crisis has been
frequent; and today, the country is on the verge of a default-
like situation for the second time in three decades.
© Tribune
When Pakistan came into being in 1947, it did not have any
manufacturing base and had to import most food.
Nevertheless, the country progressed significantly in the first
four decades, with an average GDP growth rate of 5.2 percent.
The industrial base developed in the 1960s, and two major
dams were built simultaneously. The nationalization spree in
the 1970s regressed industrial development, but growth
momentum peaked in the 1980s with an average GDP growth
rate of 6.4 percent. Ever since then, there has been an
economic downfall. With the average growth rate starting to
decline continuously, the balance of payment crisis has been
frequent; and today, the country is on the verge of a default-like
situation for the second time in three decades.
The country progressed on the external money flowing to
support the consumption needs of a growing population, while
its export base could never lift off. Earlier, it was geopolitical
rent in the shape of aid and development loans that fueled
growth. And in the last two decades, remittances became the
prime financier of the growing import demand. In both cases,
foreign capital is being deployed in consumption and unpro-
ductive assets (like real estate), while economic productivity
did not grow in tandem. As a result, with the growing popula-
By tion and demand in absolute terms, the balance of payment
crisis has frequented, and the constrained growth levels have
While the current economic model requires revisiting, Ali Khizar come down to below four percent.
the country has seen similar debt levels and deficits in Journalist and Economist Financially empowering the fiscal federating units in the last
decade (after the 18th amendment and 7th NFC award) has
the past - and successfully emerged out of those crises. further weakened the federal fiscal position, which has
resulted in the higher accumulation of debt. The responsibili-
Leveraging the youth bulge, making space for the ties of energy and other subsidies, support of marginalized
private sector, and focusing on governance, regulation, populations (through Ehsaas/BISP), defence, and debt
servicing rely solely on the federal government. At the same
and the social sector, are key for future sustainability. time, the provinces get the lion's share of tax revenues without
assuming any responsibility for prudence. Meanwhile, the
political divide amongst provinces has exacerbated the
situation.
© S.Imran Ali/PPI Images
3 4
Growing debt and its servicing is a huge challenge.
The overall fiscal structure is unsustainable, where the
federating units have to share the gaps in energy and
food commodities.
in the late 1990s. Change in the geopolitical situation after 9/11 bring the fiscal house to push investors to finance the current
created an opportunity, and the then government's privatiza- account deficit, which is necessary for a sustainable growth
tion and deregulation policies (in telecom and banking sectors) path. In addition, the government should focus on governance,
paid dividends. Today, similar policies are required in the regulation, social sectors (health, education, and environment),
energy and food markets. Then, governance can improve and tax collection. It should also let the private sector run
using technology. markets and lure investment in industries where the country
has a comparative and competitive edge to bring the economy
Pakistan is a vast and diversified market. There is immense back on a sustainable growth track.
potential due to its youth bulge. However, the country needs to
© orissapost.com
Energy is a key challenge: The power sector circular debt
has grown to unmanageable levels in the process, whereas
gas circular debt is building on a similar trajectory, with supply
increasingly being shifted towards the imported RLNG.
This is the stock of the situation at a broad level. The country where the supply is increasingly being shifted towards the
has digressed towards an unsustainable economic path for the imported Re-Gasified Liquefied Natural Gas (RLNG), while
past thirty-five years. First, there is a case of institutional decay buyers are not willing to pay the premium.
and nepotism that has derailed economic and social gover-
nance. Then, the government's footprint has increased in food Another circular debt brewing is that of wheat. Again, the
and energy markets, which has created circular debts in both government is in the business of setting prices and procure-
markets. Two out of the three recent balance of payment crises ment. With demand growing amid stagnating production, the
have been worsened by the respective federal government not indigenous supply is insufficient to feed. The gap between the
passing on the increase in the international petroleum prices to cost and sale is leading to another circular debt.
the consumers. In reality, the politics of petroleum prices have
accelerated the crises - evident in what happened in 2008, and The problem today is the growing debt (both above and below
now in 2022. the line), and its servicing. The overall fiscal structure is
unsustainable, where the federating units have to share the
In the power sector, the government is the sole buyer and seller gaps in energy and food commodities.
of grid electricity. The structure of Independent Power
Producers (IPPs) is lopsided with guaranteed returns for The federal and provincial governments should move away
investors, while the risk of pricing and demand is being shifted from setting prices in energy and food markets. It will provide
to the government. Had the government not been the sole space for private sector companies to come in, and overall
buyer of electricity, it could have moved the risk towards the economic competitiveness can improve with private efficien-
IPPs. However, that never happened. Since the government cies.
could not pay the IPPs on time due to growing gaps in costs and
revenues, the risk of IPPs kept on increasing, and the return on Today, the economic fundamentals are weak, and the current
IPPs increased with every successive power policy. The power model is not sustainable. However, the country has seen similar
sector circular debt has grown to unmanageable levels in the debt levels and deficits in the past - and has come out of these
process. The story of gas circular debt is building similarly crises too. Today's situation is not much different from what was © edcogroup
5 6
LEADERSHIP
PERSPECTIVE
Leaving No Stone Unturned:
Towards Sustainable
and Inclusive Growth
Serious challenges of current account deficit, depleting
foreign exchange reserves, massive devaluation, and high
inflation require immediate short- and long-term
interventions.
Pakistan has a thriving and resilient Given the structural issues faced by
economy. Over the past several years, it Pakistan’s economy, there is no single
encountered several challenges, of policy reform or easy solution that could
which terrorism was a major one. This help transform the country into The present government is focusing on a new economic
severely deteriorated the economic,
social, and political fabric of the country.
economically stable and prosperous in
the short term. Pakistan’s economy model based on structural reforms, improving the investment
Such consistent large-scale losses
require years to recover and achieve
needs both short as well as long term
measures for proactively tackling the
climate, and financial inclusion, through collaboration with
sustained growth. While Pakistan’s
economy was on the path to recovery,
current economic impediments. Some
of the major areas in which policy
Micro-Finance Institutions, for achieving inclusive and
COVID-19 struck and adversely affected
the economic stability of the country.
interventions are required include
structural reforms, improving the
sustainable economic growth.
Nonetheless, Pakistan’s economy has investment climate, and facilitating
improved significantly at the macro level universal financial inclusion.
due to well-coordinated fiscal and
inclusion of the informal economy, and more focus on the indirect taxation, simplification of the tax management system,
monetary policies, and the resilience of There are a number of structural issues
digital economy. Post-pandemic era calls for prioritizing the and broadening of tax base through use of technology, for
the people of Pakistan. However, there in the economy of Pakistan that slow
digital economy to aid sustainable growth in the modern world. undertaking inclusive economic growth.
is always room for improvement, down the overall growth rate. Reforms
The digital economy has the ability to significantly reduce
especially when a country is faced with are required in different segments of the
transaction cost by facilitating remote work that will not only Financial inclusion is essential for strengthening financial
serious challenges of current account economy including the export sector,
improve efficiency and productivity, but will also reduce the institutions, efficient allocation of capital, improved access to
deficit, depleting foreign exchange regulatory environment, privatization
demand of fuel to a significant extent. Furthermore, a credit, and sound risk management. The overall goal of
reserves, massive devaluation, and high and de-regularization of State-Owned
By technology based local network of agriculture producers and financial inclusion is to ensure inclusive economic growth, and
inflation. Enterprises (SOEs), tax administration,
agriculture markets with the objective of reducing the improving the incomes and livelihood opportunities for the
‘information asymmetry’, and for doing away with ‘middle-men’, lower strata of the country. Through social empowerment,
Miftah Ismail Priority Areas
is also imperative. On the whole, such reforms would inculcate financial inclusion has the strength to enhance gender-
improvement in human resource development, innovation, inclusive economic empowerment. Lack of access to financial
Federal Minister for employment rate, foreign direct investment, and growth of the facilities also cultivate the tendency of the larger informal
Need for structural Facilitating financial digital economy. economy, which not only leads to lower tax revenue collection,
Finance and Revenue but also negatively impacts the productivity and transparency
reforms. inclusion.
Pakistan is dealing with the challenge of high debt. Improving of economic growth.
the investment climate through reform policies is necessary.
Fiscal management reforms will ensure generation of higher Therefore, the present government is focusing on a new
Improving the Prioritizing the tax revenues leading to an increase in tax-to-GDP ratio. Well- economic model based on structural reforms, and improving
investment climate. digital economy. developed taxation infrastructure is necessary for ensuring investment climate and financial inclusion, through
equity, inclusivity, and sustainability. On the same lines, tax collaboration with Micro-Finance Institutions (MFIs), for
reforms should focus on shifting towards direct rather than achieving inclusive and sustainable economic growth.
7 8
INFOGRAPHICS MACROECONOMY BALANCE OF TRADE
GDP at Real GDP Total Exports (BOP)
Current Prices Growth Rate Debt & Liabilities
347.74 (USD in billion)
4% in 53544.3 3154
Pakistan Fact Sheet
in 2022 2022 (PKR in billions) (USD in millions)
Quarter 3-FY22
April 2022
FBR TAX
Fiscal Deficit Collection Annual
4,375.6
This Pakistan Fact Sheet captures the intricacies of the country’s macroeconomic position and highlights the daunting challenges it
faces. These include rising dependence on borrowing; narrow tax base with sluggish revenue generation; surging trade deficit; lack
4% (as a % of GDP)
Julu-March FY2022 (PKR in millions)
Inflation Rate
13.4%
Imports (BOP)
of investment in Pakistan; soaring inflation coupled with high-interest rates and plunging currency; elevated energy prices and
subsidies denting the national exchequer; and rising food insecurity.
Julu-March FY2022
April 2022 6001
Subsidies (USD in millions)
April 2022
459,289 Tax Revenue Forex Reserves
Time Trends and Forecast
(PKR in millions)
2021-22 12 (as a % of GDP)
FY2022 B.E.
17,426.4
(USD in billions)
March 2022 Balance of Trade
(BOP)
Worker
Real GDP growth recovered despite the
pandemic, however another dip is expected in
Despite sluggish growth of exports, the trade
balance remains negative
Current
Account Deficit
Foreign Direct
Investment
Remittances -2,847
near future (Annual % and forecast) 2810.28 (USD in millions)
10
8000
13.2 (USD in billion)
July-March FY2022 2,161.9 (USD in million)
July-March FY2022
March 2022 April 2022
6000
4000
2000
INFLATION (ANNUAL %)
0
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
Food and Housing, Water, Furnishing and
-10 National Non-Alcoholic Electricity, Gas, and Household Equipment Transport
Pakistan South Asia Exports (USD in millions) Imports (USD in millions) Beverages Other Fuels Maintenance
13.8 17 7.1 14.7 28.3
Pakistan is witnessing the highest inflation rate Almost 74% of GDP is financed by general 2% 1% -3% 4% 13%
(annual percent change) government gross debt Annual Compound Growth Annual Compound Growth Annual Compound Growth Annual Compound Growth Annual Compound Growth
(April 2021-April 2022) (April 2021-April 2022) (April 2021-April 2022) (April 2021-April 2022) (April 2021-April 2022)
100
15
80
10 60
40
Major Challenges
5 Although the economy of Pakistan achieved a GDP growth of 5.6 percent in FY2021, the fiscal situation and external sector
20
performance are making it difficult to sustain and are impacting growth outlook. The country faces several challenges:
0
0
2021
2022
2023
2015
2018
2016
2019
2020
2025
2024
2017
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 RISING DEPENDENCE ON BORROWING
Economic Policy Uncertainity Index: Despite improvement in the current account
Pakistan’s rank continues to rise balance (as a percent of GDP), it is expected to
300 decline
2021
2022
2023
2015
2018
2025
2016
2019
2020
2024
2017
0
200
Over the years the main revenue As per recent data, in 2021- As per IMF projections, the
100 -2 generating source, taxes, have 2022 taxes were only 8% country’s current gross
improved only minimally with a of the GDP, depicting the huge financing needs are at least
0 -4 compound annual growth of revenue gap that will be 27.7% of GDP in 2022.
5%, because Pakistan’s tax
1-Nov-21
1-Dec-21
1-Jan-22
1-Feb-22
1-Mar-22
1-Apr-22
required to meet
-6 base continues to be narrow. government expenditures.
9 10
RISING DEPENDENCE ON BORROWING SOARING INFLATION COUPLED WITH HIGH-INTEREST
RATES AND PLUNGING CURRENCY
Government borrowing remains The country’s fiscal deficit
an essential part of the excluding grants is forecasted Along with inflationary
financing mechanism for to increase to 6.3% of GDP in pressures, interest rates have
Pakistan. Total debt and FY22. continued to grow as well.
liabilities have increased over
the years and reached more
than 85% of the GDP in FY21,
reflecting decreased ability of
the country to pay back its Pakistan has continued to grapple Rising food and energy prices are
debts. with rising inflation for months. In likely to decrease the real
January the country’s consumer purchasing power of households,
price index rose to 13 percent, the disproportionately affect poor and
The increasing current account The current account deficit as The CAD has grown from USD - highest ever in the last two years. vulnerable households, and result
deficit (CAD) imperils the economy’s a percentage of GDP is 543 million in FY21 to USD -13,779 in increased poverty and inequality.
sustainability as higher CAD reflects expected to widen sharply in million in FY22 (July-April) which
the increasing dependence of the FY22, going from -0.6% in currently is more than 25 times the
country on debt for financing its 2021 to -5.3%, heightening value of last year, depicting the
expenditures. external sustainability risks. gravity of the situation.
The country faces the highest Pakistan’s currency has shown a
transport inflation followed by continuous downward trend.
While exports and imports have This imbalance was because of
both increased, the imports SURGING higher import growth of 39
inflation in food and non-alcoholic Currently, 1 USD is equivalent to
beverages, health, and education. 200 PKR (June 2022) and is
grew more than exports. TRADE DEFICIT percent as compared to export expected to be devalued further.
Consequently the trade deficit growth of 27.8 percent in FY22
(Jul-Apr FY2022) reached USD (July – April), and the
32.9 billion as compared to USD devaluation of Pakistan’s ELEVATED ENERGY PRICES AND SUBSIDIES DENTING
22.0 billion last year. currency.
THE NATIONAL EXCHEQUER
Given the net international investment outflow Given the lack of trust of investors in Pakistan,
recorded at USD 30.4 million, on account of the KSE 100 decreased by 3172 points or 7.11
political instability, the country is likely to percent since the beginning of 2022, and is
experience more outflow of investment if the likely to fall further given the current political
political instability continues. turmoil.
LACK OF INVESTMENT
IN PAKISTAN
Higher energy, fuel, and transportation Additionally, increased imports and a rise
prices are likely to impact food and other in oil prices are likely to widen the current
commodity prices: account deficit further.
Increase in metal prices have increased
manufacturing costs and end-
consumer products.
Increase in electricity prices have increased
input prices in most industries using
different types of machinery.
Extensive government borrowing from the financial
sector has deterred greater intermediation of
resources to the private sector in Pakistan. References:
1. International Monetary Fund, Pakistan Country Data 2022. Available at https://www.imf.org/en/Countries/PAK#countrydata
2. State Bank of Pakistan, Pakistan’s GDP Data. Available at https://www.sbp.org.pk/ecodata/GDP_table.pdf
3. State Bank of Pakistan, Inflation Monitor 2022. Available at
https://www.sbp.org.pk/publications/Inflation_Monitor/2022/Apr/IM_Apr_2022.pdf
4. State Bank of Pakistan, Foreign Investment by Country Data. Available at https://www.sbp.org.pk/ecodata/Netinflow.pdf
5. State Bank of Pakistan, Domestic Markets & Monetary Management Department: Liquid Foreign Exchange Reserves Data. Available at
RISING https://www.sbp.org.pk/ecodata/forex.pdf
Additionally, given a shortfall of 15 6. State Bank of Pakistan, Pakistan Debt and Liabilities Profile. Available at https://www.sbp.org.pk/ecodata/Profile.pdf
FOOD percent in local wheat yield, 7. State Bank of Pakistan, Pakistan’s Selected Economic Indicators Profile. Available at
Owing to climate change impacts, the
rising food insecurity is likely to raise INSECURITY estimates suggest that Pakistan may
need to import four million tonnes of
https://www.sbp.org.pk/reports/stat_reviews/Bulletin/2022/May/IND.pdf
8. Ministry of Finance, Monthly Economic Update & Outlook 2022. Available at
the demand to import food products
grain to meet the local demand, http://www.finance.gov.pk/economic/economic_update_April_2022.pdf
for meeting the local demand.
raising the import bill to a record high 9. Ministry of Finance, Pakistan: Summary of Consolidated Federal and Provincial Fiscal Operations, 2021-22. Available at
of USD 4 billion during FY23. http://www.finance.gov.pk/fiscal/July_Mar_2021_22.pdf
10. State Bank of Pakistan, Exports, Imports and Balance of Trade Data. Available at https://www.sbp.org.pk/ecodata/exp_import_BOP.pdf
11 12
INFOGRAPHICS Percentage Change in Resources (FY2022-FY2023)
12.0%
-61.9% Total Resources
72.1% Privatization Proceeds
40.4% Bank Borrowing (T-Bills, PIBs, Sukuk)
Federal Budget -57.2%
9.1%
60.8%
Estimated Provincial Surplus
Net External Receipts
Non-Bank Borrowing
2022-2023 Net Revenue Resources
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
Total Expenditures
Snapshot
1172 96
Bank Borrowing Privatisation The
15% Others
(T-Bills, PIBs, Sukuk) Proceeds
1% Majority of
Total Expenditure
is Allocated to 16% Defence Affairs and Services
800 Debt Servicing
12%
9502
Estimated
ANNUAL PKR Provincial Surplus 69% Debt Servicing
BUDGET brillion 8% Total
Resources
FY2022-2023
533
Current Net External
Receipts
6%
9502
Estimated
52% 4904
Net Current Expenditure FY2023
Expenditure Revenue
FY 2022-2023
9 times
Spending Receipts
Enhanced
21%
12%
higher than
development expenditure 1996 General Public Services
as compared to Non-Bank
8 times
Defence Affairs and Services
from last fiscal year Borrowing
in FY2020-2021 (NSSs & Others) Public Order and Safety Affairs
Economic Affairs
Environment Protection
estimated
Total
8694 Housing and Community Amenities
FISCAL Current
Expenditures Health Affairs & Services
DEFICIT
4598
The fiscal deficit is expected to be
financed by increasing multilateral Recreation, Culture and Religion
PKR
1% increase
& bilateral sources, commercial
sources, privatisation proceeds, billion Education Affairs and Services
and net external receipts. from last fiscal year 808 Social Protection
Development
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Highlights Percentage Change in Current Expenditures (FY2022 to FY2023)
45%
Social Protection
-2%
Education Affairs and Services
Dependency Increased 6% Recreation, Culture and Religion
on domestic bank spending will be -31% Health Affairs & Services
borrowing and non-bank supported by a minimal
borrowing is expected to Enhanced -77% Housing and Community Amenities
increase by 9% increase in net
revenue receipts expenditure is expected 72% Environment Protection
to be majorly financed by
72.1% & 60.8% as compared to the increase in domestic
20% Economic Affairs
Public Order and Safety Affairs
respectively, as compared to
a decline of 23% and 11%,
22% increase bank borrowing and non- 17%
bank borrowing. 11% Defence Affairs and Services
respectively, in the in the previous fiscal
year. 14% General Public Services
previous fiscal
year.
-100% -50% 0% 50% 100%
13 14Budget Allocation to Social Sector Projects Budget Utilisation Rate 2016-2021
2021-2022
2020-2021
Allocation to Pak SDGs & The overall Public Sector Development
Community Development Programme (PSDP) increased by 1% 2019-2020
Programme was not listed. since the last fiscal year.
2018-2019
20 17-20 18
Climate Change Division’s budget Within PSDP, Planning, 2016-2017
reduced from PKR 14 billion in FY22 Development, and Special
to PKR 9.6 billion FY23, and . Water Initiatives was given one of the -30.0% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%
Resources Division fell from PKR 103 highest budget increases raising it Utilisation Rate (Development) Utilisation Rate (Current)
billion in FY22 to 99.6 billion in FY23. to PKR 42.2 billion.
Provincial PSDP increased by 16% whereas
the Federal PSDP declined by 19%.
Provincial Share in Federal Budget
Change in Budget Allocation to Social Sector Projects (FY2022-FY2023)
(PKR billion)
200%
Pak SDGs & Community
Development Programme
2029.325 Punjab
100% Poverty Alleviation and Social
Safety Division
46%
COVID-19 Response and Other
1029.763 Sindh
0%
0% Natural Calamities Programme
-17% PM Kamyab Jawan Programme / 670.451 Khyber Pakhtunkhwa
Kissan Programme
-100%
-100% -100% -98%
BISP
370.234 Balochistan
Naya Pakistan Housing Authority
-200% 0 500 1000 1500 2000 2500
Changes in Allocation Under PSDP (FY2022-FY2023)
Targets: Key Medium Term Macroeconomic & Budgetary Indicators
-33%
Revised Estimate 2021-2022 Budget Estimate 2022-2023
-4% Real GDP Growth (%) 5.97 5
119% Inflation (%) 11.7 11.5
As % of GDP
-60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140%
Climate Change Division Water Resources Division Planning, Development & Special Initiatives Division
Total Federal Revenue 8.96 9
Fiscal Deficit -6.3% -4.9%
Implications for Sustainable Development
Budget utilisation Amongst various Strategy
has always social sector
programmes, BISP There was in
remained an issue: Subsidies have increase in
received the highest The budget for
development increased by 2% subsidies for 1 2 3 4 5 6 7 8
expenditure is increase in COVID-19 and
only, as compared petroleum, utility
being under- allocation hence the health sector
highlighting the to 226% increase in stores, fertilizers Stabilisation Control the Increase in Enhancement Protect the Maximum Control Tax Incentives to
utilised, and have both been and metro bus,
current importance of social reduced. the previous fiscal
while all other
in Economic Increasing Revenue in Vulnerable Relief Leakages Tax Collection
expenditure is protection in times year. subsidies reduced. Growth Inflation Exports Segments of Measures Agencies
mostly over- of taking austerity Society
utilised. measures.
15 16Reimagining Pakistan’s Economic Model: DEFINING VISIONS
VISION STATEMENT
Reducing Deficits
through Structural Reform
By
Dr. Hafiz A. Pasha
Former Federal Minister for Commerce
Former Advisor to the Prime Minister for Finance and Economic
Affairs/Federal Minister
Former Deputy Chairman, Planning Commission
Former UN Assistant Secretary General
Pakistan finds itself on the verge of a financial crisis whereby it
may be increasingly unable to honour its external payment
Priority Areas
obligations on imports and external debt repayments. The
foreign exchange reserves stand at close to USD 9 billion while Better management of public finances
the external financing requirement in 2022-23 is as much as of the country through progressive
USD 37 billion. direct tax reforms.
There is likely to be a current account deficit of almost USD 16
billion this year, the highest since 2017-18. The other deficit is Containment of the
the budget deficit, which is likely to approach the highest ever Trade Deficits.
level of 7.8 percent of the GDP, and the level of public debt will
approach 73 percent of the GDP by the end of 2021-22.
Better management of
The time has come for deep and wide-ranging structural public expenditure.
reforms to sharply reduce these deficits within a short time
frame. The opportunity for taking the necessary steps lies in
the Federal and Provincial budgets for 2022-23.¹
The critical steps to be included in the budgets for contain- This regime of incentives is prone to high transaction costs,
ment, first of the trade deficit, are as follows: misuse, and corruption. The time has come to develop a
simple cash incentive scheme along with the receipt of
Ÿ The level of import tariffs is very low in Pakistan, currently at export earnings. This is the approach adopted by
the average of only eight percent, as compared to 11 Bangladesh which now has exports over twice that of
percent five years ago. In particular, import tariffs on Pakistan. For equivalence with the existing incentives, the
agricultural products are exceptionally low. For example, rate of the cash incentive could be set at 12 percent to 15
there is a zero duty on cotton imports. Consequently, not percent, depending on the extent of value added.
exemptions, concessions, and engage in some cases, in large- The quality of debt management needs to improve, mecha-
only are imports relatively cheap, the Pakistani farmers and Emerging exports may be given a higher incentive of 20
scale tax evasion. nisms found for reducing the large pension bill, downsizing of
many industries, especially SMEs, receive little or no percent.
the federal government by a comprehensive exercise of ‘zero-
protection. Pakistan has four import duty slabs ranging
The value of these tax benefits is almost four percent of the based budgeting’, lower subsidies to the power sector and
from three percent to 20 percent. These will have to be Turning next to better management of public finances of the
GDP, equivalent to PKR 2500 billion in 2021-22. There is no other SOEs by reduction in losses and privatization, and finally,
raised to five and 30 percent, respectively, with the country, there is a dire need for very progressive direct tax
option but to withdraw these tax expenditures in the Federal by avoiding the ‘spreading thin’ of the development program
exception of basic food and medicine imports. reforms. The latest UNDP country Human Development Report
and Provincial budgets of 2022-23. This will add over 40 by allocations only to mature on-going projects.
for Pakistan on Inequality has vividly highlighted the extent of
percent to the existing tax revenues and contribute to a
Ÿ Pakistan has multiple export incentives ranging from very state capture by the elite of Pakistan of the tax system. Large
quantum reduction in the budget deficit. It will lead to This is not the time in Pakistan’s history for ‘business as usual’.
low-rate income tax, lower electricity tariffs, concessional farmers, corporations, property owners, financial entities, big
containment of aggregate demand in the economy and We do not want to see a financial crisis of unprecedented
terms of financing, sales tax refunds, duty drawbacks etc. traders, etc., all enjoy wide-ranging tax breaks, reliefs,
thereby, also to lower imports. magnitude which will endanger the lives of millions of our
citizens, and lead to a massive increase in poverty and
1. At the time this article was written, the budgets were due to be released in another 2 weeks. The third area is better management of public expenditure. unemployment.
19 20VISION STATEMENT
A Shared Growth
Model for Pakistan
By
Dr. Ishrat Hussain
Former Governor,
State Bank of Pakistan
Pakistan has followed not one but a diverse set of economic
models during its 75-year history. From a state-controlled and
Priority Areas
directed economy in the 1950s, to a mixed one led by private
entrepreneurs in the 1960s, to nationalization of large-scale Maintain macroeconomic stability by
industries and financial institutions in the 1970s, coupled with following prudent fiscal policy, non-
some partial liberalization, deregulation and privatization, and inflationary monetary policy, realistic
the common overarching feature of the domination of decision exchange rate, and outward oriented
making by a narrow band of elites, Pakistan’s economic trade policy.
journey has been eventful.
Invest in human capital particularly
The country recorded periods of boom in the 1960s, 1980s and females, and physical infrastructure.
early to mid-2000s, and bursts in the 1950s, 1970s, 1990s and
2008 onwards, with blips once again in 2016-2018, and 2020-
22. The elites who governed the country, whether civilians or Provide assistance to the poor and
the military, pursued ad-hoc short-term policies for their own low-income segments of the
sustenance but did not create space for long term structural population.
transformation of the economy, or for distribution of benefits of
growth among the majority of the population. The country was
confronted with major crises on several occasions particularly Devolve legal and administrative
since 1988, when it had to approach the International Monetary powers and financial resources to
Fund (IMF) for bail out. While receiving relief, the government in local governments.
power did not feel any urgency for undertaking fundamental
reforms, and the country was back to business as usual until
the next crisis hit under some other political regime.
The main challenge that has emerged from the diagnosis of
Learning from the past, Pakistan must turn its attention towards the ills of the last 75 years is how to revive and accelerate the
an inclusive, sustainable growth model that can be succinctly rate of growth without creating pressure on balance of
termed as the ‘Shared Growth Model’. East Asian countries are payments, keeping inflationary expectations subdued,
a living example of the prosperity they have gained during the generating maximum employment opportunities, and assisting
last 60 years by following this model. the poor segments of the population.
© itu
21 22© DHL
To address this, Pakistan has to rethink its economic strategy across-the-board blanket subsidies enjoyed by everyone,
which should have a short-term, medium-term and long-term especially for wheat, fertilizers, electricity, and fuel. Monetary
execution plan. What should this plan consist of? While there policy would no longer remain subservient to public sector
are many interventions that would be required, the four priority demand for banking deposits, and the levels of interest rate
areas are: and exchange rate would largely be determined by the supply
and demand of the productive sectors of the economy.
Ÿ Maintain macroeconomic stability by following prudent
fiscal policy, non-inflationary monetary policy, realistic Improvement in the quality of an educated, trained and skills
exchange rate, and outward oriented trade policy. This, in equipped labour – particularly women – and efficient logistics
turn, would require political stability as a sine qua non. services provided by roads, railways, ports, airports etc., would
enhance productivity and lower the costs of doing business.
Ÿ Invest in human capital particularly women and physical This would serve to enable new Pakistani products to pene-
infrastructure to enhance the productivity of real sectors, trate and enter new world markets.
and thus make Pakistan competitive in world markets, as
well as reduce the imbalance between the rising aggregate Out-migration of skilled and semi – skilled workers would ease
demand and the stagnant domestic production capacity. the pressure on employment in Pakistan while also raise per
worker remittance flows. This increase in export revenues for
Ÿ Provide assistance to the poor and low-income segments goods and services would minimize trade imbalance and thus
of the population through unconditional cash transfers, current account deficit, vitiating the need for excessive
targeted subsidies for farm inputs, girls education, external borrowing. The reduced burden of debt servicing
vocational and technical skills acquisition. would free up budgetary resources for higher level of public
investment, which in turn would contribute to accelerated
Ÿ Devolve legal and administrative powers and financial growth rate.
resources to the local governments empowering them to
take decisions pertaining to access to basic services, It is now well established that rapid economic growth and
strengthen the institutions of governance to make them poverty reduction are positively correlated, and so is employ-
effective, and allow the private sector to produce and ment generation. An emerging middle class transiting from
distribute trade goods and services. poverty is the backbone of a prosperous economy, provided
the country diligently empowers the communities at grassroot
These four priority areas are interlinked and have positive level to design, develop, and deliver basic public services.
mutually reinforcing relationships. Prudent fiscal policy that Concurrently the institution of governance – Civil Services,
mobilizes broad-based and progressive tax revenues from Judiciary, Legislature – should be given autonomy to operate
well to do businesses and households would not only reduce without any extraneous influence and interventions.
fiscal deficit and burden of domestic and external debt, but
would also be able to provide resources for financial The above agenda would require, first, a broad political
assistance to the poor and low income groups. Lower demand consensus followed by careful design, sequencing, phasing,
from the financial institutions by the public sector would free up assignment of responsibilities, collaboration among the public,
resources for private sector credit to invest in productive private, nonprofit sectors, monitoring, and corrective actions.
sectors of the economy, and thus expand the domestic By no means is this an easy task, but sincerity of purpose and
capacity. Targeted subsidies to the deserving would lower commitment would take us to the desired destination.
public budgetary expenditures compared to the present
© mobile SJIN
23 24VISION STATEMENT
A Roadmap for
Inclusive Growth
By
Dr. Aisha Ghaus Pasha
Minister of State for Finance and Revenue
Pakistan is one of the most resource-rich countries in the
world, housing abundant reserves of coal, gas, gemstones,
Priority Areas
copper, salt, minerals, and the gold economy. Its economy is
the world's 23rd largest in terms of purchasing power parity, Inclusive growth in agriculture through
and 43rd in terms of nominal GDP. Currently, the economy is supporting small and marginalized
moving on a high growth trajectory with estimated growth of farmers, and promoting small-scale
6.0 percent, while the size of the economy increased to USD innovative technologies.
382.8 billion in FY 2022.
Industrialization and export promotion
Our population stands at approximately 222.4 million with 71.8 through diversifying local production
million in the labour force. Pakistan's middle class is growing on base and strengthening a localized
one hand, while on the other, skilled and relatively cheap supply chain to reduce reliance on
© Photoschmidt 2017
labour is accessible. imports, while focusing on export-
oriented industries.
Above all, Pakistan's increasing youth bulge possesses
diverse capabilities. The country bears tremendous potential Leveraging the youth bulge: creating
and promising prospects of becoming an economically viable employment and enhancing the
and prosperous state, given its resilient and young population, youth's role in decision-making.
Similarly, efforts are underway to provide support from water to Investing in young people would be an opportunity to
economic endowments, strategic location, and cultural seeds, fertilizer, agri-credit, tractors and machinery, commodity transform the youth “bulge” into a powerhouse of innovation,
diversity. Increased focus on technological warehousing, cold storage, and the food processing industry. opportunity, and social change. Empowering ‘Youth for Work’
advancement and innovation. in Pakistan aims to increase youth employment and the role of
Unfortunately, the pandemic raised serious concerns about The need for Pakistan is to diversify its local production base young people in decision-making.
the long-term sustainability of the current economic model as it and strengthen a localized supply chain to reduce reliance on
failed to meet the needs of people and exposed its resilience. imports, while focusing on export-oriented industries. This Advancement in technology is a development pre-requisite.
By revealing its flaws, it presented an opportunity to revisit the envisioned plan aims at product diversification-making a shift As innovation and technology connect all the sectors of the
economic model in promoting inclusive development. development and poverty reduction. Because it dominates the from lower value-added products to higher value-added economy, it gives momentum to growth. It is a cost-effective
rural economy, therefore, increased productivity in the sector products aligned with emerging market trends of develop- and more efficient way of utilizing resources.
The government of Pakistan has a very clear roadmap for will remain a key driver and critical component of inclusive ment. Apart from self-sufficiency, this would be an opportunity
higher, inclusive, and sustainable economic growth. The focus growth. The agriculture sector employs 37.4 percent of the to obtain access to international markets in value-added It is now imperative to recognize the symbiotic relationship
is on improving the real sector through inclusive growth in workforce. It also generates significant foreign exchange products. For this purpose, more focus will be given to Small between economic, human, and traditional security for
agriculture, industrial, and services sectors, increasing the earnings and stimulates growth in other sectors. and Medium Enterprises and Construction sectors by Pakistan's long-term growth. The government is well aware of
productivity of labour, developing human capital through skill improving efficiency, increasing productivity, increasing the nexus between economic and national security i.e.
development, and encouraging investment in technology and To promote growth in this sector, the government is focusing investment, and creating wealth by unleashing the entrepre- “Strengthening National Security requires Strengthening
innovation. To realize these objectives, four key areas have on supporting small and marginalized farmers and promoting neurial energies of the private sector. Economic Security”. Pakistan’s first comprehensive National
been identified to ensure sustainable and inclusive growth. small-scale innovative technologies. Together with the Security Policy is an important milestone in this regard.
provinces, the government aims to increase agriculture The government has accorded the highest priority in its
The agriculture sector is critical to achieving sustainable productivity and provision of agri-loans to ensure food security. manifesto to youth empowerment at the national level.
25 26VISION STATEMENT
The Long Haul:
Employment for All
By
Dr. Pervez Tahir
Former Chief Economist, Planning Commission of Pakistan
President, Council of Social Sciences (COSS), Pakistan
Before we reimagine and reframe Pakistan’s economic model Priority Areas
or vision, an idea of the present and previous vision exercises
will be useful. The first exercise in 1965, the Perspective Plan,
imagined a high growing economy with full employment, Inclusion of the informal sector in
regional equity, universal literacy, and elimination of depend- employment through carefully targeted
ence on foreign assistance by 1985. Except for achieving policies.
foreign-assisted growth, the imagination was a bit of a stretch.
Another Perspective Plan in 1988 visualized that in 2003,
Shifting public policy attention towards
Pakistan will achieve high growth, but with only marginal
water and land distribution, besides
changes in socio-economic character. In 1993, the Perspective
enforcing proper crop zoning, in the
Plan became a rolling vision for a liberalized, privatized and
agriculture sector.
deregulated economy by 2008.
Investment in the relevant human
Since 1998, visions have replaced perspective plans. Vision
capital be adequately resourced, and
2010 focused on strategic interventions in productive sectors,
its utilization monitored effectively to
exports, science and technology, social services, and
encourage productivity and innovation.
governance. Vision 2030, adopted in 2005, envisaged a
‘Developed, industrialized, just and prosperous Pakistan
through rapid and sustainable development in a resource
constrained economy by deploying knowledge inputs’. By Consistently, the next key intervention should be in the
2014, Vision 2025 took over ‘to create a robust platform and to agriculture sector, the second largest employer with a share of
place Pakistan in the league of upper middle income countries 37.4 percent. Again, 67.9 percent of the total employed women
by 2025’ and the ‘ultimate destination is to see Pakistan are in this sector. Climate change, water scarcity, urban
among the top ten economies of the world by 2047.’ encroachment of fertile lands, and the greater incentivization
of cash relative to food crops, has increased food shortages,
None of the visions outlasted its framers and the economic hunger, and vulnerability. Public policy attention must shift to
model has throughout been a simplistic growth equation for water and land distribution, besides enforcing proper crop
the formal, albeit smaller, sector of the economy. Massive zoning.
exclusion is, thus, built into the economic model. As late as in
2006-07, the share of informal sector in non-agricultural Finally, investment in the relevant human capital is required to
employment was as high as 71.5 percent. It continued to be adequately resourced and its utilization monitored
increase until 2010-11 when it peaked to 73.5 percent. The effectively to encourage productivity and innovation. Informal
share has been declining since, reaching 72.5 percent in employment in the non-agriculture sector and the agriculture
2020-21. In a reframed economic model, the inclusion of the sector are sources of resilience in the economy against
informal sector through carefully targeted policies must be the financial crises. To sustain it, priority investments include, in
top of the list of interventions. As employment is the most that order, children out of school, skill formation and agricul-
productive means of equitable development, a focus on the tural research.
largest sector of employment (45.3 percent) will promote this
objective. It also has a gender dimension, as women employ- Our past is a graveyard of grand designs. The above interven-
ment in the informal non-agriculture sector is twice their tions add up to a modest, self-sustained vision of a fully
number in the formal (non-agriculture) sector. employed economy over the long term, in the hope that the
whole will exceed the sum of the parts. © Umair Mohsin / Flickr
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