Dipping investments

Investment ratio dipped to an all-time low during to mere 13.1% of the size of the economy

Pakistan’s investment profile is in rough waters. Statistics revealed by the National Accounts Committee (NAC) have painted a dismal picture of the economy, with some glaring errors of population reporting, while compiling the database. It is worrisome to note that the SIFC is struggling to achieve its ambitious targets for attracting foreign investment, despite a major headway made in convincing big-ticket businesses to eye Pakistan, and addressing coordination issues among federal and provincial governments, apart from removing procedural bottlenecks that hinder growth. But it seems political instability is acting as an impediment, underscoring the need for getting along politics and economy on the same page.

It is noticeable that the investment ratio dipped to an all-time low during the last fiscal year. It is a mere 13.1% of the size of the economy with investments and savings remaining below the official targets. Likewise, the investment-to-GDP ratio is below regional states, and has dropped by one percentage point compared to last year. Moreover, fixed investment-to-GDP ratio also slipped to 11.4% and private sector profile slumped to 8.7% of the GDP, marking the lowest in more than two decades. This testifies that ad hocism and mismanagement that had been our prescription for the last several decades had crept deep inside to damage the confidence of investors, and cannot be fixed in a jiffy. But SIFC is a timely and well-desired forum and it should stride on to make the ends meet by ushering in confidence across the board.

The size of Pakistan’s economy has surpassed the 100 trillion rupees mark, but the most unfortunate aspect is that a major chunk of it is informal. This is another obstacle in listing it on the global index, and at the same time buoying our revenues at home. This lethargy and built-in discrepancy adversely impacts inflow of FDIs and leaves a negative impression on the investors. Collective political reforms, one-window operations and documenting the economy by expanding the tax base are indispensable remedies.

Published in The Express Tribune, May 24^th, 2024.

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