You are here: Home » International » News » Economy
Business Standard

Structural weakness of Pakistani economy driving away investors: Report

The long-standing structural weakness of Pakistan's economy, aggravated by the global challenges of the Covid-19 pandemic and the Ukraine-Russia war, is scaring away the investors in the country

Topics
Pakistan  | economy | Asian economy

ANI 

Pak rupee's record-breaking downward streak continues for 16th session

The long-standing structural weakness of Pakistan's economy, aggravated by the global challenges of the COVID-19 pandemic and the Ukraine-Russia war, is scaring away the in the country, according to a media report.

In its recent ' Development Update', the World Bank has highlighted the structural weaknesses of Pakistan's which include low investment, low exports, and low productivity growth cycle. Further, high domestic demand pressures and rising global commodity prices would lead to double-digit inflation in the country, reported Islam Khabar.

Moreover, the growth momentum is not expected to pick up in in the near future as a sharp spike in the import bill would also impact the Pakistani Rupee adversely. The World Bank report cites the financial sector's inadequacy as one of the reasons for this low growth.

The government, which has borrowed from the banks at a high-interest rate, earns nominal interest for its cash balance, which is forcing the exchequer into heavy indebtedness as well as a liquidity crunch for the private sector.

The investments in Pakistan are also derived from savings. The domestic investment potential in the country is demonstrated by the fact that less than 50 per cent of domestic savings find their way to the financial sector with the rest used in real estate, being intermediated through informal channels, or soaked up directly by the government through National Savings, according to the media outlet.

Further, the country has a gross NPL (non-performing liabilities) ratio of 8.9 per and a recovery rate of 41 cents/dollar against 70 cents/dollar for OECD countries.

Notably, the weak institutions in the country are also the cause of concern as Pakistan lacks transparent, predictable, and judicious insolvency and credit rights regime which is critical to lowering the cost of credit, expanding access to finance, and fostering entrepreneurship.

According to the Standard & Poor's Ratings Global Financial Literacy Survey 2015 (S & P Global FinLit Survey), only 26 per cent of the adults in Pakistan are financially literate. Thus, limited financial literacy in Pakistan is concerning for the as it has exacerbated the informality challenge in the country.

While the Monetary Fund (IMF) has agreed to extend the stalled bailout package to Pakistan by up to one year and to increase the loan size by USD 2 billion, meeting the stringent conditions of the fund would prove to be an uphill task for the new Pakistan government.

As the has failed to match up with the industrial advances, a huge gap in its infrastructure has been created which calls for a significant inflow of investments into Pakistan's . However, the economy's problems which are structural and deep-rooted poses a great challenge for the government, according to the media outlet.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, May 03 2022. 14:45 IST
RECOMMENDED FOR YOU