Pakistani-American economist and former member of Pakistan’s Economic Advisory Council (EAC), Atif Mian, has said that Pakistan’s growth process is unbalanced as high growth is fundamentally unsustainable, resulting in a vicious cycle where an uptick in growth is followed by a currency crisis.
The economist took to Twitter to point out systematic flaws in Pakistan’s economy that have led to the current account approaching 5 percent of the gross domestic product (GDP).
Atif pointed out that Pakistan’s current account swung positive when the GDP contracted in 2020 due to COVID-19. However, as the economy started recovering in 2021, it has severely declined.
He attributed this trend to growth being captured by an unproductive few. The economist said that this disincentives investment in productive capacity making the country less competitive in global exports.
Secondly, he continued, rents earned in unproductive sectors (like real estate capital gains) are used to import goods and services.
Atif pointed out that there is tension between these two forces as the country cannot afford to purchase from the rest of the world if it hasn’t expanded its productive capacity first.
This results in a vicious cycle where an uptick in growth is followed by a currency crisis. He added that this cycle has continued for the last forty years.
