Muhammad Ramzan
investors often take a keen interest in the policies of a country while finalizing investment decisions. Countries with consistent policies tend to attract investment from around the world to boost industrialization and economic activities. USA, China, Singapore, Hong Kong, France, Brazil, Australia, Canada, Sweden, and India were the top ten foreign investment destinations in 2022 respectively as FDI inflows to the USA in 2022 were over US$ 388 billion and to India were over US$ 49 billion.
However, FDI inflow to Pakistan in 2022 was reportedly just US$ 1.34 billion showing a decline of over 37 percent as compared to 2021. This dismal performance on the part of Pakistan to lure FDI is the outcome of many factors, one of which is the inconsistent economic policies that tend to erode the confidence of investors and discourage FDI in a country.
Domestic and foreign investors often seek consistency and stability in policies to make informed decisions. However, changes in policies with the change of regime in Pakistan have often led to a discontinuation of policies, which shattered the trust and confidence of investors to invest in long-term projects in Pakistan. This situation has hindered economic growth in Pakistan and disturbed the expansion plans of businesses.
Inconsistent economic policies have contributed to the devaluation of the rupee and high inflation in Pakistan. Frequent changes in fiscal and monetary policies have impacted prices and exchange rates as well as affected the purchasing power of the common man and the stability of the currency.
Policy inconsistency in Pakistan has also caused economic stability and created additional challenges for businesses to operate optimally. The policy inconsistency many times led to the loss of jobs and gave rise to unemployment. The ban on imports has rendered millions of workers jobless from many sectors of the economy including textiles and construction industries.
Frequent changes in economic policies have disrupted budget planning in Pakistan, and caused inefficient allocation of resources, besides increasing fiscal deficit and public debt. Inconsistent economic policies have also strained relations between Pakistan with the IMF and other international partners as many governments failed to fulfill their commitments to the IMF, which constrained access to external financial resources.
To address these challenges and reduce the cost of policy inconsistency, policymakers in Pakistan need to ensure transparent and consistent economic policies that would provide a stable and predictable environment for businesses and investors. A long-term vision for economic development is the need of the hour for Pakistan to help build the confidence of businesses and investors to foster sustainable economic growth.
It must be emphasized that consistent economic policies are vital for the economic stability and sustainable development of Pakistan. Policy consistency would create a stable environment and attract both domestic and foreign investments. It is a proven fact that investors would never commit to long-term projects in an environment, which is characterized by frequent changes in economic policies.
Consistent economic policies would enable businesses to make decisions about long-term investments and expansions with confidence. Stable policies would facilitate them in strategic planning and foster a positive business environment.
A stable policy environment would resultantly promote economic growth in Pakistan by providing a foundation for sustained investment, productivity improvements, and innovation. This, in turn, would contribute to job creation and increase the living standard of people.
Consistent policies would also help maintain price stability and reduce high inflation in Pakistan, which has made the lives of the general public miserable. Stable monetary and fiscal policies would also contribute to a more stable macroeconomic environment.
Consistent economic policies would enhance Pakistan’s reputation on the global stage, build trust with international partners, and attract foreign investment to the country. It would also help businesses to make more efficient decisions about resource allocation to ensure optimal use of scarce resources that would in turn foster the overall economic productivity of the country.
Consistent policies would allow for effective long-term planning at both the governmental and private sector levels, which is crucial for implementing sustainable development strategies and achieving economic goals over an extended period.
In short, ensuring and maintaining consistent economic policies is essential for Pakistan’s economic future to foster a conducive environment for growth, investment, and development. It would provide the necessary foundation for building a resilient and competitive economy in the global context and enable Pakistan to emerge as a strong economy in the region. Let’s hope the policymakers will give due consideration to these suggestions to transform Pakistan into a rising economy in South Asia.
