Global economic crisis

The Global Economic Crisis has proved to be a source of both threats and opportunities for Pakistan for shaping policies on FDI. Among the up-coming threats looming for the years ahead, one can mention the risk of shifting efforts away from achieving a pro-investment and pro-business environment and the emergence of protectionist tensions. The crisis, however, also opens a chance to implement efficient global policy responses to enhance the stability of the financial system and excite economic growth. This requires action at a coordinated and planned level both by the Federal and provincial governments (post 18th amendment scenario) to rebuild financial multilateralism, foster the stability and equity of the domestic financial system encourage stronger lucidity or disclosure standards, to help the economy to secure the debt of its corporations, and to reassess the importance of public policies and regulations.

In addition, at the country level, measures specifically aimed at motivating investment could also be more extensively implemented. Investment promotion agencies could also play a key role in fostering after-care policies aimed at retaining existing activities.

The ongoing crisis opened at one side a period of major uncertainty for developing economies like Pakistan while on the other side a new phase of economic resilience amid crucial financial crisis. For effectively dealing with the crisis and its economic aftermath, it is important that policymakers maintain an overall favorable business and investment climate (including for FDI) and refrain from protectionist tendencies.

Pakistan is confronted with a number of challenges that comes from both the domestic environment as well as the negative outlook of the international economy. Having successfully stabilized the economy, reinforced its reserve situation, shortened fiscal and current account deficits and managed a drop in inflationary pressure, the government can now focus on improving the economic activity and providing expansion impetus. In order to face such challenges in future and achieve an increase in production and the desired level of growth, efforts must be concentrated on increasing capacity of industry, and removing inefficiencies by allowing productive sectors to function at optimal levels. While the targets set by fiscal and monetary policies are a significantly step towards this, implementation and coordination going forward will be key factors. The future of workers’ remittances is vague, given the fact that employment in host countries is limited. It is very important that fiscal, monetary, and external debt policies work intandem to protect the sectors exposed to the international crisis, while striving to re-establish domestic economic growth.