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Pakistan’s Economy: Current Financial Crunch and Way Forward

Pakistan’s Economy: Current Financial Crunch and Way Forward

By Sara Nazir

Like many other developing countries, Pakistan has had significant economic difficulties for the entirety of its existence. Which entail, among others, high levels of inflation, falling currency, unemployment, poverty, a substantial trade deficit, and a deficit of foreign direct investment (FDI). Nonetheless, despite such difficulties, the nation has managed to endure and display a constructive reaction to handle the severe crisis, with attempts towards economic reforms and measures designed to enhance the economic growth of the country. In this regard, Pakistani military has indeed contributed responsibly towards resolving the nation's economic crisis.


Having the world's 7th largest military, Pakistan Army fulfills its defense needs on minimal military expenses. Pakistani Army has constantly adhered to the utmost professional standards while being extremely frugal with its defense budget. Pakistan's military expenditure as a percentage of GDP has been continuously declining since the 1990s and is presently at its lowest level (2.2% of GDP). The fact that Pakistan is ranked 23rd globally among the top 40 nations based on their largest defense budget by the Stockholm International Peace Research Institute SIPRI, down one position from the previous year, demonstrates its commitment to aiding the state officials by utilizing less national resources. Moreover, Pakistan Army contributed PKR 28 billion in direct taxes to national budget in FY 2020/21 (on account of pay and allowances, customs, etc).

Political unrest has been a contrast element throughout the history of the country, which has made it risky and insecure for investment. Pakistani Army has played a significant role in helping to stabilize the nation's economic and political environment, which has been essential in fostering economic progress. Actively taking part in income-generating activities in the country has helped to both attract Foreign Direct Investment (FDI) and foster economic progress. The military has engaged in large-scale infrastructure projects such as building motorways, bridges, dams and other types of infrastructure that are essential to the nation's economic development. These initiatives have enhanced country's transport network, facilitating business and trade while also providing locals with employment possibilities.

Military has been crucial in strengthening state security, which in itself is necessary for economic growth. World community is drawn to Pakistan because of its geostrategic position. Yet the nation has long struggled with security issues, with terrorism constituting the biggest danger to its security. To provide a secure atmosphere for international companies to function, army has been deeply involved in addressing these risks. Pakistan security forces have carried out elaborate operations to root out terrorism and promote Pakistan as a "Peaceful State" to global investors. Army has created various industrial zones and special economic zones that offer tax concessions and some other perks to international investors by enhancing security situation, which has contributed to drawing foreign investment. This has aided in fostering economic growth and creation of job opportunities in the country.

In addition to above, military has played an active role in relief operations during natural disasters, resulting in a substantial influence on the country's economic growth. Natural catastrophes like floods, earthquakes, and droughts are common in Pakistan and have a terrible effect on the economy. Army has actively participated in relief activities during and after the catastrophes, which has assisted in reducing their effects and fostering economic growth. The National Disaster Management Authority (NDMA), which has been instrumental in handling natural calamities and catastrophes in the country, was a good initiative. The role of Pakistan military has been crucial in assisting the nation's economy at times of economic crises. Military's involvement in control of the COVID-19 outbreak is one such case. The epidemic has had a catastrophic effect on Pakistan's economy, but military actively assisted the government in attempting to lessen that damage by creating field hospitals, quarantine facilities, and supplying vital providing including masks, PPE, and ventilators.

Military also plays a vital role in the national efforts to promote entrepreneurship and small companies. Army has set up several business incubators that offer training, mentoring, and financial assistance to start-ups and small enterprises such as National Aerospace Science & Technology Park (NASTP). This has aided in fostering innovation, creation of jobs, and national economic growth. Army has aided the government in advancing vocational and educational training programs throughout the nation, which promoted the development of human resources and produced a trained workforce, both of which are necessary for economic progress. 5312 students are being educated in more than 26 vocational and technical institutions located all around the country, with 10.2% of the students being female and 46% of the student population being non-military. Technical Training Centers (TTCs) and Vocational Training Centers (VTCs), which have been operating since 1975 and 1981, respectively, have been combined to form FITs. At FITs, more than 275,000 students have received training.

Pakistan's Military Spending in Contrast to India

India's military spending, which has increased continuously for the past five years, dwarfs Pakistan's by a factor of seven (76.6 Bn USD). Pakistan's military expenditure has not increased over the past five years; in fact, it was reduced by more than three billion dollars in 2019 to boost domestic economic growth. Pakistan's entire national budget is now more than twice as big as India's defense budget. Pakistan is defending itself against India, which ranks third in the world in terms of defense spending and is one of the nations that purchase the most weaponry.

The Pakistani military contributed to assisting the nation to overcome its economic problems. It is important to recognize military's contribution in country's economic growth. Such initiatives have supported economic growth as country, attracted international investment, and produced employment opportunities. As a result, Pakistani military deserves praise for its constructive contribution to resolving the national economic crisis. While it has a lower defense budget than other present armies, it is nonetheless recognized as the seventh-most powerful force in the world and is the only one to have successfully countered the threat of terrorism.

The current situation in the country got complicated for the Pakistani military when its people started criticizing the state's institutions without checking the facts out of concern that they may become the subject of propaganda from the enemy. A state cannot operate effectively if the populace rejects its institutions, particularly its military. It's necessary to educate the general public about the role of the military and the novel threats coming from over the border. Likewise, it is crucial to recognize the military's assistance to controlling economic instability and confronting the danger.

*Author’s Bio

The author has done MS in Strategic Studies from Air University Islamabad and currently teaching as visiting faculty in International Islamic University Islamabad. She writes on South Asian security and strategic issues.

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