ISLAMABAD – Pakistan’s economic freedom overall score has improved by 0.6percent with higher scores for judicial effectiveness and property rightsoutpacing modest performance in monetary freedom and fiscal health.
According to a report compiled by Washington based Heritage Foundation,Pakistan’s economic freedom score is 55 and its economy is the 131st freestin the 2019 index.
Pakistan is ranked 32nd among 43 countries in the Asia–Pacific region, andits overall score is below the regional and world averages, the reportadded.
At global level Hong Kong, Singapore and New Zealand are the top threeranked countries at the world economic freedom index.
In South Asia, Bhutan is ranked at 78, Sri Lanka 115, Bangladesh 121, India129, Pakistan 131, Nepal 136, Maldives 141, and Afghanistan is at 152.
The report said that although some aspects of economic freedom had advancedmodestly in Pakistan in recent years, decades of internal politicaldisputes and low levels of foreign investment had led to erratic growth andunderdevelopment.
Excessive state involvement in the economy but omnipresent regulatoryagencies inhibit private business formation. Lack of access to bank creditundermines entrepreneurship, and the financial sector’s isolation from theoutside world slows innovation.
The foundation defines economic freedom as “the fundamental right of everyhuman to control his or her own labour and property.”
The report pointed out that in economically free societies, governmentsallow labor, capital, and goods to move freely, and refrain from coercionor constraint of liberty beyond the extent necessary to protect andmaintain liberty itself.
The report argues that in an economically free society, “individuals arefree to work, produce, consume, and invest in any way they please”.
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The foundation measures economic freedom by assessing the rule of law,government size, regulatory efficiency and access to open market. The datais shared with investors, business and finance leaders, policymakers,academics, journalists, students, and teachers.
The report added that the tax system of Pakistan is complex despite reformsto cut rates and broaden the tax base. The top personal income tax rate is30 percent, and the top corporate tax rate has been cut to 30 percent. Theoverall tax burden equals 12.4 percent of total domestic income.
Over the past three years, the government spending has amounted to 20.3percent of the country’s output (GDP), and budget deficits have averaged5.1 percent of GDP.
Progress in improving the entrepreneurial environment as been modest. Thegovernment’s 2018–2019 budget increased spending on subsidies for theconstruction sector and for such items as food (especially sugar), power,water, and textiles by 36 percent.
The combined value of exports and imports is equal to 25.8 percent of GDP.The average applied tariff rate is 10.1 percent.
As of June 30, 2018, according to the WTO, Pakistan had 66 non tariffmeasures in force.
Excessive state involvement in the economy and restrictions on foreigninvestment are serious drags on economic dynamism. About 25 percent ofadult Pakistanis have access to an account with a formal bankinginstitution, the report added.