KARACHI: Pakistan’s score has improved nominally on the Economic Freedom Index of 2019 due to judicial effectiveness and property rights outpacing declines in monetary freedom and fiscal health, says a US think-tank report released the other day.
The Economic Freedom Index 2019 has been compiled by the Washington-based Heritage Foundation and it gave Pakistan 55.0 on a scale of 0 to 100, making it the 131st freest economy on a list of 186.
The Heritage Foundation, a conservative think-tank with close link to the Trump administration, has been compiling this report for the last 25 years.
The country’s score has improved by 0.6, with an overall score of 55.0— making the country’s economy the 131st freest in the 2019 Index. Pakistan is ranked 32nd among 43 countries in the Asia–Pacific region.
The report attributed growth to “judicial effectiveness and property rights outpacing declines in monetary freedom and fiscal health”.
It further states that although some aspects of economic freedom have advanced modestly in recent years, decades of internal political disputes and low levels of foreign investment have led to erratic growth and underdevelopment.
“Excessive state involvement in the economy and inefficient but omnipresent regulatory agencies inhibit private business formation,” the report said and also cites “lack of access to bank credit undermines entrepreneurship, and the financial sector’s isolation from the outside world slows innovation” as a reason for the slow growth.
The report maintained that the judicial system suffers backlog and poor security, while corruption continues to taint the judiciary and civil service of the country.
Protection of property rights, the report states, is still weak. It also adds that despite being independent the judiciary is still subject to influence from extremist groups and high-ranking political officials.
“Corruption, including bribery, extortion, cronyism, nepotism, patronage, graft, and embezzlement, is so pervasive in politics, government, and law enforcement that the public has come to regard it as normal,” the report held.
The index states that the tax system is complex despite reforms to cut rates and broaden the tax base.
“The top personal income tax rate is 30 percent, and the top corporate tax rate has been cut to 30 per cent. The overall tax burden equals 12.4 percent of total domestic income. Over the past three years, the government spending has amounted to 20.3 percent of the country’s GDP, and budget deficits have averaged 5.1 per cent of GDP. Public debt has risen to 67.2 percent of GDP,” the report added..
The think tank report also lauded Pakistan for its ‘modest’ improvement in the entrepreneurial environment saying that the cost of completing licensing requirements is still burdensome.