Pakistan Informal Economy A Way Forward CSS Essay

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Pakistan Informal Economy A Way Forward CSS Essay

The current economic crisis in the country is the result of past governments’ short term policies and their temporary approaches towards economy management in the country. Since 2018, when Pakistan Tehrek-i-Insaf (PTI) has come into power in the country, the economy of Pakistan has seen a severe downturn. Among many factors responsible for the downturn of the economy, one is the highest percentage of informal economy in the country.

Pakistan Informal Economy A Way Forward

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What is an informal economy?

As the name indicates, an informal economy means an economy that is not formal or certified and approved. In more technical terms it means that part of any economy which is neither taxed nor monitored by any organ of the government.

According to Kristalina Georgieva, managing director of International Monetary Fund (IMF), in developing countries informal sector is paramount in general due to its sheer size. Therefore it is important to tackle it down only after measuring it properly.

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Pakistan’s Informal Economy

According to an estimate, informal sector in Pakistan contribute one-third to the country’s Gross Domestic Product (GDP). In Pakistan it is a major source of employment after agriculture but still it is a barrier to inclusive economic growth because it hinders majority of people from accessing to opportunities of equal economic growth and development.

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A Way Forward to Pakistan’s Informal Economy

Though informal sector has absorbed a large number workforce in Pakistan, who otherwise would be unemployed but still it is important to formalize them to make sure equal economic growth and development in the country. In this regard the following steps are noteworthy.

Role of Government Institutions

To mainstream all informal economies, government specialized agencies and organizations should have to play key role. In this regard they might already have a list of such unverified businesses that should be brought into government’s control. They should immediately start with that.

To let the government institutions work efficiently and free of any political influence they should be given all legal rights and control. Organizations would be able to work systematically and well planed if they would be free of all kinds of barrier, either social or political. But this does not mean they should be left totally free. A check and balance in work is necessary.

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Another important step that government should take is to make sure that officers’ in-charge of mainstreaming the informal economies should not practice nepotism while performing their duties. He should take action against all informal economies and their owners irrespective of their power, position and relations with him (her).

Make a Public Appeal

Like in dams’ construction, when Prime Minister Imran Khan appealed people to contribute economically in the construction of dams and people responded with open hearts by contributing thousands and even million rupees. In the same way Prime Minister should appeal public to verify their economies. Being public ideal, Prime Minister Imran Khan appeal will make a great change. People will respond greatly.

Offer Incentives

Another useful method to formalize informal economies in the country is to offer some incentives to business owners for legitimizing and registering their businesses. To get benefit of incentives people will respond in large number.

Proclamation of Strict Legal Actions

By adopting the above mentioned steps, government would be able to formalize a greater portion of the informal economies in the country easily. Now we will be left with those businessmen who due to some reasons are reluctant to register their businesses. Such economies can only be formalized by taking strict legal actions against them such as fine, imprisonment and punishment.

Simplification of Rules for Legalization

To get enough benefits of the above mentioned steps, the next important step that government should take is to keep the process of business legalization as simple and fast as possible. Lengthy process and demand of unnecessary documents will deter many people from formalizing their businesses and economies.

Assurance of Security

The government should also assure business owners of all kind security for their businesses. In this way people in order to secure their economies and businesses will respond to government call more effectively.


 Informal economies owner care more about their business and gains. By simplification of rules for registration, assurance of business security and provision of some incentives, informal economies in the country can be easily regularized which will ultimately result in the prosperity of country.  

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