Removing Impediments to Growth Chapter 17: Removing Impediments to Growth The economy of Pakistan has been demonstrating a loss of growth momentum over the last two decades. Between 2000-01 and 2005-06 the GDP growth rate of 6 percent has come down in the last five years to 4 percent. Some of the decline is attributable to exogenous factors like COVID-19, floods, etc. However, much of the fall in the growth rate is attributable to negative and flawed policies which have impacted both on the level of savings and investment. Today, Pakistan has a fixed investment rate of 13.4 percent as compared to above 18 percent at the start of this century. A series of recommendations are made in this part of the report on reviving the growth process in the economy. This is conditional, of course, on achieving stabilization of the economy to provide sustainable basis for higher growth. The first two sections of this part of the book have already focused on policies for containing the current account deficit and for reducing the budget deficit. 17.1‘Crowding’ Out of Development Spending Table 17.1 shows how the uncontrolled expansion in current expenditure has cut into development spending so as to limit the size of the budget deficit. Table 17.1: Trend in Current and Development Expenditure Current Expenditure % of GDP Development Expenditure 2000-01 645 13.9 72 2005-06 1121 13.2 367 2010-11 2901 14.7 514 2015-16 4694 14.3 1314 2020-21 9084 16.3 1315 2021-22 11521 17.2 1657 D +3.3 *From the peak in 2015-16 Source: MOF (Rs in Billion) % of GDP 1.6 4.3 2.6 4.0 2.4 2.5 -1.5* 173