• Home
• /
• Business

Unnoticed strength of informal economy

The state of pakistan’s economy is largely seen through the lens of media around the world. The media however, generally cites official statistics to report a very negative assessment of country’s economy.

Based on these official figures virtually every next day, the media portrays a doomsday economic scenario where it seems that the country’s economy can not be put back on track without the injection of a sustained foreign aid and loan packages from the donor agencies with tough conditionalities.

Theoretically this may be the case. However, far beyond official statistics, the economic realities seem altogether different in day-to-day life of common people. This is because of the reason that the little is known to the world outside about the hitherto unnoticed strength of the informal or the parallel economy of Pakistan. As a matter of fact, this mode of economy is playing the key role for the financial survival of most of the 180 million Muslim populated country.

The informal economy is believed to be in the neighbourhood of Rs9.3 trillion against Pakistan’s total budget of around Rs3 trillion.

The country’s parallel economy is ever growing and according to Muhammad Ali Kemal, an economist, it is estimated to have expanded by 91.4 per cent of gross domestic product (GDP). But he rightly believes that the available date is under-estimation to determine the accurate size of this mode of economy.

It is indeed hard to detect the real size and the scale of multi-dynamics of parallel economy. Nonetheless, there have been studies on the subject. Each study seems not to have done justice to determine the full picture of the informal economy of a common man. The scientific study in this regard is not possible given the fact that much of the parallel economy runs though the discreet mode of charity and handouts as ordained in Islam, practiced in one way or the other by almost by every body who is known to be a Muslim regardless of which particular sect he/she belongs to.

Centre for Philanthropy, an Islamabad-based NGO that conducts surveys and studies on charity, demonstrates its helplessness whenever it carries out the studies to determine more accurately the real size of charity-based economy in Pakistan.

“Whenever we go out to conduct research study and we ask people how much do they donate. They say it is between us and our God. Who are you to ask us what and how much we donate to whom,” Anjum Riaz, head of Centre for Philanthropy sums up a predominant belief based approach by common Pakistanis when I interviewed her in late 2011.

The economic dynamics of Pakistani society are the most difficult to understand for the West. One earning hand looks after the entire extended family in Pakistan, a missing link in the Western society.

Not long ago a British friend of mine on a trip to Pakistan shared with me something which is a matter of routine in a Western society, but that is unimaginable in this part of the world. She told me to have paid 10 pounds to her brother for doing some household chore. That makes me to recall exactly opposite — not very unusual in Pakistan. There is no dearth of stories that keep on appearing in newspapers on how the poorest of the poor sell off their one kidney to the rich kidney patients to generate money to marry off their sisters. Taking money from the sisters is unthinkable in the eastern society. And this in fact reflects to what an extent, people go in Pakistan to manage to run the economic cycle of the entire extended family even some times at the expanse of their life. Such a sacrifice driven economy of a common man in Pakistan is unthinkable perhaps in the West.

So is the case on how the poor people hit hard by terror incidents every next day, run their business against heavy odds.

Foreigners in Pakistan get shocked when they see how restaurants resume their business as usual next day after a terror incident that kills dozens in the same market. Such resilience deeply enshrined in Islam, has helped people to survive economically and socially despite killing of an estimated 49,000 people in war against terror since 9/11.

Pakistan suffered from two major catastrophes during last one decade. First it was 2005’s earthquake which killed more than 80,000 people and made millions other homeless. The second was of 2010’s flood which inundated at least 24 per cent of Pakistan — almost equal to the entire territory of Netherland. Thousands were killed and millions others once again were homeless. There was a lot of propaganda on how the UN, international donor agencies and friendly countries are showering bags of money and food to help the victims.

According to Anjum Riaz, the fact of the matter is that the international aid was not more than three per cent while around 80 per cent help came from the common people (who don’t want any acknowledgement for fear of losing the divine reward in the life hereafter).

“This is a parallel development budget which the people of Pakistan are running,” is how Anjum puts it.

The assessment of Strengthening Participatory Organisation (SPO), a NGO, with the experience in the field of relief work to the victims of catastrophes, is not very different to surveys of Centre for Philanthropy.

“Pakistan has the largest undocumented informal charity network which is the basic driving force of country’s social fabric. Pakistanis are among the world’s largest charity contributors,” Nisar Memon, chief executive of SPO, told me in late 2011 when I interviewed him for my short documentary on charity-based economy. How ironic it is that Pakistani governments one after the other, are among the highest recipients of international aid while Pakistanis in their individual capacity, are the highest donation giving nation in the world.

The writer is a Islamabad based print and TV journalist. Views expressed by him are his own and do not reflect the newspaper’s policy