I think Pakistanis have to learn simple maths and should know how economy works. We also have to choose people to lead not on basis of how long their beard measures, what they wear and talk, what they do in their spare time, which ethnicity they belong to, what party they are associated with, what is their way of life, or who they are, but on basis of what abilities they have to improve Pakistani economy.
We should realise that a corrupt person could not improve country’s economy, neither a man who or whose family and friends are involved in businesses when they are running the country.
We also have to learn to appreciate what people have done for Pakistani economy when they were given chance, and judge them on that basis rather than on personal like and dislike due to petty reasons of religion, ethnicity, sectarianism, or provincialism. If Pakistanis would not learn to do that then it would be disastrous for future of Pakistan.
Now coming to GDP growth rate, loans and remittances:
Pakistan population is increasing at the rate of around 2 percent yearly. Anyhow, the number of working age population is increasing at the rate of 3 to 4 percent, as their increase depends on birth rate 18 to 25 years ago. That means, for Pakistanis to have constant earning level (increase in earning equals price rise), Pakistan economy has to grow at least at the rate of 3 to 4 percent.
[We should remember that, in a country where population growth rate is constant (most western countries), GDP growth rate equal to increase in population growth rate is essential to maintain overall living standard, but that is not true where population growth rate is decreasing (third world countries, including Pakistan)]
Calculation [for ease I am using 100 people as population, Rs 100,000 as average earning per person, inflation 10 percent, increase in working age population 3 percent (Pak case is 3 to 4 percent), and GDP growth rate 2 percent (Pak case)]:
Year 1: 100 people earning Rs 100,000 = Rs 10 million
Year 2:
Inflation = 10 percent than Rs 100,000 of year 1 = Rs 110,000 in year 2.
GDP Growth = 2 percent
Increase in working age population = 3 percent … that means there are 103 people of working age in year 2 compared to every 100 in year 1.
To keep pace with inflation (no improvement), earning should be:
103 people earning 110,000 = Rs 11.33 million (just to keep up with inflation)
Thus real growth needed to have same earning value for workers = (11.33 divided by 11) multiplied by 100 = 3 percent.
So, for earning of workers to just keep pace with inflation, Pakistan has to have real growth of at least 3 to 4 percent (since working population is increasing at the rate of 3 to 4 percent). To have improvement in life, Pakistan needs around 5 to 6 percent growth. For a poor country like Pakistan, average GDP growth needed is at least 7 percent to have meaningful improvement in life.
Remittances: Pakistan government needs revenue to function and prosper properly (or politicians to steal). When expat workers remit money to Pakistan, they get equivalent of that remittance in rupees. Thus, remittances do not increase revenue of government. Remittances only increase purchasing power of those receiving the remittances.
Loan: When government borrow dollars, they convert that into rupee same way as people sending dollars to their family members. Government use rupees due to conversion of dollars in running the country. When rupee devalues, government loses out as government debt increases.
Government also borrows rupee denominated loan, but borrowing locally causes increase in rupee interest rate (due to supply and demand). When government borrows excessively to spend, it fuels inflation.
When we see interest rate in Pakistan falling, it means government demand for rupee loan has decreased (government living within their means without borrowing, prudently) and when that happens, economy improves and inflation reduces.
On the other hand, if government borrows and spend that money properly without corruption, then that would result economic growth. Thus, borrowing to invest on future of country is not bad, but that should only happen when country’s GDP growth is increasing at good pace.
How remittances help?
Remittances help as it keeps the exchange rate within control. Anyhow, best way to control exchange rate is not remittances but export and invisible earnings from abroad. FDI also helps keep exchange rate stable.