Looming Crisis In Pakistan
Economics should not be blamed alone for the fate of Pakistan. The cash-trapped nuclear nation is reeling under tough economic stress. The foreign reserves are pitifully low, and inflation is high. The purchasing capacity of common citizens is decreasing.
The inflation across the country has made the lives of common Pakistanis miserable. Inflation in the country grew to a record high of 35 per cent in March. Food inflation has reached a shocking level. Prices of essential commodities are shooting through the roof due to a falling rupee, skyrocketing energy costs, and a continuous decline in Pakistan’s foreign exchange reserves.
Pakistan is very prone to economic vulnerabilities. The economic crisis is nothing new in the country of 220 million. Nor are the talks with external money lenders like the IMF.
When the IMF offers a bailout, the country has to take a few bold steps. And, in most cases, the lower middle class and middle class suffer terribly in such times. It’s very risky for the incumbent to decide ahead of the election.
The rulers of Pakistan haven’t paid much heed to the issue of the economic crisis earlier.
Some of the leaders have made their fortune out of it. Imran Khan-led PTI was not very fond of the IMF either. But during his tenure in 2019, Pakistan inked a $6.5 billion bailout package with the International Monetary Fund in 2019, but only part of it was released by the IMF. Pakistan has hardly followed the IMF’s conditions. The IMF has advised the nation to reform a terribly low tax base and end the tax exemption for the export industry.
Pakistan has several types of debts, such as multilateral debt, Paris Club debt, private and commercial loans, and Chinese debt. Nearly $30 billion of Pakistan’s $126 billion in total external foreign debt is held by China. Over a period of time, Pakistan took loans from several multilateral institutions. The country borrowed large amounts from the Buttonwoods Institutions- World Bank, and the IMF.
In addition, Islamabad had to borrow from the Asian Development Bank, Asian Infrastructure Investment Bank and Islamic Development Bank. Once in CENTO, Pakistan was one of America’s largest recipients of financial assistance.
The year 2022 was pathetic. Devastating floods hit the country twice. The vast area of Pakistan was submerged during the deluge. Hence the price of essential commodities, wheat and onions, have soared. In a report, the WFP said the price of wheat hiked by 74 per cent in just a year. The country still hasn’t recovered from the post-flood casualties.
The summer is going to be crucial for the energy-thirst country. To run the fans and air-conditioning systems, more electricity will be burnt at a time the country is unable to meet its requirements.
Fixing the economy is tough arithmetic. If the economy defaults, the crisis will turn into a catastrophe. The politicians must bring a slew of sustainable reforms, even though it doesn’t serve their political agenda.
The other crisis is the image crisis of Pakistan. The reputation of the nation is damaged. The Sheikhdom in the UAE to Saudi to Islamic fraternity – all they have distanced from the nation. But the military-run nation has burnt all the bridges. It has money for acquiring advanced defence equipment one after another but no proper strategy to tide over the economic crisis. Nuclear doesn’t construct the reputation of a nation, but the performing economy does.
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