Tuesday, March 5, 2024

Pakistan’s Economic Crisis

Written By Darshan M (Grade 10)

Pakistan, for 75 years has been behaving like a beggar. We aren’t saying this, but Pak’s Prime Minister says so. Will Pakistan’s economy collapse? How did Pakistan’s situation become like this?

People in Pakistan are fighting with each other for food, People are running behind trucks for food. Pakistan has no money for imports, the food department has run out of wheat stock, and the country is going through its worst economic crisis in 50 years. The entire country had the money for three weeks of imports only and then THE END. 

Why is Pakistan begging for help?

 Pakistan’s minister asks its citizens to reduce tea consumption because Pakistan imports tea and they don’t have money to purchase tea. In Pakistan, prices of essential commodities are rising day by day. Inflation usually is around 4-6% is now 30 % in some places. Shopping malls and complexes had been instructed to switch off their light by 8:30 PM because they are running out of electricity. Pakistan’s embassy has a property in Washington that Pakistan now wants to sell. So that they can get some money that can be used to run the country. In short, Pakistan is saving money. As a result, Pakistan’s Prime Minister is seeking help from the UN. 

Reasons for the economic crisis. 

Pakistan is facing back-to-back disasters, political disasters, economic disasters, and climate disasters too. Pakistan’s political history is like the Game of Thrones which is very interesting. Pakistan got its independence from India in 1947, but its first democratic election was held in 1970 after 23 years. Pakistan has seen 29 Prime Ministers and no one has completed their complete term of 5 years. Prime Ministers were removed from their posts 18 times either because of corruption or by a military coup. 

Recently, last year Imran Khan resigned, he was a World cup winning national hero who came with the hope to build a new Pakistan but ultimately this happened when Shehbaz Sharif along with his 7 other parties placed a no-confidence motion and brought their government down. The concept of New Pakistan creates new economic problems because when the government changes its economic policy also changes to prove the inefficiency of the previous government exactly opposite decisions are taken which encourages economic disasters. 

Now let’s look at economic disasters from the past few years Pakistan’s economy is deteriorating and its loans are increasing. World Bank says that this year their economy will grow by 2% and inflation by 23%. Pakistan’s exports are $30 billion and imports are around $90 billion, which means every year on average Pakistan earns $30 billion and spends $90 billion. Due to this wide gap, their forex reserves are drastically reducing. Pakistan’s GDP is $376 billion and its loans are $274 billion. These loans are not just simply given to them they still have to pay interest on them and 1/3rd part of Pakistan’s budget goes for repayment of these loans every year. Pakistan is in a debt trap and there is the only solution to get out of that is by borrowing more money. In the next three months around $ 8 billion should be repaid and Pakistan’s foreign reserves only have $5.8 billion. Pakistan’s government knows that food prices are increasing but to initiate a scheme and provide food at cheaper rates requires money, and where will that come from? Due to continuous changes in governments globally Pakistan’s image has been spoilt. 

The next point is very tragic Climate disasters. Last year there were floods in Pakistan and they lost infrastructure worst % 30 billion this is a very big amount for a country that is already struggling. In global emissions, Pakistan contributes less than one per cent but still suffered terribly from that heavy rainfall. Pakistan is in a perfect storm situation due to these severe problems Pakistan is struggling. 

Impact on India.

The story of Pakistan is far from over. Today, Pakistan is a problem but even today there are many institutes there are many countries that love Pakistan and they are the ones who want Pakistan’s good. Different countries and world institutes have donated $ 10 billion to Pakistan and this is not a loan just help and a hope that this money won’t be used for corruption or military activities but for flood relief and rehabilitation. There was news from Washington stating that they will help Pakistan in its difficult times and we all know that America is never loyal to anyone. Protests are going on in POK people from that side of LOC are saying that they want to become a part of India and this is a sign of our foreign policy and that gesture is enough for a smart person to handle things diplomatically. 

Not much trade takes place between India and Pakistan and that’s why the economic impact is negligible having said that an unstable country in our neighbourhood is not good for a country and now Pakistan and Sri Lanka both our neighbours are going through an economic crisis. Even China helped Pakistan, and we have seen China’s debt trap strategy again and again. That is how China in the grab for help established control over many countries. In this situation, if Pakistan doesn’t get loans from the IMF on time China might help Pak and in return will ask for such favours which ultimately may cause losses for India. Pakistan is in an interesting situation and in this situation what Pakistan’s future look like only time will let us know. As they say, there are no permanent friends or enemies in geopolitics but only temporary interests, in today’s world Pakistan, has a major role to play in geopolitics.

Featured Image Courtesy – CNBCTV18


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