Economic Crisis In Pakistan

 

Economic crisis in Pakistan is now all time high in its history. There is high risk of Pakistan’s economy to get default, inflation rate to rise by 41% from next week, petrol selling at PKR 249.50/liter, utility stores stocked out all the cheap grocery items, State Bank running out of dollars to pay for the essential imports. Which is a huge red flag for a country which is not independent in producing any basic need product on its own.

Following the tradition, current government have found the only way to come out of this financial crisis is to again redeem a bailout package from IMF. When the country already holding the debt of staggering 274 billion USD, which makes about 97% of country’s total GDP.

As I mentioned in my previous blog that Japan holds the debt of about 140% of its GDP. Then the question is why Japan is not facing the same situation as of Pakistan? Well, the answer is simple as I’ve discussed few aspects of Japan’s strategy of how they deal with their debts already. Now talking about Pakistan, the roots of the Pakistan’s financial crisis dated way back to its independence in 1947. It can be discussed in following points;

MILITARY INFLUENCE & POLITICAL RESTLESSNESS: -

Ever since the death of Quaid e Azam and Liaquat Ali Khan in 1948 and 1951 respectively, Pakistan lacked the presence of faithful leaders. Every body was hungry for power, and so is the military. It all started in 1958 when Governor General Iskander Mirza dissolved constituent assembly and became the president himself. But soon he was over throwed by Military Commander General Ayyub Khan and imposed first ever martial law. Those events started a series of political restlessness and instability in the country which is continued till now. This greatly damaged our financial situation because no democratic government lasted long enough to implement a permanent financial plan which’ll fix the country’s economy for once and for all.

Talking about military influence, Pakistan has seen the record four martial laws in its 75 years of independence. During military rule, other nations hesitate to invest in your country because no one wants to talk business with the armed men. Hence, your growth is affected and the country has to move towards high interest loans in order to keep running the economy.

RELATION WITH THE NEIGHBOURING COUNTRIES: -

Country’s growth and development relies strongly on its trade with neighboring countries, because of convenient transportation and less time consumption. That’s why strong economies in the world gives huge importance to building healthy financial ties with countries sharing border with them.

In Pakistan’s case, our biggest arch rival and diplomatic enemy India lies next to us. Sanctions on trade, involving in war on various occasions, Kashmir Issue and lack of diplomatic relation with India has costed us badly. Pakistan is not a country which can afford hostility with any other nation especially neighbors. We’ve to spent a lot of our valuable resources on military every year just because we are always on the verge of war with India. And also, Indo-Pak wars of 1965 and 1971 left no choice for Pakistan other than to go for high interest loans which only weakened our financial system.

Afghanistan is another country which some how played an effective role in building of the economic crisis in Pakistan. From supporting USA at the time of Soviet invasion in Afghanistan in 1980s to alleging full military aid to them after their declaration of war against Afghan Taliban in 2000s. We can call it a poor decision from Martial Law Governments or we were left with no other choice than that. But Pakistan’s decision in this dispute wasn’t liked by the Taliban and they started considering us as the same kind of enemy like USA. Which resulted in horrifying episodes of terrorist attacks which has shaken our economy to its core. As per the various sources available on internet, Pakistan have spent more than $126.9 billion on terrorism. Only if the government had taken a bold decision at the time of need, so much of valuable resources would’ve saved.

CORRUPTION & WEAK ECONOMIC POLICIES: -

One of the biggest reasons that why Pakistan is struggling financially since its independence in 1947, is corruption. Soon after the death of Liaquat Ali Khan, every leader that came after him just focused on filling their own pockets. Even if we talk about martial law dictators, though their era was much better than the democratic time but still their allegiance to corrupt core commanders did no good to Pakistan. Corruption scandals of elite politicians and military generals are highlighted by international media on various occasions. It happened several times especially in the 90s when ruling political mafia just ate all the money which was lent from different international organization on heavy interest to invest in development.

Corruption along with weak financial policies never allowed Pakistan’s economy to even enter in stabilizing mode. If someone ever asked the previous government that what’s the financial plan you’ve to invest this money which you’re borrowing on such heavy conditions. Then they would have left speechless. Even though Pakistan’s financial strategies were quite strong until the late 50s and early 60s when our five year plan was a role model of fast paced development in South Asia for many countries. But afterwards, those policy makers were sidelined and so was their plans. And then, bureaucracy and government both were busy in doing filthy politics and no one was concerned about on which track our economy is going.

International Monetary Fund (IMF): -

The last and foremost reason of falling economy according to me is IMF. It is the organization which was established in 1940 after the great period of global recession. Its sole purpose is to financially help its member countries which have gone completely bankrupt. Now, when the country has declared itself bankrupt it means it has no reserves left to payback it’s debt. This is where IMF walks in, they offer bail out packages to such countries on very tough conditions. Like they’ll control prices of all the basic need products in the country including petroleum, electricity, gas and food items. Government of that country would have to let go of authority over dollar rate and Income Tax Department have to collect extra taxes up to what % IMF will decide from the locals on everything. Government can’t provide subsidies on any item. All these conditions, ultimately results in extreme hike in inflation in that country.

The dilemma of Pakistan’s economy is that we’ve gone towards IMF for the record 23 times in 75 years of our history. That sums up our current situation that why Pakistanis have to bear sky rocketed inflation every time. If only all that debt would have used properly, then we wouldn’t be questioning our ancestor’s decision of moving here.

Well, these all are my thoughts on economic crisis in Pakistan without any complicated facts and figures. You can share yours in the comment section below.

Note: All sources are present on internet