Nimra Ilyas
University Institute of Biochemistry and Biotechnology
PMAS Arid Agriculture University Rawalpindi
Introduction
Pakistan is facing the worst economic crisis. Its economy collapsed due to inflation, inadequate infrastructure, Weak Governance, rapid increase in imports, plummeting of the rupee, political instability, low foreign- reserves, and current account deficits. This blog post highlights the current state of Pakistan’s economy, its causes, the impact of these crises on the people of Pakistan, and possible solutions and government strategies to overcome this situation.
The current state of Economy and its Causes
Due to flood destruction and political uncertainty in the year 2022, Pakistan faces an economic crisis. The Pakistani nation has been dealing with exasperating inflation. The unemployment ratio is expanding with each day passing. Industries are in a pathetic state of importing goods instead of exporting products. The international community has guaranteed $9 billion to uplift from such an economic collapse. The present scenario indicates this financial aid of 9 billion dollars from the global community is not enough to climb out of these crises. According to World Bank Report, Catastrophic flood destruction badly affects the agriculture sector which contributes 22.67 % to the GDP of Pakistan and provides employment to 37% of the population. Moreover, Pakistan has been building infrastructure on foreign loans. China’s Belt and Road initiative are a frequent example. According to Geo-politik, Pakistan has requested 14 loans from the IMF, but strangely not paid off. As a result, there are now significant doubts about Pakistan’s ability to escape this impasse. Foreign reserves started depleting at the end of 2022. The Pakistani Rupee dropped to PKR 226 against the dollar at the end of the year compared to PKR 176 in January 2022. The Pakistani Government has been making tough decisions regarding IMF’s stringent conditions to revive the loan program. In January, Prime Minister Shabaz Sharif talked with IMF Chief Kristalina Georgieva and showed commitment to completing the ongoing IMF program. Pakistan also received additional funding from UAE, Saudi Arabia, China, and other institutional lenders. Political instability is a consistent pattern of each Government criticizing the preceding one, showcasing their policies, and, unfortunately, having nothing to do with the progress of this country is a question mark. Several initiatives the Government takes are in their political interest not in economic interest.
A former Pakistani ambassador to the U.S and U.N, Maleeha Lodhi says:
“This is the worst economic crisis that Pakistan has faced in decades”
Figure 1: Decline of Pakistan’s Economy
Government Responsibilities and Potential Solutions to Economy Crises
The emergence and continuation of good Government are essential for economic policy framework. Good Governance strictly follows the rule of law, promotes economic and social justice, strengthens the institutional framework, and does not make false promises and hopes. It is the responsibility of the Government to set the right economic policies that will help the nation out of its financial woes. Government should ensure the utilization of resources more effectively. It should focus on creating jobs and increasing investment in the economy. There is a need to adapt targeted policies such as subsidies, investment incentives, and other forms of assistance to businesses. Government should reduce its expenditure, improve tax collection mechanism, and reduce corruption which would improve productivity and encourage private sector investment. Apart from the Agriculture sector, Pakistan should also focus on diversifying its economy towards modern industries, science, research, and technology. Advancement in these sectors would increase exports, bringing in much-needed foreign exchange and boosting the country’s economy. It is Pakistan, not the IMF helps the country to get rid of these crises. We should come up with innovative measures. Our country needs to reduce its dependency on China and focus on manufacturing goods in the country itself by establishing more industries. People handling finance responsibilities should prove their intellectual and professional capacity to manage funds. There should be accountability in the system. If something goes wrong, there are strict policies to combat mismanagement. All political parties must join hands for the noble cause to uplift this nation from the worst economic crises rather than gain their interests.
Conclusion
Pakistan’s internal problems cannot be solved by depending on loans from outside. The Government should take proactive measures and policy interventions to tackle the indigent economy of Pakistan.
References
https://economictimes.indiatimes.com/?back=1
https://aric.adb.org/pdf/aem/external/financial_market/Pakistan/pak_mac.pdf
https://www.cnbctv18.com/world/pakistan-economic-crisis-lessons-for-the-world-15967711.htm
