Pakistan Economic Crisis: Pakistan is witnessing one of the worst economic crises in its history. The Pakistani rupee value is constantly degrading and the daily use commodities are becoming dearer by the day. Political parties and leaders are playing a “blame game” and no one is actually working on the actual issues. There are many reasons for the country’s current financial situation and why it reached the point, so close to a complete shutdown.
Pakistan requires external support
According to John Ciorciari, professor and associate dean for research and policy engagement at the University of Michigan’s Gerald R. Ford School of Public Policy, Pakistan clearly requires external support. In his interview published on January 17, on the Michigan University’s portal, he said the country’s foreign exchange is at a dangerously low level and to make things worse, the central bank further increased the interest rates.
Pakistan’s Minister of State for Foreign Affairs @HinaRKhar appreciated the commitment made by President @RW_UNP with regard to the economic recovery efforts and extended an invitation to the President to visit #Pakistan when she called on (1/2) pic.twitter.com/zAcpmniSse
— PMD (@PMDNewsGov) February 5, 2023
Several causes for the country’s economic crisis
Professor Ciorciari blames several causes for the country’s current situation and political instability and weak governance are at the top of the list. Pakistan depends heavily on imports and the political instability has not attracted much confidence among the international community. As no country is willing to invest in the nation, it cannot overcome the growing internal costs, with similar revenue generation from indigenous resources.
Pakistan is paying the price of regime change in the form of crippling inflation and the worst economic crisis is decades. The installed regime proved to be utterly incompetent and has completely failed. pic.twitter.com/wh7iZDf4ZK
— PTI USA Official (@PTIOfficialUSA) January 30, 2023
Power Outage contributing to Pakistan Economic Crisis
With a report published on February 6, 2023, on its website cfr.org, the Council on Foreign Policy delved deeper into the issue of a power outage in Pakistan on January 24. The power crisis began with a surge in voltage in a Sindh-based power station in the country and then it spread throughout across provinces. Close to two hundred million people were left without power for more than a day.
According to the report’s author, Noah Berman, the power crisis is not just a singular problem but would create collateral damage for Pakistan.
A total of $70 million worth of losses were incurred by the country’s textile industry alone, due to the power cuts. In the current scenario, the country’s industries cannot afford to carry the image of undependable suppliers in the highly-competitive international market. The power crisis is not only creating internal problems but also deteriorating the country’s foreign relations. China plays a very important role in Pakistan’s foreign policy and it had invested more than $60 million in the country through its Belt and Road Initiative (BRI). The continuous inconsistency in power supply in the country can make China wary of further investments.
Role of terrorism
A non-profit public policy organization based in Washington, DC, The Brookings, in its article published on January 13, 2023, points to the presence of active terrorist groups inside Pakistan and how they impact the country’s economy. Madiha Afzal has written about the notorious Pakistani Taliban (TTP) and how its terrorist activities have cost Pakistan. Last month’s suicide bomb attack in a mosque compound in Peshawar was carried out by the same terrorist outfit and its activities are still not tapped.
Pakistan has to overcome a lot of challenges to get past the current economic crisis and it would require consistent and dedicated effort by the government. The first thing that government has to do is to build trust, both internally and with other nations.