By Meraj Ghulam
The economic crisis of the past few years in Pakistan has had a significant impact, leaving many wondering what has caused such a downturn. As the country heeded towards holistic delinquency, the public has been stranded in ifs and buts. Low-income people have nowhere to sail their boats but inching to sink. The great economic crunch, developed by the elite, has worried the public—everybody questions; who is liable for the current dilemma. However, no one appears to answer. Speculations aside, political rivalry, elite capitalists, and bureaucrats are fundamental reasons behind the ruthless ruin.
Trapped in low growth, high inflation, and unemployment, Pakistan has been in a tight spot over its economy for some time now – a performance indicative of bizarre mismanagement. By the very start of the year, Pakistan was asked to repay $21 billion to foreign lenders for the fiscal year, coupled with a quite similar schedule for the next three years. In contrast, what she did was another $700 million loan begged from China, probably at a higher interest rate. We are borrowing more and more money to stabilize the economy, but unfortunately, we do not know the increment of external debts.
The only path Pakistan has loved to walk on has been borrowing to reduce the previous debts.
On the one hand, the deal with IMF is paused (at the time of writing), adding more troubles to the situation, and on the other hand, political leaders have made themselves busy screening the best rivalry. They are antonyms to each other. The fight has now not been in talks but on the streets. The movie has reached its interval.
Moreover, Pakistan’s total reserves, at the time of writing, read $4 billion, are nowhere to meet even 5% of its external liabilities, recorded at $126.3 billion. It has several different creditors, such as multilateral debts and private and commercial loans. Although Pakistan will not face any risk of multilateral debts since it is a long-term repayment, it must worry about other external debt repayment and IMF pressure. It has no option but to chalk out the crisis after failing to cook the best for IMF. The only path Pakistan has loved to walk on has been borrowing to reduce previous debts. In the end, it has observed a negative mark only.
Political turmoil must come to an end if economic certainty is important.
Has anyone in his/her tenure thought of ending the mounting circular debt? It does not seem so! From General Musharraf’s regime until now, circular debt has only increased. It was around Rs. 25 billion in Musharraf’s premiership, Rs. 500 billion in PPP tenure, Rs. 1,100 billion in PML-N’s, and 2,500 billion under PTI’s. Consequently, the government, despite resolving problems, is exacerbating them.
Pakistan’s economy of external liabilities should have thought of reformation first. Without reforms, high growth and low inflation would eventually end in a crisis. So did they. A few years back, we sold diesel for around 80 rupees and petrol at 40 cheaper than in any other country. Moreover, petrol prices are now around 272 and diesel at 293 – the highest ever. The country would have progressed today if there had been a genuine and consistent desire for long-term improvement in macroeconomics. In Pakistan, there is only a microeconomics improvement.
The Pakistan Bureau of Statistics (PBS) has now revealed details of Large-Scale Manufacturing (LSM) output declined by 7.9% due to restrictions over the imports of raw materials. They only have so many assets. It is the worst shrank ever in the history of Pakistan. However, it goes beyond worse even if the government still needs to come forward with a satisfactory conclusion with IMF soon.
The existing political rivalries and puppet governance have substantially disrupted economic activities for several years.
Simply put, Miftah Ismail’s ‘One Percent Pakistan’ term is not even near wrong. Pakistan, let alone example, Balochistan, stands far behind compared to the rest of the provinces. The major least-developed districts in the province portray the development within the province. Moreover, examine the federal cabinet if it only has a few members from the rural territory of the country. Many areas inhabit talented people, but they need to be addressed, just not having a privileged background.
Pakistan has undergone a judicial division crisis. It is a country that has been working for the elites only. Had it been a diversified group of people governing, the country would not have gone through this catastrophe. We are not bothering to tax and burden the elites. As noted, the rich are getting richer, and the poor are under greater stress. Since the Pakistan political room is decorated with the interest of elites only, it has thoroughly failed to entitle and provide equal socio-economic justice to all citizens. For those who rule, it is more important to rein in federal deficits than to work collaboratively and overcome the great crisis.
Destructive policies have caused not only political instability but also the massive crisis that the country is headed towards.
What is the wait now? The answer is the upcoming Elections. Nevertheless, the question arises if the elections resolve the problems we are indulged in, including political witch-hunts and economic crunch. Who is going to raise the flag of victory? Will they be able to stable all this juncture? Will they equally entitle all citizens? Above all, will it be run by its fingers? These are the questions of some intensive thinking since we will have the same faces in the queue for the throne.
The existing political rivalries and puppet governance have substantially disrupted economic activities for several years. Political turmoil must meet to an end if economic certainty is important. It is the hour that government should impose preemptive measures to reduce government spending and public debt. Pakistan needs to produce and extract enough assets to increase cash and pay off debt rather than growing the business market by imports. Furthermore, it should also encourage foreign currency reserves to prepare for external shocks and diversify the economy.
About the Author:
Meraj Ghulam
SIT AlumniMeraj Ghulam is an alumnus of School of Intensive Teaching (SIT), Hub. He is majoring in commerce at the University of Karachi. He keeps an interests in Business and Economy.