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An Economic Crisis in Pakistan Again: What’s Different This Time?

Photo: AAMIR QURESHI/AFP/Getty Images

Photo: AAMIR QURESHI/AFP/Getty Images

Critical Questions by Daniel F. Runde and Ambassador Richard Olson

Published October 31, 2018

Pakistan’s newly-elected government is already dealing with a balance of payments crisis, which has been a consistent theme for the nation’s newly elected officials. Pakistan’s structural problems are homegrown, but what is different this time around is an added component of Chinese debt. Pakistan is the largest Belt and Road (BRI) partner adding another creditor to its already complicated economic situation.

Pakistan’s system is ill-equipped to make changes which would avoid future excessive debt. A bailout from the International Monetary Fund (IMF) is probably the safest bet for the country although it is unclear whether the United States will support the program. How Pakistan decides to handle its debt crisis could provide insight into how the U.S., IMF, and China will resolve development issues in the future. Beijing is a relatively new player in the development finance world so much is to be learned from how it deals with Pakistan and how it could possibly maneuver in other developing countries in Asia, Africa, and Latin America.

Q1: What is Pakistan’s current financial and economic situation?

A1: Pakistan held its most recent elections in July 2018. The Pakistan Tehreek-e-Insaf party gained over 100 seats in the parliament, and its founder Imran Khan , a famous cricket team captain, was installed as prime minister. Prime Minister Khan has inherited a balance of payments crisis , the third one in the last 10 years. By the end of June 2018, Pakistan had a current account deficit of $18 billion , nearly a 45 percent increase from an account deficit of $12.4 billion in 2017. Exorbitant imports (including those related to the China-Pakistan Economic Corridor (CPEC)) and less-than-projected inflows (export revenues and remittances) have led to a current account deficit widening, with foreign currency reserves levels covering less than two months of imports—pushing Pakistan towards a difficult economic situation .

Part of Pakistan’s financial crisis stems from the fact that 2018 was a poor year for emerging markets. Global monetary tightening, increased oil prices, and reduced investor confidence have negatively impacted the country’s already precarious economic situation. But the country’s deep structural problems and weak macroeconomic policies have further exposed the economy to an array of debt vulnerabilities.

Pakistan has had an overvalued exchange rate, low interest rates, and subdued inflation over the last few years. This loose monetary policy has led to high domestic demand, with two-thirds of Pakistan’s economic growth stemming from domestic consumption. An overvalued exchange rate has led to a very high level of imports and low level of exports. Pakistan’s high fiscal deficit was accelerated even further in 2017 and 2018 because elections have historically caused spending to rise (both of the most recent fiscal crises followed elections). Perhaps the greatest financial issues facing Pakistan are its pervasive tax evasion and chronically low level of domestic resource mobilization. Taxes in Pakistan comprise less than 10 percent of GDP , a far cry from the 35 percent of countries that are part of the Organisation for Economic Co-operation and Development (OECD). Pakistan also suffers from impediments in the energy sector through frequent and widespread power outages that hurt its competitiveness.

In Western media, Chinese investment is often cited as the main driver of Pakistan’s debt crisis. This is somewhat true as China’s BRI makes Pakistan a key partner through the shared CPEC. The CPEC is a $60 billion program of infrastructure, energy and communication projects that aims to improve connectivity in the region. CPEC infrastructure costs have certainly placed a greater debt burden on Pakistan, but the current structural problems are homegrown; the root cause of the energy shortages is now less a matter of power generation, and more of fiscal mismanagement of the power sector .

Q2: What are Pakistan’s options?

A2: Pakistan appears to be in perpetual crisis-mode, and for too long the Pakistani government has been overly reliant on U.S. bilateral assistance. While it may not be the first choice of the Pakistani government, an IMF bailout is the most likely outcome of this financial crisis because it is probably the only path for Pakistan to regain its macroeconomic stability. Any “bailout” from a bilateral donor (meaning China or Pakistan’s Gulf State friends, including Saudi Arabia which has recently provided Pakistan $3 billion for a period of one year as balance-of-payment support) will not get at the root issues that Pakistan faces—its loose macroeconomic, fiscal, and monetary policies. Pakistan needs to get its house in order and remedy many of its domestic economic issues. 18 out of Pakistan’s 21 IMF programs over the last 60 years have not been completed despite obtaining over $30 billion in financial support across those programs. Just like today’s current financial crisis, Pakistan’s last two IMF packages (in 2008 and 2013) were also negotiated by incoming governments.

Q3: Would the U.S. support a new IMF Pakistan program?

A3: The current U.S. administration and Congress would not be supportive of additional bilateral funding to Pakistan—meaning money coming directly from the United States. Since 2001, Pakistan has been the beneficiary of the U.S. Coalition Support Fund (CSF), which reimburses allies for costs incurred by war on terrorism. The CSF is used to reimburse Pakistan for U.S. military use of its network infrastructure (e.g., ports, railways, roads, airspace) so that the United States can prosecute the war in neighboring Afghanistan, as well as certain Pakistani military counter-terrorism operations. The CSF for Pakistan has been as high as $1.2 billion per year, and, in recent years, $900 million per year. With nearly $1 billion in CSF distributed every year, along with $335 million in humanitarian assistance, it will be difficult to convince Congress to appropriate more funds for a Pakistan bailout yet. However, due to inaction on the part of Pakistan to expel or arrest Taliban insurgents operating from Pakistani territory, the United States has recently cut another $300 million from the CSF, bringing the total to $850 million in U.S. assistance withheld from Pakistan this year. In fact, all security assistance to Pakistan, whether it is international military education and training, foreign military financing, or the CSF, has been suspended for this year according to one State Department official.

An IMF program for Pakistan faces resistance from some members of Congress. A group of 16 senators has already signed a letter to President Trump that outlines their opposition to bailing out Pakistan because the IMF package would, in effect, be bailing out Chinese banks.

The Trump administration has also taken a hardline stance towards assisting Pakistan with its financial crisis. Secretary of State Pompeo stated this past July that he would not support an IMF bailout that went towards paying off Chinese loans. In September, Secretary Pompeo visited Pakistan, and there were indications that the United States would not block an IMF program. If an IMF program is enacted, there is no doubt that it would have stronger conditionality and a greater insistence on full transparency of Pakistan’s debt obligations.

Q4: Would an IMF package be a bailout of the Chinese?

A4: The terms of Pakistan’s loans with China are currently unclear and multiple news outlets have reported that Pakistan has refused to share CPEC information with the IMF. However, it is not unreasonable to presume that the terms in those contracts would be more demanding than terms typically asked by the IMF. Unless the terms between Pakistan and China and its state-owned enterprises (SOEs) are disclosed and made clear to the IMF, then it is unwise for the IMF to proceed with a bailout package.

The IMF’s focus is not in projecting power and influence; rather it seeks to help struggling nations get back on their feet. The same cannot be said for China. China appears to be most interested in spreading its influence and gaining valuable assets for its military and expanding economy, while at the same time exporting its surplus capacity for infrastructure building. In its annual report to Congress, the Department of Defense reiterated this concern, “countries participating in BRI [such as Pakistan] could develop economic dependence on Chinese capital, which China could leverage to achieve its interests.”

Of Pakistan’s nearly $30 billion trade deficit, 30 percent is directly attributable to China . If China were concerned about the economic crisis in Pakistan, it would make immediate concessions which Pakistan Finance Minister Asad Umar says China is working on . To help with the crisis, China could readjust its trade surplus with Pakistan in different ways. For example, China could buy Pakistani cement and other purchases in the short term to illustrate that they are aware of and swiftly responding to the economic turmoil in Pakistan. Other nations have struggled with debt obligations to China. For instance, in July 2017, Sri Lanka signed over a 99-year lease for Hambantota Port to a Chinese SOE because of Sri Lanka’s inability to pay for BRI costs. Malaysia took a different path and decided to cancel major infrastructure projects with China in August 2018 due to worries that they would increase its debt burden .

Q5: What are the consequences if there is no IMF package?

A5: It is likely that China will provide even more assistance to broaden Pakistan’s dependency. Chinese banks and SOEs have already invested heavily into Pakistan, so much so that state bank loans have not been fully disclosed to the global community. In fact, Pakistan’s Status Report for July 2017 through June 2018 shows that Chinese commercial banks hold 53 percent of Pakistan’s outstanding commercial debt. However, that percentage may be even higher than the report depicts. While China and Pakistan have agreed to make all CPEC projects readily available to the public, the information is scattered and often left blank on essential financial reports (see July-June 2017 document ), and so it is difficult to obtain a full sense of the degree of Pakistan’s indebtedness to China. Again, much of the loan information provided by the Pakistani government, especially concerning China, is not entirely transparent.

If China chooses to follow through and become the “point person” for an assistance package, the pressure will be taken off the IMF. But, if the United States does not support an IMF package, it will forego major geopolitical potential in the region to its main competitor, China.

Pakistan represents a litmus test of all future cases in which the IMF, United States, China, and any emerging market country are all involved. Depending on how Beijing chooses to navigate Pakistan’s financial crisis, China may soon find itself responsible for rectifying the debt burdens of Zambia and many other BRI countries.

Q6: What are U.S. geopolitical “equities” in Pakistan?

A6:  The United States is invested in Pakistan because of its significant geopolitical importance.

  • Pakistan is an important component of the balance of power in South Asia. Both India and Pakistan have nuclear weapons capabilities. Moreover, China, India, and Pakistan have been in dispute over the Kashmir region since 1947. Regional stability is in the interest of the United States.
  • Despite its ambiguous stance on militant groups, Pakistan is ostensibly an ally of the United States because of its proximity to Afghanistan. Since the War on Terror began in 2001, Pakistan has been an active partner in the elimination of core al Qaeda within Pakistan and has facilitated aspects of the U.S. military campaign in Afghanistan.
  • The United States now seeks a negotiated settlement to the conflict in Afghanistan. To accomplish this, perhaps the United States will come to Pakistan with a simple offer: “deliver the Taliban, and we will give you the IMF.”
  • Whereas previous administrations may have tried to “play nice” with Pakistan, under the Trump administration, there is a chance that the U.S. government will push the IMF to adopt stricter terms for a Pakistan bailout, citing the Pakistani government’s failures of the last two programs.
  • Other than strategic military importance, one of the most important national security challenges to the United States is Pakistan’s demographic trends. Currently, over 64 percent of Pakistanis are under the age of 30—the largest percentage of youth in the country’s history. Over the next 30 years, Pakistan’s population will increase by over 100 million, jumping from 190 million to 300 million by 2050 . The spike in youth population presents an opportunity for the U.S. government and private sector to increase investment in Pakistan. Pakistan’s economy must generate 1 million jobs annually for the next three decades and GDP growth rates must equal 7 percent or more per year to keep up with the population boom. Were Pakistan’s economy to collapse, the world would see the first instance of a failed state with a substantial arsenal of nuclear weapons.
  • An economically healthy Pakistan could be a large market for U.S. goods and services. If the U.S.-Pakistan relationship is strained as a result of this financial crisis, it will not only harm the United States militarily but will also harm U.S. businesses and Pakistani consumers.

Q7: Should the U.S. support an IMF package to Pakistan?

A7: Given the geostrategic importance of Pakistan for the United States, we should support a package but with stronger conditionality than in 2013 along with full transparency and disclosure of its debt obligations.

Daniel F. Runde is senior vice president, director of the Project on Prosperity and Development, and holds the William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Richard Olson is a non-resident senior associate at CSIS. He is the former U.S. ambassador to the United Arab Emirates and Pakistan; most recently he served as the U.S. special representative for Afghanistan and Pakistan during the Obama administration. Special thanks to CSIS Project on Prosperity and Development program coordinator Owen Murphy and intern Austin Lucas for their contributions to this analysis.

Critical Questions   is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2018 by the Center for Strategic and International Studies. All rights reserved.

Daniel F. Runde

Daniel F. Runde

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Could 2024 mark pakistan’s economic turnaround moment, najy benhassine, martin raiser, this page in:.

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After a commendable period of uninterrupted decline in poverty rates, Pakistan’s economy is now facing one of its worst crises  . Poor policy choices combined with a series of shocks—COVID-19, the 2022 catastrophic floods, and adverse global conditions—have caused  growth to slow , poverty to increase, and brought the country to the brink of debt default. Moreover, human development outcomes remain at levels we see in much poorer countries, while per capita income growth has been declining in the face of low productivity and high fertility. 

These challenges call for deep, sustained reforms. We recently launched  Policy Notes , which lay out our views on what these reforms should entail. What we propose is not new. What is different this time though is that the alternative of muddling through with short-term fixes and external financing is riskier and much harder to pull off. 

Many countries’ turnarounds have emerged out of similar crises. For Pakistan, this could also be an opportunity to address deep rooted issues that have plagued the country’s development for too long.  

First, Pakistan must address its  human capital crisis . Seven percent of children in the country die before their 5th birthday, multiple times higher than in comparable countries. Forty percent of children under 5 suffer from stunted growth—and it’s more than 50 percent in poorer districts. 

Halving stunting rates  in a decade is feasible, but it will require a shift from the traditional focus only on nutrition and health to providing wider access to clean water and sanitation, birth spacing services, and improved living and hygiene environments. 

It will take strong cross-sectoral and local coordination, a national mobilization and behavioral change campaign, and investments of close to 1 percent of GDP every year. 

A weak education system  is compounding the effects of stunting: 78 percent of 10-year-old children are unable to read age-appropriate text, while over 20 million children are out of school. 

Second, to finance improvements in service delivery and human capital development, Pakistan must generate more fiscal space. Tax collection has remained at a low 10 percent of GDP for decades. Abolishing expensive tax exemptions and reducing compliance costs could quickly generate about 3 percent of GDP in added revenues.   

More funds could also be raised  at the provincial and local levels from undertaxed sectors, like real estate, agriculture, and retail—potentially adding another 3 percent of GDP.  Expenditure savings  could be achieved by more efficient management of public resources. Most loss-making public enterprises should be privatized. Poorly targeted subsidies in agriculture and energy should be cut, while protecting the poorest. Overlaps between federal and provincial spending should also be decreased. These measures could provide savings of another 3 percent of GDP per year. 

Over time, bold fiscal reforms could potentially generate more than 12 percent of GDP in new fiscal space.  This is three times the additional resources needed to address human development gaps, leaving enough resources to raise public investments in infrastructure and reduce public debt. But to put Pakistan’s public finances on a more sustainable footing will ultimately not be possible without stronger economic growth. 

Third, therefore, Pakistan must strive for a more  dynamic and open economy . Current policies distort markets for the benefit of a few, while preventing productivity growth. Frequent overvaluation of the currency coupled with high tariffs lead firms to focus on domestic markets, disincentivizing exports. 

A challenging business environment deters investment, as does strong state presence in contested markets. Tax distortions also discourage productive investment and support non-tradable sectors such as real estate. Accelerating the sale of productive assets or selectively attracting foreign investment deals may bring in much-needed forex reserves in the short term, but a lasting impact will require urgently addressing the core issues behind low investment and declining productivity growth—leveling the playing field, spurring competition, cutting red tape, and increasing policy predictability. 

Fourth, the  agriculture sector must be transformed  to safeguard food security in the face of climate change and rising water scarcity. Current subsidies, government procurement, and price restrictions lock farmers into low-value, undiversified farming systems and water-intensive crops. 

These subsidies should be reallocated into public goods such as research on seeds, veterinary services, irrigation, drainage services, promoting regenerative agriculture, and building integrated agriculture value chains  . Such measures could generate productivity gains, boost on- and off-farm incomes, and make Pakistan more resilient against climate shocks. 

Fifth,  energy sector inefficiencies  need to be addressed faster and more consistently as they have long been a drain on public resources. Recent tariff increases have helped limit losses while protecting poor consumers, but large distribution and transmission losses, combined with high generation costs, must be reduced to put the sector on a sustainable footing. 

Fortunately, Pakistan has access to some of the cheapest hydropower and solar resources. Leveraging these will require investment  , which will only come if long-standing issues in the distribution and transmission systems are addressed, notably through more private participation. 

Also, tariffs adjustments needed to recover costs have to be shielded from politics in order to provide credible incentives for investors over the long term. 

All these policy shifts cannot be achieved at the federal level alone. Local governments will have to be empowered with capacity to raise and efficiently allocate funding to invest in much-needed local services. Decentralization needs to be revived.  

Moreover, while a more dynamic economy will provide opportunities for most Pakistanis, to leave no one behind social safety nets will need to expand while improving targeting and coherence across federal and provincial instruments. 

By putting such fundamental reforms into place in the coming years, Pakistan can achieve upper-middle income status by its centennial in 2047. We have no doubt it has the human capacities and a proven implementation ability to reach this goal. 

The country has ample potential to not let this economic crisis go to waste, and instead, make it a historical turning point. The year 2024 could mark ‘Pakistan’s moment’.

This blog is a repost from  Dawn , first published on January 3, 2024.

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Essay: Pakistan - how an economic crisis has sent prices rocketing

Pakistan’s current economic struggles exemplify the little fires everywhere set alight across the global economy by a war during a pandemic. Like others in countries dependent on imported commodities - for example Ghana and Sri Lanka  - Pakistanis are seeing food and fuel prices soar. Foreign exchange reserves – used to pay for imports such as food and fuel – have shrunk.

Pakistan is using up its foreign exchange reserves more quickly than previously anticipated because prices of foreign goods are going up. If the situation doesn’t change, the country faces bankruptcy.

Pakistan Karachi shop keeper

A shopkeeper uses a calculator while selling spices and grocery items along a shop in Karachi, Pakistan, on 11th June, 2021. PICTURE: Reuters/Akhtar Soomro

In April, a litre of petrol cost about 150 rupees (£0.60), but by 1st July the price had risen to nearly 250 rupees. And the price of cooking oil increased by 40 per cent just between May and June. At present the country has only enough foreign currency to pay for five weeks of imports. Pakistan is heavily dependent on imported fuel and cooking oil, but also on machinery and food grains from overseas.

All of this has made day-to-day activities more challenging. Power outages are not uncommon in the country, even when the economy is strong – they become frequent and long when the economy is under duress. This happens because energy companies struggle to operate when the costs of power generation are higher than the revenue they collect. Over the past few weeks, residents of major cities have had to go without electricity in their homes for as much as 10 hours a day – in rural areas for even more. The discomfort of the public is compounded by an intense heatwave in many parts of south Asia that has caused temperatures in some places to hit 51 degrees Celsius .

"In April, a litre of petrol cost about 150 rupees (£0.60), but by 1st July the price had risen to nearly 250 rupees. And the price of cooking oil increased by 40 per cent just between May and June."

Relying on imports Foreign exchange reserves with the Pakistan central bank currently stand at $US10.3 billion. This is a sharp drop from $US16.6 billion in January, 2022. Though recently bolstered by Chinese bank lending , reserve levels have been volatile since late April, 2022, when a political crisis resulted in the ousting of the prime minister, Imran Khan .

In Pakistan imports are far higher than exports. To preserve foreign currency, an early measure taken by the newly appointed government in May, 2022, was to ban many types of imported goods deemed non-essential luxury items. The list included chocolate, nappies, pet food and tampons, but has been amended . Initially there were concerns that pets and livestock would be malnourished because of this ban, and that chocolate would be confiscated at international airports. And that menstruating women would not have access to sanitary pads. Because of public pressure, the list has been amended and clarified. Chocolate is no longer being seized, pet food taken off the list, and sanitary pads are being manufactured domestically.

A more recent intervention, intended as a placid nudge but widely derided, is a cabinet minister’s suggestion that individuals should drink fewer cups of tea. The drink is ubiquitous in Pakistan, which is the largest global importer of tea by a considerable margin. It is considered one of life’s simple pleasures in a country troubled by power outages and expensive basic food items.

Consternation over the petty politics of “ austeri-tea ” can deflect from larger, more compelling issues. These are recurrent and arise from the position of Pakistan, and other fragile, externally indebted economies in a global system of currency hierarchies .

Poor countries cannot borrow in their own currency, but need to use one of the major currencies being traded on the international exchanges. The US dollar is the most used currency, while other dominant currencies include the British pound and the euro. These “hard” currencies are those which indebted countries must regularly purchase to pay for imports and to repay and service the loans they owe to private bondholders, international financial institutions and lenders.

Before he was ousted, Khan tried to retain public support as prime minister by resisting demands from the International Monetary Fund  to increases taxes and remove subsidies. So, by not taking steps such as making fuel more expensive, the Khan government delayed inflows of external finance. This weakened Pakistan’s reserves and made it difficult to maintain the value of the rupee. As the chasm between the dollar and rupee grew, the popularity of the government fell.

Global sanctions on Russia and Iran complicate Pakistan’s economic situation. Khan was frustrated at not being able to use a supply of relatively cheap Russian oil because of international pressure over Ukraine. Given the need for drastic measures, Pakistan’s government may now follow in the footsteps of Sri Lanka and turn to Russia for cheap fuel.

International tensions Pakistan has also refrained from importing oil from neighbouring Iran. Smuggled Iranian oil remains attractive to those living near the border. Fuel and energy cooperation between Pakistan and Iran is an especially prickly issue given opposition from the US and Saudi Arabia, another nation that has often financially assisted Pakistan.

To avert bankruptcy – and to continue buying food and fuel – Pakistan is now awaiting assistance from the International Monetary Fund (IMF) . This Washington DC-based institution has rescued crisis-ridden economies on many occasions. In exchange, recipient governments must commit to policy reforms , that are often unpopular with the public.

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Over the next few weeks, the IMF is likely to step in and commit to a bailout of approximately $US1.85 billion. If, and when, this happens, the exchange rate between the Pakistan rupee and US dollar will stabilise. Given that the dollar has risen more than 15 per cent against the rupee since January, 2022, policy makers will welcome a stronger Pakistani currency to calm surging prices.

But the heavy costs of a deal with the IMF have already driven a cost-of-living crisis as fuel subsidies have been sharply withdrawn and made food and transport unaffordable for many. Tax increases have also added to day-to-day pressures.

Currency issues and cost-of-living crises in Pakistan are inextricably linked. A more expensive dollar makes fuel more expensive, and these price increases are quickly reflected in daily essentials. Given that Pakistanis spend more than 40 per cent of their income on food , inflation makes large segments of the population marginalised and vulnerable.

Juvaria Jafri  is a research associate at the  University of Cambridge . This article is republished from The Conversation under a Creative Commons license. Read the original article .

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Pakistan: how an economic crisis has sent prices rocketing

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Pakistan’s current economic struggles exemplify the little fires everywhere set alight across the global economy by a war during a pandemic. Like others in countries dependent on imported commodities — for example Ghana and Sri Lanka — Pakistanis are seeing food and fuel prices soar. Foreign exchange reserves – used to pay for imports such as food and fuel – have shrunk.

Pakistan is using up its foreign exchange reserves more quickly than previously anticipated because prices of foreign goods are going up. If the situation doesn’t change, the country faces bankruptcy.

In April, a litre of petrol cost about 150 rupees (£0.60), but by July 1 the price had risen to nearly 250 rupees. And the price of cooking oil increased by 40% just between May and June. At present the country has only enough foreign currency to pay for five weeks of imports. Pakistan is heavily dependent on imported fuel and cooking oil, but also on machinery and food grains from overseas.

All of this has made day-to-day activities more challenging. Power outages are not uncommon in the country, even when the economy is strong – they become frequent and long when the economy is under duress. This happens because energy companies struggle to operate when the costs of power generation are higher than the revenue they collect. Over the past few weeks, residents of major cities have had to go without electricity in their homes for as much as 10 hours a day – in rural areas for even more. The discomfort of the public is compounded by an intense heatwave in many parts of south Asia that has caused temperatures in some places to hit 51°C .

Relying on imports

Foreign exchange reserves with the Pakistan central bank currently stand at US$10.3 billion, (£8.4 billion). This is a sharp drop from US$16.6 billion in January 2022. Though recently bolstered by Chinese bank lending , reserve levels have been volatile since late April 2022, when a political crisis resulted in the ousting of the prime minister, Imran Khan .

In Pakistan imports are far higher than exports. To preserve foreign currency, an early measure taken by the newly appointed government in May 2022 was to ban many types of imported goods deemed non-essential luxury items. The list included chocolate, nappies, pet food and tampons, but has been amended . Initially there were concerns that pets and livestock would be malnourished because of this ban, and that chocolate would be confiscated at international airports. And that menstruating women would not have access to sanitary pads. Because of public pressure, the list has been amended and clarified. Chocolate is no longer being seized, pet food taken off the list, and sanitary pads are being manufactured domestically.

A man wearing a suit putting his hands in the air.

A more recent intervention, intended as a placid nudge but widely derided, is a cabinet minister’s suggestion that individuals should drink fewer cups of tea. The drink is ubiquitous in Pakistan, which is the largest global importer of tea by a considerable margin. It is considered one of life’s simple pleasures in a country troubled by power outages and expensive basic food items.

Consternation over the petty politics of “ austeri-tea ” can deflect from larger, more compelling issues. These are recurrent and arise from the position of Pakistan, and other fragile, externally indebted economies in a global system of currency hierarchies .

Poor countries cannot borrow in their own currency, but need to use one of the major currencies being traded on the international exchanges. The US dollar is the most used currency, while other dominant currencies include the British pound and the euro. These “hard” currencies are those which indebted countries must regularly purchase to pay for imports and to repay and service the loans they owe to private bondholders, international financial institutions and lenders.

Read more: Pakistan: new government must tackle police corruption and killings

Before he was ousted, Khan tried to retain public support as prime minister by resisting demands from the International Monetary Fund (IMF) to increases taxes and remove subsidies. So, by not taking steps such as making fuel more expensive, the Khan government delayed inflows of external finance. This weakened Pakistan’s reserves and made it difficult to maintain the value of the rupee. As the chasm between the dollar and rupee grew, the popularity of the government fell.

Global sanctions on Russia and Iran complicate Pakistan’s economic situation. Khan was frustrated at not being able to use a supply of relatively cheap Russian oil because of international pressure over Ukraine. Given the need for drastic measures, Pakistan’s government may now follow in the footsteps of Sri Lanka and turn to Russia for cheap fuel.

International tensions

Pakistan has also refrained from importing oil from neighbouring Iran. Smuggled Iranian oil remains attractive to those living near the border. Fuel and energy cooperation between Pakistan and Iran is an especially prickly issue given opposition from the US and Saudi Arabia, another nation that has often financially assisted Pakistan.

To avert bankruptcy – and to continue buying food and fuel – Pakistan is now awaiting assistance from the International Monetary Fund (IMF) . This Washington DC-based institution has rescued crisis-ridden economies on many occasions. In exchange, recipient governments must commit to policy reforms , that are often unpopular with the public.

Over the next few weeks, the IMF is likely to step in and commit to a bailout of approximately US$1.85 billion. If, and when, this happens, the exchange rate between the Pakistan rupee and US dollar will stabilise. Given that the dollar has risen more than 15% against the rupee since January 2022, policy makers will welcome a stronger Pakistani currency to calm surging prices.

But the heavy costs of a deal with the IMF have already driven a cost-of-living crisis as fuel subsidies have been sharply withdrawn and made food and transport unaffordable for many. Tax increases have also added to day-to-day pressures.

Currency issues and cost-of-living crises in Pakistan are inextricably linked. A more expensive dollar makes fuel more expensive, and these price increases are quickly reflected in daily essentials. Given that Pakistanis spend more than 40% of their income on food , inflation makes large segments of the population marginalised and vulnerable.

Unless exports drastically increase in coming years, Pakistan’s economy will remain precarious and high prices will remain a threat. Given this situation, financial assistance is the only way to overcome crises. Unfortunately this tends to come with financial or political strings attached.

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Pakistan is roiled by multiple crises at once, with little end in sight

Headshot of Diaa Hadid.

Abdul Sattar

economic crisis in pakistan essay with quotations

Security officials and rescue workers conduct an operation on Tuesday to clear the rubble and search for bodies at the site of Monday's suicide bombing in Peshawar, Pakistan. The assault on a mosque inside a major police facility was one of the deadliest attacks in Pakistan in recent years. Muhammad Zubair/AP hide caption

Security officials and rescue workers conduct an operation on Tuesday to clear the rubble and search for bodies at the site of Monday's suicide bombing in Peshawar, Pakistan. The assault on a mosque inside a major police facility was one of the deadliest attacks in Pakistan in recent years.

ISLAMABAD — Sometimes the life story of a country can be seen in days.

Take Pakistan. Last Monday, the country was plunged into darkness after the national power grid collapsed. By Thursday, the country had veered dangerously close to economic chaos.

Then, on Monday, a suicide bomber took his place among worshipers in a mosque in the northwestern city of Peshawar, and detonated around 22 pounds of explosives, bringing down the mosque wall and killing more than 100 people, many of them buried under rubble.

A nationwide power outage comes at a time of economic crisis

Pakistan is often mired in troubles. But in recent months, a storm of global troubles, from the Russian invasion of Ukraine to the Taliban's takeover of Afghanistan, has exposed and exacerbated the country's political, economic and security fault lines.

"Pakistan, simply, has run out of luck," says Yousuf Nazar, a former head of Citigroup's emerging markets investments and a political economist.

Pakistani officials tell NPR they are still investigating the cause of a nationwide power outage on Jan. 23.

economic crisis in pakistan essay with quotations

Vehicles drive through a market where some shopkeepers use generators for electricity during a national power breakdown, in Lahore, Pakistan, Jan. 23. Much of Pakistan was left without power that day. K.M. Chaudary/AP hide caption

Vehicles drive through a market where some shopkeepers use generators for electricity during a national power breakdown, in Lahore, Pakistan, Jan. 23. Much of Pakistan was left without power that day.

In Islamabad's Aabpara market, a warren of cheap clothing shops, itinerant rat poison sellers and samosa stalls, shoppers say they'd only realized the blackout was extreme when it lasted longer than usual.

"I sat in the dark," shrugs Ali Iqbal, an editor at a local news channel. "The water was cut off, and I waited." It was only when he was able to check the news on his mobile phone, charging through a generator, that he realized it was a nationwide failure.

The power crunch came at a time when the country is also on the brink of economic chaos, with only enough foreign reserves to cover three weeks of imports .

"Pakistan has been living beyond its means and it has been piling up for debt," says Nazar. For decades, "Pakistan was able to get away with spendthrift policies."

Nazar says until recently, Pakistan's key place as a U.S. ally on the war on terror following the al-Qaida attacks of Sept. 11, 2001, and its role as a logistics conduit for U.S. and NATO forces in neighboring Afghanistan, made it easier for the country to seek help from institutions like the World Bank and International Monetary Fund.

But especially after America's withdrawal from Afghanistan and the Taliban takeover in August 2021, Islamabad has been less strategically important, he says. To make things worse, Russia's invasion of Ukraine triggered a steep rise in the price of commodities like natural gas, cooking oil and wheat. That has been a body blow to Pakistan, which is dependent on imports of food and fuel.

The economic crisis is spiraling

In November, a bailout worth around $8 billion stalled after Pakistan's finance minister, Ishaq Dar , refused to meet conditions set by the International Monetary Fund. The government was expected to stop artificially propping up the Pakistani rupee and peel back power and fuel subsidies. Dar appeared to push back against those conditions because they were politically unpopular, and his government has been trying to shore up its support ahead of elections expected this fall.

economic crisis in pakistan essay with quotations

People visit a market in Lahore, Pakistan, Jan. 4. Authorities ordered shopping malls and markets to close by 8:30 p.m. as part of a new energy conservation plan aimed at easing Pakistan's economic crisis, officials said. K.M. Chaudary/AP hide caption

People visit a market in Lahore, Pakistan, Jan. 4. Authorities ordered shopping malls and markets to close by 8:30 p.m. as part of a new energy conservation plan aimed at easing Pakistan's economic crisis, officials said.

But by January, the crisis was openly spiraling.

A senior port official, speaking on condition of anonymity because of the matter's sensitivity, told NPR last week that 12,000 shipping containers filled with cargo had piled up in Pakistani ports by Jan. 23 because banks were refusing to issue letters of credit to clear their goods. Those letters effectively authorize Pakistan's state bank to forward payments in U.S. dollars.

"More than 10 million traders are on the verge of financial and economic ruin because of this," says Ajmal Baloch , president of the All Pakistan Traders Association. "Cosmetics, medical supplies, raw materials for industry and pharmaceuticals, are stuck."

Reports began emerging of workers losing their jobs and industrial units shutting down as businesses struggled to import raw materials , including a major local car manufacturer which announced it was halting work for two weeks - having neither the inventory, nor the demand.

What began as a dollar crisis "turned into a supply chain crisis, where do not have enough inputs to export – and we can't really get more dollars unless we export," says Ammar Khan , an economist and non-resident senior fellow at the Atlantic Council's South Asia Center. "A Catch-22."

"This is the worst economic crisis that Pakistan has faced in decades," says Maleeha Lodhi, a former Pakistani ambassador to the U.S. and U.N.

Fears grew that Pakistan was creeping toward default, with concerns that it could not service some of its foreign debt, says Khan. But more immediately, the risk is Pakistan will not be able to key import items it needs to keep its economy going — and its population fed.

"Pakistan doesn't have sufficient dollars to import items like fuel and edible oil," says Khan. That risks "leading to supply chain contractions, leading to economic chaos, and loss of jobs," he says, and "shortages of everything imaginable, whether energy or food."

Last Thursday, Dar began acceding to IMF demands. He removed artificial caps on the Pakistani rupee, allowing it to devalue. By Thursday evening, it lost more than 10% of its value. Dar made more moves: he raised the price of gas, and of natural gas, which many Pakistanis use for heating and cooking.

An IMF delegation arrived Tuesday . But even as Pakistani analysts welcomed the possibility of the bailout continuing — which would come with structural reforms they say are necessary — they warned of years of hardship.

"We expect inflation to be north of 30%, potentially in the hyperinflationary region," says Khan. "There will be more unemployment. The average person is not going to get any breathing room over the next few months."

In the Aabpara market, 21-year-old Nouri Wazir says if the situation gets worse, he'll have to borrow money to get by. He is paying for his computer science courses by selling pine nuts from his village. They lie in tidy packets on an upturned cardboard box. But already, Wazir says, he is skipping lunch to save money. "There's nowhere to go but minus."

economic crisis in pakistan essay with quotations

Police officers and others take part in a march denouncing militant attacks and demanding peace, in Peshawar, Pakistan, Wednesday. The placard translates to "Why is the blood of KP police so cheap?" Muhammad Sajjad/AP hide caption

Police officers and others take part in a march denouncing militant attacks and demanding peace, in Peshawar, Pakistan, Wednesday. The placard translates to "Why is the blood of KP police so cheap?"

A suicide bombing sparks fears of more Taliban-linked terrorism

As the IMF delegation arrived in Islamabad this week, rescue workers in Peshawar were searching for casualties from a suicide bombing in a mosque. The attack was one of Pakistan's deadliest in years.

A rogue group within the Pakistani offshoot of Afghanistan's Taliban claimed responsibility. Pakistan has accused the Afghan Taliban of harboring the group and turning a blind eye to its cross-border attacks.

But the bombing also highlighted local security failures: the attacker struck a mosque frequented by police in a heavily guarded part of Peshawar. Police told NPR that the man should have been searched at least twice before entering the mosque.

Amir Rana, the director of the Pakistan Institute for Peace Studies, says the country's powerful military is also to blame. He says the military began negotiations with the Pakistani Taliban, known by the acronym TTP, shortly after the Afghan Taliban seized power across the border.

"It was the Pakistan military [that] was directly talking with the TTP leadership," Rana says. As a goodwill measure, Rana says the army quietly allowed some militants to return to their homes in Pakistan. "I think this was the biggest mistake," he says. "And when they have infiltrated inside Pakistan, they again started the terrorist attacks."

It was ordinary Pakistanis who exposed the resettlement deal in October. They also effectively halted it by flocking to the streets in the tens of thousands to protest against it, particularly in the Swat Valley, a place the group ruled with brutal violence over a decade ago. "This terrorism — not acceptable," they shouted. "These bomb blasts — not acceptable."

One senior Pakistani official involved in talks with the TTP confirmed to NPR that some militants were allowed to return home as a goodwill gesture for talks. Muhammad Ali Saif, a former spokesman for the northwestern provincial government of Khyber Pakhtunkhwa, said these men, whom he described as "foot soldiers," were held in Pakistani detention.

The government has promised to investigate this week's suicide bombing once a mourning period for the dead is completed.

Ex-Prime Minister Imran Khan remains an unpredictable political force

Few Pakistanis expect the investigations to produce results, particularly if they are critical of the military, Pakistan's most powerful institution, and one which critics say is a key decision maker in the country's politics. That is particularly pertinent now, with general elections expected in October.

The former prime minister, Imran Khan, who was ousted in a no-confidence motion last April, plans to contest those elections.

Regardless of who wins power, economists expect the next government to go back, once again, to the IMF and request an expanded bailout — to give the government more room to spend on development, not just debt servicing.

Back in the Islamabad market, taxi driver Abdul Qadir says it won't make any difference for ordinary people like him.

"Our elites run around the world with a begging bowl, but they use it to lead a life of luxury," he shrugs. Without tackling corruption, he says, Pakistan will never change.

As he speaks, a blind man sings in praise of Sufi saints to draw attention to his plight. Shoppers thrust small currency notes in his hand. One fellow takes his arm and helps him walk down nearby stairs, helps him across the road.

It's this kind of solidarity that has helped ordinary Pakistanis survive, crisis after crisis.

Pakistan’s economic crisis

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The 2022 year saw political turmoil, an economic crisis, and catastrophic flooding in Pakistan. On the economic front, the country has been dealing with backbreaking inflation, a depreciating currency, and precariously low foreign reserves. As Pakistan looks to address these challenges in a turbulent moment, important questions arise as to the long-term roots of these problems, how political instability shapes them, and what economic policy Pakistan should adopt to address its difficulties.

On February 1, the Center for Middle East Policy at Brookings hosted an event to discuss the deep roots of Pakistan’s economic challenges and the future of its economy.

Viewers submitted questions by emailing [email protected]  or by joining the conversation on Twitter with  #PakistanEconomy .

Introduction

Panel discussion.

Foreign Policy

Center for Middle East Policy

Madiha Afzal

December 8, 2023

Gautam Bambawale, Tanvi Madan

November 1, 2023

May 26, 2023

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 Ongoing economic crisis in Pakistan

In recent times, Pakistan has been grappling with a complex and persistent economic crisis that demands our attention and understanding. The economic sit­uation of the country has been negatively affected by a sequence of difficulties, making it essential to thoroughly examine the circum­stances and adopt a cooperative strategy for finding solutions.

The ongoing economic crisis in Pakistan is characterized by a com­bination of factors that have put immense pressure on the coun­try’s fiscal health. High inflation rates, mounting public debt, and a volatile exchange rate have been major contributors. One of the cen­tral issues confronting Pakistan’s economy is inflation. High costs of food and energy prices have erod­ed purchasing power and strained household budgets. This situation has not merely elevated living ex­penses but has also influenced the broader societal structure, possi­bly resulting in social unrest. Ad­dressing inflation requires a mul­tifaceted approach that includes monetary policy adjustments, tar­geted subsidies, and efforts to en­hance agricultural productivity.

CJP Isa-led SC bench to hear ECP appeal against PHC verdict on 'bat'

Pakistan’s public debt is a major concern that needs to be managed carefully in order to maintain long-term economic stability. The govern­ment should implement prudent fis­cal policies that ensure responsible borrowing, transparent use of funds, and revenue-generating initiatives. Private sector participation and for­eign direct investment can also help to strengthen the economy.

In order to recover its economy, Pakistan needs to diversify its eco­nomic base. This means reducing its reliance on a few key sectors and exploring new opportunities in technology, renewable energy, and export-oriented industries. It is also important to improve the ease of doing business, invest in educa­tion and skills development, and enhance infrastructure. The ongo­ing economic crisis in Pakistan re­quires a coordinated response from all stakeholders. The government, private sector, civil society, and in­ternational partners must work to­gether to develop and implement effective strategies. This will re­quire open dialogue, data-driven decision-making, and a commit­ment to long-term sustainability.

Sanaullah terms PHC decision 'a victory for lawbreakers'

Pakistan’s current econom­ic challenges are difficult but not impossible to overcome. By ac­knowledging the issues at hand, fostering innovation, and embrac­ing cooperation, the nation can lay the groundwork for a more stable and prosperous future.

FATIMA NOOR,

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Today's Paper | January 12, 2024

Could 2024 mark pakistan’s economic turnaround moment.

economic crisis in pakistan essay with quotations

AFTER a commendable long period of uninterrupted decline in poverty rates, Pakistan’s economy is now facing one of its worst crises. Poor policy choices, combined with a series of shocks — Covid 19, the 2022 catastrophic floods and adverse global conditions, caused growth to slow , poverty to increase, and brought the country to the brink of debt default. Moreover, human development outcomes remain at levels we see in much poorer countries, while per capita income growth has been declining in the face of low productivity and high fertility.

These challenges call for deep, sustained reforms. We recently launched Policy Notes which lay out our views on what these should entail (available on the World Bank Pakistan website ). What we propose is not new. We and others have made similar suggestions before. What is different this time is that the alternative of muddling through with short-term fixes and external financing is riskier and much harder to pull off.

Many countries’ turnarounds have emerged out of similar crises. For Pakistan too, this could be an opportunity to address deep rooted issues that have plagued the country’s development for too long.

First, Pakistan must address its human capital crisis . Seven per cent of children die before their fifth birthday — that is multiple times higher than in comparable countries. Forty per cent of children under five suffer from stunted growth — more than 50pc in poorer districts.

Halving stunting rates in a decade is feasible, but will require a shift from the traditional focus on nutrition and health only, to providing wider access to clean water and sanitation, birth spacing services, and improved living and hygiene environments.

It will take strong cross-sectoral and local coordination, a national mobilisation and behavioural change campaign, and investments of close to 1pc of GDP every year.

A weak education system compounds the effects of stunting: 78pc of 10-year-old children are unable to read an age-appropriate text, while over 20 million children are out of school.

Second, to finance improvements in service delivery and human capital development, Pakistan must generate more fiscal space . Tax collection has remained at a low 10pc of GDP for decades. Abolishing expensive tax exemptions and reducing compliance costs alone could quickly generate about 3pc of GDP in added revenues.

More could be raised at the provincial and local levels from undertaxed sectors, like real estate, agriculture, and retail — potentially raising another 3pc of GDP. Expenditure savings could be achieved by more efficient management of public resources. Most loss-making public enterprises should be privatised. Poorly targeted subsidies in agriculture and energy should be cut, while protecting the poorest. Overlaps between federal and provincial spending should also be cut. These measures could provide savings of another 3pc of GDP per year.

Over time, bold fiscal reforms could potentially generate more than 12pc of GDP in new fiscal space. This is three times the additional resources needed to address human development gaps — leaving enough resources to raise public investments in infrastructure and reduce public debt. But to put Pakistan’s public finances on a more sustainable footing will ultimately not be possible without stronger economic growth.

Third, therefore, Pakistan must strive for a more dynamic and open economy . Current policies distort markets for the benefit of a few, while preventing productivity growth. Frequent overvaluation of the currency coupled with high tariffs lead firms to focus on domestic markets, disincentivising exports.

A challenging business environment deters investment, as does strong state presence in contested markets. Tax distortions also discourage productive investment and support non-tradable sectors such as real estate. Accelerating the sale of productive assets or selectively attracting foreign investment deals may bring in much-needed forex reserves in the short term, but lasting impact will require addressing urgently the core issues behind low investment and declining productivity growth — levelling the playing field, spurring competition, cutting red tape and increasing policy predictability.

Fourth, the agriculture sector must be transformed to safeguard food security in the face of climate change and rising water scarcity . Current subsidies, government procurement and price restrictions lock farmers into low-value, undiversified farming systems and water-intensive crops.

These subsidies should be reallocated into public goods such as research on seeds, veterinary services, irrigation, and drainage services, promoting regenerative agriculture and building integrated agriculture value chains. Such measures could generate productivity gains, boost on- and off-farm incomes, and make Pakistan more resilient against climate shocks.

Fifth, energy sector inefficiencies need to be addressed faster and more consistently , as they have long been a drain on public resources. Recent tariff increases have helped limit losses while protecting poor consumers, but large distribution and transmission losses, combined with high generation costs have to be reduced to put the sector on a sustainable footing.

Fortunately, Pakistan has access to some of the cheapest hydropower and solar resources. Leveraging these will require investment, which will only come if long-standing issues in the distribution and transmission systems are addressed, notably through more private participation.

Also, tariffs adjustments needed to recover costs have to be shielded from politics, in order to provide credible incentives for investors over the long term.

All these policy shifts cannot be achieved at the federal level alone. Local governments will need to be empowered with capacity to raise and efficiently allocate funding to invest in much-needed local services. The decentralisation agenda needs to be revived.

Moreover, a more dynamic economy will provide opportunities for most Pakistanis, but to leave no one behind, social safety nets will need to expand while improving targeting and coherence across federal and provincial instruments.

By implementing such fundamental reforms in the coming years, Pakistan can achieve Upper-Middle Income status by its centennial in 2047. We have no doubt it has the human capacities and a proven implementation ability to reach this goal.

The country has ample potential to not let this economic crisis go to waste, and instead, make it a historical turning point. The year 2024 could mark ‘Pakistan’s moment’.

Martin Raiser is World Bank vice president for South Asia.

Najy Benhassine is country director for World Bank Pakistan.

Published in Dawn, January 3rd, 2024

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The Pakistan Development Review

Safdar Khan

The post 9/11 scenario in Pakistan’s economy can readily be identified with a host of positive developments. Real GDP growth rates have averaged around 6 percent since 2002, stock market surges have broken all the previous records, there is much more dynamism in the banking industry, capital flows are pouring into the economy, foreign exchange reserves have swelled to record high levels, and poverty has witnessed a declining trend. However, what mars these celebrations since last year is the scepticism of some market commentators on the growing vulnerability of Pakistan’s economy to crisis.1 The main weakness, as widely pointed out, remains the sustainability of current account deficit along with rising fiscal imbalances. A review of empirical literature on the determinants of currency crisis introduces a host of macroeconomic fundamentals broadly based on the predictions of the seminal first- and second-generation models. Although the list of these determinants varies from study to...

Economy of Pakistan by Ahmed Ali Jamali

This paper will help you to know the history of economy of Pakistan as well as the root causes and remedies to overcome the challenges

Humaira yasmin

Abdul Rehman

The present research paper aims to study on Pakistan economy and current big challenges to Pakistan economy. A stable economy of any country plays an important and vital role in any nation’s collective prosperity and development. In Pakistan some of the areas are economically backward and underdeveloped. The economy of Pakistan has been undergoing a stabilization phase since the last three years. The restoration of macroeconomic stability is and necessary to provide the platform for generating growth, jobs, and improving the quality of life of the people.

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economic crisis in pakistan essay with quotations

Economic Crisis in Pakistan: Challenges and Remedies

Economic-Crisis-in-pakistan-Basics

  • Bilal Ahmad
  • November 26, 2022
  • Daily Write-Ups , Economy of Pakistan
  • 40036 Views

The following article is written by Bilal Ahmad , a student of Miss Syeda Saba and Miss Iqra Ali . For years, Miss Syeda Saba has been known for her Grammar teaching methodology, and Miss Iqra Ali for being a top-notch writer and a writing coach.

economic crisis in pakistan essay with quotations

The decade of the 1960s is considered the golden age of economic growth in Pakistan. Due to the policies of the Ayub Khan regime, economic growth was so impressive that it was seen as a model of economic development by many developing nations. Unfortunately, things continued getting worse thereafter and have now reached a point where most economists think that Pakistan is heading towards bankruptcy. The economic situation of Pakistan is at a critical stage. Today, the country faces serious economic challenges, the first one among which is the ballooning trade deficit. Pakistan is an import-driven country where imports surpass exports. Another challenge is the fiscal deficit, when the expenditure of a government is greater than its total revenue collection. Resultantly, the government has to borrow money from international and national financial institutions such as the World Bank, International Monetary Fund, and Asian Development Bank so that it can enable higher spending without having to increase taxes. The shortage of power and water is also a gigantic economic challenge. The prevailing energy crisis in Pakistan is eating up two percent of the economy; it is because all sectors of the economy are heavily dependent on power consumption. Frequent power outages have immensely damaged the industrial production and overall performance of all the other sectors of the economy. The water crisis is also the biggest issue for economic growth. The water crisis is hampering agricultural production, which has a significant share of the economy. The high cost of doing business is another challenge that needs to be addressed urgently.

Numerous problems and hurdles in the way of starting a business, such as a delay in communication, centralized decision making, lack of loyalty, lengthy registration procedures, and lack of skilled labour force, make it expensive and unaffordable for investors to start a business in the country. This is a serious barrier to economic growth. Another serious challenge Pakistan’s economy is faced with is poor governance, which has stymied smooth and sustainable development. Good governance comes through strong, independent state institutions. A country cannot grow unless the issue of poor governance is resolved. Political instability is like the sword of Damocles for our economy. There is no denying the fact that the political environment of a country has a profound impact on its economy. In a stable political environment, the government does not have to strive for its survival and is able to pay full attention to the economic well-being of the nation by devising long-term policies. Unfortunately, the political conditions of Pakistan have never remained stable. History reveals that since its inception, the country has been longing for a stable democratic government. The law and order situation has also taken a heavy toll on our national economy. Peace and progress are both intertwined. Peaceful conditions are crucial for attracting foreign and local investors.

First and foremost, Pakistan needs to ensure an environment conducive to investors so that foreign direct investment in the country can be increased. The government should offer tax incentives for the establishment of industrial units in various sectors as such units will provide employment to the youth and will also add to the government’s revenue collection. Second, the domestic investment must be encouraged through more flexible tax policies, particularly for small and medium enterprises. Such measures would stabilize the economy and reposition Pakistan on the international stage as an attractive destination for foreign investment. Third, Pakistan needs to focus on building up its domestic industry to expand its exports. All the hindrances to the development of domestic industry must be removed. Fourth, Pakistan must modernize its industrial and agriculture sector. New plants and equipment must be installed for the purpose of enhancing the quality and quantity of industrial production. Fifth, Pakistan needs to broaden its tax base. Currently, the agriculture sector is not being taxed, while large businesses are also often given a big tax break. The tax base can be widened by taxing the agricultural sector and undue tax amnesties to large businesses. Also, there is a dire need to introduce tax reforms and strengthen tax collection coordination at the national and provincial levels. Last but not least, advancement in the field of science and technology is the key driver for the acceleration of economic development. Pakistan needs to invest in the field of science and technology as it will have a positive influence on the agricultural and industrial output.

Taking everything into consideration, it can be said that the country’s severe economic challenges can be tackled if effective strategies and policies are devised and implemented. The country can revive its economy through institutional, educational, industrial, and agricultural reforms. In this way, it can be hoped that Pakistan will become a model of economic development for developing nations around the world.

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Zahid Notes

Essay on inflation/Rising prices in Pakistan with quotations

Rising prices / inflation essay 300 - 400 words.

Essay on inflation and rising prices quotations and outline pdf download

Inflation essay for 2nd year, class 12 PDF download

Inflation is taxation without legislation - Milton Friedman
Inflation is the crabgrass in your savings - Robert Orben
Inflation is the parent of unemployment and the unseen robber of those who have saved - Margret Thatcher
Production is the only answer to inflation - Anonymous

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Opinion I surrender. A major economic and social crisis seems inevitable.

economic crisis in pakistan essay with quotations

On the list of words in danger of cheapening from overuse — think “focus,” “iconic,” “existential,” you have your own favorites — “crisis” must rank near the top. A Foreign Policy article in 2020 urged some “crisis” caution, listing health care, housing, energy, drugs, education, marriage, police violence and others as declared “crises” that might not fully qualify for such an extreme label.

A host of prognosticators, coming from diverse disciplinary directions, seems to think something truly worthy of the term is coming. They foresee cataclysmic economic and social change dead ahead, and they align closely regarding the timing of the crash’s arrival. Unsettling as these forecasts are, the even more troubling thought is that maybe a true crisis is not just inevitable but also necessary to future national success and social cohesion.

The causal diagnoses differ somewhat. Looking through a political lens, James Piereson in “ Shattered Consensus ” observes a collapse of the postwar understanding of government’s role, namely to promote full employment and to police a disorderly world. He expects a “fourth revolution” around the end of this decade, following the Jeffersonian upheaval of 1800, the Civil War and the New Deal. Such a revolution, he writes, is required or else “the polity will begin to disintegrate for lack of fundamental agreement.”

In “ The Fourth Turning Is Here ,” published this summer, demographic historian Neil Howe arrived at a similar conclusion. His view springs from a conviction that human history follows highly predictable cycles based on the “saeculum,” or typical human life span of 80 years or so, and the differing experiences of four generations within that span. The next “turning,” he predicts, is due in about 2033. It will resemble those in the 1760s, 1850s and 1920s, Howe writes, that produced “bone-jarring Crises so monumental that, by their end, American society emerged wholly transformed.”

Others see disaster’s origins in economics. Failure to resume strong growth and to produce greater economic equality will bring forth authoritarian regimes both left and right. This year, in his book “ The Crisis of Democratic Capitalism ,” Financial Times editor Martin Wolf advocated for an array of reforms, including carbon taxation, a presumption against horizontal mergers, a virtual ban on corporate share buybacks, compulsory voting, and extra votes for younger citizens and parents of children. He fears that , absent such measures, “the light of political and personal freedom might once again disappear from the world.”

Then there’s that little matter of our unconscionable and unpayable national debt, current and committed. Erskine Bowles led the last serious effort to rein it in, before his commission’s report in 2010 was torpedoed by President Barack Obama. Bowles called what’s coming “the most predictable economic crisis” — there’s that word again, aptly applied — “in history.” And that was many trillions of borrowing ago.

Now, market guru John Mauldin has begun forecasting a “great reset” when these unsustainable bills cannot be paid, when “the economy comes crashing down around our ears.” Writing in August , he said he sees this happening “roughly 7-10 years from now.”

Encouragingly, if vaguely, most of these seers retain their optimism. Piereson closes by imagining “a new order on the foundations of the old.” Confessing that he doesn’t “know exactly how it will work,” Mauldin expects us to “muddle through” somehow.

Howe, because he sees his sweeping, socially driven generational cycles recurring all the way back to the Greeks, is the most cavalier. Although “the old American republic is collapsing,” he says, we will soon pass through a “great gate in history,” resolve our challenges and emerge with a “new collective identity.”

Acknowledging the chance of unfavorable outcomes, including a war we neither win nor recover from, he still leans toward expecting a new era of optimism, national unity and civic engagement. Like economist Mancur Olson in the 1980s , he notes the flourishing of societies where disasters — natural or man-made — swept away encrusted bureaucracies and vested interests.

Paradoxically, these ominous projections can help worrywarts like me move through what might be called the stages of political grief. A decade ago, an optimist could tell himself that a democratically mature people could summon the will or the leaders to stop plundering its children’s futures, and to reconcile or at least agree to tolerate sincerely held cultural disagreements.

For a while after that, it seemed plausible to hope for incremental reforms that would enable the keeping of most of our safety-net promises, and for a cooling or exhaustion of our poisonous polarization.

Now, I’m grudgingly ready to surrender and accept that the cliché must be true: Washington will not face up to its duty except in a genuine crisis. Then and only then will we, as some would say, focus on the existential threats to our iconic institutions.

So maybe we might as well get on with it, and hope that we at least “muddle through.” I’ve arrived at the final stage: Crisis? Ready when you are.

About guest opinion submissions

The Washington Post accepts opinion articles on any topic. We welcome submissions on local, national and international issues. We publish work that varies in length and format, including multimedia. Submit a guest opinion or read our guide to writing an opinion article .

  • Opinion | Biden must elevate these Democratic leaders if he wants to win January 8, 2024 Opinion | Biden must elevate these Democratic leaders if he wants to win January 8, 2024
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  1. Economic crisis in Pakistan Essay for students

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    economic crisis in pakistan essay with quotations

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  1. Pakistan's Economic Crisis: What Went Wrong?

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  2. Essay Outline: Economic Crisis in Pakistan: Challenges and Prospects

    Introduction 1. Global economic crisis 2. Economy of Pakistan at a crossroads 3. Causes of economic decay In Pakistan Challenges of Economic Crisis in Pakistan 1. Dwindling foreign exchange reserves 2. Current account deficit increasing exponentially 3. Stagnant Small and Medium Enterprises (SMEs) 4. Reduced Foreign Direct Investment (FDIs) 5.

  3. An Economic Crisis in Pakistan Again: What's Different This Time?

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  4. PDF The Causes of Economic Crisis in Pakistan and Its Remedial Measures

    The Causes of Economic Crisis in Pakistan and Its Remedial Measures Muhammad Yaqub* 1. Introduction The State Bank of Pakistan (SBP) had indicated in its letter of invitation to the Conference that the topic on which I should speak is "Economic Policy after the Crisis".

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    Many countries' turnarounds have emerged out of similar crises. For Pakistan, this could also be an opportunity to address deep rooted issues that have plagued the country's development for too long. First, Pakistan must address its human capital crisis. Seven percent of children in the country die before their 5th birthday, multiple times ...

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    Abstract Pakistan is currently facing one of the worst economic crises in its history. A combination of rising debt levels, persistent trade deficits, political instability, and a lack of...

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    Muhammad Zubair/AP ISLAMABAD — Sometimes the life story of a country can be seen in days. Take Pakistan. Last Monday, the country was plunged into darkness after the national power grid...

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    Pakistan's economic crisis Agenda Wednesday, February 01, 2023. 10:00 am - 11:00 am EST ... The 2022 year saw political turmoil, an economic crisis, and catastrophic flooding in Pakistan. On the ...

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    September 07, 2023 Opinions, Letters In recent times, Pakistan has been grappling with a complex and persistent economic crisis that demands our attention and understanding.

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    Rida Raja delves deep into the economic crisis of Pakistan to get a more holistic, detailed, and long-term picture. She uses a factual and statistical approach to draw an economic understanding of the country's ongoing crisis. ... Essay on Energy Crisis in Pakistan December 28, 2021; Combined Competitive Examination 2023 Announced by the ...

  13. (PDF) Growth and crisis in Pakistan's economy

    This essay looks at the political economy of Pakistan during the last two decades. Why has Pakistan faced recurrent balance of payments difficulties? Are the structure of production and...

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    Pakistan, a South Asian nation with a population of over 200 million, has been grappling with a prolonged economic crisis that has posed numerous challenges to its development and stability. This essay aims to explore the causes, impacts, and potential solutions to the economic crisis in Pakistan. II. Causes of the Economic Crisis:

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    Pakistan is mired in an acute energy crisis—one with immense implications for both the nation's floundering economy and its volatile security situation. According to some estimates, energy shortages have cost the country up to 4% of GDP over the past few years.

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    The country has ample potential to not let this economic crisis go to waste, and instead, make it a historical turning point. The year 2024 could mark 'Pakistan's moment'. Martin Raiser is ...

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    Pakistan's economy is facing a downturn courtesy the weak policies of the government. The Economic Survey of Pakistan 2016-17 has already revealed that the government failed to achieve multiple economic targets, such as manufacturing, electricity generation and agriculture. Efforts made to raise the economy of Pakistan:

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    Prospects of Economic Crisis in Pakistan. 1. Increasing political awareness translating into positive political will necessary for. economic progress in Pakistan. 2. Investment by foreign countries and individual. 3. Peaceful environment due to curtailment of terrorism: conducive environment for. economic stability in Pakistan.

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    The economic situation of Pakistan is at a critical stage. Today, the country faces serious economic challenges, the first one among which is the ballooning trade deficit. Pakistan is an import-driven country where imports surpass exports. Another challenge is the fiscal deficit, when the expenditure of a government is greater than its total ...

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