The frightening situation in Pakistan is causing concern throughout the world, and serves as a warning of what happens to nations that foster extremism, support terrorism, lack growth and development strategies, and show complete contempt for the well-being of their average population. Such societies are destined to fall.
A confluence of decades of poor policy has led to Pakistan’s current economic disaster. It has devolved into a state at war with itself. Asian Lite observed that by patronizing and supporting militancy and extremism in the name of jihad, it has rarely prioritized long-term economic progress and instead displayed shortsightedness by conducting a war, either directly or through a proxy, with its neighbour.
In an effort to avert its approaching insolvency before it is too late, Pakistan is appealing to the International Monetary Fund (IMF) for a $7 billion bailout package. The IMF delegation’s visit to Pakistan would lead to challenging times. According to the study, Pakistan will need to adopt a variety of contentious austerity measures, such as large subsidy cuts and market reforms, in order to secure this loan.
The rating agency Moody’s underlined that the “country’s ability to afford its own debt is one of the weakest among the sovereigns” in a remark that was cited in the report.
Pakistan has committed to paying $15.5 billion in debt servicing by 2023. The research shows that Pakistan’s interest payment obligation for this year, which is 25% higher than in 2022, is equal to half of the nation’s gross domestic product. According to the assessment, the external debt has climbed from USD 66 billion in FY17 to USD 100 billion at this time.
Asian Lite highlighted a report from the United Nations Development Programme (UNDP) that stated that Pakistan is facing a debt of over USD 250 billion, much exceeding the carrying capability of the Pakistani state, and that it must repay a debt of USD 33 billion by 2023. The problem is getting worse due to the Pakistani Rupee’s (PKR) continuous decline, which has caused it to reach a record low of 267.48 against the dollar.
Millions of people in the country are being forced into poverty and malnutrition as a result of this severe economic setback, which also makes it impossible for the nation to import necessities. The decrease in the nation’s foreign exchange holdings is concerning. Its current foreign exchange holding of USD 3.67 billion, the lowest amount since 2014, is only enough to fund three weeks’ worth of imports.
According to the Asian Lite, a number of factors contributed to the deterioration of the crisis in Pakistan, including its sluggish GDP growth, the global economic drop in performance, increasing worldwide inflation brought on by the conflict in the Ukraine, the falling value of the Pakistani rupee, which made imports more expensive, and a devastating flood that affected over 33 million people.
The nation’s economy is presently in a recession as a result of its own actions, claims the report. Owing to the result of years of terrible policies that enabled terrorism and extremism. It has seldom placed a high priority on protracted economic goals and has shown shortsightedness by engaging in direct or indirect hostilities with India.
Innocent people and law enforcement personnel are being killed as a result of the emergence of terrorist organisations like Tehreek-e-Taliban Pakistan, which was supported by Pakistan’s army and intelligence agency ISI. The war is being waged against the Pakistani state itself.
Its myopic policy choices that led to excessive spending on non-developmental and financially unviable projects are blamed for the current economic crisis.
Pakistan’s fiscal and monetary policies have not undergone structural or economic reforms, and nepotism and graft corruption are rampant in the country’s economy.