Pakistani Economic Crisis: A Closer Look
Pakistan’s economy has been facing several challenges in recent years,
and unfortunately, the situation does not seem to be improving.
A recent report suggests that Pakistan
failed to meet any economic growth targets for the fiscal year 2022-23, with
GDP growth of 0.3 percent, agriculture, industrial output, and exports
all failing to meet their targets.
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According to Pakistan’s economic indicators, the country’s economy
grew by 0.29 percent in the year ended June 30, 2023, compared to 6.1%
growth last year. Whereas, agriculture rose by just 1.55 percent and
the industrial sector experienced negative growth of 2.94 percent.
The inability of Pakistan to pay back its foreign debt has caused the
value of its currency to continuously drop over the past few months. Also, Pakistan’s
foreign debt must be repaid in the amount of almost $80 billion between
February 2023 and June 2026.
In such a scenario, Investors start to worry about a country’s ability to
repay its debt when it takes on significant amounts of debt. As a result,
investors may begin to withdraw their capital from the market and the nation’s
economy may suffer from a lack of confidence. Likewise, Pakistan’s political
situation has also played a role in the country’s economic struggles. There
have been concerns about corruption and instability in the government, which
has made it difficult to attract foreign investment and build trust with
international partners.
The demand for that nation’s currency declines as investors sell
off their investments. In turn, this causes the currency’s value to decline.
Pakistan is a big importer of oil. Every time oil is imported, the
country’s currency is devalued, resulting in substantially higher taxes.
As a result, customers will pay more for imported goods since the value
of the local currency would decline on the international market. As a result,
inflation may increase and people’s purchasing power may decline.
According to the statistics bureau, Pakistan’s yearly inflation rate
increased to 37.97% in May, breaking a previous record for the country. Pakistan’s
consumer price index (CPI) was 36.5 percent in April. This has been
compounded by a lack of job opportunities and low wages in many sectors.
Pakistan’s economic crisis is a complex issue that requires long-term
solutions. The government’s efforts to stabilize the economy through IMF-led measures
are a step in the right direction.
According to The News International, Esther Perez Ruiz, the resident
representative of the International Monetary Fund (IMF) in Pakistan, stated on
Thursday that in to be able to reactivate the loan facility, which was
previously suspended for months, Pakistan must adopt a budget that is in line
with the program’s goals.
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