Pakistan is going through a serious economic Crisis. The country is dealing with inflation, a shortage of essentials, decreasing foreign exchange, and increasing debts. At the same time, the threat of political instability and the impact of global situations have elevated the problems for the country.
At present, the government is focusing on arranging more funds and avoiding a situation of complete economic collapse that would put millions of people in trouble.
Severe Economic Situation
The situation has become severely dire that the government was forced to sell a part of a property owned by Pakistan’s Embassy in the US. Even the PM of Pakistan has accepted the declining economic situation on public fronts and in interviews with foreign news channels. Moreover, the government has asked wedding halls, Malls, and other markets to shut down early for saving electricity consumption.
Let’s understand the causes behind Pakistan’s Economic Crisis in detail.
Political Instability
No Prime Minister in Pakistan has ever completed a 5-year term. Before the completion of their term, they are either removed due to lack of majority or other charges like corruption are initiated against them.
Last year, Imran Khan’s government was removed from power as the opposition came together to get him out of power. For these reasons, long-term policies are unable to survive in the country. At present, the country is witnessing various political protests and rallies across the country too.
Reducing foreign Exchange
Pakistan’s foreign exchange reserves have reached $4.3 billion. It’s constantly decreasing signaling a declining economic situation. Moreover, the level of foreign exchange has been the lowest since February 2014. In absence of foreign exchange, it would be difficult for Pakistan to import oil, fuel, and other essentials.
Global Inflation
Another cause of the economic crisis in Pakistan is the impact of Global Inflation. In this globalized world, an incident taking place in one part of the world impacts every other country. Consequently, the Ukraine-Russia Conflict has increased fuel prices around the globe owing to western sanctions on Ukraine. At the same time, the world is dealing with global inflation that has heavily impacted Pakistan.
2022 Floods
In 2022, Pakistan witnessed one of the worst Floods ever. The Floods from June to October last year claimed the lives of 1739 people. Also, it caused severe damage of Rs. 3.2 trillion to the already struggling economy. Also, the Floods were termed as a result of climate change.
Rising Imports
You may have seen a lot of videos circulating about the shortage of Wheat in Pakistan. Despite agriculture being the primary occupation in Pakistan, the country is facing a shortage of wheat which is a significant part of the people’s diet. Consequently, the country has been forced to import over 980,000 tons in 2022/2023 which is turning expensive for the country.
Increasing Debt
Since the government has been unable to meet the financial needs of the country, it has been taking debts from international organizations and other countries. The country has a long-term external debt of USD 110.610 billion in 2021. It has a total of $33 billion in debts to pay in the Fiscal year 2023. The primary reasons for mounting debts are lower than target tax collection, current devaluation, high-interest rates, increasing expenditure, etc.
