economic crisis in pakistan essay in urdu

Pakistan Development Update October 2022: Inflation and the Poor - Executive Summary in Urdu

2/10/2023 03:04:00 PM

Macroeconomics, Trade and Investment

World Bank Annual Report (The World Bank Annual Report)

South Asia (SAR)

Inflation,Macroeconomic Management,Macroeconomics and Economic Growth

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CARBS Business Review

Pakistan’s Economic Crisis: Unveiling the Causes, Impacts, and Remedies

Dr. ali sajjad, 30 october, 2023.

Pakistan has been grappling with an economic crisis in recent years, which is marked by high rates of inflation, a declining currency, and an increasing debt load. The country’s population has been significantly impacted by this crisis, with many people finding it challenging to meet their financial obligations. This blog will cover the reasons behind the current economic crisis, its effects on the nation, and potential solutions to the problem.

Causes of Crises

1 – external debt.

Pakistan’s current economic crisis is primarily caused by its external debt, which amounts to $126.3 billion. The country owes this debt to a wide range of creditors, including multilateral organizations, Paris Club nations, private and commercial lenders, and China. The growth of this debt load can be attributed to several factors such as excessive borrowing, slow growth, weak exports, and currency depreciation. Pakistan’s foreign exchange reserves are currently around $4 billion, which is insufficient to pay for even one month’s worth of imports.  As a result, there is a significant chance that the nation will not be able to pay its debts in full

2 – Inflation

Pakistan is currently facing a decline in the purchasing power of its populace and an increase in poverty due to a record-breaking inflation rate of over 25%. The rising costs of food, fuel, electricity, and imported goods are the primary causes of this inflation.  The government’s expansionary fiscal and monetary policies, which were implemented to boost the economy in the face of the COVID-19 pandemic, have further exacerbated the inflationary pressure.

3 – Energy Crises

Pakistan is currently dealing with a persistent energy crisis that has seriously hampered its ability to produce goods and expand its economy. The country relies heavily on imported petrol and oil, which are expensive and prone to price volatility. Unfortunately, poor management, corruption, and a lack of investment in renewable energy sources have resulted in insufficient and inefficient domestic energy production. As a result, Pakistan frequently experiences load shedding and power outages, which negatively affect millions of homes and businesses. The country’s GDP has decreased by up to 4% recently as a result of energy shortages.

4 – Political Instability

Pakistan’s financial instability is significantly impacted by its political instability. Frequent changes in government, governance, and political unrest have weakened foreign and domestic investor confidence. This has led to a decrease in foreign direct investment (FDI), causing capital flight and lowering the likelihood of economic growth. Exchange rate volatility, caused by political unrest, harms businesses that depend on stable exchange rates for international trade. Inconsistent economic policies and budgetary constraints lead to budget deficits and increased borrowing, elevating the risk of sovereign debt crises. Insecurity issues related to political instability, including terrorism and civil unrest, disrupt economic activities, deter foreign investment, and damage infrastructure, collectively contributing to economic and financial instability in Pakistan. The political uncertainty has undermined the confidence of investors, creditors, and the public in the government’s ability to address the economic challenges.

Consequences of Crises

1 – social unrest.

Due to the economic hardships the Pakistani people have experienced, there is a great deal of unhappiness and frustration, which has taken many different forms, including protests, strikes, riots, and violence. The social fabric and confidence in the government have been damaged by the rising cost of living, unemployment, inequality, and insecurity. The nation’s stability and unity are in danger as a result of the economic crisis’s escalation of ethnic, sectarian, and regional tensions.

2 – Security challenges

Pakistan’s current economic crisis has significantly weakened its capacity to address both internal and external security challenges. The country is currently grappling with a resurgence of terrorism perpetrated by various militant groups. These groups have exploited the economic crisis to further their nefarious activities, posing a significant threat to Pakistan’s stability and security.

3 – Regional implications

Significant effects of Pakistan’s economic crisis on regional stability and growth. Pakistan, a nuclear-armed nation with a population of more than 200 million, is very significant from a geopolitical standpoint. The potential collapse or instability of Pakistan’s economy could have significant repercussions for its neighbors and the global community.

Solutions to the Crisis

To address the economic crisis in Pakistan, the government and international community must act urgently and comprehensively. The following are some possible solutions:

1 – Debt relief

Pakistan may think about asking for debt relief from its creditors to lessen payback pressure and spend resources for growth. The government can negotiate a favorable debt rescheduling or restructuring with its creditors. Pakistan might also receive crucial financial aid and policy direction by asking the International Monetary Fund (IMF) for help in restarting the halted bailout program.

2 – Structural reforms

It is essential to put structural changes into place to address the underlying causes of Pakistan’s economic problems. To lower inflation, the budget deficit, and the national debt, the government should implement responsible fiscal and monetary policies. To increase revenue production and boost efficiency, it is essential to improve tax collection and expense management. Additionally, expanding export markets and encouraging the export sector can increase foreign exchange revenues. Reduced reliance on imported oil and gas can be achieved by making investments in the energy sector and the development of renewable energy.

3 – Political dialogue

Pakistan must resolve its political crisis through constructive dialogue and consensus-building. The government and the opposition should engage in a peaceful and productive dialogue to end their confrontation and find a mutually acceptable solution to their differences. The government and the opposition should also work together to address the economic challenges and implement the necessary reforms. Both parties must respect the rule of law, the constitution, and the democratic process to ensure the legitimacy and stability of the political system.

4 – International collaboration

By enlisting the aid of its allies and partners, including China, Saudi Arabia, Turkey, Iran, and the United States, Pakistan can improve its international collaboration. This may result in financial support, business opportunities, easier commerce, and technological breakthroughs. The government should also improve ties with its neighbors, especially with India and Afghanistan, to promote regional peace and cooperation. By taking part in regional initiatives, Pakistan can gain from regional connection and integration.

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Dr. Ali Sajjad is currently working as an Assistant Professor at Chaudhary Abdul Rehman Business School, Superior University. From the University of Utara Malaysia, he obtained a PhD in Banking and Finance. Moreover, he is a researcher having years of teaching and research experience. He has several publications and his area of research is accounting, finance, entrepreneurship and Islamic finance.

Please note that all opinions, views, statements, and facts conveyed in the article are solely those of the author and do not necessarily represent the official policy or position of Chaudhry Abdul Rehman Business School (CARBS). CARBS assumes no liability or responsibility for any errors or omissions in the content. When interpreting and applying the information provided in the article, readers are advised to use their own discretion and judgement.

If you are interested to write for CARBS Business Review Contact us !

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Essay Outline: Economic Crisis in Pakistan: Challenges and Prospects

Table of Contents

CSS Essay Outline: Economic Crisis in Pakistan: Challenges and Prospects

By: mureed hussain jasra (csp), 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. Shameful picture on human development index 6. Social fabric of Pakistan torn by a never ending war on terror 7. Myopic financial policies leading to fiscal quandary of Pakistan: Relying on IMF 8. Regressive taxation exempting the wealthy and squeezing the poor of Pakistan 9. Clienteles politics directly conflicting progressive reforms in fiscal policy 10. Rampant corruption and money laundering further festering the economic crisis of Pakistan 11. Mass illiteracy: biggest hurdle in the way of producing a well-trained workforce concentration of wealth in a few hands

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 4. Burgeoning middle class auguring well for economic prognosis of Pakistan 5. Policy initiative keeping public opinion at the center: a sure way for a stable economy 6. China-Pakistan Economic Corridor (CPEC) as a harbinger of economic stability 7. Advances in science and technology 8. Continuation of democracy laying a frame work of stable Pakistan 9. A robust foreign policy centered on regional cooperation to achieve trade viability 10. Restoration of relation with neighboring countries

About the author

Mureed Hussain Jasra (CSP)

Mr. Mureed Hussain Jasra boasts of a diverse professional background. Being a Civil Servant, he has served at important positions in the Federal Secretariat and autonomous bodies dealing with the important policy level matters. Prior to joining Civil Service of Pakistan, he served as a lecturer of English in the Federal Government of Pakistan and won accolades in academic circles and intelligentsia for his professional commitment and devotion to work. Mureed Hussain Jasra's current fame among the CSS aspirants owes to his stellar success as being the most towering CSS coaching teacher and mentor. Under his careful mentorship, many young men and women have won distinctions in the CSS/PMS competitive examinations and are now serving the nation in different capacities. He regards teaching as the singular driving passion of his life and has founded Civil Services Preparatory School for the young aspirants. Mr. Jasra is an avid reader of books and loves debate on history, culture, literature and governance. He is Masters in English Literature.

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I want to ask something, plz answer if you have credible information. Is the paper pattern going to be changed from the next year? Will the exams of 2020 be as per Three Cluster System?

E-Paper | September 15, 2024

State of crisis.

MUCH of Pakistan’s political history has been about governance failures and missed opportunities. Political instability has been endemic with the country alternating between military interventions and civilian rule. Reforms that could have transformed the country and placed its economy on a high-growth and sustainable trajectory were repeatedly postponed as they would have threatened the ruling elite’s privileges and hold on power. Complicating the quest to address persistent economic, governance and security challenges was the impact of global and regional developments.

In fact, the external and internal has been so intertwined in Pakistan’s history as to multiply challenges and leave the country in a constant crisis management mode. The country’s ability to weather global and regional geopolitical storms was repeatedly tested. Dealing with their fallout for protracted periods from a state of economic and political fragility ended up emaciating and exhausting Pakistan.

Now a bold new book seeks to tell the Pakistan story from a new perspective. Mohammed Waseem is among Pakistan’s leading intellectuals and brings his many years in academia to bear on a work rich in insights. His latest book Political Conflict in Pakistan deploys, as its title indicates, the analytical construct of conflict to consider the country’s political experience in multiple dimensions. This is predicated on the hypothesis that political conflict in a postcolonial state like Pakistan is pervasive and the root of “a permanent crisis of governance”. This is because of the gap between the modern state and traditional society, between institutional design and practice and between “a ‘Western’ framework of authority and Islamic norms and practices”. He sees conflict as both disruptive and constructive of the social and political order.

The book draws on sociological perspectives and political science literature to argue that all politics is about conflict. This, he writes, challenges managers of the state. How they deal with contentious issues determines the country’s evolution. Discussing what he calls the “persistent and devastating” clash between two elite groups in Pakistan, the state elite and the political elite, he argues that these groups rest mainly on two power centres, the middle class and political class respectively. “The former is generally identified with the ‘establishment’, led by the army. The latter represents political parties and parliament, which draw on the constitutional edifice as the supreme source of legitimacy.”

Governance failures and the ruling elite’s resistance to reform have marked Pakistan’s political history.

This state of play, he writes, has led to a “bifocal nature of state authority”. The two represent opposing outlooks, visions, worldviews and policy orientations. “The middle-class narrative focuses on the national interest, but the political class’s idiom focuses on the public interest.” These two power centres define what Waseem calls the “mega conflict between the civil and military organs of state”. He offers an in-depth account of how political initiative has shifted between the state elite representing the middle class and the political class symbolised by leaders of political parties that engage in mass mobilisation through electoral activism.

Waseem argues that over the decades the establishment has tried to promote, support and impose its “preferred leadership” through the electoral process denuding the country of genuine public representatives. He sees a long history of manipulation of elections by extra-parliamentary forces to shape outcomes and says “the establishment’s preference for client parties contributed enormously to a weak and vulnerable party system in Pakistan”. He backs this up by naming numerous parties the establishment created and then supported.

Read: If establishment stays neutral, Imran can’t survive no-trust move: Bilawal

In a chapter titled ‘An Establishmentarian Democracy’ he deals with an issue as relevant today as in the past as it is among the country’s enduring fault lines. Asserting that democracy has been a major source of conflict he examines whether Pakistan’s present hybrid regime is democratic only in form and not substance. To support his claim that Pakistan is what he calls an ‘establishmentarian democracy’ Waseem first compares its experience to India’s and then seeks to show that the establishment was able to significantly shape the contours of democracy while the weak role of parliament contributed to this. Some may find this an overly cynical and sweeping view that accords the establishment more controlling power over the political system than is merited. But few would disagree with Waseem’s central proposition that the military’s dominant role “hampered the growth of democracy” or that civil-military conflict has been a constant theme. He acknowledges that “while the constitutional tradition has been too weak to stop military takeovers, it has been too strong to allow generals to rule in their own name for long”.

The book explores many other themes that have been recurrent in Pakistan’s political history including challenges of the federal project, sub-nationalist movements and Islamisation. There is an interesting analysis of partition in terms of two competing paradigms, one faith-based and the other resting on a shared past. It also delves into why conspiracy theories are embedded in the mindset of educated Pakistanis. Whether the left or right, ‘liberal’ or religious ‘thinking minds’, Waseem sees them all “display paranoia about international conspiracies to pressure, bully, corner or undo Pakistan”.

The book has a sweeping scope in examining the many facets of Pakistan’s story. But it would also have benefited from consideration of the country’s economic experience as that is inextricably linked to politics. After all, competition over scarce resources also shaped politics, influenced civil-military relations and fuelled centre-province tensions. A recurrent theme in Pakistan’s history, since at least the 1980s, has been the threat posed to financial and political stability by the budgetary resource crisis. An oligarchic elite relied on ‘borrowed’ growth and bailouts to address the country’s chronic financial crises and resisted meaningful reform that included taxing itself and its support base. The power elite also assumed ‘rentier’ characteristics: using political office to access state resources and thus acquire wealth and unearned income.

The enigma of successive civilian and military governments living beyond their means can only be explained in terms of a privilegentsia averse to measures that would either have eroded its position or threatened its interests. This has contributed to miring Pakistan in perpetual financial crisis with virtually every government in the past four decades leaving the economy in much worse shape for its successor.

The writer is a former ambassador to the US, UK & UN.

Published in Dawn, March 7th, 2022

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ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.

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Translations in Urdu (اردو)

جوابدہی کا نظام : خلاصہ

یہ بروشر ADB کے جوابدہی کے نظام کا ایک جائزہ پیش کرتاہے اور اس کے بارے میں اکثر پوچھے جانے والے سوالات کے جواب بھی دیتا ہے۔

عمومی اصول: تعمیل کے جائزوں سے حاصل شدہ اسباق۔۔ترقیاتی اثرپذیری کے اصولوں کو مستحکم کرنا

ایشیائی ترقیاتی بینک کی پابندیوں کے بارے میں سب سے زیادہ پوچھے جانے والے سوالات

Supporting Environmental Safeguards in the Central and West Asia Region: Suggested Standard Operating Procedure on Working Safely from Infectious Diseases (such as COVID-19) Consultant’s Report (Urdu)

Protecting Pakistan Against COVID-19 (Urdu Translation)

ADB has approved a $500 million loan to help the Government of Pakistan procure and deploy safe and effective coronavirus disease (COVID-19) vaccines and strengthen the country’s capacity to implement its vaccination program.

معلومات تک رسائی

The new policy focuses on the guiding principles and the exceptions to disclosure.

ایشیائی ترقیاتی بینک اور پاکستان: حقائق نامہ

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حکمت عملی 2030: خوشحال، ہمہ گیر، مستحکم اور پائیدار ایشیاء و بحرالکایل کا حصول

حکمت عملی 2030خطے کی بدلتی ہوئی ضروریات کو پورا کرنے کے لیے ADBکی کوششوں کی راہ متعین کرتی ہے۔

سٹرٹیجک پروکیورمنٹ پلاننگ

پراجیکٹ کی پیچیدگی، خطرات، اس کی مالیت اور اس کی پروکیورمنٹ کے معاہدوں سے اس بات کا تعین کرنے میں مدد ملے گی کہ کس سطح کی تحقیق اور تجزیے کی ضرورت ہے تاکہ پروکیورمنٹ کے متعلقہ و متناسب طریقہ ہائے کار اختیار کرنے کو یقینی بنایا جا سکے۔

پروکیورمنٹ کے متبادل انتظامات

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Pakistan: Five major issues to watch in 2023

Subscribe to the center for middle east policy newsletter, madiha afzal madiha afzal fellow - foreign policy , center for middle east policy , strobe talbott center for security, strategy, and technology , center for asia policy studies.

January 13, 2023

1. Political instability, polarization, and an election year

Politics will likely consume much of Pakistan’s time and attention in 2023, as it did in 2022. The country’s turn to political instability last spring did not end with a dramatic no-confidence vote in parliament last April that ousted then Pakistani Prime Minister Imran Khan from office. Instability and polarization have only heightened since then: Khan has led a popular opposition movement against the incumbent coalition government and the military, staging a series of large rallies across the country through the year.

The struggle for power in Pakistan continues into 2023. While the incumbent government has not ceded to Khan’s demand for early elections, country-wide elections are constitutionally mandated to be held by October this year. It benefits the government politically to hold them off as long as it possibly can as it tries to dig itself out of Pakistan’s urgent economic crisis and its lackluster domestic performance (its diplomatic foreign policy approach has fared better, but that may not matter for elections). The last year has cost it precious political capital, and Khan’s party did very well in a set of by-elections held in July and October. The state has tried to mire Khan and his party in legal cases, relying on a familiar playbook used against opposition politicians in Pakistan, albeit to limited effect, with the courts’ involvement.

Khan’s party still controls two of Pakistan’s four provinces, Punjab and Khyber Pakhtunkhwa (KP), and the incumbent federal government’s (extra-legal) efforts to try to wrest power from it in Punjab, the largest province, have been unsuccessful (thanks to the courts). The year is off to a dramatic start, with Khan’s party initiating the process to dissolve the Punjab and KP assemblies this month to pressure the federal government into early elections.

For politics-obsessed Pakistan, the biggest question remains who will win the next general election. Will former Prime Minister Nawaz Sharif (brother of current Prime Minister Shehbaz Sharif) return to Pakistan to run as the head of his party, the PML-N? Can Imran Khan win on the strength of his popular support, despite his confrontation with the military? Regardless of the outcome, we can say this much given the histories of the main contenders: The direction of the country is unlikely to change.

2. A precarious economic situation

Pakistan’s economy has been in crisis for months, predating the summer’s catastrophic floods. Inflation is backbreaking, the rupee’s value has fallen sharply, and its foreign reserves have now dropped to the precariously low level of $4.3 billion, enough to cover only one month’s worth of imports, raising the possibility of default.

An economic crisis comes around every few years in Pakistan, borne out of an economy that doesn’t produce enough and spends too much, and is thus reliant on external debt. Every successive crisis is worse as the debt bill gets larger and payments become due. This year, internal political instability and the flooding catastrophe have worsened it. There is a significant external element to the crisis as well, with rising global food and fuel prices in the wake of Russia’s war in Ukraine. The combination of all these factors has spelled perhaps the greatest economic challenge Pakistan has ever seen. Yet the government has been mired in politicking, and the release of a $1.1 billion loan tranche from the International Monetary Fund (IMF) remains stalled as Islamabad has pushed back on the IMF’s conditions. The government has now resorted to limiting imports and shutting down malls and wedding halls early, small measures that fail to adequately address the problem.

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Pakistan may end up avoiding default for the time being with IMF help and loans from friendly countries, especially Saudi Arabia and other Gulf nations. But those won’t address the clear underlying malaise of the economy – and the fact that something fundamentally will need to change, in terms of how much the economy produces versus how much it spends, to avoid default down the road. But none of Pakistan’s political parties seem to have the political will or ability to bring about such change.

Pakistan must reportedly pay back $73 billion by 2025; it won’t be able to do so without debt restructuring.

3. Flood recovery

A “ monsoon on steroids ” – directly linked to climate change – caused a summer of flooding in Pakistan so catastrophic that it has repeatedly been described as biblical. It left a third of the country under water – submerging entire villages – killed more than 1,700, destroyed homes, infrastructure, and vast cropland, and left millions displaced.

More than four months after the worst of the flooding, nearly 90,000 people are still displaced from their homes, and the floodwater is still standing in some areas. It would be enormously difficult for any country to recover from such a disaster and rebuild lost infrastructure, including roads and schools, let alone a government dealing with a cash crunch like Pakistan’s.

But the Pakistani government – in particular the foreign minister Bilawal Bhutto Zardari, who has visited the United States twice since the summer, and the minister for climate change, Sherry Rehman – has done an admirable job bringing awareness of the flooding catastrophe to the world stage. A donors’ conference Sharif co-hosted with the United Nations Secretary General Antonio Guterres in Geneva this month raised pledges for more than $9 billion for flood recovery over the next three years (the money is mostly in the form of project loans). Pakistan has also played an important role in discussions about the devastating effects of climate change on developing nations, spearheading the effort to place loss and damage on the agenda at COP27 for the first time, and pushing for COP delegates in Egypt to agree to a loss and damage fund.

With billions of dollars in help promised, the government has passed one hurdle. But the road for recovery ahead will be tough: Displaced people are still sleeping under open skies in Sindh province. Implementing a sustainable recovery will require enormous capacity, resources, and transparency in a country already mired in other troubles.

4. Mounting insecurity

The Pakistani Taliban (or TTP), the terrorist group responsible for killing tens of thousands of Pakistanis from 2007 to 2014, have been emboldened – predictably so – by a Taliban-ruled Afghanistan, and once again pose a threat to Pakistan, albeit in a geographically limited region (for now). The group engaged in at least 150 attacks in Pakistan last year, mostly in the northwest. Because the TTP have sanctuary in Afghanistan, the Pakistani state increasingly finds itself out of options when it comes to dealing effectively with the group. The state’s negotiations with the TTP have failed repeatedly, as they are bound to, because the group is fundamentally opposed to the notion of the Pakistani state and constitution as it exists today. The Afghan Taliban have, unsurprisingly, also not proved to be of help in dealing with the TTP – and Pakistan’s relations with the Afghan Taliban have deteriorated significantly at the same time over other issues, including the border dividing the two countries.

At this point, Pakistan’s first preference will be to strike kinetically at TTP targets within its borders, but that will be limited by TTP movement across the border into Afghanistan. That movement is what leaves Pakistan with the difficult-to-resolve TTP issue and complicates things beyond the military operation it launched against the group in 2014. Still, the Pakistani Taliban at this point is not the biggest threat Pakistan faces, given the country’s major political and economic challenges – but left unchecked, it could morph into a significant crisis.

5. Civil-military relations

Pakistan has a new chief of army staff as of November 29 last year. General Asim Munir replaced General Qamar Javed Bajwa, who had held the all-powerful post for six years (due to a three-year extension). The appointment of the army chief was a subject of considerable political contention last year; a major part of the reason Khan was ousted from power was his falling out with the military on questions over the appointments of top army officials.

All eyes are now on how civil-military relations shape up under Munir. Under Bajwa, the military solidified its control over all manner of policy behind the scenes. Bajwa presided over a close “same-page” relationship with Khan; when that frayed, the PML-N was eager to take Khan’s place as the military’s ally and head of the civilian government. Bajwa left office saying the army would no longer be involved in political matters; few in Pakistan believe him. With politics set to dominate the agenda this year and an election imminent, Munir has a chance to show the country whether he will follow in his predecessor’s footsteps, or chart a new course for civil-military relations in Pakistan. Pakistan’s history indicates the former.

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Governance, Economic Policy and Reform in Pakistan Essays in Political Economy – Urdu Version

Quite frequently, one reads of how our deteriorating values or even the lack of values are an explanation of our social, political and economic problems. For example, Dr. Eqbal Ahmed wrote in Dawn on September 20, 1992, “At the root of this imbalance between nondemocratic and democratic forces in our political life lies the questions of tradition and values”. One cannot help but agree with this statement. In fact, hardly anyone disagrees with this line of reasoning. Probably, this argument has been used at every pulpit and has been discussed in every teahouse. Religious obscurantists of all shades love this as a prelude to selling their variety of religion. The advantage of this approach, “blame it on our values”, is that it provides both a readymade analysis and an easy answer, “fix your values”. We then wish for values to change. The hope is that, someday a new moral, incorruptible, altruistic and hardworking man will emerge in Pakistan and all problems will, by definition, be solved.

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An Economic Impact of Political Instability: An Evidence from Pakistan

Article history Received: April 04, 2021 Revised: April 22, 2021 Accepted: April 26, 2021 The economy of Pakistan has been badly damaged by the political instability in the country. Despite its enormous economic resources, Pakistan’s economy remained under dark shadows during most of its historical discourse. The economic indicators describe a significant relationship between politics and the economy of Pakistan. The following study, by reviewing previous studies, concludes that there is a negative relationship between political instability and economic growth in Pakistan from 2000 to 2019. Political instability flourished corruption and reduced the economic growth of the country. Moreover, a weak political system and government institutions could not resist the political tension in the country. The study finally concludes that political instability reduces economic growth in the country and economic growth reinforces political stability in the country.

Related Papers

Procedia - Social and Behavioral Sciences

Shujahat Hashmi

In case of Pakistan, only economic variables are observed as causes to high economic volatility while political variables are completely ignored. Although, it is apparent that the development pattern in Pakistan is highly volatile during the years of political instability that spans almost over the half history of the country. By taking the sample of 1971 to 2008 and using simple OLS technique, we observe how far political instability hampers the economic development of Pakistan. For the political instability measurement, ignoring all traditional measures of political instability, we construct political instability index by using seven different variables for Pakistan by employing Principal Component Technique; while for economic development measurement frequently economic development variables are used. Through analysis, the negative relationship is found between political instability and economic development in Pakistan.

The purpose of this paper is to empirically determine the effects of political instability in Pakistan within compared with India and China. We discussed GDP per capita and their impact on economic growth. By using the standard deviation and co- variance on a sample of 3 countries, and 5-year periods from 1988 to 2014, this study demonstrates that a significant negative relationship exists between political instability and economic growth we find that higher degrees of political instability are associated with lower growth rates of GDP Per capita. While democracy may have a small negative effect.

Prof.Dr.Abdul Ghafoor Awan

The objective of this paper was to investigate the relationship between economic growth and political instability. For this purpose, we selected three variables such as political instability, inflation rate and public debt to measure their impact on Gross Domestic Product (GDP). We used panel data and analyzed it through SPSS software to draw the results. We applied Multiple Regression, ANOVA and Correlation techniques for analysis of data. Our results show that there is a negative correlation between public debt and economic growth. Similarly, there is also a negative correlation between public debt and political instability. Our study suggests that Pakistan must reduce level of public debt and political instability and inflation in order to achieve high level of economic growth.

The political instability is condition for the nation building and nation building is process compulsory for the development of a nation. In most of developing countries the governments are not stable. A new government comes into the power overnight; either through coup data or army takes over. The new government introduces a new system of rules for the operation of business which cause frustration and anger among the people. Political instability now becomes a serious problem especially in developing countries. It is creating enormous difficulties and delaying the development of these countries. Political stability plays an important role in keeping society united and in maintaining legitimacy within the state. It is an essential for the economic development, social integration, and supremacy of law in a state. The stability of political system has direct effects on the procedures of nation and state building. These both require stable political systems for their growth and successful. The development of nation and state without firm and organized system of politics is not possible. So Political instability can be defined at least three ways, first approach is as, the propensity for regime or government change, second is to focus on the incidence of political disorder or violence in a society, such as killings, third approach focuses on economic growth affect by instability. PAKISTAN has spent 34 out of its 68 years, or half its life, in internal political instability as regime instability, political emergencies and constitutional deadlocks. Long-term instability in Pakistan has been significantly higher than in East Asia and post-Partition India. Lack of mature leadership, confrontation between the main organs of the state, poor relations between the center and the provinces, extensive corruption, distrust among the politicians, strong bureaucracy and crisis of governance are the immediate threats to democracy in Pakistan The political instability is directly affected economic growth. How does it affect economic growth and why this is important in developing countries like Pakistan is discussed in brief below? When there is lack of political instability in the county, it directly effects the economic growth. It closes off sources of internal and external investments. The eternal investors does not invest in the countries where there is civil war coups, army take over etc. is either small or zero. The lack of interest by the foreign investors for foreign direct investment, and giving Pakistan access to the productive markets are making economy low and more likely to rely on foreign aid. The improper use of aid on the huge disasters like earth quake in 2005 and on the wake of flood in 2010 has lost the trust of donors to support Pakistan sufficiently even in most difficult times. So that investment remains shy the Growth will remain the dream which leads the high unemployment and poverty. Political instability also limits internal investment. The wealthy classes in under developed countries have enough income to replacement. They can invest their saving in profitable projects. Generally they avoid investing

Journal of Research in Administrative Sciences

Ijaz Bokhari

IJMSBR Open Access Journal

This study analyzed the impact of political instability on financial development of Pakistan. OLS regression is used for the estimation of data. Time series data is used for the study. 40 years are included in the time series from 1972 to 2011. The variable of interest is political instability controlling the effects of trade openness, legal protection and GDP/capita. The regression results showed that political instability has negative significant impact on financial development of Pakistan. Trade openness is positive but insignificant with financial development. Legal protection and GDP/capita showed positive and significant impact on the financial development of Pakistan.

Dr. G H U L A M MUSTAFA , MUSHARAF RUBAB

The purpose of the study is to determine the impact of political instability on economic growth. For this purpose, we measured political instability by means of three proxies: terrorism, govt. type and election year whereas economic growth is determined with GDP annual growth rate. We used data from 1988 to 2016 and applied ARCH model as our dependent variable (economic growth) is subject to heteroscedasticy and ARCH effect. The results showed that political instability measured with terrorism and election year has negative effect on economic growth. However, govt. type is also found to be negative though insignificant. The study adds to the literature of Pakistan and is helpful for policymakers and investors

Journal of Accounting and Finance in Emerging Economies

Ghulam Muhammad Mangnejo

This research paper empirically investigates the outcome of Political stability on economic growth (EG) of Pakistan for the period of 1988 to 2018. Political stability (PS), gross fixed capital formation (GFCF), total labor force (TLF) and Inflation (INF) are important explanatory variables. Whereas for model selection GDPr is used as the dependent variable. To check the stationary of time series data Augmented Dickey Fuller (ADF) unit root (UR) test has been used, and whereas to find out the long run relationship among variables, OLS method has been used. The analysis the impact of PS on EG (EG) in the short run, VAR model has been used. The outcomes show that all the variables (PS, GFCF, TLF and INF) have a significantly positive effect on the EG of Pakistan in the long run period. But the effect of PS on GDP is smaller. Further, in this research we are trying to see the short run relationship between GDP and other explanatory variables. The outcomes show that PS does not have su...

Ali Abbas. PhD , Muhammad Sultan

The purpose of this research piece is to examine the chances and problems that Pakistan's economy has encountered in light of the country's rising political unrest. It studies the effects of political unpredictability on economic growth and development and analyses Pakistan's methods and policies for achieving economic recovery in the face of such difficult conditions. The article uses a variety of academic research and case studies to provide light on the wellknown instance of Pakistan's economic recovery in the face of political unrest. Pakistan, a nation that has gone through political unrest in the past, is today juggling the task of economic recovery with escalating political unrest. This study offers a thorough examination of the complex interplay between political unrest and growth in the economy of Pakistan, putting it forward as a traditional case study. This paper examines the complex dynamics and inter-dependencies between political instability and economic recovery by drawing on a theoretical framework that includes the concepts of political economy, institutional theory, and dependency theory. This study provides a comprehensive analysis of the complex dynamics between political unrest and economic recovery in Pakistan. By understanding these interdependencies, policymakers can formulate targeted strategies to navigate challenges and foster long-term economic stability and development.

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Pakistan’s Economic Crisis: What Went Wrong?

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The pulse  |  economy  |  south asia.

The country is currently running on foreign loans taken on high rates of interest. It will have to repay $80 billion in the coming three years.

Farmers clear out debris in an apple orchard damaged by floods ahead of the harvesting season in Quetta, Balochistan, April 10, 2023.

In March-April, the Pakistan government set up distribution sites across the country to provide s asta aur muft aata (low-cost and free flour) to people to ease their burden amid spiraling prices and the ongoing economic crisis in the country. But instead of doing good, the initiative caused trouble in several places where stampedes broke out, killing and injuring people.

Pakistanis are putting their lives at risk to collect something as basic as a sack of flour. It illustrates how the rising cost of food and other necessities is driving desperation and impacting the masses.

With inflation running at over 30 percent – a 50-year high – putting food on the table for the poorest, who comprise one-third of Pakistan’s population, has become harder than ever before.

When the recent stampedes over food flooded social media, so did the deeper questions: How did the country end up here? What does this economic crisis mean for the majority of the Pakistani people and for Pakistan’s international projects, especially those with China under the China-Pakistan Economic Corridor (CPEC), which Pakistan considers vital for its future economic growth?

Pakistan’s current GDP, per capita income, and GDP growth are the lowest in its neighborhood ; only war-torn Afghanistan’s economy is weaker.  Likewise, its unemployment and inflation rates are one of the highest in the region. The Human Development Inde x, which measures a country’s achievements through three basic dimensions – health, knowledge, and standards of living – placed Pakistan in the 161st position out of 185 countries in 2022. In other words, Pakistan is among the 25 countries with the lowest human development in the world.

The country’s current situation has multiple causes, including overall poor economic management, corruption, and excessive spending on defense and the armed forces. In a country where half the population is under the age of 22 , investing in the education and technical skills of youth can generate opportunities for a more sustainable economy.

Many also associate the current economic crisis, especially the rise in food staples, with last year’s floods, which caused extensive damage to agricultural land, livestock, thousands of kilometers of road, and other infrastructure. This is partially right, as inflation touched a record high after the floods in August last year. But the war in Ukraine also halted grain supply to a number of countries, including Pakistan, resulting in a sharp increase in prices of foodgrains.

But the situation was not stable even prior to these crises. According to a World Bank report on inflation and development in Pakistan, food-related shortages and transportation challenges caused by the floods and the war in Ukraine that impacted essential grain imports significantly contributed to the inflation, but so did a hike in fuel and oil subsidies. Pakistan heavily relies on imported oil. A constant decline in the value of the country’s currency has resulted in much higher tariffs with every import of oil.

The unceasing decline in the value of Pakistan’s currency over the months has been triggered by the country’s inability to repay its foreign debt . Pakistan is essentially running on foreign loans, an economic model that only leads to borrowing more, which eventually results in bankruptcy. Between February 2023 and June 2026, Pakistan will have to repay around $80 billion in foreign debt.

As of December 2022, Pakistan held $126.3 billion in external debt and liabilities, of which 30 percent is owed to China. As much as the Chinese government has supported Pakistan’s infrastructure development through CPEC, which Pakistan is determined to benefit economically from in the future, for now, the federal government is having to repeatedly turn to the Chinese for refinancing and a rollover of debts .

Although the Chinese government and commercial banks have helped Pakistan by deferring debt repayment or rolling over debts in the past, it is hard to predict if China will continue to do so.

So far, of the numerous projects agreed upon under CPEC, only a few have been completed. Chinese frustration over endless delays in project completion, halting of projects, and security threats to its nationals working in Pakistan has resulted in hesitation to invest in new projects. Yet Pakistan remains one of the biggest beneficiaries of Chinese loans.

Many blame China for the high interest it charges on loans that have burdened many developing countries including Pakistan. Instead of the promised economic growth through CPEC, China’s loans may have worsened Pakistan’s economic crisis. But it is still too early to conclude whether CPEC debts will drain the Pakistani economy or open up opportunities for growth in the future.

For now, transparency over government spending is the need of the hour, along with restructuring the country’s economy from one that overspends on defense institutions and excessively relies on foreign debt with high interest to a model that is sustainable.

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Economic Crisis in Pakistan: Challenges and Remedies

• Bilal Ahmad
• November 26, 2022
• Daily Write-Ups , Economy of Pakistan
• 41776 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.

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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The Current Situation in Pakistan

A USIP Fact Sheet

Monday, January 23, 2023

Publication Type: Fact Sheet

Pakistan continues to face multiple sources of internal and external conflict. Extremism and intolerance of diversity and dissent have grown, fuelled by a narrow vision of Pakistan’s national identity, and are threatening the country’s prospects for social cohesion and stability.   

The inability of state institutions to reliably provide peaceful ways to resolve grievances has encouraged groups to seek violence as an alternative. The country saw peaceful political transitions after the 2013 and 2018 elections. However, as the country prepares for anticipated elections in 2023, it continues to face a fragile economy along with deepening domestic polarization. Meanwhile, devastating flooding across Pakistan in 2022 has caused billions in damage, strained the country’s agriculture and health sectors, and also laid bare Pakistan’s vulnerability to climate disasters and troubling weaknesses in governance and economic stability.

Regionally, Pakistan faces a resurgence of extremist groups along its border with Afghanistan, which has raised tensions with Taliban-led Afghanistan. Despite a declared ceasefire on the Line of Control in Kashmir in 2021, relations with India remain stagnant and vulnerable to crises that pose a threat to regional and international security. The presence and influence of China, as a great power and close ally of Pakistan, has both the potential to ameliorate and exacerbate various internal and external conflicts in the region.

USIP’S Work

The U.S. Institute of Peace has conducted research and analysis and promoted dialogue in Pakistan since the 1990s, with a presence in the country since 2013. The Institute works to help reverse Pakistan’s growing intolerance of diversity and to increase social cohesion. USIP supports local organizations that develop innovative ways to build peace and promote narratives of inclusion using media, arts, technology, dialogues and education.

USIP works with state institutions in their efforts to be more responsive to citizens’ needs, which can reduce the use of violence to resolve grievances. The Institute supports work to improve police-community relations, promote greater access to justice and strengthen inclusive democratic institutions and governance. USIP also conducts and supports research in Pakistan to better understand drivers of peace and conflict and informs international policies and programs that promote peace and tolerance within Pakistan, between Pakistan and its neighbors, and between Pakistan and the United States.

USIP’s Work in Pakistan Includes:

Improving police-community relations for effective law enforcement

The Pakistani police have struggled with a poor relationship with the public, characterized by mistrust and mistreatment, which has hindered effective policing. USIP has partnered with national and provincial police departments to aid in building police-community relationships and strengthening policing in Pakistan through training, capacity building and social media engagement.

Building sustainable mechanisms for dialogue, critical thinking and peace education.

Nearly two-thirds of Pakistan’s population is under the age of 30. Youth with access to higher education carry disproportionate influence in society. However, Pakistan’s siloed education system does not allow interactions across diverse groups or campuses, leading to intolerance, and in some cases, radicalization. To tackle growing intolerance of diversity on university campuses, USIP has partnered with civil society and state institutions to support programs that establish sustainable mechanisms for dialogue, critical thinking and peace education.

Helping Pakistanis rebuild traditions of tolerance to counter extremists’ demands for violence

USIP supports local cultural leaders, civil society organizations, artists and others in reviving local traditions and discourses that encourage acceptance of diversity, promote dialogue and address social change. USIP also supports media production — including theater, documentaries and collections of short stories — which offer counter narratives to extremism and religious fundamentalism.

Support for acceptance and inclusion of religious minorities

Relations between religious communities in Pakistan have deteriorated, with some instances of intercommunal violence or other forms of exclusion. USIP supports the efforts of local peacebuilders, including religious scholars and leaders, to promote interfaith harmony, peaceful coexistence and equitable inclusion of minorities (gender, ethnic and religious) in all spheres of public life.

Supporting inclusive and democratic institutions

To help democratic institutions be more responsive to citizens, USIP supports technical assistance to state institutions and efforts to empower local governments, along with helping relevant civil society actors advocate for greater inclusion of marginalized groups. Gender has been a major theme of this effort and across USIP’s programming in Pakistan. These programs empower women in peacebuilding and democratic processes through research, advocacy and capacity building.

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Essay On CPEC In Urdu

Back to: Urdu Essays List 1

China Pakistan economic corridor “

پاک چین اقتصادی راہداری(CPEC): ایک بہت بڑا تجارتی منصوبہ ہے، جس کا مقصد جنوب مغربی پاکستان سے چین کے شمال  مغربی خود مختار علاقے سنکیانگ تک گوادر بندرگاہ، ریلوے اور موٹروے کے ذریعے تیل اور گیس کی کم وقت میں ترسیل کرنا ہے۔ اقتصادی راہداری پاک چین تعلقات میں مرکزی اہمیت کی حامل تصور کی جاتی ہے، گوادر سے کاشغر تک تقریباً 2442 کلومیٹر  طویل ہے۔یہ منصوبہ مکمل ہونے میں کئی سال لگیں گے اس پر کل 46 بلین ڈالر لاگت کا اندازہ کیا گيا ہے۔راہداری چین کی اکیسویں صدی میں شاہراہ ریشم میں توسیع ہے۔

پاکستان کی قدرتی طورملاجغرافیائی محل وقوع( اسٹریٹجک پوزیشن )اس قدر اہمیت کاحامل ہے کہ پاکستان پوری دنیا کی تیل، گیس ،زراعت، صنعتی و معدنی پیدوار اور منڈیوں کے درمیان پل بن سکتاہے۔اس قدرتی محل وقوع کی اہمیت اورافادیت کومدنظر رکھتے ہوئے پاکستان اور چین نے مل کر’’پاک چائنہ اقتصادی راہداری منصوبہ‘‘بنانے کافیصلہ کیاہے جوکاشغر سے شروع ہو کر گلگت۔ بلتستان اور خیبر پختونخواہ اور پھر بلوچستان سے گزرے گا۔واضح رہے کہ پاک چائنہ اقتصادی راہداری منصوبہ دنیا کا سب سے بڑا معاشی منصوبہ ہے۔یہ ہزاروں کلومیٹر ریلویز، موٹرویز، لاجسٹک سائٹس اور بندرگاہوں کا ایک مربوط نظام ہے۔چین یومیہ60لاکھ بیرل تیل بیرون ملک سے درآمدکرتاہے جس کا کل سفر12000کلومیٹر بنتاہے جبکہ یہی سفرسی پیک کی تکیمل کے بعدسمٹ کرمحض3000کلومیٹر رہ جائے گا جس کے باعث چین کوتیل کی سالانہ تیل کی درآمدت پر20ارب ڈالربچت ہوگی جبکہ پاکستان کو تیل کی راہداری کی مدمیں5 ارب ڈالریعنی پانچ کھرب یاپانچ سو ارب روپے سالانہ ملیں گے۔ 

ان منصوبوں کے متعلقہ علاقوں میں لامحالہ معاشی اوراقتصادی اثرات مرتب ہوں گے۔ سرمایہ کاری اور انفراسٹرکچر کی تعمیر ان علاقوں میں صنعتی اور تجارتی سرگرمیوں کے فروغ اور ترقی کے ایک نئے دور کے آغاز کا سنگِ میل ثابت ہوں گی۔ روزگار کے بے شمار مواقع میسرہوں گے۔غربت کے خاتمے کے لئے یہ مواقع لاکھوں خاندانوں کو غربت کی بیڑیوں سے آزاد کر سکیں گے۔ اگر تمام منصوبے پروگرام کے مطابق مکمل ہو گئے تو زیادہ تر علاقوں میں کاروبار، صنعت اور تجارت کا روایتی انداز اور طرز ہمیشہ کے لئے بدل جائے گا۔

پاکستان کے لئے یہ ایک انتہائی نادروسنہری موقع ہے کہ اس منصوبے سے اپنے بہترین معاشی مفادات اورمتناسب علاقائی ترقی کے مطابق اس سیفائدہ اٹھائے۔ بلوچستان، خیبرپختونخواہ اور گلگت بلتستان براہ راست اس منصوبے کا حصہ ہوں گے۔ جبکہ دوسرے صوبے روڈ نیٹ ورک کے ذریعے منسلک ہوں گے۔منصوبوں کی تیاری، ان میں مقامی صنعتوں کی شمو لیت، مقامی لیبر اور افرادی قوت کی کھپت سمیت بہت سے حساس اور دور رس اہمیت کے معاملات اس پرو جیکٹ کے فوائدکے حصول میں اہم کردار کریں گے۔

مختصر یہ کہ سی پیک کے ذریعے پاکستان دنیا میں ایک مستحکم اقتصادی قوت کاحامل ملک بن کے ابھرے گا۔ اسی وجہ سے پاکستان مخالف طاقتوں اور گروہوں کی نیندیں حرام ہوچکی ہیں جوکہ پاکستان کو پھلتاپھولتا نہیں دیکھ سکتیں ۔

واضح رہے کہ مختلف سیاسی اور قوم پرست جماعتیں سی پیک کے خلاف آوازیں بلند کررہی ہیں جس کیلئے وفاق وعسکری قیادت کو چاہیے کہ انہیں آن بورڈلیکر ان کے جائزمطالبات کوپوراکریں۔ مگرتمام سیاسی وقوم پرست جماعتوں کو چاہیے کہ ملک وقوم کے وسیع تر مفادات ،سالمیت اورخوشحالی کیلئے اس عظیم منصوبے کے خلاف صرف اپنے ذاتی مفادات کیلئے ہرزہ سرائی سے گریز کریں۔تاریخ گواہ ہے کہ پاکستان میں سیاسی وقوم پرست جماعتوں نے ماضی میں بھی عوام کے مفادات کیلئے بنائے جانے والے بڑے منصوبوں کوسیاست کی نذرکرکے پاکستان کی ترقی میں رکاؤٹ ڈالی اگر اس بارایساکیا گیاتوانہیں سخت ترین عوامی ردعمل ومذاحمت کا سامنا کرنا پڑے گا۔ضرورت اس امر کی ہے کہ پاکستان کی ترقی ،سالمیت اورخوشحالی کے ضامن سی پیک منصوبے کی تکمیل کیلئے قوم کا ہرفرد خواہ اس کی وابستگی کسی بھی سیاسی،مذہبی جماعت سے ہو یا کسی بھی علاقے وزبان وقوم سے ہو،کو چاہیے کہ مل کر ملک کی ترقی میں حائل رکاؤٹوں کومشترکہ جدوجہدکرکے اس عظیم ترین منصوبے کوپایہ تکمیل تک پہنچا کرپاکستان کوترقی کے ناختم ہونے والے سفرپرگامزن کریں۔

20 اپریل 2015ء کو پاکستان میں چینی صدر کے دورے کے دوران، مختلف شعبوں میں مفاہمت کی 51 یادداشتوں پر چین اور پاکستان کے درمیان منصوبوں پر دستخط ہوئے تھے۔ راہداری کے بڑے منصوبے جو دوطرفہ تعاون سے ہیں، ان منصوبوں میں سے بہت سے منظور کر لیے گئے ہیں اور کچھ ابھی تک مطالعات کی وجہ سے روکے ہوئے ہیں جنکو بہت ہی جلد تکمیل تک پہنچایا جا سکتا ہے۔

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

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).

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Daniel F. Runde

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