The year 2021 ended with immense diplomatic challenges for Pakistan particularly due to the turmoil in Afghanistan, regional and global situation and the escalating crisis between the United States and China. Pakistan has been in the crosshairs as the two powers clash to contain each other leading to the breakdown of the international political system.
Due to the geopolitical situation, the clash between the major powers, whether over Taiwan or Ukraine, will be detrimental to their allied nations. Countries such as Pakistan unwittingly fall victim to the dynamics of great powers.
The supply chain was affected all over the world, including Pakistan, leading to unprecedented global inflation. The effects of the coronavirus pandemic are one factor, but our fiscal and monetary are not impressive either. Formulating economic policies is a complicated process but the writing on the wall clearly shows that inflation will rise further. If our fiscal and monetary policy had been strong, stable and commendable, it would have reduced pressure on the people grappling the adverse situation.
In the last three and half years of the PTI tenure, the rupee has depreciated by Rs54 against the US dollar. The depreciation has led to an increase in inflation which, among many other things, is a major cause of economic downturn in the country. The purchasing power of the middle class and poor has also declined. Even the upper-middle class has not been spared. Around 29% of their income is being spent on their children’s education which is affecting household expenses and quality of education.
Whether its food, electricity bills, daily necessities or petroleum products, the prices have gone up manifold. In December, the inflation rate had risen from 11.5% to 12.3%. It is evident that when economic activity slows down and investment is low, economic problems can arise in any country.
Countries such as Pakistan unwittingly fall victim to the dynamics of great powers.
Unemployment has peaked in Pakistan due to growing population among other factors. According to a list released by the World Bank, the provision of economic aid to 73 countries including Pakistan will be suspended. In the current situation, Pakistan has to borrow $14 billion to meet its expenses.
The total domestic and foreign debt has swelled to $280 billion which includes $127 billion in external loans. According to UNICEF survey, Pakistan is one of the top ten borrowers in the world. Then there is also the worsening energy crisis. Our opposition leaders are also saying that it is becoming difficult for the government to control the situation. Power outages, gas load shedding and shutdown of industries are also among our major problems leading to declining exports.
The government rather than withdrawing GST exemptions should reduce the burden of its ailing industries. We are spending around Rs100 billion on running these white elephants. The mini-budget has been brought at the IMF’s behest. We could have received $100-200 billion dollars by privatizing or contracting these industries and saved the nation from inflation.
We could have also adopted other sources of income. Many people did not benefit from the amnesty scheme given by the government and huge sums of money were lying in banks and savings centres. These could have been subject to heavy fines and provided relief to the masses by relieving the heavy tax burden.
The duties on petroleum products could be reduced. Inflation has also had a devastating effect on children’s education. People are forced to consider education as a secondary purpose of life. Most of their income is been spent on food and daily essentials. If this situation continues then poverty and crime will increase, creating unrest in society.
The only solution to all the problems is to formulate a comprehensive policy by uniting all provinces to deal with the economic problems. The government should promote its small and medium enterprises along with cottage and service industries. Machinery should be updated and exports should be increased using modern technology to meet world-class standards.
An increase in exports will devalue the US dollar in Pakistan. The current situation is that imports continue to rise instead of exports. This whole situation is leading to the destruction of Pakistan’s economy which needs to be remedied without further delay.
Translated by: MM News Editorial Team
