Inflation and stability of Pakistan's Economy

in recent months, the International Monetary Fund (IMF), a United Nations Organisation for International Co-operation and Development (UNODC) member, has increased its benchmark global economic growth rate, projecting that it has come down to 2 percent this year, up from 6.03 percent in 2021. The IMF predicts that Pakistan is likely to witness a growth of around 7 percent this year and 8 percent next year. It is also expecting GDP per capita growth to be 5-6 percent in 2023-2024 respectively.

The most worrying factor about the financial crisis is high inflation rates of up to 30 percent. So, as an economist, I am very skeptical about what IMF is saying since they have not stated clearly on either side whether there will be growth or inflation in coming years as well as if we are going to see more positive development by 2023-24.

as we observe the current situation, I talked about the economic stagnation of Pakistan which made me think why was Pakistan so poor compared to other developing countries?

Pakistan’s economy needs revival. It is getting worse every day. It has lost over $7.59 million of foreign exchange. Its debt to gross domestic product ratio is higher than any country in the world. With a population of 229.50 million and poor people of Pakistan living on less than half of their income, it shows there will be no improvement in terms of poverty reduction. Unemployment is at a record high. We are entering into recession. If the public is educated, then it should raise its voice against this disastrous policy and revive the economy.

According to World Bank statistics, in the 2013/14 fiscal year, Pakistan had recorded a contradiction period of -6.5 percent; however, over the past eight years, the government did little to improve the business environment, raising concerns that businesses would soon shut down. This means that we can expect more pain, not only in Pakistan but in all these countries where corruption is rampant. Economic recovery requires reviving the country’s economy through improved infrastructural development. A weak infrastructure puts severe pressure on the economy, while inadequate investment in human capital will result in unemployment for a long time.

Pakistan is facing a severe economic crisis nowadays. Around 80% of power is imported. To save electricity, they are importing fuel and using expensive natural gas. Also, their coal reserves are exhausted. The energy supply in Pakistan is highly dependent on the Russian energy market. Thus, the Pakistani rupee is becoming weaker. These problems may worsen when Russia cuts off oil flows to India. It will affect the US dollar as well. For example, the import of crude oil was reduced to 5% in May 2018 from 10% in April 2014. There are already reports of the decline in production. Still, the problem with imports is that you cannot easily switch import of goods. Importing raw materials is another huge challenge. As far as exports go, it depends on the availability of funds and free trade agreement among states. However, many things have gone wrong in the past few days. Last month, two companies went bankrupt due to cash flow problems, sending shock waves throughout Pakistan’s stock market. The government has decided to cut subsidies on fertilizer prices so that farmers will get some relief.

Pakistan has suffered serious losses because of floods that occurred recently. Most of the infrastructure is damaged. According to Bloomberg News, “Pakistan’s total damage to buildings and roads reached $7.7 billion in June—a record, according to independent auditors, showing the massive hit the nation is taking to deal with flooding.” Many areas in Karachi and Hyderabad are underwater as thick rainwater gushes out of the Arabian Sea. Several districts were flooded across Sindh province while parts of Lahore have been plunged into darkness. many people were killed in flood-related incidents in Balochistan, including children and elderly citizens.

Unemployment is rising. During the lock down, thousands of unemployed came back to work as construction sites were opened. They are still finding it difficult to take the risk of working in dangerous situations with heavy rains. To some extent, it may help with building new houses but they did not need to spend money on these houses. Instead, these buildings have become vacant. That’s probably the main reason behind the rise in prices of houses in these places. People who took loans for home building are now unable to repay them. All this is happening despite COVID-19 restrictions. Now, despite their efforts to bring employment back, Pakistan has witnessed a significant increase in the number of jobless. Even though the federal cabinet has approved the expansion of small and medium enterprises’ tax deductions, the revenue collected by the central bank has shown negative growth. Although Pakistan’s budget deficit is shrinking, the state is reluctant to reduce the burden. The government has allocated billions of dollars to resolve issues related to health care, education, irrigation, food security, etc. However, we know that money doesn’t grow on trees, and unless we fix these issues, we will continue suffering. Since the economic problem is in the hands of the central government, what do we want to do with the resources?

Pakistan’s exports are declining. Due to a lack of adequate capital, the government has tried to open new textile mills, but those factories have failed. Similarly, agriculture has also suffered. Agriculture land is being converted to non-agricultural uses. Fewer fields were left unused for cultivation, thus leading to the loss of cultivable land.

As you know, one person has 60 times larger earnings than others do. The wealth gap between the rich and poor is widening. Therefore, if we ask ourselves this question, is our country ready to develop? Or will it benefit us in the future?.The answer should be "probably not" but we can hope that the economic 's stability will be revived soon in Pakistan.