Creative Writing – 165
With its back to the wall, Pakistan fights valiantly to stave off an economic melt-down
When the floods came during June to August in 2022, the fury of the surging mass of water devastated vast swaths of the country stretching from Balochistan to Kashmir. The economy already reeling from years of mismanagement and a huge pile of debt was at the end of its tether. Plagued by political turmoil, Pakistan continues to suffer from poor governance and corruption.
External factors like world-wide rise in inflation, the Russia-Ukraine war, and the slowing Chinese economy have hampered Pakistan’s exports. Imports are being choked due to scarcity of foreign exchange, and a plummeting currency. All these have added to the woes of the ordinary Pakistani who has to contend with soaring prices of essential items. With slowing economic activity, the country has fallen prey to a wrenching phase of recession whose stranglehold it will find hard to break.
Considering the many negative political and economic developments worldwide, the IMF (International Monetary Fund) has projected the 2022 global growth forecast to be a mere 3.2% down from 6.1% in the previous year of 2021. The world could experience economic trauma worse than that of 2008. This has been mentioned in the Trade & Development Report, 2022 prepared by the United Nations Conference on Trade and Development.
The U.S. and Europe are reeling from high inflation. To rein it in, the Federal Reserve Board (FED) of the U.S. has hiked interest rates. In one stroke, this single measure has knocked off 360 billion USD from the total aid that could have come to the developing nations. For some countries, the outflow of foreign exchange on account of debt servicing might be higher than the foreign exchange coming in. The distress it would cause the poorer countries is understandable. Pakistan has to live through such difficult times.
Pakistan’s present phase of recession might drag on for a year or longer. Pakistan’s foreign exchange reserves have dropped to a record low of 6 billion USD – just enough to cover a single month’s import bill. With a negative credit rating, and loss of investors’ confidence, Pakistan finds it very hard to mobilize short-term and long-term credits in the world market.
Quite sadly, the back-breaking floods have not generated much sympathy in the world stage. Even the IMF has not relaxed its repayment terms despite being fully aware of the country’s difficulties. In fact, stringent anti-inflationary measures forced on Pakistan will continue to be heeded by Pakistan as it plans to ask for another IMF package for the coming three years. IMF’s conditions would reduce consumption that, in turn, would keep the country’s GDP growth rate to a meager 2 to 3% for the coming years. The calamitous effect of such contraction of GDP growth is so very evident.
Subsidies will have to be slashed, and painful power sector reforms will have to be implemented. For the next government of Pakistan, it’s Hobson’s choice. If IMF terms are flouted, China and Saudi Arabia, the two dependable financial backers of Pakistan will draw their cues and back off.
Export scenario appears discouraging too. Europe and the U.S. will import less as their populations buy less due to high inflation. Pakistan, therefore, can’t expect much from its exports.
Added to all these woes is the problem to find jobs for nearly 2.5 million new job seekers every year. Quite clearly, these young people will have to acquire skills that are in demand overseas, such as IT and healthcare sectors. The jobseekers can find employment in developed countries that are short of such manpower. It will be a very desirable option for Pakistan as remittances from these workers will flow in steadily.
Pakistan stares at a cataclysmic scene now, made worse by acute political acrimony inside the country. The country needs a robust political leadership with a groundswell of public goodwill, so that the country can emerge from the deepening crisis with the least pain. Certainly, this is the time to bid good bye to terror tactics and improve relations with India and Afghanistan.