- Economic Crisis in Pakistan: 4 Major Reasons Contributed to it
Economic Crisis in Pakistan: 4 Major Reasons Contributed to it
In Pakistan, 2022 has proven to be a challenging year even by their standards. The nation has experienced serious political and economic problems during the past four months, almost all of which were self-inflicted.
In a few months, if still not weeks, the government may change hands once more. This has already happened previously. Pakistan is being led by a completely irresponsible elite that is unable to realise the magnitude of the issues the country is facing as the economy crumbles on the verge of collapse.
The Pakistan economic crisis serves as a great case study for political scientists to illustrate the tragedy of authoritarian regimes in general and military-dominated ones in particular. There is broad agreement among academics that, despite certain flaws, representative democracy gives states a greater shot of long-term social cohesion than its alternatives. Of course, not everybody has the same opinion. In fact, many people believe that democratic regimes are intrinsically unstable because of their internal rifts, chaotic nature, and dramatic swings. According to conventional belief, a good-natured ruler can better guide a nation to its greatest potential than violently opposed partisans in parliament. Let’s thoroughly understand What are the main causes of Economics crises in Pakistan
Important Factors That Led to Economic Crisis in Pakistan
Pakistan’s Malicious Military
The Pakistani military is no new to such condescending attitudes. Without a doubt, its extensive and pervasive control over the nation comes with useful rewards, like land, social status, golf club memberships, and other privileges. But at its core, the military’s involvement and meddling in politics dates back at least to the 1950s and is motivated by the arrogant notion that if left to their own devices, the “grisly civilians”—the dishonest, conniving, opportunistic, and principle-free lot of politicians—will engulf the nation in an unending state of anarchy.
This disrespect for the constitution has often led to the army carrying out coups and effectively ruling the nation for half its history. The remaining half? On the contrary, the army has become more malicious during these times, throwing an overpowering darkness while manipulating its requirements, chiefly security and foreign policy, but not entirely. Even though they are out there, Pakistan’s periods of putative democracy are notable for the level of military influence on politics which might cause Samuel P. Huntington to wince.
The military has maintained order, either directly exercising control or orchestrating activities hidden behind a curtain. The cruel irony of its quest is how much havoc it has produced, though. As experts on democracy are aware, the biggest benefit of democratic institutions is not rapid economic development or progressive social measures, but instead the assurance that there will be a smooth and peaceful transition of power.
In Pakistan, though, the transitions are anything from smooth. In this nation, administrations have fallen due to horrific civil wars (1971, 1988), a mystery plane crash that killed the president, midnight and daytime coups, and backroom deals amongst bitterly divided elites.
Pakistan’s Political Crisis
This year’s events followed a well-known script. On April 10, the middle of his term, Prime Minister Imran Khan was dismissed. The “hybrid regime”—which, despite its name, was actually ruled by the military—had become weary of the civilian it had chosen to serve as its public face. Following ten years of administration by the Pakistan People’s Party (PPP) from 2008 to 2013 and the Pakistan Muslim League (PML-N) from 2013 to 2018, Khan was put in charge through a sham election.
In actuality, Zulfiqar Ali Bhutto, the founder of the PPP, and Nawaz Sharif, the former head of the PML-N, both reminded the military of a lesson they had previously learned: Anyone with the ambition to run for president or prime minister won’t be willing to be the minority party for very long. The cherished son of the military elite will inevitably grow further than severely limited role left for him. And what follows?
When it resorted to imprisoning journalists, activists, or political enemies, Khan and the army worked along just well. However, in the most recent version of this well-known tale, a dispute about who specifically would serve as the new army leader caused the separation among Khan and the military. Khan desired Lt. General Faiz Hameed, the head of the secret services, who is largely responsible for handing Khan the 2018 election. However, it may come as no surprise that the present army head, Qamar Javed Bajwa, preferred himself. After reaching a deadlock, the conflict came to a conclusion the way so many others have: with the military triumphant and the democratic leader ousted, formally by a vote of no-confidence in government but in fact only when the military ceased supporting Khan.
But more significantly, the wall had been showing signs of deterioration for months, if still not years. Khan’s performance in office was less what his aides had anticipated. Since the 2018 election scandals, Khan’s dismissal had been demanded by all opposing parties in parliament. The final straw, as they say, was the promotion conflict.
Following his ouster, the former prime minister, who was still very well-liked by a significant portion of the populace, led throngs of his supporters out into the streets. Since then, even from formerly sympathetic places, the military has been scrutinized for manipulating political results. In fact, as a result of the army’s split from Khan, numerous “activists” who had previously been organised and empowered by intelligence agencies to torment enemies of both Khan’s Justice Party (PTI) and the military in the cruellest terms have now changed their facetious weapons on the military, particularly on social media. It has been embarrassing for an institution that is used to hero worship alone.
Economic Crisis in Pakistan
On July 17, Khan oversaw his party’s resounding victory in the by-elections for Punjab, sending a message that he wouldn’t go gently into that good night. Powerful anti-sentiment was perhaps the most straightforward explanation for the PTI’s win. The community is reluctant to give the ruling parties a mandate because inflation is beyond 20%.
In fact, as if the shift from Khan’s PTI to Shehbaz Sharif’s PML-N coalition administration weren’t difficult already, Pakistan is currently experiencing what is likely its worst economic meltdown in a quarter-century.
This problem has debt at its core as its immediate source. Pakistan owes creditors billions of dollars. Fuel, which accounts for one-fourth of Pakistan’s import bill, saw a sharp increase in dollar price as a result of Russia’s invasion of Ukraine. At the same moment, the currency having lost 30% of its valuation since 2021, making all imports into Pakistan significantly more expensive, not to forget the country’s debt. A downward spiral of currency devaluation, debt growth, and diminished faith in the ability to repay the loan has been put in motion.
What is the problem with Pakistan’s economy?
Several economists are quite worried that Pakistan could go bankrupt. Whether it would avert such a situation depends significantly on the scope and pace of IMF assistance, which varies depending on how eager nations like Saudi Arabia or China were to provide cash or other forms of assistance to Islamabad.
Yet even in the perfect scenario, using money from the IMF, Saudi Arabia, or China is just a Band-Aid solution. Both Pakistan’s debt issue and its need on bailouts from more powerful or wealthy nations persist. Both the wealthy and the ambitious middle classes are tax exempt. The main route to prosperity is controlling industries that generate rent, like sugar or land. In order to maintain the nation’s consumption-driven economy, succeeding governments have prioritised quick, populist fixes like maintaining an absurdly inflated rate of exchange (PML-N) or a collapsed price of petrol (PTI). It should go without saying that these actions have cost money.
Now it must be obvious that awaiting for a superpower to attack Afghanistan is not a viable plan for economic growth. Pakistan’s development and the welfare of its people cannot be dependent on the generosity of other nations and the desires of international alliances eternally.
In what way Economic Crisis in Pakistan will impact India?
A change in leadership is unlikely to have a substantial impact on the bilateral relations because the Pakistani military controls the major decisions that determine India’s geopolitical position in the subcontinent.
Nevertheless, the political family of the Sharifs, who are currently in charge of the demonstration against Khan’s PTI, has always favoured negotiations with India to settle disputes. General Qamar Javed Bajwa recently said Pakistan was willing to advance on Kashmir, provided India agrees.
India’s standing in Asian global politics will be affected by Pakistan’s weakening power over Afghanistan, developing comradely with Russia in light of the Ukraine crisis, and deteriorating financial ties with China.
Thus, whether a regime transition occurs or not, India will be keenly monitoring its neighbour.