Pakistan’s Titanic Struggle

A Nation Sinks Under Economic Woes

Imagine a world where the value of your savings decreases with each passing day, where the cost of living rises so high that making ends meet becomes a daily struggle, a world where the future seems uncertain. This is the reality for millions of Pakistanis as the country battles an economic crisis that threatens to unravel its very foundations.

Source: The Times of India

This economic crisis’ roots were sown in 2018, and its origins are often attributed to the ex-Prime Minister Imran Khan’s alleged economic mismanagement, mishandling of the Pakistani foreign policy and weak leadership of the nation. This cause was quite vehemently taken up by the current Pakistani Prime Minister, Shahbaz Sharif, which consequently led to a no-confidence motion in the parliament and Khan’s ouster in April of 2022.

These allegations were correct to some extent - Islamabad had borrowed extensively from the Chinese under Khan, and to repay these high loans, prices of all commodities were raised in 2018. Many believe this to be the main causal agent in Pakistan’s subsequent high inflation.

In 2019, Imran Khan tried to secure an IMF loan to help the nation battle rising inflation and depleting national monetary reserves. However, many of the nation’s laws did not align with IMF policies and thus the loan was denied. Subsequently, Pakistan made changes in its legislature so as to secure the loan, but yet again failed. Furthermore, these changes in parliament led to higher inflation and economic instability for the nation.

Source: The Times of India

Soon after taking office as the prime minister, Shahbaz Sharif stated that he would try to bring about economic reform and the Information Minister, Maryam Aurangzeb stated that Pakistan was committed to "controlling rising inflation, stabilizing foreign exchange reserves, strengthening the economy and reducing the country's dependence on imports". However, it soon became clear that Sharif’s government too was incapable of curing the nation of its woes, at least not without external help, and reality stung hard when the nation continued to hurt.

Source: Dawn (Pakistan)

In May 2022, talks with the IMF resumed and Pakistan was again forced to make changes, such as lifting the cap on fuel prices, raising the price of electricity and increasing taxes. Inflation in Pakistan rose to 21.3% in the following month, the worst since the global recession of 2008. Although Sharif had often criticized the Khan government’s Chinese borrowing, he too found himself taking a loan of $2.3 billion from Chinese banks in June. These loans largely remain unpaid at the date of publishing.

Pakistan’s troubles have been made worse by depleting national reserves. The Pakistan Summer Floods last year also cost the nation almost $30 billion, further worsening the situation.

Source: The Diplomat

The economic crisis however, has more far reaching effects than can be ascertained at first glance, the foremost of which is political instability. Imran Khan’s government was toppled largely due to the precarious economic situation of the nation; and public unrest with little to no change under Sharif has increased. The situation seems like a repeat of the Sri Lankan crisis in Pakistan, and the Sri Lankan consequences had been hugely disadvantageous for both the general public and all political institutions in the nation.

With Pakistan and Sri Lanka both in dire straits, and Bangladesh’s economy too looking under the weather in 2022, India needs to ensure that it does not suffer the same fate. The underlying theme in these nations’ crises has been disregard of internal change and over dependance on loans.

With Pakistan's economy in turmoil and lessons to be learned from Sri Lanka, India must take action to safeguard itself against the fallout of economic instability.