When celebrating its 75th anniversary, Pakistan is pitiably turning weaker, pale and poor than it used to be. Pakistani rupee, the currency is depreciating every day, harming the state’s global image. The economy is on the verge of collapsing. The inflation rate is going up. The foreign currency is vanishing fast from the country. In recent times, the foreign-exchange reserves of Pakistan have shrunk by more than half. The foreign reserves are now just less than $8.57 billion, according to Pakistan’s central bank. The debt Pakistan has incurred is terribly high, hampering its ability to boost its reserves. The state has debt and liabilities worth Rs 53.5 trillion, including the debt of Rs 23.7 trillion under the PTI government. The nation is currently not just in an economic crisis but also amid a severe political crisis.
The crisis in the country has bubbled up after decades of economic mismanagement- not certainly over a night or during the PTI era. There are a set of reasons that have pushed Pakistan nearly to the edge of catastrophe. The current-account balance is another serious concern for the government, in addition to a pathetic fiscal and balance of payments deficit. One of the reasons of this crisis in Pakistan is the reliance on imports and the amount spent on them.
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Foreign currency is very essential for trading with the rest of the world
If the foreign reserve dries up, Pakistan cannot buy desperately required imports, including food staples and fuel. As a result, this will increase the prices of essential commodities in the domestic market. One of the reasons for the foreign currency shortage is more and more imports than its export capacity. It can’t reserve the foreign currency in the stock. Pakistan has set a target for imports worth $ 70 billion while its target for export is set to $35 billion. Amid the looming crisis, the state hopes to receive $33.2 billion of remittances against $31 billion it received this year.
Freebies and populist policies have caused severe economic destruction in Sri Lanka. Bangladesh has taken stern actions against Sri Lanka. Pakistan should not wait too long either. Over the years, political leaders in Pakistan, irrespective of incumbency have spent enormously on all the populist policies which have turned into a fiasco. Recently, ahead of the general election, Islamabad’s hung parliament led by Prime Minister Sharif that unseated Imran Khan in April was forced to make some announcements, which did not please the people. The government has scraped off the subsidies on oil and power offered by the previous prime minister, Imran Khan. On July 1, the new government imposed a levy on petroleum that increased the fuel price by 70% within just a month.
At the time the citizens are losing the ability to purchase essential commodities, Pakistan’s increase in the defense budget is not certainly a citizen-centric policy. Due to frosty relations with her neighbor India, and mushrooming terror outfits in her homeland and the periphery, Pakistan spends ₹2.65 million per soldier every year. Even at the time of catastrophe, Pakistan continued its defense procurement.
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On the other hand, Chief of Army Staff General Qamar Javed Bajwa last month rang up US Deputy Secretary of State Wendy Sherman and urged Washington to help Islamabad secure an early dispersal of $1.2 billion under the IMF program. The army chief had requested the Biden administration for the assistance from IMF amid the worsening economic crisis. Pakistan and the IMF have already concluded the staff-level agreement for the combined seventh and eighth reviews but the final approval from the Bretton Woods is yet to come. General Qamar Javed Bajwa has also reached out to the authorities in Saudi Arabia and UAE for IMF negotiations.
The army affect
But the Army chief’s reach out for financial assistance speaks volumes about the strength of the democracy. The mighty military of Pakistan, which has ruled the coup-prone nation for more than half of her 75 years of life, has immense power to exercise not just in matters of security and foreign policy but also on the economic front. The army chief and the government both have received bouquets and brickbats for such acts. When a democratic government is at the helm of affairs, the military should have limitations.
The former prime minister Imran Khan criticized the man in camouflage’s intervention saying it was not the job of the Pakistan Army chief to deal with economic matters. In addition, the PTI leader Khan also said that this shows that “neither the foreign governments nor the IMF trusts the government.” Of course, such a move by Bajwa will ignite curiosity about whether the military is steering the state affairs in Pakistan.
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During the looming crisis, China has rolled over a $4.3 billion loan to her mate Pakistan. If Pakistan manages to convince the IMF, the IMF would disburse $1.17 billion to crisis-hit Pakistan. But external loans won’t give Islamabad a sigh of relief. Pakistan’s real problem is not just not the economy, but politics. At 75, Pakistan should make her democracy healthy and economy performing. If democratic values are ensured, Pakistan will gain its reputation at the global level.
Ayanangsha Maitra is a GVS contributor from India. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.