OWING to uncontrolled inflation and devaluation of Pakistan currency against US Dollar, there emerged serious economic crises in Pakistan. The uncertain economic situation has created an anxiety and insecurity among the general masses of Pakistan. The people of Pakistan have started protesting against this rising and uncontrolled inflation and depreciation of Rupee. In many parts of the country, the people are flatly refusing to pay their electric bills. The cost of essential goods is getting out of the reach of a common Pakistani and poverty is rampant in the country. Furthermore, the cost of life saving drugs and medical facilities have increased many fold and unmanageable for even the middle class.
The entire situation is seems to be managed phenomenon, which is dictated by International Monetary Fund’s (IMF). The economic experts called this state of economic crises as a “powerful grip of the grey market alongside the IMF control over the economy. Indeed, IMF has attained total control over the economy of Pakistan with dictation on all most all economic affairs; a “significant interference” in the country’s banking and currency. Indeed, as analysed by senior bankers and economic experts, “The IMF people interact with the exchange companies and bankers in Pakistan at the lowest level, which was never witnessed before.” Whereas, IMF would like to get back its loan with heavy rate of interest, this international financial organization is not responsible for the economic health of the people. Restoration of economic condition of Pakistan and economic wellbeing of the people of Pakistan falls in the domain of Government of Pakistan.
The grey economy is an economic activity which is not accounted for in official statistics and grey market is the one which “unofficial market in goods that have not been obtained from an official supplier.” Owing lack of Government control, Pakistani economy has essentially turned into a grey economy through grey marketing processes. This is mainly because of influential people within Government and bureaucracy who are essential part of all these unofficial economic activities. In recent years there have been buying and selling of securities before they are officially issued on the stock market, thus severely damaging the market and national economy.
As revealed by the currency dealers, there are three types of grey markets in practice in Pakistan today: a) the individual people or groups and some forms firms who are trading in currency without a licence, b) this include a number of firms whose selling price is almost equal to the grey market rate and c) individual, groups and firms operating from outside the Pakistan. All these grey markets operatives are severely damaging the market and national economy. The firms and people operating from across the frontiers have proved most harmful, since Pakistan does not receive dollars from these illegal dealers. “The country lost $500 million in remittances in July as it fell to $2bn compared to $2.5bn in the same month last year. The country lost over $4bn in remittances in the previous fiscal year.” The remittances are declining owing to such illegal economic practices too. The significance of economy can be imagined from a famous quote, “Economy is the start and end of everything” for every sovereign state. Indeed, the strong economy is the source of national strength and form the basis for a knowledgeable and resilient work-force of a nation. Unfortunately, despite heavy taxes and exceptionally high levies on all goods and utilities in Pakistan, there are downward trends in the economy of Pakistan since last few years. Despite being an agrarian economy, the essential food items are rapidly getting out of the reach for over 60% Pakistani masses. Inflation is record high and developmental sector is found wanting in all areas of socio-economic development of the state. The educational budget of the institutions of higher education and public sector colleges and schools has been reduced to minimum level. The other sectors of Pakistan are equally facing the economic challenges.
Indeed, not the resources but the poor economic management is considered to the real cause of deteriorating economy of Pakistan and falling living standards of its 224 million population. In fact, the basic responsibility of the government of Pakistan is to identify and prioritize the problems facing the state and society of Pakistan. Identifying the problem areas at an early time-frame and focusing to resolve them by all possible means and through better economic management could have save the government from on-going economic crises. But, neither the problems identified nor any serious efforts were made to overcome the economic crisis, hurting the state and society alike. Resultantly, once confronted by financial challenges, they resorted to rush to IMF for a possible rescue. The IMF and other international and regional financial institutions then provide the finances with heavy interest rates and pre-conditions like impositions of heavy taxes and levies on to the masses besides price hikes of petroleum and devaluation of Pakistani currency. In 2017 inflation rate was 4.15% which was further reduced to 3.93% in 2018. The inflation had risen to 6.74% in 2019 and reached to 11.12% and in 2023 it is over 35%, highest in the history of Pakistan. Similarly exchange rate of PKR versus US Dollar (1 USD=301PKR) is highest in the history of Pakistan. Pakistan cannot afford the current economic management of the state which is being run through heavy and agonizing taxation system and grey market. In fact, the economic management of nuclear Pakistan with rivalries all around and multiple fault lines within cannot be run like a corporate company nor can it be left at the mercy of non-serious economic managers. The way forward is; a massive restructuring of the economic management of Pakistan through serious innovative and revolutionary steps with home-grown economic means and indigenization rather banking on IMF and external loans.
— The writer is Professor of Politics and IR at International Islamic University, Islamabad.
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