Pakistan’s economic crisis in global context | By Zafar Aziz Chaudhry


Pakistan’s economic crisis in global context

PAKISTAN Human Development Report published by the United Nations in 2021 found that the economic privileges accorded to Pakistan’s elite groups, including the corporate sector, feudal landlords and the country’s powerful military, add up to an estimated $17.4bn, or roughly 6 per cent of the country’s economy.

Pakistan’s central bank foreign exchange cash reserves (excluding gold) have dropped to just $6.5 billion or by nearly 50 per cent since the end of last February, barely enough to cover just a few weeks of imports. The currency is under pressure and has dropped by 6 per cent this year.

Pakistan, a nuclear-armed country with the world’s fifth-largest population and one of the fastest urbanization rates, has been facing its worst economic crisis since 1998 when it froze foreign currency bank accounts to avert a default. 34 per cent of the population lives on just $3.2 a day income and has been hit by double-digit inflation which is the third-highest among the major economies of the world.

Pakistan is beset with multiple problems of internal and external conflicts. For the last few decades, due to terrorism and extremism, the intolerance to dissent and diversity has become so pervasive that it has blurred the Pakistan’s national identity due to which we have fairly lost prospects for social cohesion and stability.

Due to the weakening of state institutions and their failure to resolve public grievances of various groups have resorted to violence as an alternative. The transition of power in 2013 and 2018 had taken place smoothly. Now as we prepare for elections in 2023, we are faced with a tottering economy along with a deepening domestic polarization. In the meantime devastating floods hit the country hard causing immense damage to our agriculture which, in turn, gravely affected our health sector.

In addition to all these factors , there is a resurgence of extremist groups along with our border with Afghanistan giving rise to another wave of terrorism from Taliban-led Afghanistan. Moreover alongside the declared cease-fire on the Line of Control in Kashmir in 2021, military tension with India has become more strained. This has once again posed a threat to our national security.

In our domestic politics, as observed by Dr Maliha Lodhi in her recent column, “instability is being engendered by rising geopolitical tensions, and global economic volatility.” At our home front some thought that the military coups were due to the ethnic dominance of Punjabi Muslims, and some attributed to the religious zeal of the Army for political leadership. But at no point of time a serious thought was given to ascertain the true reasons for military intervention in civil matters, nor even there enough strong opposition from the public side. However it was gathered from an Indian press report that India had made a discreet inquiry from their retired senior military commanders who were unanimous to hold that only senior officers were responsible for staging coups and that the lower formations had nothing to do with politics.

In the World Economic Forum, UN Secretary General António Guterres in his speech said that cooperation was urgently needed in a fragmented world. This was also the theme of the annual Davos meeting earlier this month. Thus the UN Secretary General emphatically maintained that “it was a perfect storm which was raging on several fronts, especially economic, with an unfolding cost-of-living crisis, rising inequality, looming recession, energy crunch, soaring inflation and supply chain disruptions among its many aspects. Yet, when international solidarity was needed most, geopolitical rifts and the deepening North-South divide was undermining efforts to meet global challenges.”

Another major source of global instability is the turbulent relationship between the US and China. Relations between them have sunk to a historic low, raising concerns across the world about the advent of a new Cold War. A grave tension exists in many countries due to America’s policy to contain China’s rise, which is being countered by an assertive response from Beijing. The US seeks to reduce dependence on Chinese supply chains and products to decouple its economy from China’s. This has involved waging a trade war with Beijing. This decoupling of two largest economies of the world, in the words of UN Secretary General, is likely to cause a “Great Fracture” which both great powers must avert at every cost. So far efforts of the leaders of big powers have not brought any relief because of their different stand on Taiwan and other technology curbs. America wants to maintain its technological supremacy over China, and to that end, the US imposed a sweeping ban on American companies from exporting advanced chip equipment to China in order to cripple its semiconductor industry.

Just seven countries account for 90 percent of all terrorist attacks and related deaths: Afghanistan, Iraq, Nigeria, Pakistan, Somalia, Syria and Yemen. Terrorism today serves largely as a battle tactic within irregular war in the developing world. Terror is a tactic of war, but it is a product of inequitable governance and political isolation. Feelings of inequality, marginalization and indignity give rise to anger and resentment. Moreover, it is often state violence that exacerbates the situation. According to a UN study, violent state repression transformed grievances into terrorist violence in 71 per cent of the cases.