Pakistan Economy: A new Sri Lanka in making?
Pakistan is replicating Sri Lanka while trying to solve its economic crisis, denying its past mistakes as well as the current happenings and ignoring the lessons it could have learned from the island nation.
After independence in 1947, Pakistan was growing faster than India and South Asian Economies.
When did the fall begin?
The problem started with a good plan that went wrong. In 1958, there were many political changes that lead to a fall in the economy. Pakistan witnessed high growth during this period, Manufacturing grew by more than 8% p.a. big dams and national highways were constructed but the road to hell is paved with good intentions, but the question arises from where the money comes from. Pakistan's economy has opened a portal called debt.
Till today, it has borrowed 22 times from the IMF and had not used this for economic growth. In fact, it has used all this debt for building army defence and debt repayment. Every year Pakistan raises its cost to build defence. Today, 42% of Pakistanis are illiterate. Because no employment is generated and they are stuck in a serious debt trap. The growing debt crisis, dwindling forex reserves, and soaring inflation have pushed Pakistan to the brink of an economic disaster. These were some of the factors which contributed to the ouster of former Prime Minister Imran Khan in April this year through a vote of no confidence. His removal has created a turbulent period of political instability and uncertainty in the country. Today, the Pakistani rupee has been in free fall.
It plummeted to an all-time low of 274 Pakistani Rupee against the US Dollar, only adding further pressure to the Pakistani economy. Given the economy’s dependence on imports- for both food and fuel, the rising global prices have resulted in a humongous increase in the import bill in Pakistan.
The import bill for petroleum products alone has registered a jump of about 95%, reaching about $17 billion in the first ten months of FY 2021-22.
Pakistan is repeating the same mistake as Sri Lanka did in playing down the capability of the IMF and its support program for the sheer reason of avoiding difficulty instead of looking to bilateral partners for financial help and support.
Kautilya, IBS Mumbai.