The warning has been made before, but this time it looks like Pakistan’s economy is headed for collapse. Even the smartest economists don’t see a way forward. An almost impossible-to-implement suggestion came from IMF chief Kristalina Georgieva. “Please raise more taxes from the rich and protect the poor of Pakistan,” she implored, and there was no mistaking the desperation in her voice. It is estimated that around 40 percent of Pakistanis (95 million) are now below the poverty line.
Pakistan gained a brief respite with a new $3 billion conditional loan from the IMF in July. But that is only a temporary solution and the country is no closer to solving its deep structural problems that have been exacerbated by what experts call the Triple C crisis: Covid, the Ukraine conflict and climate change. Last year’s catastrophic floods caused economic losses of $30 billion, according to the UN.
Pakistan has received 22 loans from the IMF or about one every 3.5 years. It basically works on foreign loans, an unsustainable model that only results in more debt to pay off the loans. Pakistan now has $126.3 billion in debt and external liabilities, of which 30 percent is owed to China.
“We have been postponing the inevitable instead of working to resolve the economy’s underlying weaknesses,” he says Sunrise newspaper columnist, Khurran Husain. “The loss of productivity means that our economy is increasingly unable to obtain dollars in sufficient quantities to pay for its own import needs.”
Put bluntly, Pakistan does not produce enough to earn the dollars needed to pay for necessary imports. Imports of vital components were stopped earlier this year because Pakistan did not have enough foreign exchange to pay for them. Lacking parts, the automotive industry could not make cars or bicycles, while the textile industry could not import dyes. These industries are back in action, but only to some extent. Only 5,909 cars were produced in August, down from 8,980 in the same month last year and 17,899 in August 2021. However, even that performance looks almost good compared to April sales, which were a dismal 2,844 cars, up from to 18,625 in April 2022. In contrast, in April 2023, car sales in India amounted to 331,509, which gives an idea of the economic gap between the two countries.
Darkness travels to the lowest levels. While the Pakistani rupee has recovered slightly from its all-time low, it still stands at PKR 290.50. Putting 40 liters in the car tank costs a whopping PKR 13,240. Power has also become extremely expensive. Compounding the problems, inflation is over 30 percent and dollar remittances from non-resident Pakistanis have fallen sharply. The Human Development Index ranks Pakistan 161 out of 185 countries. Pakistan is among the 25 countries with the lowest human development in terms of health, knowledge and standard of living globally.
Looking for brochures
It is no surprise that the Pakistani military is jumping into the economic fight, although it might have been wiser to let civilian politicians carry the load. Army chief Asim Munir has toured the Gulf countries begging for unprecedented handouts: he calls them investments. According to the army chief, Saudi Arabia’s Prince Mohammad bin Salman pledged $25 billion, while the ruler of the United Arab Emirates pledged $10 billion. Munir insists that Qatar promised $25 billion. A Pakistani newspaper says he hopes to get “investments” of between $75 billion and $100 billion. Whether these investments materialize is another question. The army chief also says that he expects Gulf sheikhs to invest in agriculture, so he warned that they will seize and level large tracts of land to allow foreign investors to engage in large-scale cultivation.
Pakistani economists now point to Manmohan Singh’s 1991 reforms when they talk about how India got out of the economic quagmire. But such a solution seems unlikely to work in Pakistan.
Perhaps the time has come for the Pakistani military to realize that it is largely to blame for the country’s economic crisis as it spends too much on weapons, bleeding the economy dry. Would this be the time to make some kind of peace with India? Bilateral trade and investment could give the economy the boost it is unlikely to get otherwise. The ideal would be to open the borders to tourists and guarantee their safety. Pakistan’s Gilgit-Baltistan has spectacular places like Hunza. But Pakistan needs de-Talibanization before it becomes a tourist paradise.
Yes, this is an unrealizable dream. But the world moves on and it is time for India and Pakistan to get out of this 75-year rut.