Who Can Save Pakistan
Pakistan is facing some of the worst economical and political crises in the world. The country is about to default on its mounting pile of loans. The inflation rate stood at 35% in March 2023. And the prices of food and oil are rising amid the crises. But, what is unlikely is that the country does not face any protests and uprisings against the worsening crises.
Compared to the UK, which faced an inflation rise of 9-10%, the rise brought thousands of people onto the streets, disbarring public transportation and nationwide strikes of nurses and teachers. The incident garnished global media attention. However, the same is not true for Pakistan.
So through this article, we will analyze whether are people the hindrance to the required change in the country and if so, how can Pakistan be saved.
Pakistan is in Peril. The country is on the brink of defaulting on its loans. 97% of the country’s GDP is collateral for loans. It faces the same fate as Sri Lanka faced last year. Inflation is at its peak and political crises are worsening.
Pakistani currency is sliding down against the dollar, standing at 284.25 PKR against a dollar. And instead of pulling the country out of crises, the current and former Prime Minister is busy playing the blame game.
And what’s worse is that even nature is revolting against Pakistan. Severe floods yesteryear scrapped $30 billion out of the already soaring economy.
Amid the crises, two controversial bodies, IMF and China, have posed themselves as saviors to Pakistan’s economy. However, China is notorious for luring nations into debt traps, & IMF has the US as the key voter, which despises Pakistan after it joined hands with Russia to import subsidized oil.
All in all, global superpowers are using Pakistan as a pawn to straighten their owl, due to which Pakistan is unable to get out of its economic and political crises.
Although the country is doubling its debt every five years for the past years, the crises have worsened in the past year. In just a year, the debt of Pakistan swelled by 38%, and inflation rates peaked at an all-time high of more than 35%. Oil prices rose by 113% in Feb, whereas, the cost of perishable items rose by nearly 56% at the beginning of 2023.
What initiated the ongoing crises?
The current crises can be attributed to the pandemic and the War in Ukraine. Although the whole world is facing economic crises, Pakistan's economy was already in a fragile state. Additionally, due to inflation, Pakistan has started to build friendships with Russia and China, which the United States did not appreciate.
Previously, the US and Pakistan shared a strong bond, but Pakistan's decision to take loans from China and import oil from Russia while distancing itself from the US has strained their relationship. Although Pakistan tried to keep both boats afloat, it failed miserably.
Furthermore, ongoing political unrest is also a major contributor to the crises. The country's most influential leader, former Prime Minister Imran Khan (according to Gallup, 61% of respondents believed Imran Khan to be the most popular leader of the country), had to resign due to a no-confidence motion last April. This individual caused inflation and corruption to rise to double-digit figures, and increased economic and political tensions, resulting in the loss of his position. Afterward, the country fell into a state of political unrest, and Shehbaz Sharif temporarily assumed the position of Prime Minister until elections are held.
All in all, Pakistan's top political leaders and their political motives have led to the current state of affairs in the country. On the one hand, there is Imran Khan, who, while ignoring global economics, announced cuts in fuel and electricity prices, exacerbating chronic fiscal deficits and balance-of-payment troubles. On the other hand, there is Shehbaz Sharif, who is harming the country's economy by shutting down cotton factories and mills, despite Pakistan being one of the world's largest producers of cotton.
Smuggling of wheat and US currency:
The exacerbation of the crisis in Pakistan can be attributed to various factors, one of which is the country's wheat shortage despite being the 8th leading wheat producer in the world. As a result, the prices of flat wheat bread or "roti" have increased by PKR 2-10. The two major causes of wheat shortage in Pakistan are the devastating floods and the rising smuggling of food commodities out of the country, particularly to neighboring Afghanistan.
Pakistan is a pawn between tussling superpowers:
Regarding the ongoing tussle between the US and the International Monetary Fund (IMF) with Pakistan caught in the middle, the IMF is an independent organization that was established at the Bretton Woods Conference in 1944. It provides financial assistance to nations in dire situations through lending funds. Essentially, the IMF is like an international bank that grants loans to its members based on their respective quotas. However, the country with the most significant quota, the US (over 17%), has a greater influence on decision-making within the organization. This has led to accusations that the US is blackmailing Pakistan through the IMF's policies.
Recently, the IMF introduced certain policy reforms to help Pakistan recover from its dire economic situation. These policy reforms include imposing more taxes on the public, increasing oil prices, and raising taxes on commodities to build the government's funds.
However, Pakistan did not agree to these reforms listed on the mini-budget as they would be challenging. Furthermore, senior journalist Hamid Mir mentioned in an interview with Rahul Kanwal from India Today that the US forced Pakistan to accept the grueling deal through the IMF, ignoring China's offer to assist Pakistan.
This is understandable since the US, China, and Russia are all vying for global dominance, making it difficult for them to cooperate. Amidst all this, Pakistan has become a mere pawn, which is being exploited by other countries for their gains.
UAE is emerging as savior:
Although not all countries are like them, some countries have genuinely tried to help Pakistan. UAE is emerging as a savior amid the crises. UAE has provided Pakistan with $3 billion in financial aid, as well as an additional billion dollars for oil imports with deferred payments, with a promise of extending more help in the future.
Pakistan and UAE's friendship dates back to UAE's formation in 1971. Both countries have shared an assistance program (UAE-PAP) since 2011, under which the oil-rich country has also aided Pakistan in the construction of 52 schools, 64 water supply schemes, and two bridges. Saudi Arabia has already channeled $200 million into this program.
While Pakistan is currently going through a difficult time, this has not always been the case in its friendship with UAE. Pakistan has also opened an Armour training school in Saudi Arabia, where its military provides training and assistance to UAE soldiers. The friendly relations between the two countries can also be seen in the migration of people, with more than 1.6 million Pakistani workers in UAE, followed only by India. However, as the Ministry of Overseas Pakistanis and Human Resource Development (MOPHRD) stated in 2021, Pakistan exported more manpower than India and Bangladesh to UAE.
Is UAE capable of saving Pakistan?
UAE is popularly known as the land of the richest people who are famous worldwide for their lavish and royal lifestyle. UAE is the 5th largest economy in the Middle East, with a GDP of $503 billion. With the recent boost in the oil industry, the country is very much capable of pulling Pakistan out of its crises. However, external help will not make a significant difference until the root cause of the crisis is addressed.
Pakistan needs introspection:
Other countries, whether friends or foes, can only provide financial assistance, which is like putting a band-aid on a bullet wound. Until the root cause of Pakistan's crises is addressed, pouring money from the outside will not make a significant impact on its economy. Pakistan needs to introspect and address the budding terrorism, growing drug use, smuggling, and political crises. Both the ruling party and the opposition should sit together to overcome the crises because it is not just the ego of one person at stake but the whole country.
People need to feel the pain:
Unless the Pakistani government is itself stable, it cannot stabilize the entire country. Therefore, Pakistan needs to help itself more than rely on external help. People need to actively participate in government decisions. Due to the current situation, Pakistani people have become numb to pain, which has resulted in a lack of protests or uprisings.
If we compare the situation with the UK, the inflation rate rose 9-10% last year, which landed thousands of people onto the streets, protesting against the cost-of-living crises. But people do not share the same zeal in Pakistan.
Research shows that this is due to a lack of trust in the possibility of change and people's habitual acceptance of pain. This crippling mindset of the Pakistani population needs to change. People need to believe that change is possible and that it’s coming!
In conclusion, Pakistan's economy is on its knees, buried under the burden of debt. To break free from the shackles of debt, political stability is required throughout the country. After that, the whole country can come together and stand on its feet again with the help of its friends.