PAKISTAN ECONOMIC CRISIS

 

        PAKISTAN ECONOMIC CRISIS

From several years Pakistan has been facing an economic crisis with high inflation, a large trade deficit, and a devalued currency. Let’s study why Pakistan is in this state and what can they do to overcome from this crisis.

Major Reasons Behind The Crisis :

1) Political instability: Political uncertainty in Pakistan has led to a lack of investor confidence, which has resulted in a decrease in foreign investment. This has had a negative impact on the country's economy, as foreign investment is crucial for economic growth.

2) Energy crisis: Pakistan has been facing a severe energy crisis, which has led to power shortages and high electricity prices. This has had a negative impact on the country's industrial sector, and has resulted in a decrease in economic growth.

3) Lack of structural reform: Despite repeated calls for structural reform, the government has failed to implement policies that would address the root causes of the economic crisis. This includes lack of privatization of state-owned enterprises, and lack of labor market reform.

4) External debt: Pakistan has a high level of external debt, which has put a strain on the country's economy. The government has had to spend a large portion of its budget on debt servicing, which has led to a decrease in spending on other important areas such as healthcare and education.

5) Natural Disasters: Pakistan is frequently hit by natural disasters like floods, earthquakes, and droughts, which have a major impact on the country's economy. These disasters not only cause damage to infrastructure and property, but also lead to a loss of livelihoods for many people.

6) COVID-19 pandemic: The COVID-19 pandemic has had a severe impact on the global economy, and Pakistan is no exception. The country has seen a decrease in economic activity due to lockdowns and restrictions on movement, which has led to job losses and a decrease in GDP.

 

Biggest factor in my opinion:

Terrorism is the most important factor that has contributed to Pakistan's economic crisis. The ongoing terrorist activities in the country have had a negative impact on the country's economy in several ways:

1)   Deterioration of security

2)   Loss of human capital

3)   Damage to infrastructure

4)   Decrease in foreign investment

5)   Loss of reputation

6)   Military spending

Terrorism is one of the factors that has contributed to Pakistan's economic crisis, by affecting the country's tourism industry, human capital, infrastructure, foreign investment, reputation and increasing military spending. To address the economic crisis, the government needs to take measures to address the root causes of the crisis, including fighting terrorism, addressing the energy crisis, and reducing external debt.

 

What measures Pakistan can take to reduce economic crisis:

Address political instability: The government can take steps to address political instability and create an environment that is conducive to business and investment. This includes passing key economic reforms, and implementing policies that promote economic growth.

Implement structural reform: The government can implement structural reforms, such as labor market reform, privatization of state-owned enterprises, and addressing corruption.

Reduce external debt: The government can take steps to reduce external debt, such as increasing exports and reducing the trade deficit.

Combat terrorism: The government can take steps to combat terrorism, such as by increasing counter-terrorism operations and implementing policies that address the root causes of terrorism, such as poverty and lack of education.

Increase foreign investment: The government can take steps to increase foreign investment, such as by implementing policies that promote a business-friendly environment, and by addressing the energy crisis and political instability.

 

To reduce the economic crisis, Pakistan needs to take decisive action to address the root causes of the crisis, including addressing political instability, energy crisis, structural reform, external debt, natural disaster, terrorism, and the impact of COVID-19 pandemic. Additionally, it needs to increase foreign investment, exports, improve governance and reduce corruption.

 

 

What India can learn from it:

1)   Political stability is crucial for economic growth: India needs to maintain political stability and create an environment that is conducive to business and investment.

 

2)   Energy security is important: To ensure sustained economic growth, India needs to invest in energy security, by developing renewable energy sources and diversifying its energy mix.

 

 

3)   Structural reform is necessary: To ensure sustained economic growth, India needs to undertake structural reforms, such as labor market reform and privatization of state-owned enterprises.

 

4)   External debt: India should be careful to not overburden itself with external debt and rather focus on increasing its exports and reducing the trade deficit.

 

5)   Natural Disasters: India should also take necessary steps to prepare for natural disasters, such as floods, earthquakes and droughts, through better infrastructure and disaster management strategies.

 

India can learn from Pakistan's economic crisis that sustained economic growth requires a combination of political stability, energy security, structural reform, and a comprehensive plan to address the economic impact of the COVID-19 pandemic. By taking these lessons to heart, India can avoid the mistakes that Pakistan has made and ensure sustained economic growth for the future.

 

                                                                           Written by,

ATHARVA GADVIR

                                                          ARO & PUBLICITY OFFICER, ELESA