Pakistan, like many other countries, is facing a series of challenges that have combined to create a “perfect storm” of problems. The ongoing coronavirus pandemic and Russia’s invasion of Ukraine have led to a surge in global fuel prices, which is having a significant impact on Pakistan.
As a heavily oil-importing country, the rising costs of fuel have contributed to increased costs for transportation and manufacturing. The government has attempted to mitigate these effects by increasing fuel prices by over 13%, but has stated that it does not plan to implement any further price increases.
Additionally, the country was hit by severe flooding last year, causing damage estimated at over $16 billion according to the United Nations. The flooding submerged vast areas of the country, destroying farmland and limiting its ability to produce food. As a result, the prices of basic food items like wheat and onions have skyrocketed.
The political climate in Pakistan is also uncertain, with an election due to take place by the end of the year.Despite its ongoing challenges, Pakistan is no stranger to the need for bailouts. The country has a large military budget and a history of debt-driven infrastructure spending, and has struggled to stabilize its economy and break free from populist subsidies.
According to Dr. Sajid Amin Javed, Deputy Executive Director at the Sustainable Development Policy Institute in Islamabad, “If you see the history of Pakistan, we have a cycle of balance of payments problems. We go to the IMF. We implement very strict reforms, for two or three years, then it’s an election year and unfortunately, we reverse them all.
“Subsidies have been used in the past as a means of gaining support from voters, but they have not been effective in addressing the underlying problems with the economy. Dr. Javed argues that a more sustainable solution is needed, one that goes beyond short-term measures and addresses the root causes of the country’s economic difficulties.
In conclusion, Pakistan is facing a complex set of challenges, from the impact of the coronavirus pandemic and the rise in fuel prices, to the devastating effects of last year’s flooding and the uncertain political climate.
To truly resolve these issues, the country will need to adopt a more comprehensive approach that addresses the underlying economic issues and breaks free from the cycle of balance of payments problems and repeated bailouts.