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The challenge to improve the Pakistani economy
In order to overcome the rising inflation, Pakistan has asked for a $6 billion loan from the International Monetary Fund (IMF). According to Abdul Hafeez Sheikh, head of Pakistan's finance ministry, this loan will be paid by Pakistan to IMF in 3 years in installments. Sheikh says that without financial assistance, Pakistan, neither can meet its business losses nor can it control rising inflation.

The IMF has admitted that Pakistan's economic situation is very bad. Pakistan's growth rate has slowed down. Inflation is continuously increasing. The government and the people are drowning in debt. According to a World Bank report, by the end of December 2018, the debt of Pakistan's public was 73.2 per cent of its GDP, which is likely to increase to 82.3 per cent in 2019. This is the highest level of debt in the past 17 years. The Pakistani government wants to solve the problems of rising inflation, rising debt and slow growth rate, but every possible attempt of the government has been unsuccessful till now.

However, Pakistan's economist Dr Talat Anwar says that borrowing from the IMF will increase the problems of the common people even more. According to him, the IMF will definitely give loan on some conditions and implementing those conditions will further reduce the value of the Pakistani currency, which will increase the prices of commodities and food items consumed on a daily basis. The IMF can force the Pakistani government to increase interest rates, which are currently around 10.75 per cent. It can slow down the investment and also reduce the employment generation along with the growth rate.

It is notable that Pakistan has been struggling with serious economic crisis for the last one year. Its foreign exchange reserve has come down to less than two months' import. Pakistan hoped that countries like Saudi Arabia, China etc. would give financial help to it. However, these countries have given some financial help to Pakistan, but it has been inadequate. Prime Minister Imran Khan is still looking forward to get help from China. Khan hopes that China can help Pakistan to get out of the current crisis. He can also travel to China to achieve this purpose.

According to the economists, earlier, Pakistan was getting funding on free-floating mechanisms, but by 2017, there was a devaluation of 34 per cent in the Pakistani currency. A Pakistani bank president even said that Prime Minister Imran Khan may have to lose his chair if there is further decline in the Pakistani currency, because Pakistan's financial situation will get worse in the days to come. Khan has also become a targeting of the opposition due to appointing former IMF employee Raza Bakir as the new governor of the Central bank. Opposition parties feel that the new governor of the Central bank has failed to handle Pakistan's economy.

The value of US dollar against the Pakistani currency is increasing and has reached Rs 141. It is being speculated that it can also reach the level of Rs 150. Pakistani citizens are unable to meet their daily needs due to devaluation of the Pakistani rupee. The price of everything is constantly increasing. Petrol price has reached Rs 112 per liter. Significantly, its price is still increasing. Shahid Khan Abbasi, senior leader of the Muslim League (Nawaz) said that in the last 9 months, the burden of debt on Pakistan has increased to 28 thousand billion rupees. Inflation has also doubled in this period.

Recently, the World Bank released a report titled "South Asia Economic Focus-Export Wanted", according to which Pakistan's average inflation could reach 7.1 per cent in the current financial year and it will reach 13.5 per cent next year. According to the same report, Pakistan's economy is growing at a rate of 3.4 per cent in the current financial year, which can reach 2.7 per cent next year.

Due to the uncontrolled inflation, the common people are also cutting their food items. People have also made changes in the food items of their choice. The common people have either stopped eating expensive foods like paneer, fruits, milk etc. or reduced the intake of more quantities of such items. The condition of small businessmen has become worse. Many businessmen have had to close their businesses. In the current situation, the remaining traders may have to close their businesses. Medium and large businesses also do not have good economic status. Due to high level of inflation, there has been a huge reduction in the demand for diversified products. People are becoming unemployed. Growth rate is going downwards.

The Pakistani stock market condition is also very bad. The stock market CEO Richard Moran has resigned from his post before completing his term. It is being said that if the economic situation of Pakistan does not improve, then in the coming years, international financial institutions can take a tough stance against Pakistan's crispy economy.

It can be said that Pakistan's economic situation is getting worse and current Prime Minister Imran Khan has failed miserably in improving the situation. The Opposition says that the government is not able to understand how to overcome the rising inflation? In the current situation, the expectations of better economy in Pakistan is very low in the coming years.

About the author: Satish Singh is currently working as Chief Manager in State Bank of India's Economic Research Department, Corporate Centre, Mumbai, and has been writing mainly on financial and banking topics for the last 10 years.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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