The Begging Bowl Syndrome Grasps Imran Khan’s Naya Pakistan dream, while the Islamic Nation shifts its focus to Kashmir Issue. In our previous article “Pakistan Survive Without Loans And Foreign Aid?” we covered extensively the Begging Bowl Syndrome plaguing the Pakistan Economy. We also talked about.
Currently Pakistan is facing many difficulties the list is below:
1. External Debt is mounting
2. High Trade Deficit. Exports are falling while the costs of imports are increasing
3. Huge unemployment
4. Tourism Industry has collapsed
5. Unstable government, hence, FDI inflows are reduced; There are no hopes for better economic conditions.
6. Local industry is diminishing as their market is now influenced by cheap Chinese products
7. High costs of essential commodities, unaffordable for common people
The people of Pakistan are now looking towards newly (that’s what they believe despite it was done a year ago) beloved & handsome, third class degree holder from Oxford, Prime Minister Imran Khan that he will take some decisions that will bring Naya Pakistan Economy out of Shambles.
In reality the newly elected PM turned out to be just a spokesperson, of Pakistan Army, an organization, which only sees their own benefits and nothing else. The Pakistan Army is now feeling the heat as their cash in-flows, which was mostly coming from foreign countries in form of Aid, Loan & Financial packages has seen a massive drop.
Pakistan had been blackmailing US and Europe that unless they keep giving Foreign financial Aid to the failed, bankrupt economy, Pakistan will unleash its armies of Terrorists on the entire world. If that is done, Pakistan will fall apart and it is not far before the Nuclear piles fall in hands of the Terrorists who will threaten Non-Islamic countries with Nuclear attacks. Pakistan is not only sending its terrorist armies to India, but to Afghanistan as well.
There is need to divert everyone’s attention from core issue and to get the fund, hence the organization is now facing towards Terrorism route. We have discussed certain economic pointers in Naya Pakistan, that present the grim reality. Will Naya Pakistan address the core issues plaguing its economy or will it continue to divert the public attentions from its Economic collapse and create the delusion of Jihad and turn them towards spreading terror in India?
Naya Pakistan Reality Check
The PKR Rs 6 trillion-budget now has a whopping deficit of PKR Rs 3.56 trillion due to its poor monetary policies and financial reforms. Depleting foreign exchange reserves, low exports, high inflation, growing fiscal deficit, and current account deficit in combination with overpopulation, illiteracy, terrorism, and high debt aggravates the current situation to worse of its kind. Adding to its woes, the nation is placed the Financial Action Task Force’s (FATF) grey list, by Global Money Laundering and Terror Funding Monitoring Body.
Summing up the present situation has forced the Government to knock on the doors of the International Monetary Fund (IMF) for its 22nd loan. This reflects the legacy of uneven and pro-cyclical economic policies in recent years aiming to boost growth but at the expense of rising vulnerabilities and lingering structural and institutional weaknesses.
Currently, Pakistan owes the IMF billions from previous programs and is in a fiscal debt trap though 42 percent of Pakistan’s government expenditure is earmarked for debt servicing, which cannot be supported by its decreasing revenues.
According to World Economic Survey, Pakistan Ranked 24th Largest Economy in terms of PPP of $1.141 Trillion and 39th Largest economy in terms of GDP of $ 254 Billion and 147th in terms of GDP Per Capita of $1641. While the current GDP has slowed down to 2.4 Percent. The inflation rose to 8.9 Percent high, which should be less than 4.1 Percent as earmark set by the world bank for a stable economy when compared to its neighboring nations where the inflation is 2.05 for India whereas China stands at 2.02 Percent.
Ease of doing business
In terms of ease of doing business, Pakistan ranks 136th out of 190, 105th in Global Innovation Index and is been placed as the fourth most unsafe countries for the tourists according to the World Economic Forum’s Travel and Tourism Competitiveness Report due to which the nation is unable to generate wealth from tourism and in year 2018 it received only $317 million.
Pakistan Stock Exchange
The most important function of a stock exchange is that it acts as an economic indicator of conditions prevailing in the country. As of 2018, Pakistan Stock Exchange has 518 listed companies worth $84 Billion. The stock exchange has taken a massive blow amid tensions against India on Kashmir Issue. Though the present condition of the stock exchange is spiralling down, from the year 2009 – 2016 PSX remained the world’s best-performing stock exchange with a return of $26 billion.
Different Economic Indicators
The annual fiscal deficit rose to the highest in the last three decades at 8.9 percent for the financial year 2018-19 as compared to 6.6 percent of last year. To counter the fiscal deficit, the government last month had increased the price of petrol and diesel by Pakistan Rs 5.15 per litre and Rs 5.65 per litre, respectively. While petrol will cost Rs 117.83 a litre, a litre of diesel will be Rs 132.4, The government had also ordered a rollback of the prices of ‘naan’ and ‘roti’. Currently, the rates of naan are ranging between Rs 12 to Rs 15 in different cities, while roti is available at Rs 10 to Rs 12 apiece. The Islamic nation always faces a balance-of-payment crisis even provided by bailout packages to by friendly countries including China and Qatar.
“I have never seen such a high fiscal deficit in my career,” said Dr Ashfaque Hassan Khan, a former economic adviser.
The current account deficit increases when the export is less in comparison to import due to which the foreign reserves shrink and currency weakens. In year 2018, the total export was $24.82 Billion while the import stood at $56 Billion.
As of now the External Debt in Pakistan rose to $ 105.8 Billion USD in the first quarter of 2019 from $ 99.08 Billion USD in the fourth quarter of 2018. In the second quarter in 2019, this External Debt stood at $106.3 Billion USD. (Source: CEIC Data)
Pakistan made blunders falling into CPEC being a debt trap, the Former Nawaz Shariff Government in April 2015 entered into MOU of 51 agreements laid by China for its ambitious Belt and Road Initiative worth $46 Billion USD, in Power Sector, Railways, Roads and development of Gwadar Port to serve its own interests, where it can boost its trade with African Nations. Later the Project amount rose to $62 Billion USD in 2017 which was 35 percent of its GDP then. Where $35 Billion was only allocated to the Power Sector, with a payback period of 20 years.
According to International Monetary Fund (IMF), by the year 2023–2024 Pakistan will have to pay around $3.5 billion per annum to return the loans under CPEC and $90 Billion USD in 20 Years with Interest. While the Trump administration lobbies and scrutinizes against the use of IMF bailout packages to repay the Chinese debts. The Chinese are well known for their unsavoury debt traps. Recently Hambantota Port was leased to China by Sri Lanka for a period of 99 years, as the later was unable to pay the debt. Furthermore, the dragon is taking control over Zambian State Assets for being unable to pay its debt. It has stepped into the shoes of the Colonial East India Company which invested in Railways Roads and trade just to put the nation into debt and benefit their interests. If Pakistan fails to repay the debt, its Iron Friend will seize Pakistan’s assets (Power Sector, Roads, Ports, Railway) and would tax the Pakistan Govt to settle the loan. In other terms the will take down the Governance in Pakistan and turn into a Chinese colony.
Pakistan, since the very beginning, the nation has fought four wars with India over border disputes. The Cash Starved nation is more focused on the arms race. While Its military budget for the fiscal year is $9.6 Billion i.e. 4 percent of its GDP due to its ongoing security issues and border disputes. Though Imran Khan managed to cut the defence expenditure which is about one-fifth of the country total global spending $42 billion since July 2018 – June 2019.
The GDP of Pakistan is the GDP of its army which owns and runs everything starting from the army to civil petrol pumps, hawala banks, export-import firms etc. We covered about Fauji foundation owning different businesses in Pakistan in our previous article Institutional Collapse Of Pakistan: Solution. Moreover, cross-border terror-sponsoring to foster its own agenda has put a dent on its economy. It has been Put on Grey List by FATF, and recently FATF-Asia Pacific Group has placed Pakistan in Enhanced Expedited Follow Up list, more to follow on October 2019.
Pakistan’s foreign policy, like that of any other country, is shaped by its geography and to a significant extent by its domestic politics. Anti-Indianism and an urge to establish a pliable government in Afghanistan have been constant features of Pakistan’s foreign policy since its creation. Pakistan has become isolated at the international level due to its flawed foreign policy and its support for UN-designated terrorist organizations JeM, LeT, Al-Qaeda to serve its national and political interests and engage its bordering nations in a proxy war.
Pakistan has been continuing to rely on China for diplomatic and economic gain, it will have to figure out how to maintain its sovereignty and strategic autonomy vis-à-vis China. Even today Pakistan threatens to wage al-jihad war and use of nuclear missiles against India in public and social platforms and engaged in using military oppression against Balochistan, Sindh, Khyber Pakhtunkhwa, and Gilgit-Baltistan torturing and killing thousands of people. It’s quite shocking that Former President Parvez Musharraf has hailed their non-state armed actors as Heros. Recently former United States secretary of Defence said “Pakistan is the most dangerous of all countries he had dealt with.”
“We cannot have the fastest-growing nuclear arsenal in the world falling into the hands of the terrorists breeding into their mindset,” Mattis writes in his latest book “Call Sign Chaos.”
Due to diversion of development funds for military expenditure triggered a chain of reactions on different sectors. The prevailing situation of Pakistan is facing a serious financial crisis which is resulting in a rapid increase of dollar rate because of the insufficient balance of payments, Pakistan stock exchange is also facing a downfall. The demand for labor has decreased. Due to the backwardness, the industrial sector is accommodating only a small number of people. On the other end, insufficient growth in the industrial sector can be seen. The causes behind this are shortage of capital and investment in the country to build new industries.
Less collection of taxes also hinders the government of Pakistan to establish new factories and industries in the country. Due to continuous support to terrorist groups, Pakistan has been Placed on FATF Grey List. This is not for the first time Pakistan is Placed under FATF Scanner, the repercussions of getting placed prohibit any foreign investments and financial assistance to the nation.
As a result, this affects the industrial corridor of the nation while the shrinking economy has forced a significant population of Pakistan towards unemployment. This is growing by leaps and bounds not only in rural areas but also in urban areas of Pakistan. Many top universities of Pakistan producing thousands of young graduates every year but failing to get a good job on completion of their degree. It is a fact that many don’t get a decent job even after graduation.
According to reports published by the Pakistan Bureau of Statistics, the unemployment rate has increased to 5.1 % to 5.79 %, and it is still growing. If this trend continues, as per IMF estimates, by year 2024, unemployment rate will touch 6.46%. (Source: CEIC Data). This is a very alarming situation especially for the youth as they are looking to get a job as soon as they have a degree in their hands. But unfortunately, the Naya Pakistan Government lacks to provide adequate measures to reduce this unemployment rate.
With the depletion of foreign Reserves due to prevailing overall deficits, irregularities in Balance-of-Payments, the total debt rose to $105.82 Billion USD in the first quarter of 2019. In the second quarter in 2019, this External Debt reached $106.3 Billion USD.
It still continues being a big question while the public of Pakistan remits taxes then why Pakistan still relies on external debt. Why Chinese loans are more preferred than Bilateral Trade?
Though PM Imran Khan has pleaded earnestly for IMF bailout, while the IMF has agreed to pay $6 Billion USD over a period of 39 months. In addition, the UAE has also provided Pakistan with $3 Billion USD to revive its economy. But reviving the economy won’t be easy unless the government shifts its focus from harboring and sponsoring terrorism to reinforce monetary policies.
Proper economic planning, effective Government policies law and order situation in the country should be enforced. The latest technologies should be adopted in the farming sector; the use of advanced machinery can help in boosting agriculture output in Pakistan. Almost 44 % of people get jobs from agriculture, which is 20.9 % of the total GDP of the country. The Government should consider revamping the export of items with neighboring countries to promote its trade and develop economic ties. The current trade with India worth $2.4 Billion USD, while it offers the potential to achieve $21 Billion USD and similarly it can boost its ties with Afghanistan and other nations which will remove the uncertainty of Pakistan’s Economy.
A stable economy can only be achieved when a nation is at peace with its neighbors which can bring regional stability in South Asia. To achieve this the military backed government should be changed with the civilian government. Else, Pakistan, which was artificially created in 1947 by that historical British blunder called Partition on the basis of the bogus two-nation theory, is bound to implode.
Future of Naya Pakistan is dependent on the path it is going to take. It has got an option to choose between Somalia, Venezuela, North Korea and a better Pakistan. Let’s hope better sense prevails them.
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