A very well-known financial crisis in Asia affected countries like South Korea, Thailand, Indonesia, etc. This was majorly due to developmental activities which ultimately led to a large bank debt and hence the financial crisis.
And then there is Pakistan, which is playing chess with another classic crisis. There is a gross external debt of $106.3 billion on Pakistan, with a public debt of around 84.8% of its GDP. You really need to have your math wrong, or be a careless spender to be that far into debt as a country.
It is not like Pakistan does not have good economists. Names like Khurshid Ahmad, Sartaj Aziz and Abdul Hafiz Shaikh are taken among the best of the best. And yet, they swing in the great dip of debt.
The Economic Perspective
First things first, why is a former cricketer the PM, especially when the country is billions in loans? Most politicians who rise to that level are either with a very strong economic background or a very strong political background.
Recently Pakistan signed a deal with IMF (International Monetary Fund) for about $6 billion. Most of this was taken to pay the previously borrowed money. Here’s the situation – you are neck deep into loans. And then you take more loans to repay those loans. Not a very good strategy probably.
Since the new fiscal year started, Pakistani rupee has lost about 1/5th of its value against the dollar and the growth rate is falling at more than 50% pace. According to Economic Times, Pakistan’s per capita real GDP is 28% lower than India’s and IMF does not see this gap decreasing anytime soon.
There is so much of non-developmental expenditure and such low sources that Al Jazeera calls this a perfect recipe for a financial disaster.
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Wasting money in shelling at LOC and funding terrorist activities make up a major chunk of the non-developmental activity that was mentioned in the previous paragraph.
After the attack on CRPF in Pulwama, that left Indians shocked and shattered, India lifted the status of Most Favoured Nation (MFN) from Pakistan. This basically means, Pakistan will have more trouble trying to grow its economy now.
Indian politicians also plan to divert most of the Indus River water into India without breaking the Indus Treaty to create a bigger problem for the neighbour. Customs duty on all products imported from Pakistan is now 200%.
Only if the military had made better choices, these consequences would not have shown up. If Pakistan is as peaceful a nation as its politicians and leaders always speak of it to be, then it would not need 4% of its GDP for defence purposes, let alone spending on nuclear weapons.
I always believe that a country is as good as its people. If they live in a good condition, they will want to work better. Pakistan’s major income is through IT, real estate and agriculture.
But the living conditions of the public is not very good overall. The income streams will show growth only when the people feel good about being in the country.
Economists, strategists, politicians, the military and other leaders of Pakistan really need to take better decisions or we are going to witness a classic Asian economic crisis.
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