Economic Crisis in Pakistan
In 21st century economy is taken as ‘Religion’. It is the blood in the veins of nation state, vitality in the human muscles, base for brutal wars and a reason for governments to rule. The motherland has painfully experienced rising poverty and sinking economy; despite world’s best canal system, profitable geostrategic location, and unexplored resources. The nation, who earned nuclear position despite miseable poverty and sever foreign pressure, can do wonders, if provided with dedicated leadership.
Pakistan’s economy is in a downward spiral. Inflation is at 25percent (food inflation 50%), foreign reserves are falling, and the government is in danger of defaulting on its foreign debt. A spike in global food prices has hit Pakistanis especially hard, and the global financial crisis only threatens to exacerbate Pakistan’s economic woes. Pakistan is watching foreign investors flee.
Weak governance has contributed to growing militancy in Pakistan, economic troubles, and regional instability. As in the past, the possibility remains that Pakistan’s military could conduct a coup if it perceives the government as inept. Or Pakistanis may rise up in protest due to the government’s inability to deal with economic issues.
Pakistan economy is under its terrible crisis due to following REASONS
One of the immediate causes is Political instability due to Musharaf’s position as president, delay in restoring judiciaryand resultantly withdrawal of PML (N) from the alliance leaving behind ‘dead’ ministry of finance. In contrast the present government is not showing strong will to cope with the situation. Though some Positive Measures. To end Load Shedding till 14th August, 2009, Benazir income Scheme programme, Distribution of Land in Sindh, tight Tariff System against luxury items
Suicide attacks in the industrial cities-fear among people, disinvestment and maximum outflow of capital, especially in Dubai stock exchange crash.
Foreign investment in 2007 was $ 700,63.5 million but in 2008 only $329 million.
Soaring oil prices due to increased demand from growing economics of China and India, Iraq crisis, Iran holding its oil export, devaluation of Dollar after Iraq invasion and limited supply by OPEC, refusal of Saudi Arabia to enhance its oil supply. More population to use energy from to $ 134/ barrel in 2008.
Food crisis oil prices, low agriculture yield due to heavy cost of production (seeds, pesticides, water and fertilizers), unavailability of small loans to small farmers, power shortage, fast increasing of population, poor governance in managing the food and to stop its smuggling to Afghanistan. Central Asia and Iran which stored big food stocks due to American war. World Food Crisis encouraged its smuggling. Less attention by the governments to live stock, dairy stock, increased circulation of paper currency. Big share of ‘Middle Man’.
World Food Crisis: population explosion, emergence of middle class with more food consumption in India and China. Low yield in India. Earthquake in China, increase in world oil prices.
Inflation means price hike, huge gar between demand and supply, too many rupees chasing too few things. More supply of Money due to; AID after 9/11. Foreign Remittances due to over seas Pakistanis, growth in banking sector and investment in real estate. Poor supply of goods, food items due to low yield. Inflation due to rise in oil prices, food, removal of food subsidy, devaluation of Rupee, higher import price, Government borrowing from State Bank Rs . 544 billion. Resultantly increase in wage-price. Delay in monetary tightening by the State Bank. Government claims 25% while actual is 32% while food inflation is 45%
Deceleration of growth in manufacturing: energy crisis. Terrorist incidents. High interest rates by SBP discouraged Private investment. High imports and low exports. 75 industrial units in Karachi and 85...
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