The economy of Pakistan has been facing numerous challenges for a long time. However, it has reached a critical stage where it is on the verge of collapsing. The falling rupee, skyrocketing fuel prices, and a massive increase in debt are just some of the problems that have pushed Pakistan's economy to a dangerous level. In this article, we'll deeply dive into the reasons behind the worsening situation in Pakistan and whether India should be worried about the consequences. Pakistan Economy-Pakistan Economy
Debt
A Major Concern Pakistan's total external debt has increased significantly over the past few years, reaching $130.433 billion by the end of 2021. A high debt-to-GDP ratio of 70 per cent and a significant portion of the government's revenue being earmarked for interest payments this year is causing concern. The country's $27 billion in bilateral debt, around $23 billion comprises Chinese loans.
Inflation at a 48-Year High
Inflation in Pakistan reached a 48-year high in January 2023, worsening the economy. Thousands of containers of food items, raw materials, and equipment are stuck in ports, which is depressing the value of the Pakistani rupee.
Plummeting Rupee
The Pakistani rupee fell 9.6 per cent against the dollar on January 26th, 2023, in the most significant single-day drop over two decades. The removal of an artificial cap on the rupee last week resulted in a further loss of 14.73 per cent in interbank trading.
Low Foreign Exchange Reserves
Pakistan's foreign exchange reserves have dropped to a new low of $4.3 billion in January 2023, the lowest since 2014. The State Bank of Pakistan has revealed that the country's total liquid foreign reserves stand at $9.45 billion as of January 20, 2023. Pakistan Economy-Pakistan Economy
Possible Political Crises
Political instability in Pakistan is a significant challenge, with no Pakistani Prime Minister completing a full five-year term in office. In August 2023, the current government's term will end, and a caretaker government will temporarily take over for up to 90 days. The issue is that this caretaker government needs to have the authority to sign an IMF agreement, leading to concerns about the government and the opposition's ability to work together and comply with IMF requirements. Additionally, Pakistan is highly dependent on imports, particularly for energy, making it susceptible to global oil and gas price fluctuations. The recent widespread power failure has further exacerbated the country's challenges due to limited resources for its oil and gas-based power plants.
Conclusion
The economy of Pakistan is in a dire situation, with numerous factors contributing to its downfall. The falling rupee, skyrocketing fuel prices, and a massive increase in debt are just some of the problems that have pushed the country's economy to collapse. The political instability, shortage of power and energy, and low foreign exchange reserves further exacerbate the situation. Whether India should be worried about the consequences of the worsening Pakistan economy remains to be seen, but it is certainly a situation worth monitoring.For more updates keep visiting our website www.topstoriesworld.com where we provide unbiased, true and top stories of the world
Pakistan Economy-Pakistan Economy
Pakistan Economy-Pakistan Economy
