Pakistan finds itself mired in latest economic crisis: PM Shehbaz Sharif

Islamabad: Pakistan was once widely thought to become the next “Asian tiger”, but has found itself mired in financial crisis, Prime Minister Shehbaz Sharif has said, citing three critical structural flaws that have prevented its economic take-off, stunted its growth and led to repeated boom-bust cycles.

As Pakistan turned 75 on Sunday, Sharif wrote an essay in The Economist magazine in which he stated that the country in its adolescence, in the 1960s, brimmed with hope and promise as it had a date with destiny.

He said the nation was widely thought ready to "become the next Asian tiger”. However, in 2022, Pakistan found itself mired in its latest economic crisis, the Geo News reported on Monday.

“This one is born out of the most challenging global policy environment of our lifetime, characterised by a commodity supercycle, historic monetary tightening at America’s Federal Reserve and a conflict in Europe that is tearing apart the post-war global order,'' Sharif wrote.

“But it also stems from home-grown weaknesses: weaknesses that have been left unaddressed for the better part of five decades; weaknesses that have forced us to approach the International Monetary Fund (IMF) multiple times during that time. This is not how successful nations are built,” he said.

Sharif then cited three critical structural flaws that stand out in the country.

“These have prevented economic take-off, stunted our growth and led to repeated boom-bust cycles since the late 1980s,” he said.

“First, our political environment has become increasingly polarised. Instead of debating how to run Pakistan better and rid the country of poverty, political parties have been at each other’s throats," the premier wrote.

“Second, we have not invested enough in the nuts and bolts of development: education, health and infrastructure. This is in part due to an abysmally low tax take, but it also reflects our priorities in public spending, some of which can be attributed to the complicated neighbourhood we live in, including a long-standing adversarial relationship with India, Russian and then the American invasion of Afghanistan and the influx of millions of refugees into Pakistan.

“Third, we have turned inwards in a way that has prevented us from reaping the benefits of globalisation through the free exchange of people, goods, capital and ideas. Our ability to make ― and keep ― friends on the international stage has significantly weakened over time,” he said.

The premier lamented that Pakistan hardly makes anything according to the demands of the world as the local companies remain very comfortable operating within the borders, the report said.

“Pakistan today is one of the most consumption-oriented economies in the world, with consumption accounting for more than 90 per cent of our GDP (gross domestic product). By contrast, we only invest 15 per cent of our output and export just 10 per cent. Annual inflows of foreign direct investment are less than 1 per cent of the GDP,” he wrote.

“These sorry statistics are a reflection of the flaws in our economic model. No successful country has ever grown this way,” he said.

On the occasion of Pakistan's diamond jubilee, Sharif said that as the country turned 75, the moment merits serious introspection.

He said that the fifth-largest country in the world, where two out of every three people are below the age of 30 and full of aspirations, finds itself stuck with an income level of just USD 1,798.

Every third person lives on less than USD 3.20 a day. And less than a quarter of the country’s women work outside the home; more than a third of Pakistan’s people can neither read nor write, he said.

“Our immediate priority is to safely navigate through our current economic crisis. We are not alone in this. The whole world faces a difficult year. But we have the protection of an IMF programme to see us through. While some measures will create hardship and require sacrifice, we are committed to implementing the programme. This is our path to safety,” Sharif wrote.

“This challenging moment also offers us an opportunity. If we can get a core set of things right, there is no reason why we cannot turn our fortunes around. What will it take? A consensus on the direction Pakistan must take. There will always be political differences in a democracy like ours.

“But there must be agreements on a few principles: managing our finances prudently, investing in our people, encouraging merit and innovation, and promoting regional peace. This is within our grasp,” he said.

Sharif said at the same time, it is important to modernise Pakistan’s social contract and that people must pay their fair share of taxes in return for vital public services.

“We must do better for our youth and our women, and enable them to fulfil their aspirations and become drivers of our economic growth. We must have a clearer sense of what values our nation must espouse ― including tolerance, hard work, meritocracy and social justice — and the place we want Pakistan to occupy globally as a responsible and modern nation,” he wrote.

Cash-starved Pakistan is facing growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.

With the rising current account deficit at USD 13.2 billion in the first nine months and pressing external loan repayment requirements, Pakistan required financial assistance of USD 9-12 billion till June 2022 to avert further depletion of foreign currency reserves.