Pakistan’s Economy: History and Current Crisis

BY MUHAMMAD ABDULLAH ZAFAR GHAURI

Ever since Pakistan came into being, its economy has been a subject to great debate. The unfair division of land, assets, industries, waterworks created huge trouble for then newly-born Pakistan. Yet, the country surely progressed by leaps and bounds to slowly recover itself from the damages it suffered at birth.

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Throughout the historical span of 75 years, it has been noticed that Pakistan’s economy has exhibited sinusoidal behavior.

For instance, the decade of 1960’s is referred to as “Golden Age of Pakistan” in which the industrial revolution took place, a new capital Islamabad was developed, mega dams Mangla and Tarbela were built. The Wars of 1965 and 1971 proved a huge blow to the budding economy, so was the Fall of Decca, which took place on 16th December 1971.

Even in bad economic conditions, Pakistan announced the attainment of Nuclear Power to counter Indian designs. As famously quoted, Zulfiqar Ali Bhutto purportedly said: “We will eat grass, even go hungry, but we will have our own (Nuclear Plant).”

On its way to become a nuclear power, Pakistan faced sanctions from the West. After its conducted nuclear tests in 1998, the country again faced severe backlash to the economy due to Western sanctions.

Pakistan has been a low-income developing economy, greatly dependent upon agriculture, as the majority of population, either directly or indirectly is connected with it. As per 2021 statistics, almost 19.7 percent of GDP is earned through agriculture, which employs almost 39 percent of the labor force- a large chunk as a whole.

The country runs and manages its economy by exporting some agricultural produce, both in raw and finished form. Cotton, an important agricultural produce, is also exported in raw form to earn foreign exchequer, yet the yield of cotton has decreased over the time due to irregular trends of weather and pest attacks.

Moreover, the cottage industry of the country supports the country in earning a good amount of foreign exchequer, which primarily includes sports equipment, handicrafts, surgical instruments etc.

The industrial sector is also playing a role in betterment of the country’s economy, contributing to almost 19.2 percent to the GDP.  Still the economy of Pakistan is a low-income developing economy, heavily reliant upon imports.

The imbalance of imports and exports leads to a huge trade deficit and ultimately an unstable economy.

In 2020, the entire world was suffering due to COVID-19 pandemic, which inflicted heavy damages to the worldwide economy, as well as of Pakistan. The prolonged closure of businesses and trade, caused bankruptcies and defaults internationally.

Pakistan’s economy also suffered heavily during the pandemic. A loss of almost 3 million jobs was feared when the pandemic was at its peak, not a single sector was exempted from loss, the GDP took a nosedive to lose about 26.4 percent in a short span of 14 weeks.

As soon as COVID-19 pandemic began to settle down, the Ukraine War broke out on 20th February 2022. US backed major powers decided to support Ukraine, on the behest of NATO, to save the country from Russia’s occupation.

This led to blocking of trade between Ukraine, Russia and other countries. The oil and gas pipeline linkages were blocked. A humongous budget was set forth by NATO for Ukraine for war against Russia. The situation led to a decreased trade, which affected the whole world.

The Ukraine War caused losses to our country as well. Pakistan is basically dependent upon oil and fuel from the Middle East and other oil rich countries.

After Western sanctions on Russia, which is a major energy supplier to the world, the prices of petroleum products increased hence proving a burden to foreign reserves of cash starved economies like Pakistan .

Moreover, the supply of wheat to Pakistan from Ukraine and some countries was also affected, resulting in a hike in wheat price.

Political turmoil took place in the country in April this year, which ultimately led to change of government through a no-trust motion against the then Prime Minister.

Whenever an abrupt regime change takes place, the economy of a country suffers a backlash due to arising political instability and tension.

It’s an evident factor that the new government designs targets in accordance with its political needs, as a result, the previous regime’s many projects already in  the pipeline are ignored.

Same happened this time as well, and the economy took a sudden dive. It was yet to stabilize after political shock,the unexpected trend of South-Eastern Monsoon season resulted in unprecedented rains and floods in parts of the country. A large portion of South Punjab, Rural Sindh and many parts of Balochistan provinces remained under water for weeks.

The country faced almost $31.8 billion in damages. The floods caused  destruction of crops, washing away thousands of houses, killing livestock, backlash to the tourism industry and much more.

Agricultural sector suffered the worst during floods in decades. It destroyed summer crops, which include rice, corn, maize and rice, vegetable and fruits. For Pakistan, rice is an important commodity to export.

The destruction of land and crops led to further increase in the prices of essential commodities, which ultimately proved a burden upon the poor people.

After this year’s monsoon blow, the government of the day claims that the economy is once again being put on track of recovery.

As a whole, Pakistan’s economy keeps on such an up and down track perpetually, sometimes progressing and sometimes in peril.

Being responsible citizens, we should work hard for the betterment of the country and play a productive and honest role for the betterment of the economy.  If we all play our due role, Pakistan shall stand out in the line of emerging economies with a self-sustained economy.

(The author is a student of Mechanical Engineering at NUST. He is from Tehsil Dadyal, District Mirpur AJK. His hobbies include Stamp collection, coin collection and reading classical English literature.)

Also Read: Current economic situation cuts purchasing power of buyers; harms sale of commodities, dry fruit

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