Economic turmoil grips Pakistan as price spikes, political instability plague nation

In the wake of the closure of approximately 1,600 clothing factories, an estimated 700,000 workers, including daily-wage laborer Asif Maseeh, find themselves grappling with unemployment in Pakistan’s ongoing economic crisis. The shuttering of these factories, which constitute a third of the country’s textile industry, has significantly impacted the nation’s export earnings.

Maseeh, having lost his job earlier this year, now engages in manual work and drives an autorickshaw to make ends meet. However, the escalating cost of living is taking a toll on him and his family. In a dimly lit apartment in Lahore’s industrial area, Maseeh and his wife Shamim Asif highlight the challenges they face in providing for their five children, none of whom can afford to go to school.

The economic struggles extend beyond individual hardships, with Pakistan seeking its 23rd bailout from the International Monetary Fund (IMF). The interim finance minister, Shamshad Akhtar, has hinted at the possibility of an additional IMF loan due to the fragile state of the economy. Amidst soaring inflation, impending energy price hikes, and an upcoming general election in February, industrialists in Karachi threaten to shut down production unless the government addresses unprecedented gas tariff hikes.

The economic downturn is exacerbated by sharp increases in energy and essential commodity prices, a consequence of the IMF’s lending conditions prompting the government to phase out energy subsidies. The inflation rate, although having fallen to 29% in November from a record 38% in June, has significantly affected the cost of essential food items.

Beyond economic challenges, Pakistan grapples with political instability following the ousting of Prime Minister Imran Khan in April 2022. The interim caretaker administration currently oversees affairs until the upcoming election. Additionally, devastating floods and security crises, marked by attacks and suicide bombings, further contribute to the nation’s woes.

Despite its potential for investment, Pakistan faces challenges in attracting businesses due to an image problem related to law and order. The country’s foreign exchange reserves have dwindled, necessitating emergency funding from the IMF and support from allies like China, Saudi Arabia, and the UAE.

The China-Pakistan Economic Corridor (CPEC), a significant investment under the Belt and Road Initiative, aims to boost Pakistan’s economy. However, concerns linger regarding the nation’s ability to repay the estimated $30 billion owed to China. As the February elections approach, any new government faces a daunting task in revitalizing Pakistan’s economy, even with the support of its “Iron Brother,” China.