As 2023 ends, Pakistan confronts overwhelming challenges. With a population exceeding 241 million and an estimated growth rate of just 2.1 percent, it is at yet another critical crossroads.
First, there is the threat of growing poverty. According to the UNDP Human Development Report-2022, Pakistan’s Multidimensional Poverty Index Headcount has reached 38.3 percent, surpassing the South Asian average of 29 percent. This positions Pakistan second in South Asia, trailing only Afghanistan, which has a staggering 55.9 percent poverty rate. This poverty coincides with stagflation, characterized by inflation exceeding 30 percent, and rising unemployment. Rural poverty beats urban poverty by a factor of two; the disparity evident across all provinces. Slumping incomes boost food insecurity, further threatening human development. Pakistan’s Human Development Index in the 2022 report stood at 0.544, ranking it an unenviable 161 out of 192 countries ranked.
A recent report added to Pakistan’s woes by predicting the rupee would be Asia’s worst-performing currency in 2024, with further depreciation expected over the next three years. This has been blamed on persistently high inflation, a large trade deficit, debt repayments, an external funding gap, and falling foreign investments. There is also concern over the re-emergence of parallel currency markets, undermining the credibility of the central bank and the government, who have taken great pains to curb illegal currency trading and stabilize the rupee. Pakistan’s record-high policy rate, coupled with its uncertain external balance, would likely persist, hampering alike business and the average consumer’s purchasing power.
There is no doubt that 2024 will be critical for Pakistan, testing the expertise of those who advise and run the economy. The new government that emerges after elections on Feb. 8, 2024 must be prepared to embrace unprecedented, tough, and unpopular reforms to address the country’s economic woes. This exercise would need to work in tandem with an across-the-board push to reduce the widening divide between the rich and poor, which poses great risks to internal stability. Pakistan must also slash development spending, ridding itself of white elephants that burden the national exchequer. This is no less than a national emergency, and any attempts to treat it as anything less are bound to fail.