Despite improving macroeconomic indicators, including declining inflation, a stable currency and sustained foreign exchange reserves, Pakistan continues to face economic challenges, particularly for the general public.
Years of stagnant growth have left salaries virtually frozen even as inflation soared, severely reducing the purchasing power of the average consumer. According to recent estimates, over 40 percent of the country’s population currently lives below the poverty line, with hefty utility bills triggering anger and protests. Efforts at course-correction, either through a bailout from the International Monetary Fund (IMF) or structural reforms, have yet to yield any significant benefits.
The situation is complicated by Pakistan’s internal problems, particularly resurgent terrorism. The banned Tehreek-e-Taliban-Pakistan (TTP) has killed tens of thousands of Pakistanis and been emboldened by the 2022 return to power of the Afghan Taliban. Last year, the group was involved in at least 150 attacks across Pakistan, with Islamabad repeatedly urging Kabul to prevent its soil from being using to foment terrorism to no avail. Calls for dialogue, as forwarded by some political parties, are doomed to failure because the TTP is fundamentally opposed to the notion of the Pakistani state and its Constitution. A political crisis that has now spanned two years also endangers any attempt at stability, with investors sounding the alarm over any potential policy shift in case of a change in government.
Unfortunately, prevailing conditions mean Pakistan will continue to suffer an economic crisis every few years. This is primarily because the country “does not produce enough and spends too much,” forcing it to take on more debts to keep the lights on. Because of this, every subsequent crisis is worse than the last, with successive governments more concerned with firefighting than much-needed structural reforms. According to the State Bank of Pakistan (SBP), the country is scheduled to repay maturing foreign debt and make interest payments on accumulated external debt of $30.35 billion in the 12 months spanning August 2024 till July 2025. Sadly, none of Pakistan’s political parties seem to have the political will or ability to bring about the change required to overcome this.