While Pakistan has always had its share of issues, recently the situation has been exceptionally

bad. Coming out of a global pandemic, followed by political instability due to change in
government, devastating floods in more than one third of the country and the economic
situation bordering on default accompanied with ever growing social issues like corruption,
poverty and injustice, Pakistan has been deep in crises.

By the end of 2019, the global economy was already entering a recession and improvement was
expected in 2020 but with the unexpected outbreak of covid-19 all predictions were proven
wrong. The covid-19 pandemic led to governments taking strong measures to save lives;
lockdowns of various severity were observed around the globe. In these lockdowns only
absolutely necessary sectors like services and hospitals were allowed to be open, all other
businesses were, although temporarily, shut down. This led to disruption in supply chain
management and layoffs of many employees from various businesses. Though countries
observed accommodative monetary and fiscal policies to prevent an economic crisis and to be
able to support its citizens as much as possible, much couldn't be done to prevent an inevitable
recession. 

Once the vaccine was available for covid-19, the vaccination programs in 2021 across Pakistan
helped ease the lockdowns and thus the impact of the pandemic on the economy had started
to weaken. All this while, economic policies were focused on reviving the economy and
Pakistan's economic growth rebounded to 3.9% in fiscal year 2021, ending in June. Pakistan's
economy was further expected to increase in fiscal year 2022 as also commented by the
country director of Pakistan for Asian Development Bank, “Pakistan's economy is on the path to
recovery, supported by promising growth in the industry and service sectors.” Throughout the
second and third wave of covid-19, accommodative fiscal and monetary policies continued to
escalate growth in all sectors. 

Just as Pakistan was expected to flourish economically, a regime change through a vote of no
confidence took place which brought upon political instability and fueled an economic
catastrophe. Historically, no Pakistani prime minister has ever completed a five-year term.
Assassinations, execution, disqualification or removal through imposition of martial law is a fate
most Pakistani prime ministers have faced which led to the country being in a constant phase of
uncertainty. It is not surprising that the removal of ex-prime minister Imran Khan through a
vote of no confidence triggered a political and economic crisis is Pakistan. The taxes imposed by
the new government, accompanied with higher tariffs on gas and electricity prices, along with
continuous increase in petrol and diesel prices put a lot of pressure on businesses. Middle and
lower class of the country is among the most affected. This led to many businesses and even
industries in Pakistan having no option but to shut down to be able to avoid bankruptcy. As of
march 22nd, 2023 textile industry of Pakistan which had an overwhelming impact on the
economy, contributing 60% to exports is reported on the verge of default. This is because
import consignments are stuck at port due to curbs on opening of letters of credit (LC’s). This is
an issue that most businesses that rely on imports of raw materials are suffering from. Factories
are functioning vastly below their efficiency. If this continues further more businesses and
industries would have to shut down which would lead to an even larger gap in GDP and millions
would become jobless. All this along with new government policies lead to world economies
and the International Monetary Fund (IMF) losing trust in governance and refusing to give any
further loans. 

Already struggling through an unstable political situation, Pakistan was unprepared for the
floods in 2022 which submerged over one third of the country under water. Housing,
agriculture, livestock, transport and communications are some sectors that suffered the highest
damage, at USD 5.6 billion, USD 3.7 billion, and USD 3.3 billion, respectively. Sindh is the worst
affected province with close to 70 percent of total damages and losses, followed by Balochistan,
Khyber Pakhtunkhwa, and Punjab. In a country where agriculture and livestock are one of the
main sources of income in so many areas, the impact of the destruction of over 3.6 million
acres of crops and over 750,000 livestock killed, was unthinkable on the economy. Thousands
of families that lost their homes and sole source of income depend completely on humanitarian
support now. These floods also caused a huge disruption in the supply chain management of
the country as the crops that were expected to be harvested and earned from in the next year
were all now submerged, which led to prices reaching an all-time high. This also affected the
exports of the country and a decrease in agricultural contribution to GDP. Previously,
agriculture was estimated to contribute approximately 22.67% to the economy. In the most
affected flood areas poverty is expected to worsen, the national poverty rate may increase,
pushing millions more below the poverty line. The damages caused by the floods totals at more
than 14.9 billion US dollars. This burden on the economy resulted in inflation skyrocketing,
which further created a cycle of crisis in the country.

In broader news, US retreat from Afghanistan and subsequent panic of the population has
caused an unusually high influx of Afghan refugees in Pakistan. This has caused a huge burden
on the already crippling economy. The government has taken measures to rehabilitate and
manage this issue but to no avail. As a result, metropolitan cities like Karachi have been choked
with a surge of immigrants. Which lead to countless problems such as lack of housing, unsafe
housing built rapidly and an increase in crime. These eventually cause a hindrance in the
development of Karachi as the allocated funds do not account for the undocumented
immigrants in the city. Because of this, even though Karachi is a major industrial city, the
development work is not up to par with the rest of the country. 

Furthermore, the impact of Russia Ukraine conflict on global economy has been extremely
negative and became evident in the form of an upsurge in international commodity prices. The
world stock market started on a positive note during 2022, but due to the geopolitical tension
the global stock indices dropped down in the same year. This resulted in inflation reaching an
all-time high across the globe and in Pakistan. Adjustments in electricity and gas prices, along
with significant increase in non-perishable food prices also contributed to the increase in
inflation. This conflict had serious consequences for the already struggling economy of Pakistan
as well as it had magnified the amount of difficult policy choices for the government of
Pakistan. Therefore, controlling inflation and strengthening economic recovery became
significantly important. 
Although Pakistan's economic situation seems extremely disappointing and unhopeful at the
moment Pakistan can once again start its journey towards betterment. The government needs
to introduce new policies and focus on development programs. The current government needs
to bring political stability and gain the trust of economies so that investors are willing to bring
business to Pakistan which would boost the economy. It also needs to be made sure that we
are prepared for disasters like floods and have an emergency plan set up always. So that in a
situation like one that Pakistan faced in July 2022, the country does not suffer a catastrophic
economic loss. The government needs to make sure that the relief programs for the affected
people reach them and help them with the best possible outcomes, so that these people who
are vital for Pakistan’s economic growth can be back on their feet as soon as possible.

References

1. Pakistan’s Economic Recovery to Continue Amid Steady Vaccine Rollout, Asian

Development Bank https://www.adb.org/news/pakistan-economic-recovery-continue-
amid-steady-vaccine-rollout-adb
2. International rescue committee https://www.rescue.org/press-release/pakistan-floods-
will-devastate-economy-likely-leading-widespread-hunger-and-violence
3. SBP’s annual report on the state of Pakistans economy
https://www.sbp.org.pk/press/2022/Pr-21-Dec-2022.pdf
4. Overview of the economy by finance.gov.pk
https://www.finance.gov.pk/survey/chapter_22/Overview.pdf
5. Textile industry on verge of default https://tribune.com.pk/story/2407359/textile-
industry-on-verge-of-default