2022 Pakistan

economic crisis

The 2022 Pakistan economic crisis is an ongoing economic crisis in Pakistan, that has caused
severe economic challenges for months due to which food, gas and oil prices have risen.[1][2]

Background

GDP per capita development in India, Pakistan and Bangladesh up to 2018

Pakistan's economic crisis was at the centre of a political standoff between Prime Minister
Shahbaz Sharif and his predecessor Imran Khan earlier this year, which led to Khan's ouster in
April 2022. Sharif accused Khan of economic mismanagement and mishandling of the country's
foreign policy, forcing him to step down in a no-confidence vote.

Timeline

Information Minister Maryam Aurangzeb told a news conference on 19 May 2022, that last
month, Pakistan was committed to "controlling rising inflation, stabilizing foreign exchange
reserves, strengthening the economy and reducing the country's dependence on imports". Import
of unnecessary and luxury items was banned. Sharif had said at the time that the decision would
"save the country's precious foreign exchange" and that Pakistan would have to "pursue
austerity."[3]

In late May 2022, the government lifted the cap on fuel prices - a condition for advancing the
long-stalled bailout deal with the International Monetary Fund (IMF). IMF also insisted Islamabad
to raise electricity prices, ramp up tax collection and make sizeable budget cuts.[4]

Federal Minister for Planning and Development Ahsan Iqbal told reporters on 14 May 2022, that
Pakistanis could reduce their tea consumption to "one or two cups" a day as imports were
putting additional financial pressure on the government. "The tea we import is imported on
credit," Iqbal said, adding that businesses should be shut down first to save electricity. According
to the Observatory of Economic Complexity, the South Asian nation of 220 million is the world's
largest tea importer, having bought more than $ 640 million worth of tea in 2020.[5][6]

Finance Minister Miftah Ismail said that a loan of $2.3 billion from a Chinese consortium of
banks had been credited to the Pakistani central bank's account in late June.[7]

In May, it was 13.7%, as measured by the country's Consumer Price Index. According to the
Pakistan Bureau of Statistics, inflation has increased by 19.8% in urban areas and 23.5% in rural
areas. Pakistan's Shehbaz Sharif-led government has increased prices of all petroleum products
by about Rs 14-19 per litre with immediate effect from Friday to fulfil commitments to the IMF
for the revival of a $6-billion bailout package. According to the finance ministry's notification, the
government imposed a Rs 10 (Pakistani rupee) per litre petroleum levy on petrol and Rs 5 each
on high-speed diesel (HSD), kerosene and light diesel oil (LDO). The price of petrol now stands at
Rs 248.7 per litre, HSD at Rs 276.5, kerosene at Rs 230.2, and LDO at Rs 226.1. The government
has been increasing petroleum prices since May 15 under the IMF deal. Since May 26, the prices
of petrol, HSD, kerosene and LDO, have increased, respectively, by 66% (or Rs 99), 92% (132.39),
95% (Rs 111.95) and 80% (Rs 100.59). The government has also given an assurance to the IMF
that it will gradually increase the petroleum levy on all products by Rs 5 per litre every month to a
maximum of Rs 50 per litre, and that the price of liquefied petroleum gas (LPG) will be gradually
increased to Rs 30,000 per tonne from the existing rate of Rs 4,670 per tonne. In yet another
setback, the National Information Technology Board said, "Telecom operators have warned
about shutting down mobile and internet services due to long hours of power outages." Sharif
said on Friday that it was a "very difficult challenge" for the government to control load-shedding
and slammed the previous Imran Khan-led government for not securing cheap gas.

Inflation in Pakistan rose to 21.3% in June, the highest since December 2008 when inflation
stood at 23.3%.[8]

Federal budget

On 10 June 2022, the government unveiled a new 47 billion budget for 2022-23 to persuade the
IMF to resume the 6 billion bailout deal, which was agreed upon by both sides in 2019.[9]

References

1. "Economic crisis and default fear" (https://tribune.com.pk/story/2361264/economic-crisis-and-default-

fear) . 12 June 2022.

2. "Goods transporters suspend nationwide operations after fuel hike" (https://arynews.tv/goods-transporte

rs-suspend-nationwide-operations-after-fuel-hike/) . 16 June 2022.

3. " 'Emergency situation': In a first, complete ban imposed on non-essential items, says Marriyum
Aurangzeb" (https://www.geo.tv/latest/417812-emergency-situation-in-a-first-complete-ban-imposed-on-
non-essential-items-says-marriyum-aurangzeb) .

4. "Pakistan's foreign policy reset hits a dead end" (https://www.aspistrategist.org.au/pakistans-foreign-poli

cy-reset-hits-a-dead-end/) . The Australian Strategic Policy Institute. Retrieved 13 July 2022.

5. Mogul, Rhea (June 15, 2022). "Pakistanis told to drink less tea as nation grapples with economic crisis"
(https://www.cnn.com/2022/06/15/asia/pakistan-tea-economy-intl-hnk/index.html) . CNN.

6. Islamabad, Associated Press in (June 15, 2022). "Pakistanis told to drink less tea to help fight economic
crisis" (https://www.theguardian.com/world/2022/jun/15/pakistanis-told-to-drink-less-tea-amid-economi
c-crisis) . the Guardian.

7. "$2.3 bn Chinese loan credited to State Bank of Pakistan: Finance minister" (https://www.business-stand
ard.com/article/international/2-3-bn-chinese-loan-credited-to-state-bank-of-pakistan-finance-minister-122
062500105_1.html) . Business Standard. Retrieved 25 June 2022.
 8. "Pakistan Inflation Hits 21.32% in June on Costly Oil" (https://www.bloomberg.com/news/articles/2022-0
7-01/pakistan-inflation-accelerates-to-21-32-in-june-on-costly-oil) . Bloomberg. Retrieved 1 July 2022.

9. "Pakistan's New Budget Aims to Please the IMF" (https://thediplomat.com/2022/06/pakistans-new-budg

et-aims-to-please-the-imf/) .

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