The Pakistani rupee has taken a significant hit in recent months, currently trading at around PKR 288 in the open market. For millions of people across the country, buying fruits during the month of Ramzan has become a luxury. The economic situation in Pakistan has never been so grim, with inflation at 35.4% in March 2023, causing widespread pressure on the poor masses due to unchecked inflation. Even those with jobs have struggled to make ends meet, as prices of essential goods have skyrocketed, leaving many without money for medicines, new clothing or travelling.
The State Bank of Pakistan has responded to rising inflation by increasing interest rates by 100 basis points to 21%, a move that experts doubt will help to control prices. Dr. Qaisar Bengali, a leading economist, has stated that the interest rate increase will not curb inflation but will increase the cost of doing business. Despite the increase, the country is trapped in a debt cycle, and its economic woes seem unlikely to disappear anytime soon.
Pakistan is awaiting a much-needed $1.1 billion tranche of funding from the International Monetary Fund, part of a $6.5 billion bailout agreement reached in 2019 with the global lender. However, the country’s economic problems appear to be mounting, with experts suggesting that political stability and consensus among institutions are necessary to solve the ongoing economic crisis. Atif Mian, a Pakistani-American economist based at the prestigious Princeton University, has warned that Pakistan’s economy is in a tailspin, going from crisis to catastrophe, with the system becoming unhinged.
Inflation in Pakistan is not only being fuelled by large deficits and money printing but “foolish policy choices” that have seriously impacted the productive capacity of the economy, according to Atif Mian. Rising suicides and incidents of crowd stampedes at free food points are all indicators of increasing frustration among the people. Professor Ziaullah Khan of the University of Karachi warns that if the economy is not controlled, we will see more crimes, suicides and stampedes in the coming days, and chaos in society may ensue.
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