essay on current situation of pakistan 2023

Pakistan: Five major issues to watch in 2023

Subscribe to the center for middle east policy newsletter, madiha afzal madiha afzal fellow - foreign policy , center for middle east policy , strobe talbott center for security, strategy, and technology @madihaafzal.

January 13, 2023

1. Political instability, polarization, and an election year

Politics will likely consume much of Pakistan’s time and attention in 2023, as it did in 2022. The country’s turn to political instability last spring did not end with a dramatic no-confidence vote in parliament last April that ousted then Pakistani Prime Minister Imran Khan from office. Instability and polarization have only heightened since then: Khan has led a popular opposition movement against the incumbent coalition government and the military, staging a series of large rallies across the country through the year.

The struggle for power in Pakistan continues into 2023. While the incumbent government has not ceded to Khan’s demand for early elections, country-wide elections are constitutionally mandated to be held by October this year. It benefits the government politically to hold them off as long as it possibly can as it tries to dig itself out of Pakistan’s urgent economic crisis and its lackluster domestic performance (its diplomatic foreign policy approach has fared better, but that may not matter for elections). The last year has cost it precious political capital, and Khan’s party did very well in a set of by-elections held in July and October. The state has tried to mire Khan and his party in legal cases, relying on a familiar playbook used against opposition politicians in Pakistan, albeit to limited effect, with the courts’ involvement.

Khan’s party still controls two of Pakistan’s four provinces, Punjab and Khyber Pakhtunkhwa (KP), and the incumbent federal government’s (extra-legal) efforts to try to wrest power from it in Punjab, the largest province, have been unsuccessful (thanks to the courts). The year is off to a dramatic start, with Khan’s party initiating the process to dissolve the Punjab and KP assemblies this month to pressure the federal government into early elections.

For politics-obsessed Pakistan, the biggest question remains who will win the next general election. Will former Prime Minister Nawaz Sharif (brother of current Prime Minister Shehbaz Sharif) return to Pakistan to run as the head of his party, the PML-N? Can Imran Khan win on the strength of his popular support, despite his confrontation with the military? Regardless of the outcome, we can say this much given the histories of the main contenders: The direction of the country is unlikely to change.

2. A precarious economic situation

Pakistan’s economy has been in crisis for months, predating the summer’s catastrophic floods. Inflation is backbreaking, the rupee’s value has fallen sharply, and its foreign reserves have now dropped to the precariously low level of $4.3 billion, enough to cover only one month’s worth of imports, raising the possibility of default.

An economic crisis comes around every few years in Pakistan, borne out of an economy that doesn’t produce enough and spends too much, and is thus reliant on external debt. Every successive crisis is worse as the debt bill gets larger and payments become due. This year, internal political instability and the flooding catastrophe have worsened it. There is a significant external element to the crisis as well, with rising global food and fuel prices in the wake of Russia’s war in Ukraine. The combination of all these factors has spelled perhaps the greatest economic challenge Pakistan has ever seen. Yet the government has been mired in politicking, and the release of a $1.1 billion loan tranche from the International Monetary Fund (IMF) remains stalled as Islamabad has pushed back on the IMF’s conditions. The government has now resorted to limiting imports and shutting down malls and wedding halls early, small measures that fail to adequately address the problem.

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Pakistan may end up avoiding default for the time being with IMF help and loans from friendly countries, especially Saudi Arabia and other Gulf nations. But those won’t address the clear underlying malaise of the economy – and the fact that something fundamentally will need to change, in terms of how much the economy produces versus how much it spends, to avoid default down the road. But none of Pakistan’s political parties seem to have the political will or ability to bring about such change.

Pakistan must reportedly pay back $73 billion by 2025; it won’t be able to do so without debt restructuring.

3. Flood recovery

A “ monsoon on steroids ” – directly linked to climate change – caused a summer of flooding in Pakistan so catastrophic that it has repeatedly been described as biblical. It left a third of the country under water – submerging entire villages – killed more than 1,700, destroyed homes, infrastructure, and vast cropland, and left millions displaced.

More than four months after the worst of the flooding, nearly 90,000 people are still displaced from their homes, and the floodwater is still standing in some areas. It would be enormously difficult for any country to recover from such a disaster and rebuild lost infrastructure, including roads and schools, let alone a government dealing with a cash crunch like Pakistan’s.

But the Pakistani government – in particular the foreign minister Bilawal Bhutto Zardari, who has visited the United States twice since the summer, and the minister for climate change, Sherry Rehman – has done an admirable job bringing awareness of the flooding catastrophe to the world stage. A donors’ conference Sharif co-hosted with the United Nations Secretary General Antonio Guterres in Geneva this month raised pledges for more than $9 billion for flood recovery over the next three years (the money is mostly in the form of project loans). Pakistan has also played an important role in discussions about the devastating effects of climate change on developing nations, spearheading the effort to place loss and damage on the agenda at COP27 for the first time, and pushing for COP delegates in Egypt to agree to a loss and damage fund.

With billions of dollars in help promised, the government has passed one hurdle. But the road for recovery ahead will be tough: Displaced people are still sleeping under open skies in Sindh province. Implementing a sustainable recovery will require enormous capacity, resources, and transparency in a country already mired in other troubles.

4. Mounting insecurity

The Pakistani Taliban (or TTP), the terrorist group responsible for killing tens of thousands of Pakistanis from 2007 to 2014, have been emboldened – predictably so – by a Taliban-ruled Afghanistan, and once again pose a threat to Pakistan, albeit in a geographically limited region (for now). The group engaged in at least 150 attacks in Pakistan last year, mostly in the northwest. Because the TTP have sanctuary in Afghanistan, the Pakistani state increasingly finds itself out of options when it comes to dealing effectively with the group. The state’s negotiations with the TTP have failed repeatedly, as they are bound to, because the group is fundamentally opposed to the notion of the Pakistani state and constitution as it exists today. The Afghan Taliban have, unsurprisingly, also not proved to be of help in dealing with the TTP – and Pakistan’s relations with the Afghan Taliban have deteriorated significantly at the same time over other issues, including the border dividing the two countries.

At this point, Pakistan’s first preference will be to strike kinetically at TTP targets within its borders, but that will be limited by TTP movement across the border into Afghanistan. That movement is what leaves Pakistan with the difficult-to-resolve TTP issue and complicates things beyond the military operation it launched against the group in 2014. Still, the Pakistani Taliban at this point is not the biggest threat Pakistan faces, given the country’s major political and economic challenges – but left unchecked, it could morph into a significant crisis.

5. Civil-military relations

Pakistan has a new chief of army staff as of November 29 last year. General Asim Munir replaced General Qamar Javed Bajwa, who had held the all-powerful post for six years (due to a three-year extension). The appointment of the army chief was a subject of considerable political contention last year; a major part of the reason Khan was ousted from power was his falling out with the military on questions over the appointments of top army officials.

All eyes are now on how civil-military relations shape up under Munir. Under Bajwa, the military solidified its control over all manner of policy behind the scenes. Bajwa presided over a close “same-page” relationship with Khan; when that frayed, the PML-N was eager to take Khan’s place as the military’s ally and head of the civilian government. Bajwa left office saying the army would no longer be involved in political matters; few in Pakistan believe him. With politics set to dominate the agenda this year and an election imminent, Munir has a chance to show the country whether he will follow in his predecessor’s footsteps, or chart a new course for civil-military relations in Pakistan. Pakistan’s history indicates the former.

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The Current Situation in Pakistan

A USIP Fact Sheet

Monday, January 23, 2023

Publication Type: Fact Sheet

Pakistan continues to face multiple sources of internal and external conflict. Extremism and intolerance of diversity and dissent have grown, fuelled by a narrow vision of Pakistan’s national identity, and are threatening the country’s prospects for social cohesion and stability.   

The inability of state institutions to reliably provide peaceful ways to resolve grievances has encouraged groups to seek violence as an alternative. The country saw peaceful political transitions after the 2013 and 2018 elections. However, as the country prepares for anticipated elections in 2023, it continues to face a fragile economy along with deepening domestic polarization. Meanwhile, devastating flooding across Pakistan in 2022 has caused billions in damage, strained the country’s agriculture and health sectors, and also laid bare Pakistan’s vulnerability to climate disasters and troubling weaknesses in governance and economic stability.

Regionally, Pakistan faces a resurgence of extremist groups along its border with Afghanistan, which has raised tensions with Taliban-led Afghanistan. Despite a declared ceasefire on the Line of Control in Kashmir in 2021, relations with India remain stagnant and vulnerable to crises that pose a threat to regional and international security. The presence and influence of China, as a great power and close ally of Pakistan, has both the potential to ameliorate and exacerbate various internal and external conflicts in the region.

USIP’S Work

The U.S. Institute of Peace has conducted research and analysis and promoted dialogue in Pakistan since the 1990s, with a presence in the country since 2013. The Institute works to help reverse Pakistan’s growing intolerance of diversity and to increase social cohesion. USIP supports local organizations that develop innovative ways to build peace and promote narratives of inclusion using media, arts, technology, dialogues and education.

USIP works with state institutions in their efforts to be more responsive to citizens’ needs, which can reduce the use of violence to resolve grievances. The Institute supports work to improve police-community relations, promote greater access to justice and strengthen inclusive democratic institutions and governance. USIP also conducts and supports research in Pakistan to better understand drivers of peace and conflict and informs international policies and programs that promote peace and tolerance within Pakistan, between Pakistan and its neighbors, and between Pakistan and the United States.

USIP’s Work in Pakistan Includes:

Improving police-community relations for effective law enforcement

The Pakistani police have struggled with a poor relationship with the public, characterized by mistrust and mistreatment, which has hindered effective policing. USIP has partnered with national and provincial police departments to aid in building police-community relationships and strengthening policing in Pakistan through training, capacity building and social media engagement.

Building sustainable mechanisms for dialogue, critical thinking and peace education.

Nearly two-thirds of Pakistan’s population is under the age of 30. Youth with access to higher education carry disproportionate influence in society. However, Pakistan’s siloed education system does not allow interactions across diverse groups or campuses, leading to intolerance, and in some cases, radicalization. To tackle growing intolerance of diversity on university campuses, USIP has partnered with civil society and state institutions to support programs that establish sustainable mechanisms for dialogue, critical thinking and peace education.

Helping Pakistanis rebuild traditions of tolerance to counter extremists’ demands for violence

USIP supports local cultural leaders, civil society organizations, artists and others in reviving local traditions and discourses that encourage acceptance of diversity, promote dialogue and address social change. USIP also supports media production — including theater, documentaries and collections of short stories — which offer counter narratives to extremism and religious fundamentalism.

Support for acceptance and inclusion of religious minorities

Relations between religious communities in Pakistan have deteriorated, with some instances of intercommunal violence or other forms of exclusion. USIP supports the efforts of local peacebuilders, including religious scholars and leaders, to promote interfaith harmony, peaceful coexistence and equitable inclusion of minorities (gender, ethnic and religious) in all spheres of public life.

Supporting inclusive and democratic institutions

To help democratic institutions be more responsive to citizens, USIP supports technical assistance to state institutions and efforts to empower local governments, along with helping relevant civil society actors advocate for greater inclusion of marginalized groups. Gender has been a major theme of this effort and across USIP’s programming in Pakistan. These programs empower women in peacebuilding and democratic processes through research, advocacy and capacity building.

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As Fragile Kashmir Cease-Fire Turns Three, Here’s How to Keep it Alive

Wednesday, February 21, 2024

By: Christopher Clary

At midnight on the night of February 24-25, 2021, India and Pakistan reinstated a cease-fire that covered their security forces operating “along the Line of Control (LOC) and all other sectors” in Kashmir, the disputed territory that has been at the center of the India-Pakistan conflict since 1947. While the third anniversary of that agreement is a notable landmark in the history of India-Pakistan cease-fires, the 2021 cease-fire is fragile and needs bolstering to be maintained.

Type: Analysis

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Understanding Pakistan’s Election Results

Tuesday, February 13, 2024

By: Asfandyar Mir, Ph.D. ;   Tamanna Salikuddin

Days after Pakistan’s February 8 general election, the Election Commission of Pakistan released the official results confirming a major political upset. Contrary to what most political pundits and observers had predicted, independents aligned with former Prime Minister Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) won the most seats at the national level, followed by former Prime Minister Nawaz Sharif’s Pakistan Muslim League-Nawaz (PML-N), the Pakistan Peoples Party (PPP) and the Muttahida Qaumi Movement (MQM). No party won an absolute majority needed to form a government on its own. The resultant uncertainty means the United States may have to contend with a government that is more focused on navigating internal politics and less so on addressing strategic challenges.

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Tamanna Salikuddin on Pakistan’s Elections

Monday, February 12, 2024

By: Tamanna Salikuddin

Surprisingly, candidates aligned with former Prime Minister Imran Khan won the most seats in Pakistan’s elections. But while voters “have shown their faith in democracy,” the lack of a strong mandate for any specific leader or institution “doesn’t necessarily bode well for [Pakistan’s] stability,” says USIP’s Tamanna Salikuddin.

Type: Podcast

The 2021 India-Pakistan Ceasefire: Origins, Prospects, and Lessons Learned

Tuesday, February 6, 2024

The February 2021 ceasefire between India and Pakistan along the Line of Control in Kashmir has—despite occasional violations—turned into one of the longest-lasting in the countries’ 75-year shared history. Yet, as Christopher Clary writes, the ceasefire remains vulnerable to shocks from terrorist attacks, changes in leadership, and shifting regional relations. With the ceasefire approaching its third anniversary, Clary’s report examines the factors that have allowed it to succeed, signs that it may be fraying, and steps that can be taken to sustain it.

Type: Special Report

Peace Processes

Challenges Facing Pakistan in 2023

• February 3, 2023 |

Mary Hunter ,

• Image Credit: Unsplash

A challenging year lies ahead for Pakistan as it negotiates the aftermath of the unprecedented floods, economic turmoil, the desire among the youth to leave and the ongoing struggle against terrorism. The reader should not conclude that because this article only tackles challenges, the author has not noted recent positives and opportunities for Pakistan. To the contrary, 2022 saw Pakistan lead the international community in matters of climate justice, helping to secure the historic loss and damage deal. Depending on how much progress is made by COP28 this year, this could mark a fundamental shift in climate negotiations that works to support further countries vulnerable to climate change, like Pakistan itself.

Pakistan is also stepping out of a global year for popular culture and the arts, which will motivate the creation of further artistic outlets and help to bridge Pakistans film and music industries with others around the world. Academic events like ThinkFest held in Lahore and the Pakistan Conference hosted by Harvard University last year, marking 75 years of independence, testified to a burgeoning intellectual culture, an interest among the youth in tackling contemporary challenges and a strong international interest in Pakistan Studies. Pakistan will have to balance these positives and opportunities with very challenging circumstances, not all of the origins of which were avoidable.

Pakistan will have to balance these positives and opportunities with very challenging circumstances, not all of the origins of which were avoidable.

The Aftermath of the Floods

It has been well-documented that the floods in Pakistan last year, caused by increased monsoon rainfall, have affected over 33 million people. The ongoing consequences of much of Pakistan going underwater have made dire conditions a daily reality for many, especially children. UNICEF, whose health interventions have reached nearly 1.5 million people to date, has warned that up to 4 million children are still living near contaminated and stagnant flood waters: Frail and hungry children are fighting a losing battle against severe acute malnutrition, diarrhoea, malaria, dengue fever, typhoid, acute respiratory infections, and painful skin conditions. (sic)

Besides health concerns, UNICEF has found that 2 million additional children have been locked out of learning, on top of the estimated 22.8 million children aged 5-16 not in school after the destruction of nearly 27,000 schools. Thus, the floods have exacerbated poor health and educational outcomes for the next generation of Pakistanis, who will also have to contend with more serious and frequent extreme weather events unless the world gets serious about reducing global temperatures. Given Pakistans acute vulnerability to climate change, it will have to increasingly treat the phenomenon as a non-traditional threat and prepare accordingly in its national security estimations.

Economic Turmoil

While the human impact of floods must be the most central concern for Pakistan and the international community, the economic impact is unprecedented. The World Bank has estimated that total damages exceed 14.9 billion USD and total economic losses amount to around 15.2 billion USD, while rehabilitation and reconstruction will cost close to 16.3 billion USD. The organisation also projected that Pakistan lost around 2.2 per cent of Fiscal Year 2022 GDP as a direct result of the floods.

To make matters worse, there are concerns that Pakistan may default on its loans to the IMF. Miftah Ismail, the former finance minister, has warned that Pakistans expenses are much higher than its income and that the country could default if it fails to approach the IMF. The IMF defines defaulting in simple terms as a broken promise, or a breach of contract, such as through missed payments or data misreporting. The consequences of Pakistan defaulting on its loans include an inability to import fuels to generate electricity, resulting in blackouts, as well as increased unemployment. Pakistanis already have to cope with inflated food prices and competition for subsidised products.

The Desire Among the Youth to Leave

Pakistanis rightly emphasise how the countrys youthful population is a great source of potential, but the young are among the most likely to express a desire to leave Pakistan. This desire, as reflected in a survey published in November 2022 by the Pakistan Institute of Development Economics, has translated into reality for a considerable number. Official documens allegedly show that 765,000 people left Pakistan in 2022, nearly triple the number in 2021. Given that 92,000 of these people were classed as highly educated, this flurry of departures has been presented as a continuation of the countrys brain drain. The government of Pakistan thus faces the challenge of incentivising its talented youth to remain in Pakistan and encourage those who have left to return. Based on anecdotal evidence, some Pakistanis who have left the country for higher education feel that there are not the same opportunities at home, leaving their only options to be jobs for which they are overqualified.

Ongoing Struggle Against Terrorism

Three police officers sadly lost their lives in the first terror attack in Pakistan of 2023, when heavily armed terrorists attacked a police station in Peshawar on the 14 January. This comes after the conclusion of an indefinite ceasefire between the government of Pakistan and the Tehreek-i-Taliban Pakistan (TTP) on the 23 rd of November, that was agreed upon in June. Following an absence of attacks in the capital of Islamabad for eight years, the first suicide bombing occurred at the end of December inside a taxi, leaving the driver, bomber and a police officer dead.

Outside of the capital, the inhabitants of Swat demonstrated in October against increased killings in one of the largest protests the valley has seen to voice not only the rejection of political violence but also to demand protection as a constitutional right. While the progress and sacrifices made by the Pakistani military and police forces in addressing terrorism should be noted, attacks will continue until more successful peace talks are held with the TTP. This is by no means a simple task, given the mutually opposing demands of the TTP and the government of Pakistan, especially in terms of the TTPs rejection of the constitution of Pakistan as un-Islamic.

Dealing with any of these challenges in isolation would be difficult, but their simultaneous existence will require the government of Pakistan to rehabilitate and reconstruct those communities devastated by the floods while also seeking long-term security, economic, and educational solutions that also give hope and opportunities to the youth of Pakistan. The more the youth become central to policy-making, both as stakeholders and as visionaries, the more sustainable and forward-looking Pakistan will become.

Mary Hunter

Mary Hunter is a PhD candidate at the University of St Andrews, researching the Islamisation of Pakistan. She is also a freelance writer on issues relating to Islamophobia, Pakistan and its diaspora in the UK.

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Pakistan navigates economic turbulence in 2023: A year of challenges and resilience 

• December 25, 2023

2023 posed significant challenges for Pakistan’s economy, characterised by a sharp slowdown, escalating inflation, and a near-default situation. However, amidst the turbulence, glimpses of progress emerged, suggesting a potential path towards recovery. 

To meet International Monetary Fund (IMF) conditions, the government undertook stringent fiscal reforms, such as raising taxes and cutting subsidies. Despite being unpopular, these measures were deemed necessary to control the budget deficit and rein in inflation. 

The latter part of the year witnessed positive indicators. Inflation, though still elevated, began to exhibit a downward trend. The agricultural sector experienced a robust comeback, particularly in cotton and rice production, while large-scale manufacturing showed a modest improvement. 

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Despite these positive developments, Pakistan’s economic recovery remains precarious. The global economic slowdown and geopolitical tensions continue to pose external challenges. Internal factors, such as political uncertainty and ongoing security issues, further contribute to the risks. 

Throughout 2023, Pakistan consistently made headlines, grappling with economic crises, food shortages, mass protests, political arrests, and election-related upheavals. Here’s a recap of the key events in Pakistan during the year: 

In 2023, Pakistan faced new lows, with the Pakistani rupee hitting an all-time low, surpassing the PKR 300 mark against the US dollar in August. Foreign reserves with the State Bank of Pakistan (SBP) dwindled to a concerning $3.1 billion in January 2023. 

The country struggled to secure funding from the IMF, leading the SBP to raise interest rates by 300 basis points to 20 per cent, the highest since October 1996. Additional taxes were introduced, accompanied by increases in gas and electricity prices. Despite occasional reductions, petrol prices remained above Rs250 per litre. 

The Consumer Price Index (CPI) reached an unprecedented 38.0 per cent YoY in May 2023, as per the CEIC database. Although it moderated to 26.9 per cent YoY in October, essential items like milk and onions became prohibitively expensive. 

To combat inflation, Pakistan launched a free flour scheme, particularly in Punjab, under the Ramzan package. However, a tragic stampede in Karachi in April-March resulted in over 10 casualties at a free food distribution centre. 

In a significant development, Pakistan secured a staff-level agreement with the IMF for a $3 billion, nine-month standby arrangement (SBA). The IMF executive board is set to convene on January 11, 2024, to consider final approval for the next $700 million tranche. 

Summing up 2023 for Pakistan, the year was marked by elevated bank credit costs, volatile energy supplies, import restrictions, political instability, and weakened law and order. While some sectors, such as sugar, fertilisers, cement, and IT services, performed relatively well, others, like textiles, automotive, and pharmaceuticals, faced considerable distress. 

Entrepreneurs faced unprecedented challenges, with a myriad of crises affecting the business landscape. Experts described the first six months as particularly challenging, citing uncertainty, a balance of payments crisis, and a shortage of foreign exchange. 

The latter half of the year saw some alignment of factors, but challenges persisted, including inflation, unemployment, and continued monetary policy tightening. Despite these, there was improvement in donor relationships, credit rollovers, and foreign exchange inflows. 

The automotive industry faced an extremely challenging year with import restrictions and demand suppression contracting the market. Despite absorbing the impact, optimism prevails for long-term gains from the envisioned economic restructuring. 

For sustainable economic growth, Pakistan must commit to fiscal prudence, structural reforms, and export diversification. Investments in human capital, especially in education and healthcare, are crucial for long-term success. 

In the backdrop of Pakistan’s economic challenges, its relations with neighbouring countries, particularly Afghanistan and India, continue to play a pivotal role in shaping the economic landscape.

Islamabad’s interactions with Kabul and New Delhi remain tense, adding another layer of complexity to the existing economic challenges.

Pakistan faces persistent challenges in its relationship with Afghanistan, characterized by sporadic skirmishes along the Afghanistan-Pakistan border.

These clashes, involving Pakistani and Taliban forces, result in temporary cross-border closures and gunfire exchanges.

In September 2023, a key closure led to an estimated $1 million loss over one week. Diplomatic efforts to curb cross-border attacks and pressure the Taliban demonstrate the evolving nature of these regional ties.

Furthermore, Pakistan’s implementation of the Illegal Foreigners Repatriation Plan in late 2023 triggered widespread public unrest, particularly impacting nearly 2 million undocumented Afghan refugees.

The policy raised concerns about its implications for cross-border trade and travel, leading to protest campaigns along the Chaman-Spin Boldak border.

Unlike the Russia-Ukraine war, the ongoing Israel-Palestine conflict has had a limited economic impact on Pakistan. The main consequence is an increased cost, which, fortunately, has remained around six per cent thus far.

Officials in the planning ministry and the State Bank closely monitor Middle East developments, formulating strategies to mitigate potential adverse impacts on the economy.

While the likelihood of an Arab oil embargo is low, vigilance is crucial, especially for a country with a fragile economy. Contingency plans should be in place to address various possible scenarios, considering the potential for disruptions in global markets and supply chains.

Global conflicts and economic stability

Conflicts worldwide, including the Russia-Ukraine war, have demonstrated the potential for disruptions in fuel and food prices. Middle East nations, as key global oil suppliers, significantly influence Pakistan’s economy.

The intensifying Middle East conflict poses challenges, impacting oil prices, currency fragility, and potential cost escalations in goods and services.

Given Pakistan’s historical ties with Western countries, including FDI, the conflict raises concerns about the stability of the economy. The textile industry emphasises the necessity for early elections and a stable elected government to effectively address challenges arising from the conflict.

Business organisations, such as the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), view the situation as evolving and refrain from taking a stance at this point.

The president of Pakistan’s textile industry advocates for early elections and a stable government to address challenges effectively.

Economists highlight Pakistan’s susceptibility to oil price fluctuations and the potential impact of the Gulf crisis on remittance inflows.

While some businesses anticipate no major shift in consumer preferences regarding Western brands, concerns linger about negative sentiments affecting certain brands. Calls to boycott Western brands may arise, although consistent follow-through remains uncertain.

In the midst of these regional and global challenges, Pakistan’s economic resilience is being tested. Successful navigation through these complexities requires strategic planning, continued reforms, and a steadfast commitment to stability and prosperity.

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Pakistan’s complex and evolving security landscape in 2023.

https://arab.news/w6j9m

As 2023 drew to a close, terrorism not only persisted but worsened further in Pakistan, pointing toward a complex and diverse threat landscape. The absence of a coherent and comprehensive counterterrorism policy, Kabul’s reluctance to decisively act against Tehreek-e-Taliban Pakistan’s sanctuaries, and the deterioration of Pakistan-Afghanistan ties contributed to a volatile security situation. Pakistan confronted a three-front situation from TTP, Baloch insurgents, and Daesh-Khorasan. In the face of these rapidly evolving threats, Pakistan’s counterterrorism and counterinsurgency responses were ad-hoc and inconsistent. In 2024, the country needs a significant overhaul of its internal security framework to mitigate militant and insurgent threats effectively.

While old terrorist trends persisted in 2023, new ones also emerged, bringing into sharp focus the complex nature of threats to Pakistan. Among these, the most potent risk came from TTP, which continued its attacks with impunity from its hideouts in Afghanistan and enjoyed the ideological and logistical support of the Taliban regime in Kabul. While the Afghan interior ministry said it had arrested some 40 TTP militants, the group’s top leadership continued to reside in Afghanistan and plotted attacks against Pakistan. The trend of militant factions pledging allegiance to TTP from different parts of Pakistan continued. So far, more than 40 militant factions have merged with TTP, adding to its operational and organizational strength.

The most alarming development in 2023 was TTP’s daring attack in Chitral to take control of the territory. While the attack was repulsed, TTP showed the intent and capability to gain territorial control in Pakistan’s peripheral areas. This is part of the group’s efforts to evolve from a terrorist to an insurgent group. In its current incarnation, TTP can be classified as a proto-insurgent or a hybrid terrorist group, i.e., a group behaving like an insurgent entity. Despite its selective strategy of hitting hard targets, TTP has no territorial control to be classified as an insurgent group. Still, the group has been trying to influence public opinion through its slick social media propaganda and gain territorial control. Considering the ground incursion in Chitral, TTP could also launch a massive attack in the summer of 2024.

Pakistan’s counterterrorism and counterinsurgency responses were ad-hoc and inconsistent in 2023. In the coming year, the country needs a significant overhaul of its internal security framework to mitigate militant and insurgent threats effectively. Abdul Basit Khan

Likewise, Daesh-K also emerged as a significant threat to Pakistan’s internal security. Facing a ruthless crackdown from the Taliban regime in Afghanistan, several fighters of Daesh-K relocated to Pakistan’s tribal areas adjacent to the Afghanistan-Pakistan border. Daesh-K has shown a strong presence in the Bajaur and Mastung districts of Khyber Pakhtunkhwa and Balochistan provinces, respectively. It is fighting a battle for survival and relevance in Pakistan by targeting rival sects’ religio-political parties. Daesh-K particularly hit political workers and leaders of Jamiat Ulema-e-Islam Fazal (JUI-F) and Jamaat-e-Islami (JI) while calling these attacks part of its “battle against democracy.” Keeping this in mind, Daesh-K may target political rallies and gatherings in Pakistan as electioneering gains momentum ahead of the national polls in February. At the same time, the arrests of Daesh-K-linked female radicals from Lahore and Sheikhupura underscore the group’s ability to make inroads within the local population despite adverse circumstances. Daesh-K is quite adept at exploiting the political, communal, and sectarian fault lines to advance its ideological footprint.

Similarly, the Baloch insurgency showed no signs of abating and drew its strength from the socio-economic grievances of the masses in the southwest due to the enforced disappearances, ethnic disenfranchisement, resource ownership, and political exclusion. The Baloch insurgency suffered a tactical blow in 2023 due to the Baloch Nationalist Army’s chief Gulzar Imam’s arrest and the surrender of another key commander, Sarfraz Bungalzai. The rumors of Baloch separatist groups’ merger to overcome the setbacks from Imam’s arrest and Bungalzai’s surrender also gained traction in 2023. However, the disagreements over the Majeed Brigade, the suicide squad of the Baloch Liberation Army-Jeeyand faction, proved to be a significant stumbling block in a potential merger. Two new militant groups, Tehreek-e-Jihad Pakistan (TJP), an alleged front group of TTP, and Ansar-ul-Islam (AI), also burst onto Pakistan’s threat landscape. TJP carried out some high-profile suicide attacks in different parts of Pakistan, especially against military installations, and proved to be quite lethal. The AI emerged toward the end of 2023, dispelling the impression that Pakistani militants were operating out of Afghanistan. At the same time, an old militant group, Lashkar-e-Islam (LI), which became dormant in recent years, resumed its activities in 2023 as well and claimed responsibility for some attacks.

Another less pronounced but equally disturbing trend in 2023 was the focus of militant and insurgent groups on the evolving role of women within their respective organizations. For instance, TTP started a separate Urdu-language monthly magazine, Banat-e-Khadijatul Kubra, for women. The periodical reinforced TTP’s misogynist worldview, seeing women as homemakers and nurturers of future generations of militants. In sharp contrast, Baloch insurgents employed female suicide bombers, albeit in low numbers, to hit their targets. Despite their limited number, Baloch women’s participation in insurgency as combatants pointed to their evolving roles within the ethno-separatist insurgency. As outlined above, the arrests of five Daesh-K female militants implied that the terror group continued to have a niche appeal among limited pockets of educated middle and upper-middle-class segments of Pakistani society.

In the current situation, Pakistan’s counterterrorism options range from bad to worse. For instance, if Pakistan, due to the Taliban’s reluctance to act against TTP, extends its counterterrorism operations across the border, it will prove to be counterproductive. The Taliban will perceive it as a violation of its sovereignty and could retaliate violently. On the contrary, if Pakistan tries, yet another time, to reach a negotiated settlement with TTP, it will likely fail again. Irrespective of outcomes, Pakistan will have to evolve its counterterrorism and counterinsurgency framework in a manner that takes a long-term view of the problem.

- The author is a Senior Associate Fellow at the S. Rajaratnam School of International Studies, Singapore. X: @basitresearcher

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• Essay on Current Affairs of Pakistan 2024

Pakistan is going through a lot these days. As every day brings something new for it, whether it is a political rift, drill against corruption, judicial activism, governance issues, economic condition or inflation. We start the Essay on Current Affairs of Pakistan 2024 from the current Political Scenarios . Since Imran Khan is out from the office of Prime Minister, there seems a political rift in the environment. Every coming day brings something new to the scene. Currently, it is the future of the PTI which other parties claimed to alter with the alliance of top opposition names.

Drill against Corruption: The interim government has always been determined on no compromise policy on corruption. In recent, FIA suggested filing a reference against many of big names.

Soon under FIA, several others were put on ECL that initiate a whole new debate on the next government but here comes the higher judiciary of Pakistan.

Judicial Activism: The Supreme Court of Pakistan shows its concern on many issues and asserts authority to protect legal values of country. Now, federal government is given a task to review such problems. That raises the questions on governance structure of this country.

Governance Issues: Good governance is the lifeline of any human society. No matter, who exceed the legal limitations but corrective measures need to be taken to avoid the shame in the future. Governance is also seemed to compromise in other fields of administration. Most noticeably, it was seen when the rupee to dollar ratio was changing abruptly and all the concern public office holders were on a different page.

Relation with Friend Countries:

Furthermore, now the economy of this country is mostly dependent on the finical support of friend countries. Especially, gulf countries play a major role in the economic stability of Pakistan. Meanwhile, the relationship with India is always important, but the Kashmir issue is also at the standby position.

Economic Condition:

Although, there is a lot of hustles when it comes to economic development still serious actions are missing. Instead of expanding the revenue and tax circle, the prime focus of the government is to put extra load on already burdened taxpayers. Moreover, there are no war efforts to tackle the menace of unemployment and underemployment which is a real way to nourish the national economy but the focus is still on maintaining cosmetic optics. By doing so, the government is paving the path for inflation.

Inflation has to be the main target of any people’s government, in order to accommodate the marginalized and avoid uncertainty in the economy but yet the task is largely unaddressed.

Currently, Pakistan is facing a lot of problems and the government in charge seems to shy away from real problems and concentrate on the game of optics. Hopefully, this is an appropriate essay on the current affairs of Pakistan 2024. Furthermore, in the next months, the new trends will also add to it.

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An Analysis of Pakistan’s Economy in 2023

Pakistan’s Economy in 2023: Analyzing Its Challenges and Prospects

Pakistan’s economic situation in 2023 is marked by both challenges and opportunities, according to an Analysis of Pakistan’s Economy 2023. While many have suffered through difficult times economically recently, signs of growth and stability are emerging across the board.

Pakistan Is Facing 10 Economic Challenges

Pakistan’s rapid population growth – estimated at 2.2% annually – has placed additional strain on resources within the country. Leading to unemployment, poverty and inequality issues.

Pakistan suffers from inadequate infrastructure that is unable to keep pace with the growing needs of its rapidly increasing population. Hampering economic development and making it harder for businesses to compete against international rivals.

Low Tax Revenues: Pakistan suffers from an inadequate tax-to-GDP ratio. Meaning the government lacks enough revenue to finance public services and stimulate economic activity.

Deteriorating Public Finances:

Pakistan’s public finances have seen significant deterioration over the years, with budget deficit and public debt increasing significantly – exacerbating economic difficulties further.

An Ineffective Banking System and Economy:

Pakistan’s banking system is ineffective and cannot meet the needs of its population. Thus impeding economic development as businesses struggle to access funds necessary for growth.

Weak Regulatory Environment:

Pakistan suffers from an inadequate regulatory environment , which hinders economic development. Corruption and cronyism have proliferated throughout society as a result, further undermining progress toward economic advancement.

Lack of Investment in Economy:

Pakistan has not been successful at attracting sufficient foreign direct investment (FDI). An essential ingredient of economic development as it provides capital, technology, and access to new markets.

Human Capital Inadequacy:

Pakistan lacks an adequate pool of educated workers, which has limited its economic growth potential.

Poor Education:

Pakistan suffers from an inadequate educational system that has inhibited its citizens’ development of human capital and made them less competitive in global economies.

Pakistan is facing numerous security concerns that have prevented economic development, including terrorist attacks, political instability and regional tensions.

The current account deficit

Pakistan’s economy faces several serious obstacles. One being its current account deficit which has steadily been widening for several years now. This trend can be partly attributed to a large trade deficit and declining exports that has reduced foreign exchange reserves. Inflation also remains an ongoing concern as rising prices erode consumers’ purchasing power.

Pakistan’s economy has experienced substantial improvements.

Pakistan has experienced some positive economic developments despite these obstacles. Pakistan has made significant strides toward stabilizing its fiscal situation by taking measures to reduce budget deficit. And boost revenue collection, and by making efforts to attract foreign investment to spur economic growth.

Enhancing Infrastructure Development in Pakistan.

Recent years, Pakistan has also focused on strengthening its infrastructure, with particular attention being given to improving transportation and energy systems. Such investments should ultimately pay dividends by increasing productivity while simultaneously decreasing business costs in Pakistan.

Pakistan’s growing technology sector, which is driving innovation and increasing competitiveness. Pakistan boasts a vibrant startup ecosystem featuring many young entrepreneurs creating products and services which they hope can be exported abroad.

Even with these successes, however, the country still faces significant obstacles. Most notably, more must be done by government to address poverty and inequality. Two persistent issues in many parts of the country. Furthermore, improvements need to be made in business climate and make it easier for entrepreneurs to launch and expand their companies.

While Pakistan’s economic situation in 2023 presents both challenges and opportunities, there is reason for optimism. Recent progress made has resulted in some success; with continued efforts being put in to tackle its financial difficulties. It should be well positioned for building a more secure future.

Are IMF debt traps the real danger for Pakistan’s economy in 2023?

International Monetary Fund (IMF) loans have long been seen as being an economic debt trap for certain nations, such as Pakistan. Critics allege that IMF loan conditions can lead to an endless cycle of debt. And austerity measures that damage both economy and people in these nations.

Proponents of IMF programs maintain that these loans provide essential funding for countries facing economic difficulty. and that the conditions attached to these loans are essential in helping restore economic equilibrium and foster sustainable development.

Pakistan has received IMF assistance on multiple occasions in the past, though some of their conditions can be controversial. For example, Pakistan was required to implement austerity measures such as cutting spending and raising taxes that may prove challenging when facing economic instability.

Experts contend that Pakistan has benefitted greatly from IMF assistance in terms of meeting its key economic challenges, such as reducing fiscal deficit and stabilizing foreign exchange reserves. Furthermore, technical assistance was given by IMF which has helped strengthen Pakistan’s policies and institutions.

The International Monetary Fund is often seen as a debt trap for Pakistan’s economy. Though various experts hold differing viewpoints on the matter. While IMF programs can present challenges that require creative solutions and may hinder sustainable growth and stability in some instances. They can also be invaluable support in times of difficulty and provide invaluable assistance when times get rough.

Why experts consider IMF a Debt Trap?

Experts describe the International Monetary Fund as a debt trap for various reasons, including:

Conditions can be stringent:

International Monetary Fund loans come with stringent conditions that may include austerity measures and structural reforms. That can be difficult for countries to implement and can have far-reaching economic and social ramifications.

Cycle of Debt: IMF loans often carry with them strict conditions that force countries into an endless cycle of debt repayment; the country often taking on additional loans just to service previous ones. This burden of repayment is difficult to escape.

Harmful impacts on economy:

IMF-mandated austerity measures such as cutting spending and raising taxes can damage both a country’s economy and its citizens, including reduced consumer spending and economic growth.

Long-term impact on economy:

IMF loans may have significant long-term repercussions for an economy and its citizens. For instance, cutting spending on social programs may worsen poverty and inequality, while decreasing public sector size could have adverse effects on job creation and economic development.

Unwanted focus on development:

Critics contend that the IMF’s emphasis on macroeconomic stability and fiscal discipline can come at the expense of development and poverty reduction efforts that are vital components of long-term growth and stability.

Experts often refer to the IMF as a debt trap due to its stringent loan conditions and subsequent debt cycle, harmful effects on economies and citizens, long-term consequences, and lack of focus on development.

Will Pakistan be able to increase economic growth over the coming years?

Forecasting Pakistan’s economy can be difficult, but certain factors could have an effect on its ability to expand in coming years.

Political Stability: An attractive political environment is essential to attracting investment and supporting economic expansion. If Pakistan can maintain stability through reforms that foster an enabling business environment, its economy could see substantial improvements.

Reforms: Over the past several years, Pakistan’s government has implemented numerous reforms designed to enhance tax collection, reduce budget deficits and stabilize currency exchange rates. If these reforms continue along with measures designed to spur economic development, Pakistan could improve its economic outlook significantly.

Investment: Pakistan relies heavily on foreign investment to bolster its economy. If the government can create an environment conducive to investors, attracting sufficient funds could drive economic development forward.

Export Growth: Pakistan relies heavily on exports as an engine of economic expansion; thus increasing exports will be vital if it wants to achieve sustained economic development. If the government can improve competitiveness of exports and thus boost growth and the economy simultaneously.

Infrastructure Development: Infrastructure expansion.

Investment in infrastructure such as transportation and energy systems can reduce business costs while simultaneously increasing productivity. If governments continue investing in this area, economic growth could increase significantly and open new doors for business and industry.

Conclusion In summation, Pakistan’s economic success will depend on various factors including political stability, reforms, investment decisions, export growth and infrastructure development. If the government can overcome any hurdles to sustainable economic development and create an ideal environment for sustained economic development then Pakistan may achieve sustained economic stability and growth in coming years.

Conclusion Pakistan’s economic situation in 2023 was determined by a combination of factors, including government reforms, investment decisions, export growth and infrastructure development. While political instability and austerity measures present challenges to economic progress, progress was also made with tax collection and decreasing budget deficits.

International Monetary Fund (IMF) loans have long been considered controversial in Pakistan due to their strict conditions, which can create a debt trap. Critics contend that IMF’s focus on macroeconomic stability and fiscal discipline may come at the cost of development efforts and poverty alleviation initiatives.

Pakistan’s ability to successfully diversify and strengthen its economy over the coming years will depend on several key elements, including political stability, reforms, investment decisions, export growth and infrastructure development. If the government can maintain stability while creating an environment favorable to business and investment activity then sustained economic growth may be possible – yet with so many challenges still standing in its way it may take considerable effort and patience in order to realize lasting economic success for Pakistan.

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A diary of (near) default — Pakistan’s journey to avoid insolvency in 2023

Despite having little in common, even our political parties could agree on one thing: Pakistan’s economic situation was dire in 2023. The year saw Pakistan go through a long and rocky road to finding some semblance of economic stability — if it can even be called that — while weathering political and social turmoil. Pakistanis also experienced a double whammy this year: the one-two punches of the worst economic crisis in decades and all-time high inflation. Add to that the gut punch of the aftermath of the catastrophic floods of 2022 began to settle in.

In 2023, according to the World Bank , over 39.4 per cent of the population fell below the poverty line, which means over 12.5 million people are living in meagre conditions. Additionally, 8.5 million people face acute food insecurity due to high inflation and the balance of payments crisis, effectively making the country one of the worst in terms of food security on the Global Hunger Index.

Those who could leave just up and left the country. Several of my close friends moved abroad too because of the uncertainty. They were not alone. More than 450,000 people left Pakistan in the first three months of 2023 because of a lack of employment opportunities and the consensus that Pakistan was on the brink of default.

A default, according to Faisal Mamsa, the chief executive of Tresmark, is the culmination of a series of events. The primary cause is that outflows of cash are consistently more than inflows, and you need to borrow to fund that mismatch.

The risk of Pakistan’s defaulting reared its ugly head throughout the year, enough to drain the optimism out of the best of us. According to the US Institute of Peace, Pakistan owes its creditors over 77.5 billion dollars in the next three years.

The debt servicing to government revenues ratio has inflated to a point which has left a big, red question mark on the nation’s economic future.

An almost dystopian picture was painted especially by citizens on X when they thought of Pakistan actually defaulting, perhaps even worse than Sri Lanka’s economic crisis the previous year. A person on X pointed out that the state could lose its legitimacy if Pakistan truly ran out of basic imports. Another pointed out that a state of lawlessness would ensue if Pakistan went through a default, which let’s face it, the country is no stranger to.

Consequently, even the harshest critics of the International Monetary Fund (IMF) agreed that it was necessary for Pakistan to safely navigate its default risks.

When talking about the IMF, economic liberals such as Miftah Ismail paint a rosy picture of the institution, as they talk about adhering to its conditions, words such as ‘privatisation’ and ‘ trade liberalisation ’ are presented as answers to Pakistan’s challenges.

While the Dars of our time built up the notion that the dollar can be controlled through artificial means. But even they were forced to put their pride aside to assuage the Bretton Woods institution.

Putting those who claim to be economic oracles aside, it does ring alarm bells when you think about the country having to constantly battle the risk of default for the better part of the year amid political upheaval with political members more concerned with slinging mud at one another than with the average man’s plight.

With elections around the corner, let’s take a journey — a very bitter and hard-to-digest one — at the number of times Pakistan has come close to default this year.

In January, the dwindling foreign reserves raised alarm bells, even to those who did not pay attention to the economy, as it reached $4.6 billion — barely enough to cover three weeks’ worth of imports.

Inflationary pressure was building and the State Bank was forced to raise its monetary policy rate to 17pc to rein in high inflation, taking the country’s key policy rate to its highest level since 1997.

Dread over default rose as Pakistan failed to placate the IMF due to differences. Funding from other multilateral and bilateral institutions also got jammed, raising questions of how the country will meet its external finances of over $30bn which include energy imports and debt financing.

Pakistan’s economic crisis reached its boiling point in February as the rupee underwent its biggest devaluation in history — of 15pc. This exacerbated fears that Pakistan was heading towards a default without a comprehensive IMF programme to prop it up.

The State Bank’s foreign exchange reserves shrunk to a meagre $3.7bn, which wasn’t enough to last a month’s import bill.

Pakistan and IMF held virtual talks in hopes of unlocking the $1.1bn tranche as part of a $6.5bn bailout signed in 2019 to no avail. The delay in talks also made government bond prices plummet.

However, China stepped in with a life-saving $700m loan , effectively becoming Pakistan’s biggest creditor.

By the end of February, Moody’s — a credit rating agency in the US — downgraded Pakistan’s credit rating to Caa3, citing Pakistan’s dismal liquidity raising the risk of default as Pakistan continued to fail to negotiate with the IMF. It further added that it saw no clear visibility of Pakistan’s future funding needs apart from the IMF, and warned that “weak governance and heightened social risks impede Pakistan’s ability to continually implement the range of policies that would secure large amounts of financing”.

In March, China came to the rescue again, providing respite to the country with a $2bn loan as Pakistan’s negotiations with the IMF stalled; its dire balance-of-payments crisis continued despite the government removing artificial caps on the exchange rate and raising fuel prices to meet IMF requirements.

Moreover, inflation in the country hit a record 50-year-high at over 30pc . It got worse.

Inflation hit another historic record at 36.4pc as Pakistan’s acute balance of payments crisis continued in April. This time, Saudi Arabia stepped in with some relief as it pledged over $2bn to help finance Pakistan’s essential imports.

Saudi Arabia’s role was deemed an important step to unlocking the $1.1bn tranche from the IMF, as one of the lender’s requirements was for Pakistan to provide financing assurances from bilateral creditors.

The IMF was brought to the negotiating table once again to conclude the ninth review of its programme, as the sword of default continued to hang above Pakistan.

The IMF, quickly raised the issue of fiscal reforms and measures to straighten Pakistan’s fiscal structure so it could improve its finances.

Pakistan’s risk of default continued as the question of how it would go on about its debt servicing went unanswered, with central bank reserves hovering around $3bn. Hopes were minimal as IMF talks continued.

The IMF raised concerns over a new tax amnesty in the federal government’s budget as it was against the institution’s conditions and governance agenda.

The government then responded by increasing taxes, slashing subsidies and stopping artificial control of the rupee.

And just when things were getting worrisome on the import side, China came to the rescue yet again with the roll over of $1bn as the gruelling negotiations with the IMF continued.

In July, Pakistan rejoiced at securing the $3bn dollars staff-level arrangement , however, the country still hovered on the edge of default as reserves remained dismally low. The road to unlocking the tranche remained full of obstacles as Pakistan waited for IMF orders and adhered to its conditionality, which includes difficult decisions of increasing taxes and cutting subsidies, in addition to letting the rupee freefall against the dollar.

Subsequently, the rupee continues its depreciation against the dollar by 1.34pc in July.

In addition, China rised to the occasion yet again with $600m in financing as the country anxiously waited for the tranche release by the IMF. This brought China’s loans to the country to around $5bn in three months just to help Pakistan avoid default.

Inflation remained sky-high at 27.4pc in August as the government sought to meet IMF conditions, making it all the more difficult to focus on inflationary pressure and rupee depreciation.

Additionally, the rupee depreciated around 6.2pc against the greenback in a month.

Against the backdrop of the administrative clampdown against the black currency market, the rupee improved its standing against the dollar, as stakeholders held their breath for the IMF review.

According to a Bloomberg report , the rupee becomes the best performing currency in September, appreciating by more than 6pc.

November - default averted?

In November, the IMF review concluded successfully , unlocking a better-than-expected $700m out of the $1.1bn tranche of the ninth month package, as agreed in July. The IMF stressed on a market-oriented currency rate and warns of rising geopolitical tensions in the near future. Everyone breathed a sigh of relief.

Current scenario

Accordingly, Khurram Schehzad, chief executive of Alpha Beta Core, emphasised on Pakistan’s economic scenario being inextricably linked with global geopolitics.

He stated that even though commodity prices have adjusted downwards, continuity of wars such as the Russian invasion of Ukraine and Palestinian question will continue to keep a check on commodity prices, and therefore will continue to pose threat to Pakistan external account as it is an import-based economy.

Yousuf M. Farooq, director of research at Chase Securities, observed that the global market had considerably tightened, making it a challenge to finance deficits and roll over debt with higher interest rates.

Additionally, he noted that small current account surpluses were imperative to halt the accumulation of debt and demonstrate to creditors the country’s commitment to resolving its issues; in particular there is a need for “continued fiscal consolidation”.

Tahir Abbas, head of research at Arif Habib Limited, noted that the economic situation of Pakistan has improved significantly post signing of the IMF Stand-By Arrangement (SBA) facility back in July.

Abbas noted that the crucial element of getting the disbursement was the fact it helped in securing rollovers from friendly countries. In addition to making sure there were multilateral inflows which are characteristics contingent on the IMF program.

Khurram Schehzad echoed the same sentiments, stating that the active IMF programme had led to relatively stable macroeconomic factors.

Way forward

To minimise the risk of default in the future, Schehzad stresses on prioritising several key areas for sustainable growth:

• Reforming the energy sector
• Fiscal reforms with lower taxes, broadening tax base and rationalisation of expenditures
• Debt restructuring and reprofiling
• Restructuring and privatisation of SOEs
• Devolution of finance, administration and management to local government

He further asserted on the need to invest in, encourage, support and diversify exports while becoming more indigenous and self-reliant on food and agriculture through modern technologies. Additionally, there should also be a focus on renewable energy sources to power.

Abbas recommended several ways that could help curtail the risk of defaulting going forward, such as enhancing the country’s dollar earning capacity through exports diversification, specifically in areas such as:

Mining and minerals exploration in Balochistan

Seed enrichment, efficient water allocation and technological enhancement in agriculture

Information technology

He also added that broadening the tax net including tax-to-GDP ratio and introduction and rationalisation of taxation of different sectors including agriculture and retailers could further could help the depleting fiscal revenues of the government.

Moreover, major reforms in the energy chain including the power and gas sector are needed to properly address the long-term and underlying issue of lack of liquidity in the country.

It won’t be an exaggeration to say that 2023 was the year in which the years of delaying difficult reforms caught on. There is a saying which goes procrastination is like a credit card; a lot of fun until the bill arrives. Unfortunately, this year, Pakistan had to foot the bill.

What this year proved is that there is no-one-size-fits all solution to Pakistan’s multipronged challenges. An amalgamation of climate change, food insecurity, inflation, poverty, and sky-high unemployment has made it difficult for people to not take whatever the political parties are saying with a pinch of salt — if they can afford it.

However, as we leave the year behind, let’s remember its one important lesson when it comes to economic policies; it is a marathon not a race.

The author is a member of staff.

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