Pakistan’s Rising Economic Problems

Almost everyone in Pakistan nowadays is talking about the economy which is looming large like a dark cloud. In retrospect, it looks like political events have overshadowed economic concerns for a longtime.

Nadeem Naqvi, the chief executive of international investment company in Karachi, traces the roots of the present economic crisis back to last year when Chief Justice Chaudhry was removed from his post triggering the ongoing judicial crisis. “From that point on, the previous government’s entire attention shifted away from the economy and towards politics,” he says.

Inflation is the main problem

According to Naqvi, the main economic problem is inflation, which erodes consumer purchasing power. A kilogram of flour now costs 22 rupees. That is 70% higher than it was a year ago. Saqib Shirani, the country economist for Royal Bank of Scotland and also a member of the economic advisory council of the Pakistani government, says prices started to increase in March this year. And in his view there are more price rises ahead: “I think the full impact will be felt in about 12 months. Right now we are just seeing the tip of the iceberg”.

Poor are the most affected

The poor have been hit hardest by inflation. Almost 20% of the population lives on or below the poverty line. They are the most vulnerable group in society. It is difficult for these people to pay for essential things like school fees, clothing or rent.

According to Naqvi, the situation calls for a new policy which pays more attention to the needs of the poor. “The distribution of wealth is geared towards the very rich. So the poor have not really benefited that much from the last several years of high growth, he underlines.

“Economic suicides”

Conditions are so bad that there are cases of poverty induced suicides. Shirani believes there is more bad news to come. “This is just my intuition, but I think that there would be more people under lot of stress and lot of duress and there may be more economic suicides going into the next 1 or 2 years”. Although this trend is not dramatic, it does show that the problem is serious and it needs to be addressed.

To solve the crisis, Naqvi suggests a “Marshall Plan”. He says: “I think in order to address the problem at the source, what you really need here is something like a Marshall Plan for 5-10 years to improve the social conditions and the economic conditions of the lower income groups”.

A sustainable plan needed

According to Naqvi a plan, which focuses on the basic necessities should be developed on a sustainable basis. First, the issue of good governance should be tackled with the officials being made accountable for their actions. Unfortunately there is still a high degree of incompetence and corruption in Pakistan, he says. The second field is education. Due to the high illiteracy rate, fundamentalists are often able to influence people and point them in the wrong direction. And thirdly, the social sector needs to target resources on health and women’s development.

A sustainable plan with clear guidelines could help improve the position of the poor in Pakistan and help them to live a better life.