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Pakistan Reader# 604, 30 May 2023
Subiksha S
On 29 May, the United Nations released a report warning that Pakistan is facing a serious food crisis. It is expected to deteriorate further due to economic and political problems and the aftermath of devastating floods in 2022. The report explains that Pakistan's economy is struggling, with high levels of public debt and a slow global economy. The country needs to repay a significant amount of external debt in the next few years, which is putting further strain on its finances. The political situation is also unstable, making it difficult for Pakistan to receive financial support from international organizations like the International Monetary Fund. Last year's floods and the war in Ukraine disrupted agricultural production and grain imports, leading to food shortages and price increases. Pakistan also heavily relies on imported oil, and the declining value of its currency has resulted in higher oil prices, further contributing to inflation.
Pakistan's reliance on foreign loans to sustain its economy has led to a growing debt burden. The country has significant external debt, with a substantial portion owed to China. While China has supported Pakistan's infrastructure development through the China-Pakistan Economic Corridor (CPEC), which is expected to bring economic benefits in the future, Pakistan's inability to repay its debts has created concerns about the sustainability of these projects.
Some argue that China's loans, with their high-interest rates, have worsened Pakistan's economic crisis. However, whether CPEC debts will ultimately drain the Pakistani economy or lead to future growth opportunities is still uncertain. Chinese frustration over project delays and security threats has resulted in hesitation to invest in new projects, but Pakistan continues to rely on Chinese loans.
Additionally, there are general elections in October 2023, which may increase political unrest. These factors, along with a shortage of foreign reserves and a weakening currency, are making it hard for Pakistan to import enough food and energy supplies. As a result, food prices are increasing, and there are energy shortages throughout the country. The effects of the 2022 floods made the situation worse, which caused significant damage to the agriculture sector. The report predicts that millions of people will experience high levels of food insecurity in the coming months, as households struggle to afford food and other essential items. The report also highlights that the crisis in Pakistan could impact neighbouring Afghanistan, as Pakistan is its main trading partner. The report recommends building the capacity of disaster management authorities and strengthening social protection programs to address the crisis. In addition to Pakistan, the report identifies other countries, including Afghanistan, Nigeria, Somalia, South Sudan, and Yemen, as facing severe food insecurity. These countries require urgent attention to prevent a worsening crisis. Pakistan needs greater transparency in government spending and a restructuring of its economy. This includes reducing overspending on defense institutions and finding sustainable alternatives to foreign loans with high-interest rates. Investing in the education and technical skills of the youth can also create opportunities for a more sustainable economy in the long run.
References
Amin Ahmed, “Pakistan designated ‘very high concern’ area in food insecurity,” Dawn, 30 May 2023
Mariyam Suleman Anees, “Pakistan’s Economic Crisis: What Went Wrong?” The Diplomat, 2 May 2023
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