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Pakistan drowns in economic turmoil and terrorism despite IMF lifeline

In a recent move to help stabilize Pakistan’s severe economic crisis, the International Monetary Fund (IMF) has sanctioned a nine-month Stand-by Arrangement of US$3 billion. This bailout package, coupled with Saudi Arabia, UAE, and China’s combined financial aid of US$3.7 billion, represents a crucial lifeline for the economically beleaguered South Asian nation. However, these substantial inflows have done little to improve Pakistan’s grim economic landscape.

Pakistan drowns in economic turmoil and terrorism despite IMF lifeline
Pakistan’s economic turmoil intensifies amid escalating terrorism

Despite the international financial assistance and the IMF deal, Pakistan remains trapped in a downward spiral of economic instability. At the heart of the nation’s problems are the austere financial policies enacted upon the IMF’s directive. While these policies were conceived to pull Pakistan out of the crisis, they have only served to intensify the struggles faced by everyday people.

Recently, in a move that further exacerbated the plight of the Pakistani public, the government approved a sizeable increase in the base electricity rate. The federal cabinet sanctioned a rise in the primary power tariff, with hikes as high as ₹7.5 per unit, despite the financial burden already shouldered by citizens. This move falls in line with Prime Minister Shehbaz Sharif’s commitment to IMF Managing Director Kristalina Georgieva, emphasizing that Pakistan would uphold its agreement with the global lender.

As the initial enthusiasm over the multibillion-dollar support from the IMF and allied nations waned, the Pakistani rupee depreciated against the US dollar, plunging the country further into economic turmoil. Moreover, the Pakistani government has imposed an added tax burden of ₹215 billion on its citizens to secure the IMF deal. Despite these harsh measures, the federal government’s latest economic report suggests a slight glimmer of hope, forecasting a narrowing fiscal deficit by 2024.

The bleak economic conditions in Pakistan are further illustrated by its falling rankings in the Global Hunger Index (GHI), which dropped from 38.1 in 2006 to 26.1 in 2022. This situation finds Pakistan ranked at a dismal 99th position among 121 countries surveyed. Furthermore, Pakistan is grappling with a colossal mountain of international debt, including an obligation to service an external debt amounting to $2.44 billion as of July 2023, much of which is owed to China.

Pakistan’s debt repayment responsibilities extend beyond China. It owes Saudi Arabia around $195 million, and has outstanding payments due to France and Japan of $2.85 million and $4.57 million, respectively. In addition to these commitments, Pakistan must also service its significant outstanding loans with the IMF, totaling US$ 189.67 million.

Amid these economic crises, Pakistan’s Khyber Pakhtunkhwa province is battling a surge in terrorism. The region has witnessed an unsettling increase in bomb blasts, with 665 terror incidents, including 15 suicide attacks, reported between June 2022 and June 2023. Despite these rising security issues, Pakistan’s focus seems to be skewed toward its IMF deal and broader economic predicaments, overshadowing the country’s pressing security concerns.

The violence, primarily concentrated in North Waziristan and Peshawar district, includes numerous acts of militancy ranging from gun assaults, grenade attacks, to IED detonations. Tragically, a recent bombing in a mosque under construction resulted in the loss of life and left several others injured. This escalation in violence comes amid a string of targeted attacks in Peshawar district, which claimed the life of a Public Service Commission’s director.

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