Skip to main content

Regime change in Pakistan 2022 and its effect on debt and inflation

Regime change in Pakistan 2022 and its effect on debt and inflation

Pakistan and Political Turmoil

 Pakistan has been facing the problem of political turmoil for the last few months.  On 10 April Imran Khan became one of the Prime ministers of Pakistan who were unsuccessful to complete their five years.   The sudden change of the prime minister Imran Khan leads the economy towards many economical challenges like uncertainty for investors like China and Russia. The new government has to face economical challenges. 

Problem of inflation

The new prime minister of Pakistan Shehbaz Sharif failed to run the government as well as Imran Kahan was working. The growth rate coming down like 4 % and the dollar rate is also out of control. The inflation is increasing day by day and the petrol prices are going up in alarming increase. The common man' purchasing power has been decreasing.  The double-digit inflation food inflation, unemployment, and balance of payment dilemma are special attention-seeking hurdles for economical stability.

Inflation Rate out of control

 In June 2022 the annual inflation raised to 21.3 percent, while in June 2021 this rate was very low as compare to present. This inflation rate increase due to the increase in fuel prices 92% , depreciation of currency and low reserves of country. The food items became costly 24.6%. The increase in May 2022 was 17.3%. In June the consumer price (on monthly bases) increased 6.3 % which is a record increasing rate. This inflation is not due to the high demand from consumer. So it is clear that ,all this increase is due to cost push inflation (increase in cost of production). Imports became costly due to the high increase in foreign exchange and this thing disturbed the balance of payment. Not only import's bill became a problem but also exports are unfavorable as decrease their value due to the rise in dollar.



Debt crises

External debt is a major economical issue for the new government because at the last of last year it was  $120 billion while the $5-8 billion was the current account deficit. Five years ago debt was 39% of FBR taxes now it was 75% of FBR taxes. Now Debt to GDP ratio is 90 % while it was 76 % in 2018.  In nutshell, the political crises and economic crises are coupled. So the working class of Pakistan has to bear this burden on its shoulder for many years.34% of  Pakistanis are forced to live on $3.2 per day according to the World Bank report. So this soaring inflation has made the life of the public in Pakistan miserable. The report also declared that deteriorating the current fiscal year is a cause of tighten fiscal belts and the debt is a solution. But the debt-seeking government is also not successful in acquiring debt for some of his friends.


 Now inspite of all problems Shehbaz government is not reducing government spending but the common man has to face a rise in fuel prices by the oil and gas regulatory authority. Grey list is also a hidden sword for Pakistan's economy. Bankruptcy is one of the most alarming hurdles for economy. The government has plunged into this economical crisis after a successful no-confidence vote against Imran Khan.

Comments

Post a Comment

Popular posts from this blog

Understanding Current Inflation: Causes, Effects, and Implications for Consumers and Businesses in 2024

Understanding 0f Current Inflation: Causes, Effects, and Implications for Consumers and Businesses in 2024 Introduction Inflation is the constant rise in the price level of goods and services. It is a fundamental economic occurrence that influences everyone. The current flow in inflation rates across the globe has glimmered general concern and debate. Understanding the causes of current inflation, its effects, and the implications for consumers and businesses is crucial for directing this stimulating economic environment. Inflation not only affects the common man life but also affects the business and industry all over the world. So it is necessary to understand what inflation is and how it affects the economy. Understanding Current Inflation in 2024 Causes of Current Inflation Several features contribute to the existing inflationary pressures, each playing a exclusive role in driving up rates of goods. 1.   Supply Chain Disturbances The COVID-19 pandemic triggered signi...
Post a Comment
Read more

What is FATF and how does it add countries to the grey and black list? What about Pakistan?

 What is FATF and how does it add countries to the grey and black list? What about Pakistan? what is FATF The Financial Action Task Force is a decision-making institution. It deals with the issues of money laundering and virtual currencies. This body aimed to give protection to the security of the financial system at the international level. For this, it's one role is the war against terror financing. Greylisting is not as harmful to a country as much blacklist. FATF can influence economic activities by scrutinizing and keeping eye on their international level transections. So it can say that the blacklist is the "call for action" and the grey list is "monitoring by FATF". So it will decrease trade opportunities and has the disadvantage of a closed economy. The war against terror financing FATF is against the support of terrorists by money. For this reason in 2019, it blacklisted two countries Iran and North Korea. Twenty-three countries are on the grey list. Pa...
Post a Comment
Read more

Economic reforms of Hazrat Umar Farooq R.A are the need of time for developing countries like Pakistan

  Economic reforms of Hazrat Umar Farooq R.A are the need of time for developing countries like Pakistan   Who is ''Farooq The Great'' Hazrat Umar R.A is the second caliph of Islam from 634 to 644 AC and a great administrator.  Gandhi said about him that he was a leader of a vast empire(Arabian Peninsula) but lived simple life to cut the public expenditures by adopting a simple lifestyle. He was the influential king who trigger the economic revelation in Arabia and was worthy of the following but unfortunately, he is ignored by the intellectuals of the world. so it is the need of time for poor developing countries to follow his reforms to overcome the challenges which are faced by them.   Islam and welfare economics   It is not an exaggeration to say that Islamic teachings paved the way for welfare economics and introduced great reforms which are applicable to the present and future. Islam forced the state to give all basic rights and to provide basic needs to t...
Post a Comment
Read more