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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.

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