Pakistan Economic Crisis 2023: SSB Interview Topic [Fully Explained]

Zaheer Hussain
February 17, 2023
4,436

Pakistan experienced political turmoil, an economic crisis, and catastrophic flooding in 2022. On the economic front, the country has faced crippling inflation, a depreciating currency, and dangerously low foreign reserves. As Pakistan looks to address these challenges in a turbulent moment, important questions arise as to the long-term roots of these problems, how political instability shapes them, and what economic policy Pakistan should adopt to address its difficulties.

Pakistan Economic Crisis 2023

Why In The News?

The Pakistan Economic Crisis 2023 Is An Ongoing Economic Crisis In Pakistan. The Crisis Has Caused Severe Economic Challenges For Months Due To Which Food, Gas And Oil Prices Have Risen. Russia’s War In Ukraine Has Caused Even More Energy Problems In The Country As Inflation Is At All-Time High.

Understanding The Crisis

Pakistan’s Economy Is In Dire Straits With Very High Inflation, Dangerously Low Foreign Exchange Reserves, And Global Lenders Like The International Monetary Fund (IMF) Refusing To Disperse Further Funds.
While The Economy Has Been Doing Badly For Quite Some Time, The Floods Of 2022 Caused Unprecedented Damage To The Country With Critical Infrastructure Destroyed And Millions Displaced.
Currently, Pakistan Sits On The Verge Of Economic Collapse With Its Hopes Pinned On Getting Concessions From The IMF On The Extended Fund Facility (Eff) Established In 2019, As Well As Getting Help From Friendly Nations In The Form Of Long-Term Loans Or Donations.
On January 9, The International Conference On Climate Resilient Pakistan (ICCRP) Began In Geneva Where Pakistan’s Prime Minister, Shehbaz Sharif, Made A Desperate Plea For Help. On The Sidelines, Pakistani Representatives Met IMF Officials Regarding Its Currently Stalled EFF.

Pakistan’s Devastating 2022 Floods

While Pakistan’s Economy Was Not In Great Shape Even Before 2022, The Floods Took It To The Brink Of Disaster. In 2019, Pakistan Had Come To An Agreement With The IMF About An EFF Worth $6 Billion, Which Was Later Increased To $7 Billion.
To An Already Precarious Economic Situation, The Floods Brought Unimaginable Economic Damage. Deemed To Be A Consequence Of Climate Change, The Floods Inflicted An Estimated Loss Of $3 Billion On The Country, Caused Over 1,700 Deaths, And Displaced 8 Million People.
The Floods Derailed Any Semblance Of Economic Recovery, And Pakistan Failed To Keep The Promises It Had Made To The IMF When The EFF Was Sanctioned.
Thus, In November 2022, The IMF Refused To Release A Pending Payment Of $1.18 Billion Due To The Government’s Unwillingness To Meet Certain Demands Including Assurances From Pakistan On Increasing Energy Rates, Imposing More Taxes, And Artificial Control Over The Exchange Rate.

The Forex Crunch

Currently, The Country Is During A Severe Cash Crunch, With Foreign Exchange Reserves In The State Bank Of Pakistan’s (SBP) Depleting To $5.576 Billion During The Week Ended On Dec 30, 2022.
Along With Another $5.8 Billion Held By Commercial Banks, The Forex Reserves Are Just About Adequate To Pay For Three Weeks Of Imports To The Country. As Pakistan Still Reels From The Effect Of The 2022 Floods, Servicing Foreign Debt And Paying For Crucial Commodities Such As Medicine, Food, And Energy Are Among Its Chief Concerns.
According To Data Released By Pakistan’s Central Bank, The Reserves Are Less Than Half Of What They Were A Year Ago And At An 8-Year Low. However, Pakistan Is Scheduled To Pay $8.3 Billion To External Lenders Over The First Three Months Of 2023. Without Any Relief, The Country Is Set To Default On These Payments.

Inflation At Its Peak

With Massive Spikes In Prices Of Food Products And Other Essentials, Pakistan Recorded An Inflation Rate Of Around 24.5 Percent In December. This Number Was Even Higher In Rural Pakistan, Close To 29 Percent, According To Data From The Pakistan Bureau Of Statistics (PBS).
Prices Of Perishable Food Items Have Soared By Nearly 56 Percent. Onion Prices Have Risen By More Than 415 Percent Since Last Year. Wheat, A Staple In The Pakistani Diet, Has Seen Prices Increase By 57 Percent, According To PBS.
It Is Reported That A Single Roti Currently Costs Rs 30 – For Context, The Minimum Daily Wage Is Pegged At Rs 500, With An Average Family Consuming Around 10 Rotis A Day.

Turning To Friendly Countries

Pakistan Has Turned To Friendly Countries And Other International Aid For Help. On January 4, Finance Minister Ishaq Dar Expressed Hope For A $3 Billion Bailout From Saudi Arabia. This Proposal For A Second Bailout From The Arab Kingdom In Less Than A Year Awaits Final Approval.
Help Could Potentially Come Also From China, Pakistan’s “All-Weather Friend”. PM Sharif Had A Lengthy Call With Chinese Premier Li Keqiang, Reported to The Chinese Embassy On January 5.

The ICCRP Meeting

Pakistan’s Information Minister Marriyum Aurangzeb Said On January 9 That Donors Had Committed To Give More Than $8 Billion To Help Pakistan Recover From Last Year’s Floods. The Pledges Came As The ICCRP Hosted By PM Sharif And UN Secretary-General Antonio Guterres Kicked Off In Geneva.
Pakistan So Far Has Received Funding Pledges From Countries Like The US, France, Saudi Arabia, China, And Japan, With The Asian Development Bank And Asian Infrastructure Investment Bank Also Promising Help.

Pakistan-Economic-Crisis-2023 Download

REVIEW QUESTIONS

High Inflation Levels In The Economy Leads To
Increase In Money Supply
Decrease In Money Supply
No Change In Money Supply
None Of The Above

ANSWER: A

_____ Concept Is The Opposite Of Inflation?
Deflation
Stagflation
Recession
None Of The Above

ANSWER: A

A Government Resorts To ____ To Reduce Inflation.
Cuts In Government Spending
Increase In Government Expenditure
Reduction In Repo Rate
None Of The Above

ANSWER: A

If Too Much Money Is Chasing Too Few Goods
Stagflation
Cost-Push Inflation
Demand-Pull Inflation
None Of The Above

ANSWER: C

Inflation Is Measured By _______
Consumer Price Index
Wholesale Price Index
Marshall’s Index
None Of The Above

ANSWER: A

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