Impact of Pakistan’s economic uncertainty

Laiba Saleem

“We consider that Pakistan will meet its external payments for the remainder of this fiscal year ending in June, however, Pakistan’s financing options beyond June are highly uncertain. Without an IMF program, Pakistan could default given its very weak reserves.” – Grace Lim, an analyst at Moody’s
The endless political unrest in Pakistan has heavily impacted its economic stability. In May this year, the annual year-on-year inflation stood at an all-time high of 37.97% as per the Pakistan Bureau of Statistics and Rupee fell abnormally against the US dollar reaching nearly 300 PKR. As a result, the economy short-circuited, and the implications of a weak economy were felt everywhere. Not just the local companies, even the MNCs could not take this hit; and therefore companies as big as Shell Pakistan also announced their withdrawal from the country.
Amidst the economic meltdown, authorities are seeking economic assistance from international monetary institutions and friendly countries so as to restore the economic balance. Earlier this month, Finance Minister Ishaq Dar confirmed the deposition of $1 billion from the UAE, $2 billion from Saudi Arabia, and a $3 billion bailout package by the IMF. In response to the debt provided, IMF commented “Pakistan’s economic challenges are complex and multifaceted and the risks are exceptionally high”.
Owing to uncertain economic conditions, a common man has been badly affected. The consequences of a vulnerable economy are many; however, this article mainly focuses on the possible ways an individual considers to escape this turmoil. Besides economic uncertainty, skyrocketing inflation, excessive mismanagement, and an unpromising job market are altogether contributing to the despairs of an ordinary Pakistani that force him/her to flee from the country in whichever way possible. People are either forced to migrate from rural-to-urban areas or move abroad to make their ends meet.
In order to deal with developing economic situation, an ordinary man is migrating from low economic areas (rural) to urban centers in search of livelihood and better living standards. This phenomenon has given impetus to rapid urbanization, thus big cities like Karachi, have recorded a massive inflow of people. According to 2022 year-end stats, 82 million people were residing in the urban areas of Pakistan, which was estimated to be roughly 41%, of the total population, by 2030 and more than 50% by 2050.
However, the rural migrants moving to urban centers are not protected and are assisted by the government through ‘safety net’ policies and schemes. Eventually, they are forced to work in the informal sectors to make ends meet and live in slums with inadequate resources; their life turns into a nightmare and so in order to survive they dive into the world of crime. The developing situation ultimately leads to problems like rising poverty and deteriorating law and order situation in urban areas.
Given the vulnerable economic situation, high risk of default, and the intensification of macroeconomic challenges, individuals with sound educational backgrounds are also afraid of what the future holds for them. Shrinking of the job market due to the shutting down of major MNCs, local startups going out of business, and rising inflation are collectively instilling a state of panic and fear among the youth.
Consequently, a large number of the young generation is seeking opportunities abroad leading to brain drain. They prefer moving to countries that can offer them a better combination of both – lifestyle and employment opportunities. The educated class goes abroad on work or travel visas, PR, or sponsorship provided by MNCs or big institutions that make their relocation easier and legally secure.
On the other hand, poverty-stricken class with less education, opt for illicit ways of migration because they find it hard to meet the eligibility criteria. They mostly try their luck by taking a longer and prohibited route to the West, that is, via Libya and the Dardanelle strait to Greece and later Europe. If fortune approves, they go through these difficult routes without getting a scratch otherwise they are either imprisoned or drowned during the journey. A similar kind of incident took place on June 14, this year when a fishing boat carrying around 750 illegal migrants, some of them Pakistani – capsized.
According to reports, around 104 people were rescued, 82 people were declared dead and the remaining were never found. This incident highlights, how people stricken with economic crunches are ready to risk their lives to seek better lives.
Given the rising trends of urbanization and brain drain that Pakistan is witnessing due to economic uncertainties, it should be noted that these trends bear severe social and economic consequences. Rapid and unregulated movement of the working class from rural areas to urban centers will compromise the productivity of the agriculture sector which holds the largest share of our GDP.
Further, it will also put pressure on infrastructure in city centers, increasing demand for resources, and poses a serious threat to the environment. Moreover, the qualified people leaving the country will result in a shortage of productive human resources for the public and private sectors. The recent statistical data on people going abroad presents a distressing situation for the future of the country’s human resources.
Keeping in view the above-discussed impact of economic uncertainty on the lives of common individuals, it is high time to take concrete measures to boost economic indicators to create confidence among the citizens and investors. This will help to retain investors and qualified human resources in the country and also limit the deterioration of the agriculture sector.

 

The writer is researcher at Pakistan Council on Foreign Relations (PCFR) and can be reached at: saleemlaiba520@gmail.com