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In-depth Analysis of Pakistani Economy in the Wake of Political Instability

In-depth Analysis of Pakistani Economy in the Wake of Political Instability‍ Pakistan has been a perennial social and political crisis for the last two decades. The state of affairs in Pakistan has only worsened since the beginning of this year when the tensions between the country’s military and judiciary peaked. The political instability in Pakistan, coupled with economic recession, has led to a spike in domestic turbulence and international scrutiny. In light of these events, it is crucial to analyze the current state of affairs in Pakistan. In this blog post, we explore the issues plaguing Pakistani economy, its implications on geo-political landscape as well as international relations.   Pakistan’s Geo-Strategic Importance Pakistan is a nuclear power with a huge army. It is one of the most important countries in South Asia and enjoys both strategic and trade relations with China, Russia, India, Afghanistan and Iran. Further, on account of its geo-strategic importance, Pakistan has been an influential player in the Afghan peace process. The U.S., Russia and Iran have all tried to control the country’s foreign policy to their own advantage. Pakistan has also been at the center of many regional conflicts including those in Kashmir and Afghanistan. And so far it has been successful in keeping its borders open for trade with both Afghanistan and India despite political instability within its own territory of Baluchistan, Khyber Pakhtunkhwa and Sindh provinces. However, as a result of deteriorating socio-economic conditions coupled with recent political instability, Pakistan’s ability to maintain good relations abroad is being threatened by the specter of social unrest at home. While this may not seem like an immediate cause for concern for those outside Pakistan’s borders now may be the time to plan ahead for future contingencies before it becomes too late.   Political Instability in Pakistan Pakistan has been experiencing a fragile state of affairs for the last two decades. The state of affairs in Pakistan has only worsened since January 2018 when tensions between the country’s military and judiciary peaked. In light of these events, it is crucial to analyze the current state of affairs in Pakistan. The political instability in Pakistan, coupled with economic recession, has led to a spike in domestic turbulence and international scrutiny. The prevailing situation has also led to a decline in trade and foreign investment by multinational companies which are now avoiding doing business with Pakistan as they fear it would be too risky. In the wake of this political instability, there have been several attempts on the part of civilian government led by Nawaz Sharif to regulate their relations with the military. However, due to lack of support from opposition parties and military’s reluctance, these efforts failed miserably. The incumbent government failed to pass any significant legislation or take any concrete steps towards improving relations with the military even though it faced rebellion from opposition members. One reason behind this failure was that Nawaz Sharif didn’t have enough votes from parliamentarians as most seats were taken by Imran Khan’s PTI party (which was voted against).   Problems Facing Pakistani Economy Pakistan’s economic crisis is the result of a number of internal and external factors. Pakistan’s economic woes can be attributed to its dwindling exports, weak currency, and energy crisis. Declining exports are the single largest cause of poverty in Pakistan today. The value of Pakistani rupee has fallen from Rs128 to Rs152 per US dollar post-2008 recession. In addition to this, the country’s power sector has been experiencing an energy crisis for more than a decade now. In order to resolve these problems, Pakistan needs to undertake urgent reforms in its economy by reducing trade deficits and increasing exports. We suggest the following measures which might help improve the state of affairs: – Reforms in taxation regime: A tax reform will enable the government to collect taxes from individuals who have evaded taxes thus far. The government should also make changes in its tax laws so that it can collect more revenues from large corporations as well as international investors who are not paying their fair share of taxes – Increase in investments: The State Bank should promote investment into equity markets by investing funds into companies that have potential for growth and development with a focus on small-medium enterprises (SMEs) – Other measures: The government should consider other measures such as stimulating entrepreneurship through lowering interest rates or granting loans at subsidized rates may also help ease some constraints faced by Pakistan’s economy.   Lack of Transparency and Corruption in Government Organizations The Pakistani government is not immune to corruption. Corruption in the country has led to an increase in poverty, unemployment and power shortages. There is a lack of transparency and accountability in most institutions of the state. The citizens of Pakistan have been living under socio-economic hardship for years. According to Transparency International, which ranked Pakistan 139th out of 176 countries related to corruption, the Pakistani government does not exercise accountability and lacks transparency. This has resulted in a staggering growth of militant organizations like the Taliban and Al Qaeda that are growing louder by the day. It is estimated that there are over two hundred thousand people within these organizations and they are widely regarded as one of the greatest threats to stability in the region. Moreover, there are allegations against senior Pakistani military personnel with links to terrorist organizations that cannot be ignored any longer. Pakistan is a source and destination country for trafficking in persons, specifically forced labor and sex trafficking; men, women, girls, and boys from all social strata – including children – have been subjected to forced labor or commercial sexual exploitation within Pakistan’s borders or abroad; those at higher risk include displaced persons (including those among internally-displaced populations), refugees, slum dwellers, children working as street vendors or domestic servants in urban centers – especially during periods of increased economic activity such as construction projects or agricultural harvests – some Pakistani nationals may be subjected to human trafficking while working as laborers abroad (reportedly including workers constructing soccer stadiums   Exports and Manufacturing Sector are Disappointing Pakistan’s exports have been the driving force of its economy for a long time. The International Monetary Fund (IMF) expects Pakistan to grow by 4.6% in 2018 and 4.8% in 2019, but this will be largely on account of government spending which is not sustainable in the long-term. The IMF also notes that Pakistan exports are not as strong as before and manufacturing sector has also seen disappointing performance recently. Exports from Pakistan fell by 11 per cent year-on-year in 2017, this was mainly due to the sharp fall in cotton exports which dropped by 22 per cent year-on-year. On the other hand, Pakistani manufacturing sector too has seen a decline in output and surprisingly, there was no growth even during the last quarter of 2017 when these sectors were supposed to witness a revival due to better monsoon rains that further increased agricultural output. In fact, manufacturing sector shrunk by 3 per cent year-on-year during this period and it’s worth noting that it’s quite a significant decrease given that Pakistan’s total industrial production had grown by 6 per cent year-on-year during this period.  Conclusion The Pakistani economy has been struggling to meet its potential in the past few decades. The country has a geo-strategic importance, with a huge population and abundant natural resources. These factors have, however, not translated into economic prosperity. The Pakistani government is riddled with corruption and lack of transparency. These factors have severely impacted the country’s ability to meet the aspirations of the people. The country’s exports and manufacturing sector have been disappointing. The Pakistani rupee has been losing value over the last few years and the economy is at a standstill. Although Pakistan has immense potential, it is still struggling to make it big on the world stage. Quick links: 
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