Stagflation and Economic Crisis In Pakistan

By Schajee — Own work, Public Domain, https://commons.wikimedia.org/w/index.php?curid=11747919
By Schajee — Own work, Public Domain, https://commons.wikimedia.org/w/index.php?curid=11747919

We are in a stagflationary period. This is not the first that stagflation has hit blocked Pakistan's economic curve.

The first period of stagflation started in the 1970s when Bangladesh was formed. The liberation war broke the economic spine, and markets, employment, and industrial production were seized. Z A Bhutto tried to halt this period but it ended during Zia's militia regime. Bhutto’s nationalization and economic policies severely affected the system, it caused 250 M industrial loss, unemployment, lower GDP growth scale, and higher budget deficits.

The second period of stagflation occurred in the 1990s, after the soviet afghan crisis and the US aid to Pakistan via coalition support fund. During the second time, Benazir Bhutto and Nawaz Sharif tried to manage the stagflation, first NS imposed privatization and economic liberation, which promoted & soar economic independence, development, and GDP growth.

Later on, NS was toppled by a Military Coup de’tat led by no other than Parvaiz Musharraf. (who is now severely ill & dangling amid hell and this world)

Militablishment brought Shaukat Aziz to tackle the stagflation, Aziz dismissed old policies and proposed a new economic system called MTDF. (Medium Term Development Framework) Shaukat Aziz’s govt implemented firm taxations and monetary and financial progress policies.

The programme goal was to increase development and sustain an economic system that help to decrease poverty. MTDF replaced the Five Year Plans of the National economy of Pakistan. Malik Ghulam Mehmood, Finance minister proposed this plan to PM Liaquat Ali Khan. Mr. Ghulam Ali was inspired by 5 years plans of the Soviet USSR.

During the global financial crisis in 2007–8, Pakistan’s growth halted and stagnant for a longer period causing a shattered economy.

After the insurgencies in West Pakistan, major elections, and tension in 2008, the economic growth nosedived, the financial trajectory declined, and the broad-based pro-democracy movement formed political coalitions between PPP, PMLN, and ANP & JUI to oust Pervaiz Musharraf.

In response, Musharraf muttered, “I will defeat those who try to push me to the wall. If they use their right to oust me, I have the right to defend myself.”

The third stagflation occurred during the collective government leadership led by PM Yousif Raza Gillani. From 2007 to 2011 the GDP and Stagflation growth rate varied 6.8% to 2.4% and 7.8% to 14.5%.

Stagflation hit the poor and working-class a very rock bottom. Then the nationwide flood of 2010 disrupted the whole system and wiped out 20% of economic infrastructure and caused a private sector loss of a billion. Many experts believe that economic mismanagement and disbalance between public and private sectors might be the reason.

In Gillani’s government, 40% of the public went under the poverty line and 16% of inflation surged during the 4 years and 86 days. PIDE Pakistan Institute of development economics claimed, that the major reason for Pakistan’s stagflationary period is the lack of coordination between fiscal and monetary institutions.

Technically, we are in a fourth stagflationary period. After the ousting of Imran Khan, who started the ferocious political cult, who were majestically brought into the political game, remained in power from 2018 to 2022. After the political war and dethroned, the joint government formed by PMLN, PPP, and other parties, chose a new PM Shehbaz Sharif, who has the country on the economic death bed.

The new inflationary price jerks of common goods, gasoline, and other resources by govt finance sector have made chaos in public. The inflation hits 13.5% in May, the highest level amid the shrinking currency.

High commodity prices and large imports trigger the inflation ticker. I wonder why economists were comparing Pakistan’s economic situation with the Srilankan collapse. Food prices soared 17 percent and transport costs went up to 30 percent. (approximation)

The quarter-monthly fuel jerks by the govt is an effort to be eligible for an aid program by the mighty IMF. Pakistan is in need of 36 billion for the fiscal year which will start in July. From this point, the socio-political and economic trajectory of Pakistan will be worth observing.

The current government is in the political backlash by Imran khan and his cabinet, who were incompetent during their government. They are enforcing & pressurizing the government to call the election, which is due in the summer of 2023.

In this terrible situation, the oligarch class, the giant elephants in the room, who must not be bothered, are completely careless, not compromising even an inch with their expenses and lavish lifestyles.

The next few months and years are going to be so important and worth observing. The political climate and Economic growth ticker will be alarming soon. Strong measures need to be taken in order to sustain this economic catastrophe that is affecting all over the globe.

Rabinder Kumar

June 2022

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Rabinder Kumar

Rabinder Kumar

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Like a Norse God | I write about intriguing robust topics. For freelance gigs: rabinderkumarr@gmail.com