The rising economic crisis in Pakistan is worsening as political instability continues to undermine efforts to tackle the issue. The crisis has affected various human development indicators, including gender equality, education, poverty, environmental sustainability, and health. The depreciation of the rupee, high inflation rates, dangerously low foreign reserves, and the high cost of doing business has created a grim economic outlook, with Moody’s Investor Service warning of a possible default looming as repayments of $7bn are due soon.

The IMF has offered Pakistan a loan of $1.1bn only if the country implements tough reforms that include overhauling corporate taxation, increasing taxes, reducing subsidies, and enhancing governance of state-owned enterprises. The resultant effect of these measures would most likely lower disposable income, fuel inflation, and reduce investment and consumption. Furthermore, technical-level talks have been conducted, but staff-level approval remains suspended, with the IMF demanding details on fuel subsidies worth $528.5m.

Pakistan needs to act to secure the IMF loan to mitigate the socioeconomic effects of the crisis. The delay caused by borrowing directly from banks is costing Pakistan more, contributing to a negative impact on investor confidence, and hampering Pakistan’s ability to obtain external financing. Pakistan must develop comprehensive reforms that address both short-term stabilization and long-term structural issues, such as improving governance of state-owned enterprises and expanding social safety nets.

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By hassani

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