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Pakistan’s Economic Crisis: Roots and Cause Explained

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Pakistan's Economic crisis

After the catastrophic economic downfall of Sri Lank, another populous South East Asian country is standing amidst an ever-growing financial turmoil. With the national currency hitting new lows, depleting foreign reserves, and political instability, Pakistan’s economic crisis is worsening with every passing day.

So, how bad is the crisis? What is the government doing to protect the economy? And is there a way out?

What Went Wrong in Pakitan’s Growing Economy?

With General Ayub Khan, ruling the country, Pakistan witnessed an array of political and economic changes in 1958. The fundamental changes in the constitution brought by the second president, lead the country to grow 2% faster than every other South Asian economy at the time.

This period witnessed the fastest growth in Pakistan. Manufacturing went up by 8% per annum. The construction industry builds huge dams and national highways. In this growing stage, the country was exemplified as a nation racing fast towards development.

But, where did the Pakistani government acquire the capital for this growth? The government opened a seemingly beneficial portal that would damage the nation’s economy later. And the portal was DEBT.

Debt Crisis in Pakitan

As of today, Pakistan has borrowed massive amounts from the IMF 22 times. And IMF is not the only source. Asian Development Bank and World Bank have also been the primary lenders of growing Pakistan.

But, it is crucial to understand that debt by itself is not harmful. Almost every country borrows from another country or financial institution. But, how and where the borrowed money is utilized decides the success or failure of the debt.

If used in the country’s development, it helps the country move forward. But, Pakistan didn’t invest the borrowed money in essential development factors like education, infrastructure, and skill development. Instead, the government poured vast amounts into strengthening its military.

If you review Pakitan’s national budget, it becomes evident. The country spends the majority on two things, first debt repayment and second defense, in particular, the army. Every year, Pakitan hikes the defense budget by a substantial percentage.

The Silent Drivers of Pakistan’s Economic Crisis

To date, no Pakistani PM has completed his entire term in office. Some of them were assassinated, while in some cases, the government was toppled internally. And political stability is a critical deciding factor in quality foreign investment.

Where a government can’t guarantee the next five years, why would companies invest for the next 50 years?

Furthermore, where developed nations spend well over 7% of the budget on education, Pakistan spends less than 2.5% on the education sector.

Pakistan student studying in school

So, the lack of funding in development didn’t leave much room for income sources to scale. Even in 2022, the country’s literacy rate is just 58%. This led the country deeper into its own created debt crisis. And the only way out was by more debt.

China’s Role in Worsening Pakistan’s Economic Crisis

The economic downfall even worsened when Pakitan started borrowing from the most notorious lender, China. The Chinese government is known for diplomatically entangling countries in its debt traps. Where the world bank loans at an interest rate of 3% to 3.5%, China charges its borrowers up to 6%.

Furthermore, Pakistan’s development project conducted by China employed the Chinese as 50% or more of their workforce. The Chinese have also cornered many areas in Gilgit-Baltistan that are even off-limits to the locals.

Today, over 40 countries globally owe more than 10% of their GDP in loans to China. Unfortunately, these are the official stats by the government, and nobody knows the actual debt holdings.

Currently, Pakistan’s economy is a staggering $130 billion in loans. And, in the bid to repay the debt and sustain its crumbling economy, the Pak government is planning to borrow a $6 billion bailout from IMF.

Pakistan’s Economic Crisis: The Unusual Steps By the Government

At the beginning of June 2022, Pak reserves only had enough money to pay for two months of imports. Mohammad Hafeez, a former all-rounder for the Pakistan cricket team, highlighted the issues that the “ordinary man” in Pakistan faces amidst the economic turmoil.

Therefore, the government is encouraging its citizens to take some unusual steps in an attempt to combat Pakistan’s economic crisis. For example, businesses are asked to operate in broad daylight and close the shop early evening to save energy bills. Authorities are also discussing the plan to switch off street lights on alternate nights.

Government employees, on the other hand, are restricted to taking unnecessary trips, lunches, and hi-teas at the office to reduce expenses. Moreover, from now on, authorities will only be permitted to purchase utility vehicles like ambulances and school buses to cut down on private vehicle costs.

“I appeal to the nation to reduce tea intake by one or two cups daily because we borrow money for tea import as well,”

Federal Minister for Planning and Development, Ahsan Iqbal,

Even weddings will now have to wrap up the party at the latest by 10 pm.

The government is also encouraging companies to adopt hybrid or remote work formats to reduce fuel usage. The plans to restore a five-day work week are also in full rage.

The Way Forward: Band-Aid and Long-Term Solutions

Much like Sri Lanka, the economic turmoil of Pakistan is leading the nation towards the path of bankruptcy.

Therefore, it’s high time for the government to attract more foreign direct investment (FDI) by emphasizing an investment-friendly environment development. The most practical ways to achieve this are by improving security, easing custom laws and regulations, and rebranding the nations as desirable destinations for MNCs and tourism alike.

Furthermore, Pakistan should also focus on promoting the domestic industry and expanding its export portfolio. It can be achieved by modernizing its industrial sector by establishing manufacturing plants equipped with the latest technology and equipment for enhancing global integration.

Furthermore, authorities can also invest more in the R&D sector to promote innovation and labor productivity.

Can Pakistan Revive From the Current Economic Crisis?

The present Pak government will have challenges in the upcoming months as inflation will increase and the currency will continue to weaken. The economic crisis in Pakistan won’t go away overnight.

Support from the IMF and friendly nations like Saudi Arabia, China, and the UAE will only temporarily provide its collapsed economy some breathing room. Some of the most urgent actions the government needs to take care to address the expanding fiscal and current account deficit.

Before Pakistan finds itself digging the economy into another crisis, it must make the most of this moment of hard-won relief by focusing on creating a secure and sustainable economy.

Economy

Pakistan Crisis Explained – Looming Threat of a Military Coup

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Pakistan crisis

Pakistan Crisis: struggle with terrorism, economy, and political Dispute – over 850 innocent lives lost in Q1 2023.

The South-Asian country is facing a perilous situation with a staggering toll of over 850 innocent lives lost to terror attacks in the first three months of 2023.
As the economy continues to struggle, with long-term allies like China refusing to provide bailouts and political disputes escalating, Pakistan finds itself at a critical crossroads. The judiciary is also not spared from the ongoing tug-of-war.

Now, the big questions are –

  • Can Pakistan recover from its current economic catastrophe?
  • Why terror attacks are on the rise?
  • And is Pakistan on the route of another military coup?

The Economy in Shambles

Over a dozen people were killed as the crowd rushed to grab a pack of flour. Sadly, it’s not an isolated incident.


Ration distribution in Pakistan
Ration distribution in Pakistan (Source: Samaa English)

With inflation at 30% high – the highest recorded in five decades – the costs of essential goods have surged. But the situation only headed south, with Islamabad forced to remove subsidies as Pakistan’s financial support from the IMF dries out.

And all this is happening in a nation still trying to recover from last year’s flood, ravaging the country’s vast swaths in October. A climate catastrophe that killed 1700 people and cost the nation 15 billion USD in damages.

Read More: Pakistan Flood Puts Climate Injustice in the Spotlight: The Age of Catastrophe

On top of it, the currency is in a tailspin. But nobody is ready to help Pakistan bail out.

Why Nobody is Rady to Bailout Pakistan?

In the past, Pakistan has received significant financial aid from countries like UAE and Qatar, amounting to 24.4 billion USD over the last five years, and Chinese commercial banks have loaned over 30 billion USD. These bailouts were primarily driven by humanitarian, common interest, and economic reasons.

However, due to the government’s inability to fulfill previous promises, the countries are reluctant to help Pakistan.

IMF was another major lender of the South-Asian nation. But, the country finds itself caught in a catch-22 situation due to pressures from the International Monetary Fund (IMF) to reduce subsidies and curb inflation. On the one hand, to address inflation, the government needs to provide subsidies, but on the other hand, if they cancel subsidies to increase revenue, it may lead to citizen protests.

But this delay in IMF’s bailout comes in contrast to its approval of a 15.6 billion USD loan for Ukraine and the United States’ decision to print 300 billion USD to save a bank in Silicon Valley.

It clearly shows that the priorities of IMF and Western countries are different – which does not include countries like Pakistan and Sri Lanka.

And while stuck in one of the worst economic catastrophes, terror attacks in Pakistan are also on the rise.

The Alarming Surge of Terror Attacks 

Terrorist attacks in Pakistan have been surging since the Taliban’s takeover of Afghanistan, and 2023 has been one of the deadliest years yet.

The devastating bombing in January, which marked one of the deadliest blasts in Pakistan’s history, is sadly not an isolated incident. Since then, several more attacks have resulted in loss of life and widespread destruction.

Peshawar Bomb Attack
Peshawar Bomb Attack (Source BBC)

In Karachi, a police headquarters was targeted, resulting in the deaths of four individuals. In Balochistan’s Khuzdar district, at least two policemen were killed in a “remote-controlled blast,” and another attack in a crowded market in Balochistan claimed four more lives.

February alone recorded 58 terrorist attacks that killed 62 innocent civilians, including security personnel, civilians, and terrorists themselves, with 134 others injured. 

The situation again escalated on March 4th when the TTP targeted a mosque in Peshawar, claiming the lives of around a hundred people, including most police officers. Despite the government’s efforts, the TTP continues to defy authority, leaving the situation seemingly helpless.

These ongoing and frequent terror attacks highlight the persistent threat faced by Pakistan, with innocent lives being lost and communities being affected by violence and instability.

How is the Politics Further Worsening the Pakistan Crisis?

The government is stuck in a complex situation. The Shabbat Sharief government blames its predecessors for all the economic woes. While the former prime minister, Imran Khan, keeps challenging the very establishment. Today, Imran Khan is facing over 30 cases, including terrorism charges.

The government is also locking horns with the judiciary for control over institutions. Judges are openly called out for being biased.

Amidst the deterioration of the government institution, all eyes are now on the military front of Pakistan – where the real power lies.

Given the country’s crumbling economy and politics, will the commander step in as they have done thrice earlier (1958, 1977, and 1999)?

Is a Military Coup Under Way in Pakistan?

The recent stampede in aid distribution centers paints a very dire picture of the Pakistan crisis. However, the country has come a long way since its last coups.

The situation on the ground is getting bad to worse. The desperation of the ordinary hard-working people is on the rise.

Experts fear there might be slight interventions in the decision-making process. But while the current upheaval might be ringing military coup bells, for now, the power still resides in the hand of the people.

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Children

244 Million Out of School Children (Where’s Their Right to Education?)

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out of school children

Education is the most basic right of every child. But for a staggering 224 million out of school children, education is a luxury they can’t afford.

That’s why, through this article, we are debunking the false mirage of all the “development in educational” and shedding light on:

  • The current status of such millions of out-of-school children
  •  Major driving forces behind the education crisis globally
  •  Potential solutions

244 Million Out of School Children Globally

In 2022, a UNSECO report displayed that over 244 million children and youth between 6 and 18 won’t start a new school year, with the most out-of-school children in the Sub-Saharn region (98 million).

Research has shown that children are the first to bear the brunt in today’s war-torn world and calamities heightened by skyrocketing inflation and extreme climate events.

Though the numbers have come down after the sharp COVID-19 (290 million), the current wars, inflation, and climate change have left aid organizations responsible for financing universal education without sufficient funds.

Throughout the globe, there are various factors causing children to drop out of school, with some countries being hit harder than others. Nigeria, Yemen, and Afghanistan, in particular, are grappling with a staggering increase in the number of out-of-school children, largely due to the following underlying reasons.

High Inflation – Low Economic Safety

For parents unsure, if they’ll have a next meal, sending children to school is the last thing on their minds. For example, over 80 million people in Nigeria live below the poverty line. This has led the country to one of the worst national education crises.

“I miss my teacher, friends, and all my schoolmates.”

10-years old Treasure, Nigeria (source: Frace 24 English)

Security threats, extreme poverty, and lack of public schools contribute to Nigeria’s education catastrophe. Like Treasure, 20 million Nigerian children are out of school, making them highly vulnerable to child labor, abuse, and underage marriages.

8-Year Long Civil War

In Yemen, out-of-school children are at increased risk of exploitation – being forced into civil war (child soldiers), early marriages, and child labor.

Mansour, a 16-years old boy, broke his spine in an accident at work in 2019 and has been unable to walk since. Once, Mansour went to school, studied, and regularly met his friends. Now, he is completely dependent on his mother for everything.

And Mansour is not alone.

Yemen’s war has forced 2 million children out of school, wrecking their future. Moreover, 3.7 million Yemen students consistently miss school due to the withholding of teachers’ salaries (almost 2-3rd of Yemen’s teachers have not received their salary in seven years).

Taliban Takeover

Since Taliba’s takeover in 2021, Afghan women over the age of 12 have been banned from school. With the new academic year starting in March, hundreds of thousands of teenage girls remain barred from classes.

Today, 80% of Afghan girls and young women (2.5 million) are banned from school. Out of which 30% have never even gained a primary education.

Despite repeated claims of reopening schools and universities for women, the Taliban (the de facto government) has failed to follow through. The group made similar claims during its previous rule from 1996 to 2001, but the girls were banned throughout the five-year rule.

“(the ban)takes away their ability to participate in their community in a way where they can ultimately have jobs, become doctors or teachers.”

Catherine Russell, Unicef (Source: al Jazeera) 

While the international community has made the right to women’s education the critical condition for aid negotiation, the Taliban is only giving empty promises in return.

Can Out of the School Children Crisis be Solved?

The out-of-school children problem is multifaceted and diverse. Almost every country’s fraction of students don’t go to school, but the numbers are significantly high in war-torn and under-developed countries. Even for students who are going to school, the quality of education and learning opportunities in such countries is vastly different.

According to a recent study by the world bank, these children are at the Irish of losing $17 trillion in lifetime earnings. And unless actions are taken, learning losses will continue to endanger the future of these children, nations, and the world.

Experts advise that providing school meals to students will encourage poverty-ridden families to send their children to school for food. But this will need funding from international governments and organizations.

Education- A Fundamental Right

The world has come a long way in making education a fundamental right. From only 1 out of every ten literate individuals two centuries ago to today’s 9 in 10 adults with essential reading and writing skills – we’ve made progress.

But, to tackle the current and looming world problems in the 21st century and beyond, we’ll need a strong team of educated people. It’s hard to imagine that even today, millions of children are growing up without the opportunity for education that we had. But the reality remains the same.

So, yes, we’ve come a long way, but a lot of work is still left to make education a fundamental right for every child globally.

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Climate Change

Shein Exposed – The Dark Side of China’s Fast Fashion Giant

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fashion hauls

Shein – one of the world’s top fast fashion websites, popular for its cheap and trendy clothing, has enjoyed explosive growth over the past years. Courtesy of thousands of sponsored fashion hauls and cheap laborers, the company is more popular than ever.

But there’s a dark side Shein doesn’t want you to know – the real cost of fast fashion. In this article, we will unveil the reality of how Shien is providing ultra-cheap fashion, the toll it has on the environment, and how it’s shaping today’s mindless consumerism.

Shein – More than a Fast Fashion Brand

Over the years, She-in has gone from being a low-cost Chinese apparel merchant to a global online fashion giant. Its sales skyrocketed from $10 billion in 2020 to over $100 billion in 2022. The biggest Unique Selling Point (USP) of the brand is low-price trendy clothing, majorly catering to Gen Z women.

The company mass produces thousands of products daily in its 6,000 clothing factories across China. According to Rest of World, the brand includes 2,000 to 10,000 new styles each day, a majority of which are copied from other popular brands or small-scale designers.

But behind the glamourous shield of Shein lies the dirty reality about how the company is able to produce so much at low prices. Blue color laborers forced to work 75-hour shifts with very little time off, and mostly under unfit conditions, are at the heart of the company.

Atrocious Working Conditions

Multiple reports and investigations have exposed how the company consistently violates Chinese labor laws. Journalists have uncovered concrete evidence that Shien’s $7 crop tops were made by workers in unsafe workshops working on minimum wage (often without contracts.)

Inside The Shein Machine,” a Channel 4 documentary, revealed the harsh reality of factory workers through undercover footage. These workers were made to work 17-hour shifts to produce hundreds of garments daily. In one factory, they were paid a base salary of $20 per day, which would be deducted by $14 for every garment with mistakes.

Environmental Impact

The cheap, readily available fabric of choice from Shein is virgin polyester, a material that is not only highly polluting but also incredibly persistent. Its production process releases three times more carbon than cotton, and unlike biodegradable cotton, polyester never breaks down. This is a devastating reality, and it’s Time for a change.

Fast fashion garbage dumps
Fast fashion garbage dumps

According to Time, the company releases over 6.3 million tons of CO2 per year. However, Shein is not alone climate culprit here. Across the board, the fashion industry accounts for about 10% of carbon emissions.

Landfills are overwhelmed with a staggering 93 million tons of textile waste annually, much of which is burned and releases harmful pollutants into the atmosphere.

The Impact of “Fashion Haul” Influencing

Social media is filled with influencers packing huge boxes of fashion-forward, cheap polyester clothing. For those unfamiliar, fashion hauls are young social media creators showing off their latest fashion purchase, rating the product, and recommending the right one to their millions of followers. Titled “Summer fashion haul” and “Bought all this under $50 only”, these videos are mostly targeted to GenZ with the aim to spark a desire to buy the displayed look.

The result – mindless consumerism!

Evoking FOMO in the viewers, these hauls play a crucial part in glorifying fast fashion and normalizing shopping in large quantities. A majority of which is disposed of after a few times.

Shein fashion haul

Promoting driven-to-shop psychology, these fashion hauls have become immensely popular with the hashtag #hauls over 13 billion views and #clothinghaul about 1 billion on TikTok. A majority of these hauls are powered by Shien, with the hashtag #sheinhauls 3.8 million views on the platform.

The fashion hauls are Shein’s critical marketing strategy. Their affiliate collaboration with influencers who gets a 10%-20% commission on each purchase is one of the key reasons why the fast fashion website became the giant it is today.

Shein is on a Decline

Shein, the fast-fashion brand known for its cheap and trendy clothing, has seen a meteoric rise in recent years. However, its sales took a sharp turn in 2022 for the first time since the pandemic, with a few reasons behind the drop.

The slowing post-pandemic economy has left shoppers with less disposable income to spend, and persistent accusations of poor clothing quality, worker mistreatment, and unethical business practices may have finally caught up to the brand.

According to Brandwatch, 70% of online conversations about Shein were negative between 2020 and 2023. However, despite these challenges, Shein remains optimistic and reportedly seeks $3 billion to fuel its expansion in 2023.

The Problem is Bigger than Just Shein

Reports of Shein abusing its workers, producing harmful clothing, and worsening the planet have been circling for years. Still, the brand is thriving with more customers than ever.

This sparks the question – Is Shein really the problem?

And we know the answer. Shein, or any fast fashion brand, has transformed the fashion industry because of multifaceted factors, including affordability, convince, emotional connection, and above all, social pressure.

We are contributing to the exploitation of minimum-wage laborers

We see it, we are engaging with it every day on social media, and we are ridden with negative emotions like addiction and guilt. According to ThredUP, one in three Gen Z feels assisted to fast fashion, whereas one in five feels pressured to keep up with the latest fashion trends.

But that’s not what fashion is about. Created as a medium of self-expression and creativity – today, the industry has taken a 180-degree turn. And sadly, it’s no foreseeable end to the trend. However, a huge section of the population is standing up against fast-fashion brands like Shein.

The Need to Adopt Responsible Fashion

The industry is huge, and Shein is not the only culprit. By engaging in the fast fashion trends, we are giving the green light to brands like Shiens to continue labor exploitation and release humongous amounts of toxic chemicals.

But by educating and supporting ethical and truly sustainable fashion brands, we stand a chance to snowball a positive change in the industry. Fortunately, the trend of responsible fashion is already catching on with young shoppers.

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