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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

Muslim Women’s Empowerment and Inheritance Rights 

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Muslim Women's Inheritance Rights

Despite Islam giving Muslim women the right to inheritance, it is rare to see Muslims follow this Islamic law.  The recently released National Family Health Survey 2019-20 (NFHS-5) fact sheet for Jammu and Kashmir states that only 57.3% of women in the Union Territory of Jammu and Kashmir own a house and/or land, alone or jointly (PDF of the survey). J and K is a Muslim-majority region. According to 2011 census, 68.3% of the region’s population is Muslim. 

Even though we can read these figures as “at least more than half women own property”, however, given that all women are coparceners in one or the other way, it raises vexing questions.

Islam entitles a sister to inherit half of what a brother gets as a coparcener. Despite this fact, the number of women owning property is almost half of that of men.

The data on women’s inheritance in Pakistan and other Muslim-majority South Asian countries is much worse. There are very few women who own property in South Asian countries.

Inheritance Rights, a Taboo?

Women asking for their coparcenary rights is considered taboo here. Further, women also seem to have internalized that asking for inheritance rights will break their relationship with other members of the family, especially brothers. As a result, they sign relinquishment deeds without giving a second thought about it.

Also Read: Death of Mahsa Amini: How Governments are Denying Women’s Right to Choice?

Women’s Empowerment through Inheritance

People mostly see the inheritance of property as a matter of money and wealth. However, it goes beyond that, at least for women. Economically speaking, ownership of any kind of property by women is a very important determinant in the quest for women’s empowerment.

In a realist world where everyone is responsible for their own survival, women should not expect their male relatives to care for them. Unless women do not attach economical value to their lives, they will have no power. This is especially true for unemployed women who do not have financial independence. Since inheritance of property is a given- however small value it may have, they do not have to get an education or work to get it. The only thing they need to do is not to sign the relinquishment deed.

Also Read: Why Are Muslim Women Still Behind Bars

Militating Against Women’s Empowerment

Relinquishment of coparcenary rights militates against women’s empowerment. It is high time that women ask for the inheritance rights that the constitution as well as the religion gives them. The right to inheritance also seems one of its kind means to women’s empowerment where people peddling religiosity may not find a reason to oppose it. Women should know that signing a relinquishment deed may lose them a lifetime opportunity for leading an independent and respectful life in this patriarchal world.

Also Read: The women behind #Blacklivesmatter movement

The Debate on Equality of Rights

It is generally accepted that Islam entitles a sister to inherit half of what a brother gets as a coparcener. However, the interpretation of the Quran regarding this law is debatable. According to Mohmmad Iqbal, “the share of the daughter is determined not by any inferiority inherent in her, but in view of her economic opportunities, and the place she occupies in the social structure of which she is a part and parcel.” Iqbal goes on to justify the case of inheritance law in Islam arguing that the daughter “is held to be the full owner of the property given to her by both the father and the husband at the time of her marriage.” Further, “she absolutely owns her dower-money which may be prompt or deferred according to her own choice, and in lieu of which she can hold possession of the whole of her husband’s property till payment, the responsibility of maintaining her throughout her life is wholly thrown on the husband.”

Therefore, for Iqbal, if we “judge the working of the rule of inheritance from this point of view, you (we) will find that there is no material difference between the economic position of sons and daughters.”

However, Iqbal made this point in 1930. Since then, there has been a significant change in the economic positions of men and women. If the motive behind inheritance laws, as mentioned by Iqbal, is applied to modern-day conditions, sons and daughters may well get an equal share in inheritance.

Towards Muslim Women’s Empowerment

Inheritance rights bestowed by Islam on Muslim women show Islam’s inherent quest for women’s empowerment.

Even though the West blames Muslims for repressing women’s rights, Islam has its in-built laws for women’s empowerment. These laws, unlike West’s feminist rhetoric, go beyond symbolic empowerment like sartorial choice, and hence materially empower women.

However, it is a shame that Muslims do not follow Islamic laws like inheritance law in letter and spirit. If all Muslims obeyed these laws, the world would become a better place for Muslim women.

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“The Worst is Yet to Come”— Recession 2023 & the Looming Uncertainty

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recession 2023

Recession 2023 is just around the corner.

The global economic crises are now inducing the certainty of a looming recession. Economists and financial organizations warned of upcoming uncertainty; however, regrettably, the world failed to decode the uprising of the economic catastrophe. 

Today’s economies around the globe are confronting an urgent economic crisis and is on the brink of a recession. And, the experts fear the worst is yet to come!

Shear Impact on Leading Economies – US, UK, China, and India

“Global growth is slowing sharply, with further slowing likely as more countries fall into recession. My deep concern is that these trends will persist, with long-lasting consequences devastating for people in emerging markets and developing economies,”  

World Bank Group President David Malpass.

For the first time since 2009, the US declared negative GDP growth two quarters in a row, which officially qualifies as a recession.

The British Pound is at its historic low of $1.038 against US dollars due to rare emergency interventions. Cities and states in China are still in lockdown because of a rise in Covid-19 cases. On the other hand, Indian Rupee is at its 75-year low of Rupees 82.11 against the US dollar, soaring the hike in repo rates to 5.90%

Srilanka already declared insolvency earlier this year. Russia and Ukraine war had already set the stage for World War III. And the recent resilience of china on Taiwan has tarnished the world economic environment. 

Read More: Sri Lanka: What Led the Island Nation to Bankruptcy?

All these together indicate the harsh truth: Recession 2023 will worsens the conditions of all major economies and push the globe into undefined circumstances like:

  • Central banks hiking the interest rates
  • Hike in energy and food prices
  • Depreciation of major currencies against the dollar

 Central Banks Hiking the Interest Rates  

To counteract rising inflation and the impact of a strong currency on the economies, central banks are hurriedly raising interest rates. This happens as the US Federal Reserve keeps up its aggressive interest rate hikes.

Rising Interest Rates
Rising Interest Rates. Image Source: India Today

On the other hand Reserve Bank of India is also struggling with persistently high inflation, which is made worse by geopolitical unrest, droughts, and supply-chain disruptions

Hike in Energy and Food Prices

Russia is the world’s third-largest oil-producing country. It provides 7-8 million barrels of crude oil per day, or 14% of global production, to international markets. 

The US and UK’s restrictions and many other nations’ decisions to stop purchasing Russian petroleum have exacerbated the crisis.

Russia and Ukraine are the biggest sunflower oil producers globally and the second most frequently used cooking oil. However, sunflower oil cannot yet be exported from Russia due to the tightening of import restrictions. 

Plus, due to the increasing demand for sunflower oil in the market, other edible oils are now more expensive, raising the cost of food and other products across borders.

Depreciation of Major Currencies Against the US Dollar 

Compared to the US dollar, the Japanese yen has dropped to its lowest level since August 1998. The Indian rupee is hitting its lowest in history, and for the first time in 20 years, the euro is now lower than the USD.

The decline of major currencies indicates the current state of the global economy. Moreover, it provides a crystal-clear forecast of how disastrous the recession 2023 would be if significant steps are not taken to control the situation.

The Decelerating Global Economy: IMF Forecast for Recession 2023

The International Monetary Fund (IMF) is warning that over a third of the economy is headed for a recession this year or next. Its world outlook shows growth withering from 6.0% in 2021, 3.2% in 2022, and an estimate of just 2.7% in 2023.

Recession 2023 will be different from all the recessions the world has faced to date. Different factors are driving economic crashes in different countries, for example:

A cynical recession by hiking interest rates in the US, a structural recession in China powered by the crashing property market, and financial insecurity exaggerated by the ongoing energy crisis in Europe.

The ongoing turmoil in the national and global market is further sparking the threat of World War III.

Rising Certainty of World War III

Russia has already invaded Ukraine, and in opposition to Ukraine’s protection, the US cleared this support with Ukraine by immediately sending weapons to Ukraine. Such US behavior infuriated Russia, leading to increased attacks. 

Russian President Vladimir Putin warned the US and European countries that further expansion of support to Ukraine might lead the situation to a ‘Global catastrophe.’ 

On the other hand, China assaulted Taiwan due to the recent visit of the US finance minister. The current clash of China and Indian troops erupt seriously, leading to grim conflict on north-east Indian borders.  

Additionally, civil wars in countries like Somalia, Yemen, Syria, Ethiopia, Afghanistan, and Mali are raising the certainty of World War III

Needless to say, World War III will destroy the world economy, resulting in more financial turmoil, starvation, a hike in oil prices, and the depreciation of currencies

Recession 2023: The Worst is yet to come

Slowing down economies, high repo rates, depreciation of currencies, bankrupted countries, and looming wars between nuclear countries are further solidifying the onset of a cold economic winter. 

The circumstance indicates what is coming. The indication of recession, the yell of “the worst is yet to come.

However, to wrench the global situation on track, policymakers should continue to give needy powerful tailored assistance to respective governments while also putting in place reliable medium-term fiscal strategies.

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Hindutva Activists Call for Economic Boycott of Muslims

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Hindutva Activists Call for economic boycott of Muslims

Days before the Hindu festival Diwali, Twitter is full of anti-Muslim hatred. One of the trending hashtags on Twitter is “Halal Free Diwali”. It seems like a well-orchestrated campaign against businesses owned by Muslims or catering to Muslims. Through this social media campaign, Hindutva activists and supporters are calling for the boycott of Halal-certified products. Some of them allege that Muslims are creating a parallel economy that is used for Jihad. Some people have even gone a step ahead and called it “economic Jihad”.

Economic Boycott of Muslims is not New

The economic boycott of Muslims on this Diwali is not something new. It has been a constant for several festivals now.

Earlier this year, Temples in Karnataka prohibited Muslims from doing trade during festivals. This happened in the same locality where the Hijab row had erupted.

Hindutva activists alleged that Muslims had dominated the trade. They said that Muslims were doing “injustice” by dominating the businesses and keeping Hindus out. The Hindutva supporters also argued that while Muslims are involved in some unpleasant incidents but also want to reap the benefits of trade during Hindu festivals.

The boycott calls escalated later. Some Hindutva organizations also called for a boycott of Muslim cab and tour operators.

Boycott of Companies Owned by Muslims

Last year, some Hindutva miscreants launched a campaign of misinformation and fake propaganda against iD Fresh Foods, a company owned by a Muslim businessman. Common masses were misled through WhatsApp forwards that the products of the company contain animal extracts. It was a concerted attack to hurt the company’s reputation. Further, some people also alleged that the company only employed Muslims.

Even though these allegations were refuted by the company, nothing could undo the harm that the company suffered. Further, the government did nothing to punish the culprits who defamed the company.

Disempowering Muslims

Muslims in India are a minority. They have a very low literacy rate. They do not have access to resources. As a result, most Muslims are involved in trading rather than the government sector.

When a particular community boycotts Muslim shopkeepers, the Muslims have no choice but to shut down their shops. The only way out for these shopkeepers is to operate in Muslim-majority areas. However, since most Muslims are involved in the trading sector, how many traders can the Muslim community sustain?

Also Read: 2 Billion Muslims must send a Stern warning to India’s Nazi-like government to stop its anti-Islam discourse

Distortion of History

Hindutva activists and supporters allege that Muslims have always dominated Hindus. They accuse Muslims of perpetrating injustice on them in the past. Hence, they claim it is payback time.

It is a typical strategy that precedes genocide. The “other” are demonized. Their history is distorted. They are accused of being dirty. Further, they are also accused of things like dominating the economy or stealing jobs. 

Nothing can be farther from the truth. Muslims in India are disempowered. They are underrepresented in all the public sectors job.  The representation of Muslims in the formal sector of the economy is also low.

The condition of Muslims in India and their power can be gauged from the fact that they make up almost 15% of India’s population, but Muslim representatives constitute only 5% of the Indian parliament’s total strength.

It is the political power that determines the power of a particular community. Muslims do not even have political power proportionate to their population. The truth is that Indian Muslims are marginalized and excluded.

India’s Economic Policy and Economic Boycott of Muslims

Ever since coming to power in 2014, India’s Prime Minister Narendra Modi has launched many schemes to make India’s economy grow faster. Further, Modi wants India to become a manufacturing hub.

While these schemes and plans are ambitious, Modi’s supporters are calling for the economic disempowerment of 15% of India’s population.

Also Read: Why Is Indian PM Modi’s Silent About Attacks Against Muslims?

Muslim Countries and the Indian Economy

A significant proportion of India’s population works in Gulf countries. They send remittances back home, contributing to India’s foreign exchange. Further, Indian businesses have a ubiquitous presence in Gulf countries. They do a lot of business there.

Muslim-majority countries contribute to India’s economy without discrimination. In fact, Gulf countries give preference to Indians rather than Pakistani Muslims when it comes to business and employment.

However, back home, Indians are marginalizing Muslims. Hindutva supporters are calling out Muslims because of their religion.

It is rather ironic that Hindutva supporters think it is fine for them to find employment and use profits from business proceedings in Gulf countries but at the same time accuse Indian Muslims of economic and employment Jihad back home.

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