Globalization has made states interdependent rather than independent. As a result of which, any political, social or economical issue has the magnitude to draw attention to the whole world; it is this connectivity of the nations that affects the structure of the whole system. The ongoing economic crisis indicates the level of interdependence.
The crisis began in the US construction industry, it soon spread to banking and insurance sectors, it soon spread to stock exchanges and ultimately to the production sector. On the face of it, the crisis appears to be the result of greed, corruption and inability of the system to reform itself. The core crisis has emerged due to the interest based credit financial instruments such as derivatives, where interest is the core cause of all crisis and problems especially for Muslims.
Most experts argue that the economic crisis in Pakistan is due to negative course of actions of politicians and present government must review policies in consultation with the stakeholders. The pledges of $5.28 billion made at the recently concluded (FoP) meeting in Tokyo show the confidence of international community over economic performance of the government.
In previous years some indicators showed country’s footing towards crisis such as, the imported goods like automobiles and cell phones which are capital intensive and have negative contribution on the balance of payment. One cause of increase in the import of capital intensive item was the increasing consumer banking and as a result of which dozens of new banks opened up. There is also decline in Pakistan’s labor-intensive textile industry. Another negative point is the developing spending cut between $50 to 100 billion. If the government expenditure on development declines, the private sector also loose interest in investment. The fourth indicator was deceleration in private sector demand, which dropped from 11 to 4 per cent, and the people are more sensitive to profitability than interest rates.
In positive points, it includes increase in the wheat support price, which is higher than the world price provided to farmers and untimely rains are worrisome but it is expected to get bumper rabbi crop. The performance of the stock market in the last few months is climbing even if moderately. Despite being speculative, stock market has rationality and is showing increase in the number of companies.
Over all in the First nine-month (July 2008 to March 2009) figures show that the country’s exports were merely $13.41 billion against $26.12 billion of imports, with trade deficit widening to $12.71 billion. The local crisis would hit its peak in 2009-10. If we throw light on the history of the crisis, it reveals that the Social Policy and Development Centre (SPDC), has predicted 2009 as a year of crisis on the basis of the last regime’s policies. The crisis, therefore, occurred one year earlier in 2008.
Some experts argue that adding to the local crisis; the trickle down effect of Global crisis has gone from the developed to the less developed parts of the world. They say Pakistan is no exception; the combined effects of a global food, fuel and financial crisis took quite a toll on the economy as the current account balance and fiscal deficits increased, inflation surged and growth slowed. However world financial crisis did not have much impact on Pakistan as compared to international food and oil prices and international politics. Fortunately, strong corrective actions have been taken over the past few months including an IMF program in November 2008 that is helping to stabilize the Pakistani economy. Macroeconomic imbalances are showing signs of improvement while inflation is easing. But economic growth has taken a hit, with growth slowing down from 7.3 percent during 2004-07 to 5.8 percent in 2008, and is projected to slide to around 3 percent in 2009. The scope for counter cyclical fiscal policy is limited at this time, but the government is taking measures to protect social spending to help reduce the adverse effects of the crisis on the poor. Pakistan is going through a critical phase at this juncture. The country was already facing economic burdens because of its participation in the war on terror. According to the government of Pakistan, it has suffered economic losses worth US$34 billion so far because of this war. While the aid that it received is far below the requirement. The continued global economic crisis has hit Pakistan to a considerable level. Remittances sent to the country by the overseas Pakistanis have declined over the years in terms of value. Pakistan is one of the most prominent examples of a nation where economic pressures are feeding unrest. According to some observers, Taliban’s can take advantage of the bad economic conditions of the country. Shuja Nawaz, director of the South Asia Center at the Atlantic Council argues that “Well, I don’t know if they’re paying much attention to the economic news, but the Taliban knows only that when the government is unable to deliver services, and when there is unhappiness among the general population because of food prices which have gone up tremendously, electricity shortages are rampant, that it is much easier to convince the people that the Taliban have the solution rather than the government,.” However the recent developments which include the restoration of deposed judges, and rapprochement between country’s two major political parties do provide some optimism.
The severity and intensity of the global financial crisis demand the preventing and controlling measures at the global level to mitigate its effects and implications. The developed part of the world must exercise a greater role for the achievement of the better tomorrow. But on the other hand shielding the local economy is also one of the important overlooked measures to protect and maintain the local economy at certain level despite the international economic and financial crisis at international level. The so called international crisis should remain at international level and there should be some shock absorbers in the countries to protect the domestic financial and economic activities.
However Pakistan’s economy was likely to grow between 4-4.5 per cent in the next fiscal year. Pakistan has set target of minimum paid-up capital requirement (MCR) to Rs10 billion by banks by 2013 against Rs23 billion earlier was to support medium size banks in the country, while revised target was still higher as compared to other countries banks’ MCR.
Pakistan has been lurching from crisis to crisis. Every 10 years, Pakistan has to go out in the world with a begging bowl in hand. Every 10 years, Pakistan make itself hostage to the IMF. Every 10 years, Pakistan extracts a heavy price from the poor and the middle classes of the country.
But there is some Golden opportunity in the recent trends in the shipping industry, with vessels becoming larger, have increased chances for the country to capitalize on such opportunities, and the Karachi Deep Water Container Terminal was a timely and strategic addition to Pakistan’s port facilities. Due to Pakistan’s lucrative geographic location, it is undisputedly the gateway to Asia. Pakistan can provide access to the sea to emerging economies of Central Asia as well as the Middle East and the manufacturers of developing countries could use Pakistani ports as a key stop on their way to meet the vast import needs of developed countries of Europe and North America.
This would also provide viable access for the landlocked countries of Afghanistan and Central Asian Republics to the Arabian Sea. Pakistan could play a crucial role in integrating regional economies. The importance of ports for economic development could not be overestimated.
To sum it up, it’s very difficult to predict any thing at this time due to so many unprecedented factors. But surely the crisis in Pakistan has mostly to do with domestic policies on different front, and has less to do with the international financial crisis. Pakistan is a country of numerous resources and it’s capable of self sustaining, but provided good policies are made, Islamic economic principles are followed and less advice are taken from the western world. Terrorism and international political pressures have harmed Pakistan more than any thing else. If only Pakistan decides its destiny on its own then only can there be any sustainable development and economic progress.
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