Gravitas Plus: Pakistan's Economic Crisis Explained

Summary

Pakistan is grappling with a severe economic crisis marked by a shortage of basic medicines, staggering 31.5% inflation, and skyrocketing food and fuel prices. The Pakistani rupee has plummeted to an all-time low against the dollar, and the country faces a debt repayment of $22 billion with foreign reserves of merely $3.2 billion. Unemployment is rising, and the GDP growth forecast has been revised down to 4.3%. The IMF is demanding austerity measures and reforms before releasing further bailout funds, highlighting the urgent need for the country's leaders to address the crisis and find a path to recovery.

Takeaways

• 😷 Pakistan is facing a severe economic crisis with shortages in basic medicines.
• 📈 Inflation in Pakistan has reached a staggering 31.5%, the highest since 1974.
• 🍗 Food prices have skyrocketed, with milk costing 235 Pakistani Rupees per liter and boneless meat at 1000 Pakistani Rupees per kg.
• 📉 The Pakistani Rupee has plummeted to an all-time low of 278 against the US dollar.
• 🏭 Over 1 million Pakistanis are at risk of losing their jobs, primarily in the textile sector.
• 📊 Unemployment is on the rise, projected to increase to 8.5% in 2023.
• 💹 The GDP growth forecast for 2023 has been reduced to 4.3%.
• 💵 Pakistan's foreign reserves are critically low, with only $3.25 billion remaining.
• 🚗 Despite economic turmoil, Pakistan saw imports of luxury cars amounting to $1.2 billion in the past six months.
• 🏛️ The IMF has stalled further bailouts until Pakistan meets certain conditions, including setting up an anti-corruption task force and increasing taxes on luxury goods.

Q & A

What is the current state of Pakistan's economy according to the script?

Pakistan's economy is in a critical state, described as being in the ICU with a shortage of basic medicines, high inflation, and a falling currency value.

What is the current inflation rate in Pakistan as mentioned in the script?

The inflation rate in Pakistan stands at 31.5 percent, which is the highest since 1974.

What are some of the food prices mentioned in the script that indicate the economic crisis?

Milk is selling at 235 Pakistani Rupees per liter, a kg of chicken costs between 700 to 780 Pakistani Rupees, and boneless meat is at 1000 Pakistani Rupees per kg.

How does the script describe the value of the Pakistani Rupee against the US Dollar?

The value of the Pakistani Rupee is at an all-time low, with 278 Rupees to 1 US Dollar as of the week mentioned in the script.

What is the potential job loss situation in Pakistan's textile sector according to the script?

Over 1 million Pakistanis could lose their jobs, primarily in the textile sector.

What is the projected GDP growth for Pakistan in 2023 as per the script?

The GDP growth forecast for Pakistan in 2023 has been trimmed to 4.3 percent.

How much does Pakistan have left in foreign reserves according to the script?

Pakistan has just 3.25 billion dollars left in foreign reserves.

What is the current debt situation of Pakistan as described in the script?

By the end of December 2022, Pakistan's total external debt stood at 17.87 trillion Pakistani Rupees.

What measures is Pakistan taking to secure an IMF bailout as mentioned in the script?

Pakistan has nearly doubled gas prices, hiked taxes on luxury goods and services, and is expected to announce similar increases in the price of electricity to secure an IMF bailout.

Why is the IMF hesitant to provide further financial assistance to Pakistan according to the script?

The IMF is hesitant due to concerns that Pakistan may not be able to repay the loan and because the wealthy in Pakistan contribute very little to the economy.

What does the script suggest as a way for Pakistan to recover from its economic crisis?

The script suggests that Pakistan's leaders need to put aside their differences, build consensus, and address the economic issues collectively to recover from the crisis.

Outlines

00:00

🇵🇰 Pakistan's Economic Crisis

The video discusses the severe economic crisis in Pakistan, highlighting a shortage of basic medicines, a staggering inflation rate of 31.5%, and skyrocketing food and fuel prices. The Pakistani Rupee has plummeted to an all-time low against the US dollar, with the country's Forex reserves dwindling to a critical $3.25 billion. Unemployment is on the rise, with the textile sector at risk of massive job losses. The country's GDP growth forecast for 2023 has been revised downward to 4.3%. The situation is further exacerbated by a high number of terrorist attacks, with 58 incidents in February alone. The video suggests that Pakistan's economy is on the brink of collapse due to its massive external debt, which stands at 17.87 trillion Pakistani Rupees, and the urgent need to repay $22 billion to foreign lenders in the same year.

05:00

📉 Pakistan's Credit Downgrade and IMF Bailout Conditions

The video continues by exploring the implications of Pakistan's downgraded credit rating by Moody's from caa1 to caa3, reflecting the country's inability to cover its import needs and external debt obligations. This downgrade will affect Pakistan's ability to attract foreign investment due to increased risk of debt default. The IMF has stalled further bailouts until Pakistan meets certain conditions, including setting up an anti-corruption task force, increasing electricity tariffs, and imposing levies on petroleum products. Pakistan has taken steps to secure the bailout by raising gas prices and taxes on luxury goods. The video also criticizes the lack of contribution from wealthy Pakistanis to the economy, pointing out that they continue to enjoy luxury lifestyles while the country struggles. The IMF's managing director emphasizes the need for the rich to contribute more, especially when the poor are suffering. The video concludes by suggesting that Pakistan can recover if its leaders can put aside their differences and work together to address the economic crisis.

Keywords

💡Economy in the ICU

This phrase metaphorically describes a country's economy that is in a critical condition, akin to a patient in intensive care. In the context of the video, it is used to emphasize the severity of Pakistan's economic crisis, suggesting that immediate and drastic measures are required to stabilize the situation. The script mentions this to set the tone for the discussion on Pakistan's economic woes.

💡Inflation

Inflation refers to the rate at which the general price level of goods and services in an economy is increasing over time. In the video, it is highlighted that Pakistan's inflation rate stands at 31.5 percent, indicating a significant erosion in the purchasing power of the currency and a high cost of living, which is a major concern for the citizens.

💡Foreign Exchange Reserves

Foreign exchange reserves are the foreign currency assets held by a central bank or other monetary authority. The video points out that Pakistan has a meager 3.25 billion dollars left in foreign reserves, which is crucial for repaying international debts and maintaining the value of its currency. This low amount signals a potential crisis in meeting international financial obligations.

💡Debt

Debt in the economic context refers to an obligation that an entity has to pay a sum of money or other agreed-upon value in the future. The script mentions that Pakistan's total external debt is 17.87 trillion Pakistani Rupees, a staggering amount that poses a significant risk to the country's financial stability and its ability to service this debt.

💡IMF Bailout

An IMF bailout refers to financial assistance provided by the International Monetary Fund to countries facing economic difficulties. The video discusses that Pakistan is seeking an IMF bailout but is required to meet certain conditions, such as implementing austerity measures and increasing taxes, which can be politically and socially challenging.

💡Austerity Measures

Austerity measures are policies of reducing government spending and increasing taxes to control or reduce the budget deficit. The video mentions that Pakistan may have to introduce more austerity measures to secure an IMF bailout, which could include increasing the prices of utilities like gas and electricity, affecting the general public's living conditions.

💡Unemployment

Unemployment refers to the state of being without a job and actively seeking work. The video script reports that unemployment in Pakistan has been steadily rising since 2019, with projections for 2023 indicating a further increase to 8.5 percent, highlighting the job market's deterioration and its social and economic implications.

💡GDP Growth Forecast

GDP growth forecast is an estimate of the rate at which a country's Gross Domestic Product is expected to grow over a specific period. The video states that Pakistan's GDP growth forecast for 2023 has been trimmed to 4.3 percent, suggesting a slowdown in economic activity and potential challenges for the country's development.

💡Currency Devaluation

Currency devaluation occurs when a currency's value decreases relative to other currencies. The script notes that the Pakistani rupee is falling against the dollar, reaching an all-time low, which can lead to higher import costs, inflation, and a reduced ability to repay foreign debts.

💡Luxury Imports

Luxury imports refer to the purchase of high-end, non-essential goods from other countries. The video criticizes the wealthy in Pakistan for importing luxury cars and other luxury items, spending 1.2 billion dollars in six months, while the country struggles with economic hardships. This behavior is seen as a sign of misplaced priorities and a lack of contribution to the national economy.

💡Terror Attacks

Terror attacks are acts of violence intended to create fear and advance political, religious, or ideological objectives. The video mentions that terrorists carried out 58 attacks in Pakistan in the month of February alone, averaging over two per day, indicating a high level of insecurity and instability within the country, which can further deter investment and economic growth.

Highlights

Pakistan is facing a severe economic crisis with shortages in basic medicines.

Inflation in Pakistan has reached a staggering 31.5 percent, the highest since 1974.

Food and fuel prices are soaring, with milk costing 235 Pakistani Rupees per liter and petrol at 272 per liter.

The Pakistani Rupee has plummeted to an all-time low of 278 against the US Dollar.

Over 1 million Pakistanis may lose jobs, particularly in the textile sector.

Unemployment is projected to rise to 8.5 percent in 2023.

GDP growth forecast for 2023 has been reduced to 4.3 percent.

Pakistan's foreign reserves have dwindled to a mere 3.25 billion dollars.

Terror attacks in February alone reached 58, averaging over two per day.

Pakistan's economy is unstable, with a total external debt of 17.87 trillion Pakistani Rupees.

Pakistan is required to repay 22 billion dollars in 2023, putting immense pressure on its reserves.

Foreign direct investment in Pakistan has plummeted by 44% in the first seven months of the fiscal year.

Moody's has downgraded Pakistan's credit rating from caa1 to caa3 due to insufficient foreign reserves.

The IMF has stalled further bailouts until Pakistan meets certain conditions, including anti-corruption measures and tax hikes.

Pakistan has increased gas prices and is expected to raise electricity prices to secure an IMF bailout.

The IMF is urging rich Pakistanis to contribute more to the economy, as they currently benefit from subsidies meant for the poor.

Pakistan's leaders need to build consensus and resolve the economic crisis to prevent further decline.

Transcripts

hello and welcome to gravitas plus I am

Molly camphir Pakistan is in a state of

mess

the economy is in the ICU the

politicians are at War and the people

are crying for help

I Know What You Must Be Wondering

what new here Pakistan has been in a

Perpetual state of mess since its birth

well yes it has but this time it's one

hell of a mess

look at the developments there is a

medicine shortage Pakistan does not have

even basic medicines like discipline

Panadol calpol brufim if I speak of

inflation it stands at 31.5 percent

not since 1974 has Pakistan seen such a

high rate of inflation

if I speak of food prices they are

touching the sky milk is selling at 235

Pakistani Rupees per liter a kg of

chicken costs 700 to 780 Pakistani

Rupees boneless meat is selling at 1000

Pakistani Rupees per kg

same story with fuel prices petrol is

selling at 272 Pakistani Rupees per

liter diesel is selling at 262 Pakistani

Rupees per liter kerosene at 217 per

liter if I speak of the currency it's

falling like a bungee jumper only that

we doubt if it will be able to bounce

back as of this week the value of the

Pakistani rupee is 278 against the

dollar this is an all-time low if I

speak of jobs last we checked over 1

million pakistanis could lose their jobs

mostly in the textile sector

if I pick off unemployment if been on a

steady ride since 2019 this year that is

2023 it is projected to grow further to

8.5 percent

if I speak of the GDP for 2023 the GDP

growth forecast has been trimmed to 4.3

percent if I speak of Forex Reserves the

cash and other assets held by Pakistan

Central Bank it's another tragic story

Pakistan has just 3.25 billion dollars

left in foreign Reserves and let's not

even talk about Terror in the month of

February alone terrorists managed to

carry out 58 attacks in Pakistan 58

attacks in 28 days that's an average of

over two per day this is another record

in itself

now we understand that breaking records

is a good thing but Pakistan seems to be

breaking records in a race to the bottom

so much so that the people of Pakistan

are making fun of the State of Affairs

they are making memes because memes seem

to be the only affordable thing for them

at the moment the question is why is

Pakistan in such a critical situation

and what can it do to climb out of this

hole well to start with Pakistan's

economy has always been unstable the

difference now is that its nearing

collapse this is primarily because of

the country's debt

according to the World Bank by the end

of December 2022 Pakistan's total

external debt stood up

17.87 trillion Pakistani Rupees I repeat

17.87 trillion this is one of the

highest levels of debt the world over

and what's worse Pakistan has to repay a

large chunk of this amount and repay it

right away in fact one report says that

in 2023 alone Pakistan will have to

repay 22 billion dollars to foreign

lenders but to repay this amount it

needs cash

where is it going to get this cash from

God knows

I told you about the Forex Reserves

usually countries meet their debt

obligations from the money that they

have in Forex reserves Pakistan needs to

repay 22 billion dollars in that

but it has just 3.2 billion dollars in

reserves

how on Earth will it manage to repay

this

again God knows in most cases countries

tend to make up for debt through new

Investments that they receive

foreign direct Investments or FDI to be

precise Pakistan is suffering on that

front as well

have a look at this report

Pakistan's FDI plunged 44 during the

first seven months of this fiscal year

if we break it down further in the last

fiscal year Pakistan received 1.22

billion dollars in FDI in this fiscal

year it has received just

683 million dollars

which means foreign investors are wary

about sending money to Pakistan and we

don't blame them have a look at this

report now global ratings agency Moody's

has cut Pakistan's Sovereign credit

rating earlier the rating was caa1 it

has now been downgraded to caa3 why is

that because of Pakistan's foreign

Reserves

they are far less than necessary to

cover its Imports also less than its

external debt obligations in the

immediate term Modi says this has raised

the risks of a debt default hence the

downgrade so how will this impact

Pakistan well these ratings will come

into play every time Pakistan gets a

foreign investor these investors will

assess islamabad's ability to repay

loans and live up to the Investments

based on its credit rating simply put

this report is going to hurt Pakistan

financially it could make the current

turmoil even worse and what about the

IMF why is it not helping Pakistan

because it has already done enough

so it has stalled the bailout

it says Pakistan needs to implement

certain conditions before it gives out

another bailout to the country what

conditions basically setting up an

anti-corruption task force hiking

electricity tariffs imposing a levy on

petroleum products is Islam about doing

this

it has no option have a look at this

headline in its bid to secure the

bailout Pakistan have nearly doubled the

gas prices and if reports are to be

believed it is expected to announce a

similar increase in the price of

electricity Pakistan has also hiked tax

on luxury goods and services so that it

could get an IMF bailout Reports say

taxes on a raft of luxury Imports will

be increased in order to unlock the next

batch of an IMF loan and by the way this

increases just the beginning Pakistan's

Finance Minister says that in the days

ahead the Prime Minister could introduce

more austerity measures to meet the

imf's demands and this makes you wonder

why if the IMF after Pakistan why can it

not just give the money well there are a

host of reasons and two of them stand

out one the fear that Pakistan will not

be able to repay the loan like we've

been saying and number two the fact that

rich pakistanis contribute very little

to the economy let me read out a

statement from the imf's managing

director who summed up the situation

quite well I'm quoting those who are

making good money in public or private

sectors need to contribute to the

economy it shouldn't be that the wealthy

benefit from subsidies it should be the

poor who benefit from them so the IMF

wants Rich pakistanis to do their bit

because at a time when the poor are

suffering the Richie Rich are still

living a life of luxury they are buying

luxury cars importing them from abroad

in fact Reports say during the last six

months Pakistan spent 1.2 billion

dollars on Imports of luxury cars

high-end electric vehicles and spare

parts the list of buyers consists of

Pakistani businessmen as well as the

country's Army generals both current

index

look at this report Dawn carried it last

year it says ex-military officials in

Pakistan were allowed import of tax-free

bulletproof vehicles

can you imagine that this only tells you

about the misplaced priorities of not

just the Pakistani government but also

its rich and Elite

instead of helping the government

instead of donating money to the poor

the rich are basking in the glory of

their Fortune as the economy sinks to

the bottom of the battle the question is

is there a way out can things be fixed

can Pakistan recover yes it can

but to do that the leaders of the

country who cannot stop abusing each

other will have to put their differences

aside and build consensus to resolve the

mess

as they say an eye for an eye makes the

world blind but unfortunately the

country's leaders seem to be turning a

blind eye to the common man's misery

[Music]