Why Pakistan is on the Brink of Total Economic Collapse

collapse could be globally devastating some of the most obvious causes of the problems Pakistan is having are the same ones that have been plaguing the whole world namely the Russian invasion of Ukraine the effects of the global covid-19 pandemic and natural disasters and while some countries have been able to bounce back a fair amount since 2020 poorer countries have not there's a direct line from rising

fuel prices from the ongoing Ukraine Invasion to economic woes in places like Pakistan simply put they have a huge population and rely heavily on fuel so once prices should it up it wreaks havoc on the economy the same is true for covid-19 which caused economic downturns globally countries with more economic infrastructure to begin with as well as the ones whose governments sprang to action with solutions

to cushion the economic fall generally fared better Pakistan as we'll get into didn't have anything close to these things and then there was intense flooding in 2022 from monsoons those resulted in about 8 million pakistanis being displaced and tens of thousands still homeless the cost of just those monsoons was around 30 billion dollars in terms of damage and lost work output so what makes Pakistan more

ripe for an economic collapse than other countries a lot of it has to do with Decades of corruption and financial mismanagement long before the recent collapse Pakistan had been borrowing from other countries at like super high levels and as they did they were making it pretty clear they really didn't have great ways to pay that money back now borrowing from other countries is incredibly common and

it's not necessarily a sign that things are on the verge of collapse but the ways that borrowed money is usually paid back are not really working for Pakistan usually cash from what are known as Forex reserves is used to meet debt obligations it's kind of like when you make sure you take a little of your paycheck and try to set it aside for tax season so

you know you can pay the IRS in April but Pakistan's Forex is only at around three or four billion dollars at this point far less than what they owe another way to get money to pay back debts is when other countries or business entities invest in your country this is known as FDI or for indirect investment Pakistan has had a 44 percent drop in FDI this

fiscal year so far AKA people don't see investing in Pakistan as a good bet at the moment on top of that foreign investment is usually based on how good a credit rating a country has and Moody's a credit rating entity has lowered Pakistan's credit rating from caa1 to caa3 this is mainly because the country as Moody sees it is pretty likely to default on their loans

ultimately Pakistan has found itself in something of a vicious cycle they need money so they borrow it and the usual ways they'd pay it off just aren't available so they're considered a riskier investment which means even less money comes in and then they need to borrow more for the average Pakistani this is mainly being felt in the form of massive inflation and considering tens of millions

of pakistanis live off about 3.20 cents a day they can hardly afford huge price hikes in everyday Goods another big part of the collapse has to do with the strength and Corruption of the Pakistani military while it's not technically a military dictatorship it might as well be that's because the military is the only entity in Pakistan that has steadily grown since their independence in 1947. it's

now a 26 billion dollar entity with power that far outweighs its supposed role over the years it's kind of become a separate branch of government essentially with no oversight it invests in businesses as it wants without any transparency to the public and without government intervention it's essentially operating for the obscene wealth of its current and former generals the generals have purchased and are currently running state

agencies that oversee everything from Power water and housing to telecoms Aviation and health and whenever they want more money they just use State funds or they take money from the huge defense budget to give you an example of how big it is Pakistan spends 2.4 percent of their GDP on education and 17.8 percent on the military so in an era where Pakistan's government and its citizens

are in dire need of money the military is essentially just hoarding all the cash in the country we're not hoarding all the subscriptions to our Channel though you can totally have one if you hit that subscribe button just saying the military doesn't just have economic power though they also kind of run the government like Pakistan has elections and in 2018 they voted Imran Khan in as

leader but in August of 2022 the military decided they'd had enough and basically ran them out of office they installed new leadership but those new leaders have largely been puppets of the military there's theoretically a free and fair election happening in 2023 which is actually one of the reasons Pakistan is having trouble getting a bailout more on that in a minute and just like the military

Elite in Pakistan the country's Uber Rich are also guilty of hoarding cash and the cash they spend often goes to buying foreign products like luxury items in other words very little of their money goes towards helping the country's economic issues in the last six months for example there was reportedly 1.2 billion dollars spent on Imports of high-end cars electric vehicles and car parts and most of

these purchases were by the ultra wealthy businessman and by Army generals this extreme imbalance of wealth combined with General government corruption and all the global disasters recently have left Pakistan in a state of chaos basic medicines are unavailable food prices are at an all-time high gas prices are soaring and inflation in general is at 31.5 percent which is the highest it's been since 1974. the value

of the PKR the Pakistani rupee has plummeted down to about 278 PKR to one US dollar that's an all-time low it's estimated that more than a million people are on the verge of unemployment and they'd be be joining an already struggling Workforce which has had Rising unemployment since 2019. it's presumed it'll get to about 8.5 percent in 2023. there's also been a rise in terrorism potentially

fueled by dissatisfaction from the economic collapse there were 58 terrorist incidents alone in January of this year to fight all these Trends the government needs cash and often the easiest place to get it is via bailouts from Global Banks like the IMF and the World Bank this has worked in previous years for Pakistan as recently as 2019 the IMF gave them six billion dollars and yet

Pakistan is essentially right back where they were before getting that money if not in a worse position and while these Global banks are looking to help bail out countries in need they do have certain stipulations before they'll give money and these all boil down to how confident they are that a country receiving a bailout won't just squander it and come asking for more at the moment

these banks are concerned that with the upcoming 2023 election much of the money they give as a bailout would go towards politicians advertising and spending money to win the election but beyond the election the banks have communicated to the government of Pakistan the types of changes that need to be made to secure bailout funds and most of these changes are austerity measures AKA moves to cut

spending and generate Revenue but since there aren't a lot of opportunities to raise revenue at the moment it's mostly about cutting and not just budgetary spending the government has been essentially forced to cut literal electricity to many of its cities and towns citizens are currently struggling to live with no electricity for most of each day which combined with the high cost of food and other Staples

makes the living conditions in the country pretty miserable they've also agreed to impose a levy on petroleum products and have basically doubled gas prices they've set up an anti-corruption task force to try to keep potential bailout money from being mismanaged while Pakistan is a developing country it's also a vital one in the region and in global politics this is furthered by the fact that it's a

nuclear power so if it were to fully default and have its economy collapse it would be really bad news on a few fronts some experts argue it would potentially cause a domino effect on other developing countries around the world who are still dealing with the negative effects of the pandemic the invasion of Ukraine and more that would mean millions of people descending into poverty and dying

there's also the issue of the nuclear Arsenal if Pakistan were to collapse to the point where it didn't have essential power to guard its nuclear weapons it could mean the Arsenal could be stolen or sold off to the highest bidder so many people argue that Pakistan needs something of a reset it has already begun to adopt harsh but necessary measures but the government has to find

ways to restructure itself so that it not only is less prone to corruption but that it also can break free from the power and the greed of the military sadly all of these types of moves will likely result in at least a decade of lost growth as well as a serious backtracking of any recent progress they've had in Education Health Care and other sectors plus as

people suffer through these potential changes it'll only cause more unrest terrorism and general unhappiness TBH I wish I could just lend Pakistan like 20 billion dollars and get them back on track but to quote my accountant why are you wasting my time with these phone calls so I guess that means I don't have it have any thoughts on the economic collapse pop them in the comments

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