How Will Economic Crisis In Pakistan Impact Its Neighbours?

Economic Crisis In Pakistan: Deep economic troubles in Pakistan suggest that India might have to live with increased Chinese influence in Pakistan, in particular and South Asia, in general.

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How Will Economic Crisis In Pakistan Impact Its Neighbours?: The condition of Pakistan has become like Sri Lanka and it is standing on the verge of becoming a failed state. In this situation, India might need a new strategy to engage with Pakistan’s external donors to mitigate risks arising from a volatile situation in our neighbourhood.

This Topic Is Relevant For UPSC Mains’ GS 2: Effect of Policies & Politics of Countries on India’s Interests, India and its Neighbourhood.

Context

On January 09, 2023, the International Conference on Climate Resilient Pakistan (ICCRP) began in Geneva where Pakistan’s Prime Minister, Shehbaz Sharif, made a desperate plea for help. On the sidelines, Pakistani representatives met IMF officials regarding its currently stalled EFF.

What Is Happening in Pakistan?

Pakistan is facing its worst-ever Economic crisis After battling with the outbreak of flood, the public is battling with inflation and starvation.
Pakistan’s rupee has reached a record low. The value of the Pakistani rupee has reached about 225 rupees against one American dollar.
Pakistan’s foreign exchange reserves have also reached a record low level — only 4.5 billion dollars (around Rs 37,000 crore).
With this Pakistan can run for the next few days only because it has to be spent a large chunk of money on buying essential things like petroleum products, grains and sugar.

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Who Is Responsible For Pakistan’s Worst Economic Condition?

While the Pakistan’s economy has been doing badly for quite some time, the floods of 2022 caused unprecedented damage to the country with critical infrastructure destroyed and millions displaced.
This situation in Pakistan did not arise in a day or two. This condition of Pakistan has happened because it has chosen the policy of terrorism and enmity instead of development and progress.
The entire attention of Pakistan and its establishment has been only on how to destabilize India. Its policies like bleed India with a thousand cuts were made so that somehow India could be weakened.
But this enmity has given nothing but misery to Pakistan.
Pakistan made a nuclear bomb to threaten India, but it could not make itself and that’s why there are riot-like situations today for a handful of grains.

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How Will Pakistan’s Economic Crisis Impact India?

Deep economic troubles in Pakistan suggest that India might have to live with increased Chinese influence in Pakistan, in particular and South Asia, in general.
The last time a big power, the US, had roped in Pakistan in its proxy war against the then Union of Soviet Socialist Republics (USSR), sections of Pakistan’s ruling establishment felt emboldened to undertake hostile actions against India.

How Should India Deal?

India has long been concerned about China’s clout in its neighbourhood, including Nepal, Bangladesh, Pakistan and Sri Lanka. Sensitivities have been heightened, and diplomatic relations frayed, since Indian and Chinese troops clashed along a remote Himalayan border in 2020.
So, India might need a new strategy to engage with Pakistan’s external donors to mitigate risks arising from a volatile situation in our neighbourhood.
Pakistan’s sorry fate today also has a lesson for the neighbourhood, as it exposes how jingoistic majoritarianism can wreak havoc on the social and economic fabric of a nation.
Therefore India still needs to check its short term, medium term and long term impact of failure of economic stability of its immediate neighbor i.e. Pakistan.
On humanitarian grounds India can also provide Ration To Pakistan, if the need arises.

What Next For PAK?

Pakistan needs to raise more than $26 billion to repay foreign debts and reduce its massive current account deficit. Nearly 30% of Pakistan’s foreign debt is owed to China.
The dwindling of forex reserves leaves Pakistan with import cover for only over a month. In the next three months, the country has to pay $8.3 billion to external debtors.
The release of $1.1 billion that was originally scheduled to be disbursed by the IMF in November of last year has yet to be approved, resulting in Pakistan having insufficient foreign exchange reserves to cover only one month’s worth of imports.
Pakistan so far has received funding pledges from countries like the US, France, Saudi Arabia, China, and Japan, with the Asian Development Bank and Asian Infrastructure Investment Bank also promising help.

Did You Know?

India provided about $4 billion to Sri Lanka in rapid assistance between January and July, including credit lines, a currency swap arrangement and deferred import payments, and sent a warship carrying essential drugs for the island’s 22 million people.

Situation in Pak and its Impact on South Asian Countries | India-Pak Relations

FAQs

Recently, at which International Forum Pakistan’s PM, Shehbaz Sharif, made a plea for help?

On January 09, 2023, the International Conference on Climate Resilient Pakistan (ICCRP) began in Geneva where Pakistan’s Prime Minister, Shehbaz Sharif, made a desperate plea for help

What Is The Current Level Of Pakistan's foreign exchange reserves?

Pakistan's foreign exchange reserves have also reached a record low level -- only 4.5 billion dollars (around Rs 37,000 crore).

What Is Hyperinflation Which Is Currently faced by Pakistan?

Hyperinflation is a term to describe rapid, excessive, and out-of-control general price increases in an economy. Annual inflation rate in Pakistan rose to 24.5% in December of 2022 from 23.8% in November.