When cricket star-turned-political “saviour” Imran Khan sold the dream of a “New Pakistan”, he was promising a break from the cycle of power struggle, violence and economic disparity that has affected the country since its formation in 1947. But data now shows that his government only aggravated the long-running problems.
Pakistan’s journey to an ever-winding mess began with leadership betrayals and assassinations in the early part of its existence, and the military coups and radicalisation only made it worse. Its political and military leadership has, despite many warning signs, focused mainly on an internal power struggle, terror export and an anti-India narrative.
Result: Pakistan remained an import-dependent, poor economy. Industry could not grow, so the country bought more from other countries than it exported to them. This meant the foreign exchange reserves were always in a threshold crisis. No wonder there are never enough funds to develop much-needed large-scale projects.
The leadership saw an easy way out in loans from external agencies and other governments. But it hardly ever thought of how hard it would be to repay those loans in case of a troubled economic environment.
That day is now here.
Pakistan is now on the verge of bankruptcy, less than five years after the military-backed anointment of Imran Khan as prime minister. He is out of office and out of favour now; holed up politically and literally.
But what did he really do about that dream he sold? The country’s economic data is a prime indicator.
If you look at the GDP of Pakistan, it’s hard to spot real problems during Imran Khan’s tenure, at first glance. The problem is not immediately reflected in the annual growth rate figures.
Data from the International Monetary Fund (IMF) says Pakistan saw a real GDP growth rate of 6.1% in 2018. It fell to 3.1% in 2019, during the first year of Imran’s PM term; and then saw a contraction of another 0.9% in 2020. But that was the year Covid hit the world. It went back up to 5.7% in 2021 and grew to 6% in 2022, as per IMF data.
Yet, the economy’s absolute value, in dollar (USD) terms, shows a truer picture. The country of over 23 crore people saw a significant downshift.
Its GDP, at current prices in USD, was $356 billion in 2018. It fell by 9.8% to $321 billion in 2019. The Covid year saw it further going down to $300 billion.
Though the last two years have seen recoveries, $348 billion in 2021 and $376 billion in 2022, its real economic size is still near the pre-pandemic levels. The concern deepens when the future doesn’t look particularly positive.
The IMF has downsized its real GDP growth rate predictions: 3.5% for 2023, 4.2% for 2024 and 4.6% for 2025.
These numbers may go down further.
These are bad signs for a country where the general government’s gross debt is around 80% of the GDP, and where an economic default on external loans is a real possibility now.
If that happens, it will be a free fall for Pakistan’s troubled economy.
IMF data says the general government gross debt of the country from 1994 (the year data is available from) to 2017 was in the range of 50-60% barring some exceptions.
It worsened, rising to around 65% in 2018, and shooting up to 77.5% in 2019, then 79.6% in 2020, before coming down to 74.9% in 2021, and then rising to 77.8% in 2022.
A large debt means a significant amount of the government’s revenues have to be paid in debt servicing, meaning less to fund necessary amenities like health, education, food, and shelter.
Upon calculating Pakistan’s 2022-23 budget, we find 41.58% of total government expenditure goes to debt servicing and 16% to defence services, while just 0.95% goes to education and a measly 0.2% to health in a country that has a vast number of poor people.
According to the State Bank of Pakistan (SBP) and World Bank figures, the country currently has an external debt of $126 billion.
Imran Khan’s government added $30 billion of external debt during its tenure of about four years, SBP data analysis says.
The country must pay $21.95 billion in debt servicing in the next 12 months, while its foreign exchange reserve has reduced just to $4.3 billion.
Many analysts currently see Pakistan as a country begging for loans, even to import essential items like fuel, food, and medicines. The inflation rate has doubled from 5.8% in August 2018, when Imran Khan became PM, to 13.4% in April 2022, when he lost a trust vote and was ousted. It has further shot up to 31.5% in the latest figures released for February 2023.
The poor economic conditions reflect in the per-capita income, affecting the common person. IMF data says Pakistan’s annual per-capita income was $1,698 in 2018, the year Imran Khan became PM.
It went down to $1,500 in 2019, and further down to $1,376 in 2020. The last two years have the figure going up: $1,564 in 2021 and $1,658 in 2022.
But high inflation with low or stagnated income means people will find it hard to afford even the basics. And since the incomes are stuck, and the inflation rising, the problem multiplies — a vicious circle.
Much of the economic stability of a country reflects in the stability of its currency or its exchange rate against the USD. When Imran Khan became PM in August 2018, one USD was worth 123 Pakistani rupees (PKR). In April 2022, when Imran Khan was ousted, it had increased to 182 PKR against one USD, as per the State Bank of Pakistan. And the PKR has seen further deterioration in the past 12 months, with the exchange rate going further down to 282 against the dollar on March 15, 2023.
Before Imran Khan took over, Pakistan was already derailed in economic terms. And his time as PM saw the country’s macro- and micro-economic indicators bottoming out, leaving it in a do-or-die predicament.
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