Answer to Question #202853 in Macroeconomics for Hammad

Question

what are the current economic issues faced by Pakistan in the year 2020 & 2021

Answer 1

Economic growth - Pakistan's economy suffered a major setback in 2020, even hitting a negative -0.4% in the wake of the global Covid-19 health crisis. Per capita income has dropped significantly since the beginning of the pandemic.

Public debt and fiscal imbalances - The current government sought a debt relief from international stakeholders in 2020 to battle the economic fallout caused by the coronavirus pandemic. It secured a further $1.3billion from the IMF. Before 2020, Pakistani had already sought a bailout from IMF in 2019 as it was experiencing a twin deficit and fiscal deficit was at a breaking point. The high public debt has caused extreme balance of payment pressures.

Inflation - inflation is one of the biggest issues facing the Pakistani government today. As of September 2020, headline inflation rose up to 9%. Since then, citizens have faced a double-digit inflation rate which has deeply affected millions of households by eroding their purchasing power.

Inconsistent macroeconomic policies - Pakistan's economy is faced with chronic structural inefficiencies, partly because of under-reliance on investments and exports to drive economic growth. It thus faces an inability to earn sufficient foreign income to pay for its imports and debt servicing needs. There has been lack of structural reforms in Pakistan's economy to solve the impending economic issues for the last three years.

Unemployment and poverty - weak economic growth has come along with a growing lack of jobs and high poverty levels in Pakistan.