Pakistan’s economic crisis is one of several roiling the country: NPR

ISLAMABAD – Sometimes the story of a country can be seen in a matter of days.

Take Pakistan, for example. Last Monday, the country was plunged into darkness after the collapse of the national power grid. By Thursday, the country had spiraled dangerously into economic chaos.

Then, on Monday, a suicide bomber swooped in among worshipers at a mosque in the northwestern city of Peshawar, detonating some 22 pounds of explosives, bringing down the mosque wall and killing more than 100 people, burying many under the rubble.

The nationwide blackout comes at a time of economic crisis

Pakistan is often mired in problems. But in recent months, a storm of global upheaval, from Russia’s invasion of Ukraine to the Taliban’s takeover of Afghanistan, has exposed and exacerbated political, economic and security fault lines in the country.

“Pakistan has simply not been so lucky,” he says. Youssef Nizar Former Head of Emerging Markets Investments at Citigroup and Political Economist.

Pakistani officials told NPR that they are still investigating the cause of the nationwide blackout on January 23.

In Islamabad’s Aabpara Market, a warren of cheap clothing stores, rat poison hawkers and samosas stalls, shoppers say they only realized the power outage was severe when it lasted longer than usual.

“I sat in the dark,” shrugs Ali Iqbal, an editor at a local news channel. “The water went off and I waited.” Only when he was able to check the news on his mobile phone, charging it through a generator, did he realize it was a nationwide failure.

The energy crisis came at a time when the country was also on the brink of economic chaos, with only enough foreign reserves to cover Three weeks of imports.

“Pakistan was living beyond its means and running into debt,” says Nisar. For decades, “Pakistan has been able to get away with wasteful politics.”

Until recently, says Nazar, Pakistan’s key status as a US ally in the war on terror in the aftermath of the al-Qaeda attacks of Sept. 11, 2001, and its role as a logistical conduit for US and NATO forces in neighboring Afghanistan made it easier for them. The country to seek assistance from institutions such as the World Bank and the International Monetary Fund.

But after America’s withdrawal from Afghanistan and the Taliban’s seizure of power in August 2021, Islamabad was less strategically important, he says. To make matters worse, the Russian invasion of Ukraine caused a sharp rise in the prices of commodities such as natural gas, cooking oil, and wheat. This was a heavy blow to Pakistan, which depends on imports of food and fuel.

The economic crisis is escalating

In November, the bailout amounted to approx $8 billion I stopped after the Pakistani Finance Minister, Isaac Dar, refused to meet the conditions set by the International Monetary Fund. The government was expected to stop artificially supporting the Pakistani rupee and reduce energy and fuel subsidies. Dar seemed to resist the circumstances because they were politically unpopular, and his government is trying to shore up its support ahead of elections expected this fall.

By January, however, the crisis was escalating in public.

A senior port official, who spoke on condition of anonymity due to the sensitivity of the matter, told NPR last week that 12,000 shipping containers full of goods had piled up in Pakistani ports by Jan. 23 because banks were refusing to issue letters of credit to clear their goods. . These letters effectively allow the State Bank of Pakistan to forward payments in US dollars.

He says “More than 10 million traders are on the brink of financial and economic collapse because of this” The most beautiful Baloch, President of the Pakistan Merchants Association. Cosmetics, medical supplies, raw materials for industry and pharmaceuticals are stuck.

Reports are starting to come in from Workers lose their jobs And the industrial units that were closed because companies struggled for that Import of raw materialsincluding Major domestic auto manufacturer Which announced it has been out of business for two weeks – no stock and no order.

What started as a dollar crisis “has turned into a supply chain crisis, where there aren’t enough inputs to export — and we can’t really get more dollars unless we export,” Amar Khan, economist and non-resident at the South Asia Center of the Atlantic Council. Catch-22.

“This is the worst economic crisis Pakistan has faced in decades,” says Maliha Lodhi, a former Pakistani ambassador to the United States and the United Nations.

Fears grew that Pakistan was creeping toward default, with fears that it would be unable to service some of its foreign debts, Khan says. But immediately, the danger is that Pakistan will not be able to import the basic items it needs to sustain its economy – and feed its population.

“Pakistan does not have enough dollars to import items like fuel and cooking oil,” says Khan. This, he adds, risks “a shrinking supply chain, leading to economic chaos, job losses,” and “shortages of everything imaginable, whether energy or food.”

Last Thursday, Dar began to comply with the demands of the International Monetary Fund. He removed the industrial caps on the Pakistani rupee, allowing it to depreciate. By Thursday evening it had lost more than 10% of its value. Dar made more moves: He raised the price of gas and natural gas, which many Pakistanis use for heating and cooking.

A delegation from the International Monetary Fund arrived Tuesday. But even as Pakistani analysts welcome the possibility of a continuation of the bailout – which comes with structural reforms they say are necessary – they warn of years of difficulty.

“We expect inflation to be north of 30%, likely in hyperinflation territory,” says Khan. “There will be more unemployment. The average person is not going to get anywhere to breathe over the next few months.”

At Aabpara Market, 21-year-old Noori Wazir says if the situation gets worse, he will have to borrow money to survive. He pays for his computer science courses by selling pine nuts from his village. They lie in neat bundles on an inverted cardboard box. But the minister says he is already skipping lunch to save money. “There is nowhere to go except imperfect.”

A suicide bombing raised fears of more Taliban-linked terrorism

As an International Monetary Fund delegation arrives in Islamabad this week, rescue workers in Peshawar have been searching for victims of a suicide bombing at a mosque. The attack was one of the deadliest in Pakistan in years.

A rogue group within the Pakistani branch of the Afghan Taliban claimed responsibility for the attack. Pakistan accuses the Afghan Taliban of harboring the group and turning a blind eye to its cross-border attacks.

But the bombing also highlighted domestic security failures: the bomber struck a mosque frequented by police in a heavily guarded part of Peshawar. Police told NPR the man should have been searched at least twice before entering the mosque.

Amir Rana, director of the Pakistan Institute for Peace Studies, says the country’s powerful military is also to blame. He says the military began negotiations with the Pakistani Taliban, known by the acronym TTP, shortly after the Afghan Taliban seized power across the border.

It was the Pakistani army [that] He was speaking directly with the leadership of the Pakistani Taliban, says Rana. As a goodwill measure, Rana said, the army has allowed some militants to return home to Pakistan. “I think that was the biggest mistake,” he says. “And when they did, they infiltrated into Pakistan and started terrorist attacks again.”

It was ordinary Pakistanis who debunked the resettlement deal in October. They also effectively stopped it by pouring into the streets in tens of thousands to protest it, particularly in the Swat Valley, a place the group has ruled with brutal violence for more than a decade. “This terrorism – unacceptable,” they chanted. “These bomb explosions – unacceptable.”

A senior Pakistani official involved in talks with the TTP confirmed that some of the militants were allowed to return home as a goodwill gesture for talks. Muhammad Ali Saif, a former spokesman for the government of Khyber Pakhtunkhwa province in the northwest of the country, said the men, whom he described as “foot soldiers”, were being held in Pakistan.

The government has promised to investigate this week’s suicide bombing once the mourning period for the dead ends.

Former Prime Minister Imran Khan remains an unpredictable political force

Few Pakistanis expect the investigations to yield results, particularly if they are critical of the military, Pakistan’s most powerful institution, which critics say is a key decision-maker in the country’s politics. This is especially important now, with a general election expected in October.

And the former prime minister, Imran Khan, who was ousted in a motion of no confidence last April, plans to contest that election.

Whoever wins power, economists expect the next government will, once again, turn to the International Monetary Fund and ask for an expanded bailout – to give the government more room to spend on development, not just debt servicing.

Back in the Islamabad market, taxi driver Abdul Qadir says it won’t make any difference to ordinary people like him.

“Our elites run around the world with a begging bowl, but they use it to live a life of luxury,” he shrugged. Without addressing corruption, he says, Pakistan will never change.

As he speaks, a blind man sings the praises of the Sufi saints to draw attention to his plight. Shoppers push small banknotes into his hand. A colleague takes his arm, helps him walk up the nearby stairs, and helps him cross the road.

It is this kind of solidarity that has helped ordinary Pakistanis survive, crisis after crisis.