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- Created a new document for Pakistan Affairs with sections on historical personalities, partition, national integration, economic challenges, political stability, foreign policy, and climate change. - Added multiple topics related to Kashmir and intergovernmental organizations. - Established a new index page for CSS Notes 2025, outlining the purpose and organization of the notes.
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Pakistan Affairs current affairs
"The economy of Pakistan is like a patient in the ICU — requiring urgent, consistent care, but suffering from misdiagnosis" — Dr. Ishrat Hussain, former Governor, SBP
Overview of Pakistan's Economic Situation
Pakistan's GDP growth remains volatile and below potential, oscillating between 2% and 4% in recent years. There is also an inflation crisis, especially in food and energy, which leads to scarcity for the population. On the other hand, Pakistan faces growing public debt due to low exports and high imports, alongside consistent IMF loans, which leads to economic vulnerability.
Key Economic Challenges
Chronic Fiscal Deficits
- A fiscal deficit occurs when a country spends more than it earns in revenue in a given year.
- Pakistan's fiscal deficit stands at 2.4% of GDP (FY2025).
- One of the reasons is Pakistan's low tax-to-GDP ratio, which was projected to be 10.6% in 2025.
Balance of Payment Crisis
- Persistent current account deficit sits at a $420 million deficit in (FY2025).
- Exports remain stagnant while imports are high due to energy and machinery needs.
- Pakistan relies heavily on remittances and borrowing to manage its current account.
Circular Debt and Energy Sector Crisis
- Pakistan's circular debt is Rs. 2.4 trillion (FY2025). Everyone owes money to someone else, so the entire energy sector gets stuck.
- Inefficiencies in transmission, distribution, theft, and subsidies fuel the crisis.
- Frequent power shortages hurt the industry and, therefore, the overall economy.
Rising External Debt
- Total external debt and liabilities reached $130 billion (State Bank of Pakistan, 2024).
- A major portion of Pakistan's budget (almost 45%) is used for debt servicing and paying back old loans.
- Pakistan relies heavily on the IMF, China, the World Bank, and Gulf countries, which erodes economic sovereignty. Everyone views us as broke ass beggars.
Tax Evasion and Low Revenue Generation
- Narrow tax base: less than 1% of population pays income tax.
- Pakistan relies heavily on indirect taxes, such as sales tax (over 60%) which hurts the lower income class and increases inequality.
Inflation and Currency Devaluation
- Pakistan's year on year inflation hit a record level of 36.5% in 2023.
- Rupee depreciation leads to increase in cost of imports.
- Purchaing power reduces which heavily effects the lower-income population.
Unemployment and Informal Economy
- Youth unemployment remains high. Over 10% of the youth are unemployed which might not sound a lot until you realize that 60% of the population is under 30.
- Over 70% of workforce engaged in informal sector with no job security.
Agricultural Stagnation
- Outdated techniques, water mismanagement, and climate change impacts.
- Low crop yields and farmer indebtedness.
- Poor supply chain infrastructure.
Low Investment and Industrial Productivity
- Private sector reluctant due to political instability and poor law & order.
- Manufacturing sector shrinking.
- Weak export base and lack of value-added industries.
Recommendations to Address Pakistan’s Economic Challenges
Tax Reforms and Broadening the Tax Base
- Implement progressive taxation to reduce inequality.
- Digitize FBR and curb corruption.
- Reduce informal taxes and make sure majority of the population pays income tax.
Export-Led Growth Strategy
- Focus on value-added exports (textiles, IT services, agriculture)
- Decrease import dependency by investing in domestic industry.
- Expand trade relations beyond traditional partners (Central Asia, Africa, etc.)
Investment in Human Capital
- Increase spending on education. Less than 2% of GDP is spent on education.
- Implement youth productivity and internship programs.
Agricultural Modernization
- Invest in climate-resilient crops and irrigation infrastructure.
- Invest in modern machinery and farming techniques to boost agricultural output.
- Reduce middlemen and reform the agricultural supply chain between producers and consumers to reduce costs.
Special Economic Zones
- SEZs can help develop light and heavy industries, reducing dependency on imports.
- Investment-friendly policies in SEZs can help attract foreign direct investment.
- SEZs in Balochistan and KPK can reduce regional economic disparities.
References
https://www.economicsobservatory.com/the-phoenix-that-never-rises-whats-holding-back-pakistans-economy https://www.economist.com/asia/2022/07/28/pakistan-may-be-able-to-avoid-a-full-blown-economic-crisis https://youtu.be/XNMW0yDRCCY?si=nTLCmEHxf4Np0z6Q https://youtu.be/rXJZduDEFis?si=qW8mKkJUaVmSZJzG https://youtu.be/G3um0-jT1L8?si=DOm5PXAbmwhCDM9P