Political unrest undermines economic growth and leads to poor governance, which eventually controls all governmental institutions and brings on recurrent financial crises. Pakistan is the latest victim of this political instability, which could unfortunately spread to other countries. Although this political drama was nothing less than a movie plot, the economic consequences of these events can be dire for the common man and the government as well. The current fiscal year, which ends in June 2023, is forecast to see barely a 2% growth in Pakistan’s GDP. The slower development would be driven by damages and disruptions brought on by catastrophic floods, a tight monetary policy, rising inflation, and an adverse global environment. Not only has this, the political clashes the country is facing also effected its economy. The extent to which political instability permeates the country and the time is quite surprising given its negative impact on economic performance. If Prime Minister takes populist steps like reducing energy prices, Pakistan could go down the same path as Sri Lanka. Economic Impact of Pakistan’s Political Crisis political instability, economic uncertainty and social unrest are developing in Asia and Latin America, Africa and even Europe. Recent significant regional and global shocks, including as growing inflation, the effects of the worldwide food, fertilizer, and fuel shortages, the economic crisis in Sri Lanka, and the devastation caused by the floods in Pakistan, have slowed growth in South Asia. Additionally, it examines how COVID-19 could further affect migration and how free movement of labor and migration might aid in economic growth.

According to how the Pakistani government has handled the flood situation so far, it is clear that our policymakers and the appropriate state institutions did not adequately reflect on the super-floods of 2010. Pakistan requires a lot of assistance from the international community, especially the biggest climate change contributors, but there is also much that has to be done domestically to make the nation more resilient to various climate-related disasters. The colonial administration actually increased the probability of moderate frequency-high intensity flood occurrences by constructing a complex water management system. Pakistan must enhance water drainage, but it cannot deconstruct its irrigation infrastructure. To reduce the intensity of flooding, obstructions that prevent natural drainage of waterways should be eliminated. Flood risk due to heavy rainfall will last for shorter periods of time because to improved drainage. This will thus minimise the severity of evictions, water-borne illnesses, and the loss of human and cattle life. In order to ease drainage and reduce flood damage, it is crucial that important infrastructure, such as highways and railway lines, have functional drainage ditches or other relevant architectural features.

Given Pakistan’s economic issues, only sound data analysis would allow for effective and long-lasting policy creation and reform. Policymakers need to identify the reasons why the economy of Pakistan is not expanding at the appropriate rate and create a comprehensive development strategy to execute sustainable growth free from political influence. On the administrative front, a number of challenges need to be resolved; for example, even the finest policies won’t work if they aren’t properly enforced, which is one of Pakistan’s largest concerns. Pakistan requires stability at the same time. Though the concept is sound, it is currently politically impossible. What is more crucial is for Pakistan’s current federal and provincial governments to move beyond putting out fires and advance crucial reforms that are crucial to ensuring the country’s political and economic stability and long-term growth prospects, including in local governance, agriculture, energy, and other areas. In fact, doing so serves their political interests. Many mass protests and rallies on different matters are taking place throughout Pakistan’s regions. In some ways, the protests reflect the state’s unsatisfactory and divisive policies. Pakistan is already dealing with a strange mix of political events. The ruling class in Pakistan needs to understand that this is a unique time in the nation’s history and a political and economic turning point. A significant proportion of Pakistan’s political history is composed of choices that were taken without putting the economic effects into effect. Furthermore, a lot of prior administrations struggled economically because they lacked a competent group of economists who could create long-term economic plans. The need for raising health and education standards as well as streamlining the police and legal systems must be prioritized.

Water borne diseases do occur during the times of flood. People who got affected by the flood had already been traumatized by the flooding but now they are also facing diarrhea, skin infections, and other waterborne illnesses. Water-borne diseases in areas hit by recent record flooding as authorities stepped up efforts to provide clean drinking water to the hundreds of thousands of people who lost their homes in the disaster. Water borne diseases are spreading rapidly in flood affected areas and even in the in relief camps set up by the government across the country. According to a report released by health officials, more than 90,000 cases of diarrhea have been reported from one of the worst-affected provinces. Similarly, according to official data, 44,832 instances of malaria have been recorded since June of this year during the monsoon season. The latest development comes a day after Pakistan and the World Health Organization expressed concern over the spread of water-borne diseases among flood victims. Floodwaters continued to recede in most of the country, but many districts in southern Sindh province remained under water.

Almost half a million people displaced by the floods live in relief camps. In the provinces affected by the floods, thousands of medical camps have been set up in flood-hit areas to treat victims. A number of pregnant women living in flood-affected areas were also exposed to risks. A few days ago, Pakistan and the United Nations asked Pakistan for emergency funding of $160 million. Floods cause climate induced migration. According to initial government estimates, the devastation caused $10 billion in damage. In Balochistan, Khyber Pakhtunkhwa, Sindh, and Punjab, there are currently more than 500,000 people living in relief camps as a consequence of internal displacement

Water borne diseases are causing serious health problems. Apart from food scarcity in the affected areas, there is a shortage of clean and hygienic water. Official medical teams have been sent in the relief camps and Non-Governmental organizations are also working to provide them with clean water and other facilities. Public is also donating and the Pakistan is getting foreign assistance as well but there are a lot more problems yet to come due to floods. Winters are coming soon and the displaced population would have to be protected by the cold as well or else they will catch cold. COVID cases usually rise winters and preventive measures for this are also needed to be taken.

Floods are indeed the worst kind of climate crisis. One third of Pakistan and more than 33 million of population have been affected by the floods in Pakistan. The floods have left the whole country in the alarming situation. It has not only caused the deaths, but it has disturbed the whole system of the country. The circumstances are very complicated. The worst floods in recent Pakistani history was followed on by heavy monsoon rains, which has swept away villages and left more than three million children in desperate need of emergency assistance and more vulnerable to waterborne illnesses, drowning, and starvation.

At 22.7 percent, the agriculture industry contributes for nearly a fifth of Pakistan’s GDP. Massive destruction, specifically to the country’s important cotton crop, arises at a time when Pakistan’s foreign exchange reserves are rapidly diminishing and the government is already dealing with significant inflation, which reached a five-decade high of 27.3% in August. According to a UN Food and Agriculture Organization study from August 29, about 80% of Sindh’s crops—which provide approximately 30% of all Pakistan’s production of cotton ruined. Pakistan’s textile sector, a significant employment and contributor of foreign cash, uses nearly 70% of the cotton cultivation there. The industry is bracing for a shortage because almost 35% of that is produced in Sindh province by farmers like Kingrani.

Although the immediate financial impact of the disaster in terms of destroyed buildings, bridges, and road networks as well as lost crops and livestock can be calculated, government should also be cautious and must plan for the disaster’s spilling effect on the rest of the economy. Meeting the requirements of tax hikes and austerity policies as part of its deal with IMF for its bailout deal, which was agreed last month for the cash-strapped nation, will be Pakistan’s economic team’s most difficult challenge.

Population has been left homeless and the population of the rural areas owning animals like Cows, Buffaloes, and Chickens have all lost them in flood and it has caused a huge loss to their businesses as well. It has destroyed the whole agricultural system as well. Places which were famous for their tourism are also affected. So, the flood has caused an equal material and non-material loss.

Pak-U.S Relations Flashbacks:  

In order to analyze the current Pak-U.S relations, there is a need of shedding a light upon the historical background of their relations.

Pakistan is the country that holds the great geostrategic importance. Right after the independence, it faced security and economic issues. Earlier, U.S was against the creation of Pakistan and divided India but later on, Pakistan and U.S did establish ambassadorial relationship. During the cold war era, Pakistan and U.S foreign policy revolved around military-diplomatic relations and defense policies. In this war of capitalists vs. communists, Pakistan chose U.S block rather than the communists Soviet’s block because it suited the Pakistan’s ideology, democratic ideas of the leaders and its economic interests. U.S foreign policy has always involved the idea of establishing its ideology like democracy or capitalism in the states. So, it did the same in the cold war and allied with Pakistan to increase its sphere of influence in the South Asian Region. India was pro Soviets and Pakistan was pro-U.S.

Since the 1950s, each side was using the other to enhance its own agenda that significantly affected each other’s interests. The goals of the Pak-US relationship were only partially served. U.S had also put sanctions on Pakistan. For example, after 1965 Pak-Indo war, U.S put sanctions on Pakistan and there was an economic collapse in Pakistan. Pakistan also fought along with U.S against the Soviet Union in Afghanistan. After the Soviet’s withdrawal from Afghanistan, U.S imposed nuclear sanctions on Pakistan as well. In the post 9-11 era, Pakistan was also blamed for terrorism but then, joined hands with U.S to fight against terrorism. U.S interests lied in Pakistan in order to fight the war on terror in Afghanistan and it was also in Pakistan’s interest to have peace in its neighboring country or else, there would be no peace in its own region.
Fast forward, there have always been ups and downs in their relationship.

Analysis:

Pakistan-U.S relations have been much better if they had not solely relied on security threat perceptions and strategic interests. There would have been a sustainable relationship among them if the economic factor was involved. By economic factor, it does not mean the financial aid provided by the U.S to Pakistan, but the economic diplomacy that is among China and Pakistan. Projects like CPEC and BRI have and will strengthen the relationship between Pakistan and China for the long term. This is because of the involvement of the economic interests of both countries.

Right after the U.S withdrawal from Afghanistan in 2021, zero diplomacies in Pak-U.S relations has been observed. The role of Pakistan in the ‘’U.S-Afghan Taliban negotiations’’ process, and the sacrifices made in ‘’war on terror’’ have also not been acknowledged by the U.S. It seems like there is no common interest left between both of the states that can bind both of them together.

Keeping good relations with Pakistan had been beneficial for U.S since it could contain the economic influence of China. Now, when China has involved Pakistan and many other South Asian regions in its economic activities like CPEC and BRI, still, no counter-strategy is visible from the U.S’s side. There is a big possibility that U.S foreign policy is focusing on the other regions (like the Middle East, Europe or Central Asia) and will shift again towards South Asia. This fact cannot be denied that countering China’s economic hegemony in the top priority of U.S’s Foreign policy and it might be secretly working to counter this. China is filling the vacuum left by U.S in different regions for example, RCEP which is Regional Comprehensive Economic Partnership is the first multi-lateral free trade agreement that aims to create a consolidated market for the 10 member countries and their trade partners. RCEP in an agreement signed between 10 ASEAN states and also China, Japan, South Korea, New Zealand, Australia are signatory states. These countries contribute 29 percent to the world’s economy. This agreement has the potential to provide liberal facilities and a competitive investment environment in the Asia-Pacific region. China joined RCEP in response to the US-led Trans-Pacific Partnership. Also, COVID 19 led the countries to join this economic emancipation. This will extend the China’s influence in Asia-Pacific, and it is perceived that this is how it is countering US strategic pivot to Asia. RCEP is seen to be a political victory and not just an economic victory. U.S political influence in this region can also decrease. RCEP also gives an opportunity in wake of the decoupling of China. This may improve China’s perception and relation with Southeast Asian nations. America exports around 5.3 billion goods to Japan but it will now decrease since Japan will have better access to Chinese firms. RCEP impels U.S to respond to geopolitical primacy in the region. India did not participate in RCEP because according to them their local economy will be affected but on the other hand, it will also affect India’s look East policy. India can however collaborate with U.S more. CPEC and RCEP will have a linkage. It can also create economic opportunities for Afghanistan. Pakistan will have stronger relations with China. This will create two blocks “Indo- U.S” and “Pak- China” block. According to the US president Biden, America has to align with other democracies.

This all has affected U.S-Pakistan relations and it has been assessed that Pakistan has close economic ties with China and there is a strong bond. So in order to contain China’s economic expansion globally, America is looking towards the other regions. China has very much a Pro-Russia policy. Keeping that in view, Pakistan’s stance has remained neutral in the Ukraine-Russia war Even though Ukraine did not get enough support and defense from U.S in the Russia-Ukraine war because of the U.S vested interests in Russia but still Pakistan has been criticized for remaining neutral, the irony! This has further complicated US-Pakistan relations. If we analyze the current foreign policy of Pakistan, there is a lot of focus on the economic diplomatic relations other than China as well. For example, Engage Africa Policy, Strategic Engagement Plan with European Union and Strategic Economic Framework with Turkey. Pakistan and China have also involved Russia in the BRI project.  Pakistan has no such economic diplomatic relations with U.S but still, it would never be an easy decision for the United States to entirely abandon or fully engage Pakistan.

By: Saddam Tahir

Climate change is not only an environmental challenge; rather it has evolved into a security and developmental challenge over the years for countries across the globe. With changing climate scenarios, Pakistan’s development model needs to go through a paradigm shift, creating a second climate science arm. All economic planning and investments, out of necessity, need to be an exercise in planning and investment of climate adaptation, duly informed by institutions generating climate knowledge and providing climate services. Climate services can help the country pursue three tracks:

• Climate adaptation
• Disaster-risk reduction
• Sustainable development

In the annual report for 2020, Global Climate Risk Index has placed Pakistan in the fifth position on the list of countries that are most vulnerable to climate change. According to the report from 1999 to 2018, Pakistan has experienced 152 extreme weather hazards, faced economic loss worth $3.8 billion, and 9,989 people have died. Based on the statistics recorded by the think tank, the report concluded that Pakistan’s vulnerability to climate change is intensifying. The report points out that Pakistan is “recurrently affected by catastrophes and continuously rank among the most affected countries both in the long-term index and in the index for the respective year”. Due to the geographical location, Pakistan has become most vulnerable to climate change and hence placed on the long-term index of the report. One of the co-authors of the report David Eckstein registers in the report that “the entire region where Pakistan is located is prone to extreme weather events, in particular, heavy rainfalls e.g. during monsoon season, and floodings as a result.”

This year’s report is particularly relevant for Pakistan as climate change is fast “increasing variability in the water cycle, inducing a greater number of extreme weather events, reducing the predictability of water availability, and adversely affecting water quality”. Three water-related issues are central to climate adaptation in Pakistan:

1. a) Water stress, reflected in increasing uncertainty and scarcity.
2. b) Hazards and disasters reflected in floods, droughts, storms surges, and glacier lake outbursts.
3. c) Water quality is reflected in the deteriorating quality of ground and surface water used for drinking, irrigation, and industry.

As the early warning systems continue to be underdeveloped and underutilized, the national meteorological and hydrological services remain weak. National public institutions mandated to provide hydrological information, therefore, lack the necessary capacities needed to provide climate services for water. The results are perilous: human, social, and economic losses are continuously soaring as floods have globally increased by 134 percent and droughts by 20pc in the last two decades. This gives Pakistan all the more reason to augment climate services.

Despite international support and growing climate vulnerabilities, Pakistan has not developed its National Framework for Climate Services (NFCS). The presence of an NFCS will provide an institutional mechanism to coordinate, facilitate and enhance collaboration among national institutions to improve, jointly produce, deliver and use science-based climate projections and services. Some regional countries like China and India who developed robust national frameworks have successfully accessed global science and technology, as the GFCS seeks to build on continued improvements in climate forecasting to increase access to the best climate data. Planners, investors, and vulnerable communities have the right to benefit from easy-to-use information so that they can plan and cope with projected trends and scenarios.

Since Pakistan’s datasets on temperature, precipitation, soil moisture, snowfall in glacial areas, ocean conditions, and winds are absent or inaccessible, policymakers are not always informed about long-term historical averages of these parameters or their risks. Development planners end up shooting in the dark by taking decisions without knowing long-term projections and trends. However, Pakistan’s leadership remains fully committed to addressing the concerns and threats of climate change. As multiple projects of reforestation took place in the last few years to tackle natural disasters.

From the past years, China and India are engaged into various conflicts and an example of tensions between them was seen on 21^st October 2017 when both the Asian giants were face to face. The tensions escalated to a level where they were in a state of war. The Sino-Indian War of 1962, border conflict, is also an example of the bitter past between China and India. Despite the rivalry the bilateral trade between China and India in post-1962 saw a rapid growth. In 2018, the trade between them touched $87.6 Billion.

If we talk about 2019, the world’s two largest developing economies China and India are negotiating on different dimensions that promote free trade between both the courtiers. China and India both are the competitors in the race of growing economies. A partial equilibrium approach based on highly disaggregated trade data shows that in a scenario where China and India are completely holding the markets, there would be a huge potential to create an impact on trade and welfare in their specific areas, where they enjoy a comparative advantage. Especially, with their annual GDP growth rates standing respectively at 6.2% and 6.1% for 2019, China and India have since come to be recognized as the fastest-growing economies. According to the World Bank estimates and assessments based on purchasing power, China and India have already become the second and fourth-largest economies of the world respectively, surpassing developed countries. Some economists predict that this century will be Asia’s Century.

According to the reports India is thinking to cut or eliminate tariffs up to 80% on Chinese products that will be imported in the future, 16 countries are negotiating on a free trade agreement in Vietnam in which China and India are the main players. India plans to cut duties on 86% of imports from Australia and New Zealand, and 90% for products coming in from ASEAN, Japan, and South Korea. India would immediately eliminate customs duties on 28% of goods, while tariffs on other imports from China would be reduced or eliminated over a period of 10-20 years. The trade deficit with China in 2018-19 was a whopping $53.6 billion.

Recently Xi Jinxing visited India and the visit was dominated by trade matters. Mr. Modi wanted to reduce its huge trade deficit with China. The two leaders are concerned about their economies and thus want focus on trade. China and India share major contention even today due to their border issues yet both rivals have found a common ground, where their mutual interest is to strength their respective economies and utilize the economic potentials that this region offers. The relations between China and India are in the process, in terms of strengthening their economic ties. According to Indians, bilateral trade has been increased with China but so has the deficit and this is a serious matter. Indians appreciate the steps that were taken by the Chinese to improve imports from India. These efforts could be the reason for more success of Indian pharmaceutical and IT products in the Chinese market. Chinese Foreign Minister, Wang Yi appreciated Indian concern over the imbalance of trade. He further said that we stand ready to continue providing facilities to Indian exports to China. He further emphasized on expanding cooperation in industrial production, tourism, border trade, and other areas so that we can achieve overall balance in Indo-China Trade relations. This year the bilateral trade will touch $100 Billion and that is a historic trade figure between two countries. In the financial year that ended in March, Sino-Indian trade stood at $87 billion, down 3% from a year ago. Indian exports rose by 26% and imports fell by 8%, shrinking the deficit by $10 billion.

India and China are showing a huge interest in trade agreements not for the sake of other interests, both countries are self-centric, making their position stronger in the region. China is a big economic threat to the U.S and India is one of the closest allies of the U.S.

Pakistan is one of those countries which are most vulnerable to terror financing and money laundering that is emerging from different terrorist groups operating in country. The Asia Pacific Group APG presented the final Mutual Evaluation Report after which Pakistan’s chances of being retained in grey list are quite high. In its National Risk Assessment report Pakistan has been denying the fact that money laundering and terror finances is a high-risk issue and considers it a medium risk. On the other hand, Pakistan has been under the continuous threat of terror financing from its porous borders, DNFBPs (Designated non-Financial Businesses and Professions). Out of 40 recommendations Pakistan was fully compliant only on one, mainly compliant on 9, no-compliant on four and partially compliant on 26 recommendations of FATF. Pakistan’s performance was considered effective only on one benchmark that led APG to place Pakistan on Enhanced Follow up list.

The Pakistani delegation left for Bangkok to meet the Financial Action Task Force officials from September 8 to 10. Pakistan had to face FATF as a part of efforts to exclude its name from “grey list” and which will scrutinize the country’s performance before the final review meeting. Pakistan is under great pressure to ensure compliance before October 2019 as the final deadline was September 2019. Failure to do so might cripple the economic condition of the country.

Financial Action Task Force (FATF) is an international task force that is created for the government, by the government in order to fight the undesirable consequences of money laundering. FATF born in 1989 was created in response to the difficulties of money laundering and was initiated by G7 countries including Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.  These countries felt the need for international cooperation. FATF started with 16 members and the number rose to 35 members. Among these 35 members, 8 are regional bodies which mean that 180 jurisdictions are a part of the FATF family. The rules and conducts set by FATF have to be followed by the member countries

Pakistan has failed to implement the UNSC resolutions against 26/11 mastermind Hafiz Saeed and other terrorists associated with terrorist groups like Lashkar-e-Taiba and Jamat-ud-Dawa. The resolutions are related to curbing money laundering and terror financing in Pakistan. The FATF report came a week before when the agency had to decide whether to retain Pakistan in a “grey list”. Pakistan was placed on the grey list in June 2018 and was given a chance to complete the action by Oct 2019 or to get ready to face the risk of being placed on the blacklist with North Korea and Iran. Whereas on the other hand, Pakistan’s government is trying to follow the FATF recommendations. So, Pakistan certainly is not a part of the non-complaint category. Partial compliance in 26 areas is technical compliance. Pakistan has gained some confidence after being supported by China, Turkey and Malaysia but India with the support of the United States emphasized on Pakistan’s blacklisting.

Pakistan is well aware of the fact that the presence of US and India on FATF forum is an obstacle for its case as both the countries are trying to isolate Islamabad on International level. Whereas, China’s position on FATF can be beneficial for Pakistan to implement its policies according to the forum. Pakistan is faced with the challenge to do more against terrorism because of the ambiguity in legislation which needs clarification. The US and India came up with evidence against Pakistan therefore Islamabad need to do something to strengthen its case because Pakistan is not in a condition to bear the shock of blacklisting. The way forward Pakistan could be politicizing the case with the support of China and showing commitment towards addressing the gaps in legislation.

BY AQSA MUNIR KHAN 

The three day visit of Prime Minister Imran Khan seems to have struck a chord and both President Donald Trump and PM Imran Khan have found some common grounds to move forward on. This week’s summit talks turned out to be a positive initiative from both sides as they kept aside their bitterness and grievances. This meeting broke the ice and both the countries are now back on track to have bilateral relations. Pakistan’s President’s visit to the United States was not only a good step to the outer world but was a good indicator for Pakistan’s economy too.

The talks revolved around four different subjects including the peace process in Afghanistan, the Kashmir issue between two contending rivals India and Pakistan, regional security, and fostering trade and economic relations. Trump on Monday also hinted at the possibility of restoring about $13 billion aid to Pakistan that was suspended in 2018. Outcomes of these talks indicate that the bilateral ties between both countries will grow in the near future.  However, the US is dangling the possibility of stronger trade and economic relations with Pakistan if it helps with the peace talks in Afghanistan and do more to crack down on terrorism within its borders.

Investment and economic cooperation were of a more prime concern than the renewal of the US aid to Pakistan. Because the US has been Pakistan’s important development, investment, and trade partner and Pakistan’s second largest export market after European Union with total trade of $6.627 billion during FY 2018-19 and over $1.5 billion worth of investment. Moreover, The American President also showed interest in raising the US investment and expanding trade relations with Pakistan.

Acknowledging that there have been ups and downs in Pakistan – U.S relations Pakistan is looking forward to discover ways and means to deepen its economic relations with Washington through a constructive and positive approach. This cooperation will be beneficial for both the countries. Pakistan is expecting US engagement in the areas such as economy and finance, energy, science, and technology as well as agriculture. These areas have the potential to build up long-term economic growth, stability, and human development.

Indeed, this three-day visit to Washington has helped to soften Pakistan’s relations with the US. Now is the time when the US investors must convince their potential investors to invest in Pakistan and should transfer the latest technology to Pakistan. Moreover, Pakistan should focus more on its private sector by providing all kinds of support and skills to boost its exports.

BY AQSA MUNIR KHAN