In economics, the term ‘recession’ means “The reduction of a country’s Gross Domestic Product (GDP) for at least two quarters; or in normal terms, it is a period of reduced economic activity” The International Monetary Fund regards periods when global growth is less than 3% to be global recession. On the October 8, 2008, IMF released its World Economic Outlook, according to which the world economy was predicted to experience an all time low. While many economists and brokers alike, panicked; some shook their heads in dismay; some just planned on waiting to see what twisted fruits this might reap. We in Pakistan, however, just laughed at the naivety of the IMF, for this prediction did not apply to us at all – we were already knee-deep in it, and had been so for over a year!
Such predictions barely held any ground for the once 26th largest economy in the world, and 47th largest in terms of the dollar. It is sad to see our economy like this now, for Pakistan is actually a very economically diverse country, boasting industries of textiles, agriculture, sports goods, chemicals, food processing, and fishing, to name a few. We were, at one point, one of the top exporters of fish and shrimps to Europe. In 2005, the World Bank named Pakistan as the top reformer in the region; and by 2006 we had managed to decrease our poverty level by 21 %.
Unfortunately, now all these are a thing of the past, for right now is no better than that of any other under-developed country. The main reason for this slump has largely been the political instability over the past few years; no proper economic policies were implemented; at least none that succeeded. This caused a very high rate of inflation, which, in 2008, had increased to a whopping 25% as compared to a 7.9% of 2006. In addition to this, we already had a negative balance of payments, with the quantity of imports outstripping the quantity of exports. The result was that our main stock exchange, the Karachi Stock Exchange, became stagnant for the first time and then declined drastically, and on top of that, Pakistan’s GDP dropped to 4.9%.
What occurred afterwards is what we call the domino effect. The value of the Rupee crashed from 60-1 USD to 80-1 USD in only a month, the prices of commodities soared through the roof, the number of people living below poverty line increased from 60 million to 77 million, and consequently, the working class layman became virtually deprived from basic necessities like water, wheat, electricity, natural gas, and cooking oil; add to all this, the preposterous amounts of load-shedding, and what we get is a nation in shambles.
The sad part is that we live through this everyday. The privileged few of the population can keep small amounts of petrol at home, but all the others have to roam around the city, usually on foot, desperately seeking a petrol station that actually supplies petrol. We have become a country where our most cultivated crop, wheat, is no longer available to the masses, and an average man on a minimum wage considers himself the luckiest man alive if he manages to get only one proper meal a day.
We have reached a point where rebuilding our deteriorating economy will take time, constant vigilance, a lot of risks and of course, vast amounts of money. Thank fully, we have taken steps, like a loan of $9 million USD from the IMF, slowly we will improve. Bigger economies, like that of the USA, will survive this; our chances of making it unscathed, with our dignity and economy still intact, are extremely slim, it is, after all, survival of the fittest. Only time will tell how far down our GDP will take us.