Deteriorating Economic Conditions of Pakistan

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Today Pakistan is almost bankrupt and foreign donors have also refused to provide any more aid until Pakistani government cuts its defence expenditure. If the Pakistani government decides not to cut defence expenditure then the only other option it has is to keep on printing currency which will result into even higher inflation. Inflation is running at about 20 per cent according to many estimates. And my own prediction is that inflation can reach 100 per cent a year in 2 to 3 years. This means that price of every thing will double every year.

As an economist, I will like to inform the reader of the deteriorating economic condition of Pakistan and what impact that might have on him or her. Pakistani government is acquiring debt at the rate of Rs. 60,000 per second. And what is the government doing with this debt and other revenues raised by the government! Of every Rs. 100 that the government raises in revenues from taxes and custom duties etc., Rs. 40 are paid as interest on the debt that Pakistani governments have taken in the past. Rs. 40 are being spent on defence, while another Rs. 10 are spent on civilian administration. The remaining Rs. 10 are spent on education and training, health and nutrition, water supply, population planning, women development, rural development, science and technology, and building of roads, bridges, dams, etc., combined. To spend such a meager portion (only 10 per cent) of the budget on the 120 million people of Pakistan shows how "messed up" the priorities of our government are.

The enormous debt that Pakistan has taken in the past and present has not been spent on important development issues like health, education, and infrastructure, but mainly on defence. Pakistan spends less than 2 per cent of its budget on education and less than 1 per cent on health. The rest of the world by comparison spends about 20 per cent on health and education. As a result of low spending, 75 per cent of Pakistanis are illiterate and about 50 per cent do not have access to health care facilities and clean drinking water. Pakistan is ranked 116 of 127 countries in education and 100 of 127 countries in health by World Bank and IMF.

The biggest national security threat to Pakistan, in my opinion, is that of financial bankruptcy. In the worst scenario, financial bankruptcy can force government to close public schools and hospitals and temporary power shortages might become permanent. Moreover, clean drinking water might not be available to the people. Some tests conducted recently by international scientists showed that drinking water in Pakistan, in villages as well as major cities like Lahore, Rawalpindi, and Karachi, is contaminated with bacteria, chemicals, and lead. Studies have shown that lead can cause mental abnormalities, especially in children. Also, Pakistani government might even fail to pay its own employees. This is what happened in Zaire just recently where soldiers started looting and shooting after not getting paid due to lack of funds, killing thousands including the French minister to that country.

I recognize the legitimate defence requirements of the military, however, Pakistan cannot afford to spend more than what it earns. Pakistan's defence expenditure of about 40 per cent of revenues is one of the highest in the world. The rest of the world (including India) spends less than 20 per cent of its revenues on defence. This excessive defence spending has drained Pakistan's economy and has undermined our national security. Other countries that spend a high percentage of their budget on military include the former Soviet Union, Iraq, Yugoslavia, Ethiopia, and Somalia. Their experiences prove that economic weaknesses and military adventures only result in misery and tragedy to the people and destruction to the country involved. The best defence for any country is a strong economy. In surveys undertaken in US, a majority of Americans considered Japan instead of Soviet Union as the bigger threat. …