Playing With The Economy.

Pakistan is facing yet another economic dilemma. The Pakistani Rupee has been sinking fast during the last few weeks against US $ as the country's forex reserves are decreasing day by day. Our Pak Rupee touched a historical low of Rs 196 against 1 US $ on 17th May 2022. The quandary for the government is that if it increases fuel prices, this will result in more inflation because fuel is an important part of the cost of commodities/services produced and if it doesn't, the US dollar will keep jumping high and high against the Pak Rupee which will also result into high inflation because we import a lot of commodities for our consumption.

Pakistani's foreign exchange reserves are sinking to a level of near default because of the widening current account deficit. If Pakistan defaults on international payments obligation, the flow of imported goods will be disrupted creating a shortage of goods which might result in unrest in the country. To add fuel to the fire, there is political uncertainty in the country that has not been witnessed before during the last 75 years.

The coalition government of Prime Minister Shahbaz Sharif is not taking difficult decisions to address the deteriorating economic condition of the country because difficult economic decisions will have political costs i.e. losing voters in the coming election. But the inaction of the government to stabilise the country's economy is exacerbating uncertainty resulting in more chaotic economic conditions in Pakistan. There is economic and political...