Pakistan’s economic prosperity: What could be possible spoilers?

Pakistan is on its way to economic prosperity after the pandemic, but future prospects and schemes may be under threat from regional spoilers.

pakistan economic prosperity

Pakistan on the path to economic recovery and prosperity after the harsh slowdown the entire world suffered as a result of coronavirus and the subsequent lockdowns imposed. Pakistan is relatively way ahead of other countries in the race to catch up to the COVID-19 pandemic, and if things stay under control, Pakistan could see an economic turnaround much faster than most other countries in the region.

In ‘Focus Economics’ a journal employing the opinions of leading economists; the Pakistani economy should have recovered in the first quarter of this fiscal year, beginning July 2020—after GDP posted a slight contraction in the fiscal year 2020 (July 2019–June 2020) due to lockdown measures imposed at the tail-end of the year.

In July–August, industrial production rebounded, predominately driven by upbeat manufacturing and construction activity, which was likely supported by the government’s fiscal stimulus package.

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The timely easing of the easing containment measures, according to the journal, should have supported private consumption—as suggested by a sharp pickup in auto sales. Furthermore, despite monsoon rains hampering supply chains, exports declined at a softer pace in the July–September period relative to April–June. Consequently, the trade deficit narrowed slightly over the quarter, boding well for the current account and much-needed FX reserves.

Thus, the Pakistani economy is visibly improving, and this is also clearly visible in the appreciation of the Pakistani rupee against the US dollar. Although this has partly been due to the US dollar dropping in value against other currencies, Pakistan’s currency has appreciated against all trading partners, reported Business Recorder earlier this month, and it is predicted to further appreciate next year.

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Pakistan’s economic prospects look fruitful. However, regional instability and tensions may hinder the country’s potential growth.

The region is going through economic and social change, as well. With Hindu Nationalism on the rise in India, Afghanistan going through a peace process, and Pakistan and Iran’s warming ties, the region is shifting its shape politically and Pakistan is playing a central key in the new outlook.

Regional spoilers to Pakistan’s economic prosperity? 

The diplomat reported this September how India is painfully aware of the shifting regional outlook as Chinese and Pakistan regional connectivity projects expand.

The report read that the Indian Defense Minister Rajnath Singh met with his Iranian counterpart in Tehran on September 5 amid growing concern in New Delhi about the future of Afghanistan.

Singh flew to Iran’s capital from Moscow, where he had attended the Shanghai Cooperation Organisation (SCO) defense ministers’ meet and also held bilateral talks with Chinese Defense Minister General Wei Fenghe, among others.

Singh’s Iran trip comes against a backdrop of growing Indian tensions with China, whose patronage has been enthusiastically sought by Iran, as well as the Iranian clerical leadership’s vocal concern about the state and welfare of India’s Muslims in Kashmir and elsewhere.

Iran’s shifting ties are clear in an increasing involvement of China in Chabahar port, which India had heavily invested in as a linkage to Central-Asia. China’s growing role and Iran seeking a linkage to Gwadar from Chabahar (first proposed in 2019) mean that this regional connectivity ‘battle’ is slipping fast from Indian hands.

With Pakistan investing heavily in the new regionally strategic special economic zones, investment and technology may very quickly flow into the country with a large standing cheap labor force. These prospects look endearing to Pakistan and detrimental to the interests of other regional powers.

The only thing posing a threat to these prospects is depreciation in Pakistan’s security and stability or other ‘spoilers.’ India, for example, had been heavily lobbying to get Pakistan on the FATF blacklist. It would’ve been hugely detrimental to Pakistan’s prospects. Gulbuddin Hekmatyar, an important individual in Afghanistan’s peace process, has repeated many times that India has created deliberate spoilers in the Afghan peace process.

Peace in Afghanistan would enable regional connectivity and economic prosperity, increasing the likelihood of the success of Pakistan’s new regional projects such as the extensions of the CPEC project or the special economic zones. One of the SEZs is in Rashakai KPK, near the Afghan border, intended by the Pakistani government to be a regional connectivity hub. The extensions of CPEC could include ML1 transit extension into Afghanistan or Iran.

A linkage between Chabahar and Gwadar, and Gwadar’s own success itself can change the maritime affairs significantly in the Gulf and the Mediterranean. The functionality of these ports would redistribute importance and strategic significance from other ports such as ports in India, the UAE, and others.

GVS News Desk


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