Pakistan's economy may shrink as a result of current situation in Afghanistan

Pakistan's economy is anticipated to decrease further as FDI inflow declines due to the current scenario in Afghanistan. According to Dawn, Pakistan's economic managers should be concerned about the steady fall in FDI flows into the country in recent years. Net flows declined slightly under 39% year on year in July, continuing a pattern that began last fiscal year, when long-term, non-debt-creating investments fell by 29% to 1.85 billion dollars from the previous year. According to the Pakistani newspaper, "with rising fears of the impact of the Afghan situation on Pakistan, net FDI flows are expected to shrink further."

Three million Afghan refugees living in Pakistan

The spike in Pakistan bond yields following the collapse of the government in Kabul implies a lack of trust in the economy among international investors. If the insecurity and instability in Afghanistan persists, Pakistan's export income may be harmed, according to the report. Following the current scenario in the war-torn country, Pakistan stated that Afghan refugees will be housed in special camps set up near the Afghan border. According to statistics, there are over three million Afghan refugees living in Pakistan, nearly half of whom are doing so illegally.

Meanwhile, Pakistan's trade imbalance reached USD 3.058 billion in July, raising alarm bells. The government's fight against a ballooning trade imbalance is backfiring, as the gap grew by 81.4% in the first month of the current fiscal year (FY22), owing mostly to a nearly two-fold increase in imports compared to exports.

According to figures released by the Ministry of Commerce on Monday, the merchandise trade imbalance in July this year was USD 3.058 billion, up from USD 1.686 billion in the same month last year. In FY18, the trade imbalance hit an all-time high of USD 37.7 billion. The trade imbalance has been expanding since December 2020, owing to exponential expansion in imports and relatively moderate growth in exports.

Rising food price issue in Pakistan

For the past three years, the Pakistani government has failed to meet the basic necessities of the country's citizens by ignoring rising food prices. The Pakistan Tehreek-e-Insaf (PTI) government has been chastised for failing to take significant measures to cut food costs.

(Inputs from ANI)

Image- AP