Understanding this crisis

PAKISTAN is experiencing its most severe economic crisis in recent history. However, as I have argued previously, this crisis is “a crisis like no other” (Dawn, May 2022). It is not just an economic meltdown, but a confluence of myriad and complex challenges in the political, governance and environment domains. With regards to the economy, the current episode is comparable in many ways to the economic crises that have devastated countries such as Argentina, Mexico, Greece and Lebanon, etc in the past. Public commentators as well as policymakers appear to have been slow to recognise the magnitude and complexity of the crisis. Partly due to a lack of appreciation, and largely due to political considerations, the policy response since last year has also been slow, behind the curve and, now, deeply flawed. More recent plans formulated to respond to the perennial crisis via attracting investment in a handful of sectors of the economy are overly optimistic as well as simplistic, reducing the country’s myriad and complex problems that hinder capital formation, the creation of an entrepreneurial ecosystem, the development of a vibrant export sector, etc, down to a mere shortage of dollar liquidity. For these reasons, it is important to understand why the crisis Pakistan is currently experiencing is so different than the past.