Soaring Food Inflation & Persistent Unemployment Deepen Pakistan’s Socioeconomic Crisis

New Delhi: Pakistan’s socioeconomic crisis is being worsened by rising food inflation and unemployment rates, according to a media report. Maldives Insight cited the World Bank’s data to show that about 45 per cent of the population in Pakistan is classified as living below the Poverty Line (BPL). The country’s unemployment rate remains at a 21-year low, with investment at a 50-year low and gross debt-to-GDP ratio at 71.3 per cent.

“All this deepens stagnation, inequality, fiscal strain, and IMF dependency, complicates reforms even as debt default risk increases,” the report said. Further, the report cited increasing monthly household expenditure on food -- from 86.79 in 2018-19 to 88.07 in 2023-24. The data from the latest Household Integrated Economic Survey also showed a decline in food consumption to 81.47 kg from 86.95 kg during the same period.

“A major share of household income is spent on basic food items. The second largest share of expenditure is on housing, water, electricity, gas, and other fuels, reflecting the rising cost of housing and utilities,” reads the survey, published by the Pakistan Bureau of Statistics (PBS). In addition, a declining foreign inflow increased Pakistan’s debt-to-GDP ratio. It reached 71.4 per cent, even though the statutory limit set by law is 60 per cent.

As a result, the country's investment ratio fell to just 13.1 per cent of GDP -- the lowest in 50 years -- instead of the target of 15 per cent, forcing it to seek external loans to meet its development needs, the report said. It added that the ratio may further slip below 13 per cent. Almost 5-60 per cent of Pakistan’s budget goes to debt servicing, forcing international financial institutions to call Pakistan’s debt unsustainable.

“How can any investor commit capital to a nation where deep-rooted uncertainty is the norm, a fact clearly mirrored in the steady decrease of foreign direct investment?” said Aamir Aziz, a textile manufacturer and exporter from Pakistan. According to Yousuf Nazar, former head of Citigroup’s emerging markets investments, Pakistan’s debt has emerged as the central limitation on both fiscal policy and economic growth.

“Pakistan’s debt burden has already breached the threshold of sustainability,” he said. “The choice now is stark: summon the political will for reform or remain trapped in a cycle where yesterday’s borrowing consumes each new budget. Debt service has become not just a fiscal constraint, but a social crisis.”

Disclaimer: This story is from the syndicated feed. Nothing has been changed except the headline.