- Written by Anbarasan Ethirajan
- BBC News
Daily wage worker Asif Masih wakes up every day wondering how he will feed his family of seven.
“We pray to God that we will find a way to eat tomorrow,” Masih told the BBC.
This 45-year-old is among an estimated 700,000 workers who have lost their jobs in recent years, after the closure of about 1,600 clothing factories in crisis-hit Pakistan. This is equivalent to a third of the country’s textile mills, which contribute 60% of the country’s total export earnings.
Mr Masih started manual labor and driving an rickshaw after he was laid off earlier this year from his job in a factory that makes clothes for international fashion brands.
Sitting in a dimly lit one-room apartment in Lahore’s Youhanabad industrial area, Mr Masih and his wife Shamim Asif described how the spiraling costs of living are affecting them and their five children. The couple works very long hours to feed their three daughters and two sons, none of whom go to school.
“We used to somehow manage our daily expenses around 500 Pakistani rupees (£1.40; $1.75) a day,” Masih said. “Now things have changed. To cook just one meal, we need 1,500 rupees.”
His wife added: “Our income is not even enough to provide a good meal. How can we send our children to school?”
Mr Masih is just one of millions affected by Pakistan’s ongoing economic crisis, as the country receives another IMF bailout – the 23rd since 1958.. Interim Finance Minister Shamshad Akhtar last month raised the possibility of seeking an additional loan from the International Monetary Fund due to the “fragile” economy, Bloomberg reported.
There is more uncertainty on the horizon, with inflation rising, energy prices expected to rise further in January, and a general election approaching in February.
Industrialists in Karachi, a transportation hub and Pakistan’s largest city, even threatened to halt production entirely on December 4 unless the government reverses unprecedented gas tariff hikes.
Many Pakistanis have already been forced to search for additional income, following sharp increases in the prices of energy and other basic commodities. This is partly due to lending conditions imposed by the International Monetary Fund, which prompted the government to phase out energy subsidies.
Inflation fell to 29% in November after reaching a record high of 38% in June. In recent years, the cost of basic foodstuffs such as wheat flour, meat and rice has sometimes more than doubled, what economist and former Finance Minister Muftah Ismail described as a “catastrophic” situation for the poor and working class.
While the war in Ukraine, the slow post-pandemic recovery and volatile energy prices have affected the cost of living globally – and contributed to the closure of 1,600 garment factories – Pakistan also has its own problems.
A political crisis erupted in April 2022 after then Prime Minister Imran Khan was dismissed by a parliamentary vote. Protest marches were held for several months, paralyzing economic activity. An interim administration is currently in charge until next year’s elections.
Devastating floods also killed more than 1,700 people and submerged large areas of agricultural land during the monsoon season last year. the World Bank The total damage and economic cost was estimated at around $30 billion (£24 billion).
Pakistan is also facing a security crisis with a series of attacks and suicide bombings carried out by Islamic militants who want to impose a strict version of Islamic law.
With its diverse and expansive geography and young population, Pakistan should be attractive to investors, especially in labor-intensive industries such as clothing or automobile manufacturing. But in addition to the current instability, decades of conflict in neighboring Afghanistan have also affected the country, with millions of Afghan refugees crossing the border.
“The perception of Pakistan is not very good in the rest of the world. There is an image problem in terms of law and order and it is not a friendly place to do business,” Ismail said.
With outstanding debt and a rising import bill, Pakistan’s foreign exchange reserves held by its central bank fell below $3 billion earlier this year – not even enough to pay for a full month of imports.
After months of negotiations, Islamabad was finally able to obtain $3 billion in emergency financing from the International Monetary Fund in July. Allies such as China, Saudi Arabia and the United Arab Emirates have also helped boost their foreign currency reserves.
Before reviewing the IMF lending program, the interim government in October sharply increased natural gas prices for most households and industries, in order to reduce losses for the state-run gas sector. For example, the fixed tariff for more than half of household consumers has risen from Rs 10 per month to Rs 400.
Kamran Arshad, president of the Pakistan Textile Mills Association, Northern Province, told the BBC: “Our electricity prices have doubled. Factories that are unable to bear the rising production costs are closing down, leading to the loss of thousands of jobs.”
Ongoing economic turmoil and a lack of job opportunities have led thousands to leave the country, many of them making dangerous and illegal journeys across rough seas in rickety, overcrowded boats. Hundreds of Pakistanis were killed when a fishing boat packed with migrants capsized off southern Greece in June.
“The government has lost credibility with its citizens,” said Sabrina Page, an associate professor of economics at the University of Delaware. “The economic environment is very bad. So, people are willing to risk a lot to get out.”
A decade ago, when Pakistan fought a war against Islamist militants in the northwest, investors were wary — except for China, which pumped billions of dollars into the economy. She even calls Pakistan an “iron brother,” highlighting how close their relationship is.
Within the framework of the Belt and Road Initiative, China is investing more than $60 billion in the China-Pakistan Economic Corridor (CPEC), which began in 2015. This corridor connects the Pakistani port of Gwadar in the Arabian Sea with the northwestern Chinese region of Xinjiang through a network of highways, railways and lines. pipes.
It is hoped that this project, which is China’s largest foreign investment, will help boost Pakistan’s economy. But analysts are concerned about whether the investments will generate enough revenue to repay Chinese loans. The International Monetary Fund estimates that Pakistan owes about $30 billion to China.
Professor Page said: “Chinese investment is promising. But we build infrastructure with borrowed money, and as a result, we expose ourselves to liability. A lender like China will get its money back somehow.”
Even with Iron Brother’s support, any new government that takes power after the February elections will find it difficult to revive the economy.
Additional reporting by Amal Ghani in Lahore