An estimated 700,000 workers who have lost their jobs in recent years, following the closure of about 1,600 clothing factories in crisis-hit Pakistan. This amounts to a third of the country’s textile factories, which contribute to 60% of the country’s total export earnings.
Millions are hit by Pakistan’s ongoing economic crisis, as the country receives yet another bailout from the International Monetary Fund (IMF) – the 23rd since 1958. Last month, interim finance minister Shamshad Akhtar even raised the prospect of seeking an additional IMF loan due to the “fragile” economy, Bloomberg reported.
And there is more uncertainty on the horizon, with soaring inflation, energy prices due to increase further in January and a general election looming in February.
Industrialists in Karachi, a transport hub and Pakistan’s largest city, have even threatened to shut down production completely on 4 December, unless the government reverses unprecedented gas tariff hikes.
Many Pakistanis have already been forced to seek additional income, following sharp increases in the prices of energy and other essential commodities. This is partly a consequence of the IMF’s lending conditions, which led the government to phase out energy subsidies.
The inflation rate fell to 29% in November after hitting a record 38% in June. In recent years, essential food items like wheat flour, meat, and rice have at times more than doubled in cost, in what economist and former finance minister Miftah Ismail called a “disastrous” situation for the poor and the working class.
While the war in Ukraine, a sluggish post-pandemic recovery and fluctuating energy prices have impacted the cost of living globally – and contributed to the shuttering of the 1,600 clothing factories – Pakistan also has its own problems.
A political crisis broke out in April 2022 after then prime minister Imran Khan was ousted by a parliamentary vote. Protest rallies were held for months, paralysing economic activity. An interim caretaker administration is currently in charge until next year’s election.
Devastating floods also killed more than 1,700 people and inundated vast tracts of agricultural land during the monsoon season last year. The World Bank estimated that the total damage and economic cost was around $30bn (£24bn).
Pakistan has also faced a security crisis with a series of attacks and suicide bombings by Islamist militants, who want to impose a harsh version of Sharia law. With its varied, expansive geography and a youthful population, Pakistan should be attractive to investors, especially for labour-intensive industries like clothing or automobile manufacturing. But in addition to the current instability, decades of conflict in neighbouring 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 also that it’s not being a friendly place to do business,” Mr Ismail said.
With debts to repay and a rising imports bill, Pakistan’s foreign exchange reserves held by its central bank fell below $3bn earlier this year – not even enough to pay for a month’s worth of imports. electricity prices have just doubled. Factories that are unable to bear the escalating cost of production are shutting down, leading to thousands of job losses,” Kamran Arshad, the Chairman of All Pakistan Textile Mill Association, North Zone, told the BBC.
The ongoing economic turmoil and a lack of job opportunities have led thousands to leave the country, with many undertaking dangerous and illegal journeys through rough seas in overcrowded rickety boats. Hundreds of Pakistanis died when an overloaded trawler full of immigrants capsized off southern Greece in June.
“The government has lost credibility with its own citizens. The economic environment is dire. So, people are willing to risk a lot to get out”, said Sabrin Beg, an associate professor of economics at the University of Delaware. Under the Belt and Road Initiative, China is investing more than $60bn in the China-Pakistan Economic Corridor (CPEC), which began in 2015. This connects the Pakistani port of Gwadar in the Arabian sea to China’s north-western region of Xinjiang through a network of highways, railways and pipelines.
It is hoped that the project, China’s biggest overseas investment, will help boost Pakistan’s economy.