Pakistan faced the worst economic crisis in its history in 2023 and it is not going to see any improvement in 2024 either. United Nations (UN) report on 'World Economic Situation and Prospects 2024’ has forecast that several challenges including inflationary pressures, currency depreciation, and high levels of sovereign debt would Pakistan’s economic growth this year as well.

Pakistan has figured among the nations whose currency has depreciated by over 20 percent. In 2023, the average inflation rate in Pakistan crossed 30 percent while it is expected to remain high in 2024 as well, close to 20 percent, as per the UN report. 

On the other hand, Bangladesh which separated from Pakistan in 1971 has managed to keep inflation rate in a single digit.

Bangladesh’s currency is stronger than that of Pakistan, and the country is working to achieve the 5.6 percent target in 2024. 

Pakistan's economy faces policy paralysis and the country is indebted with huge external loans, particularly, those under China's Belt Road Initiative (BRI). 

Now, Pakistan is burdened with repaying foreign loans worth USD 27.47 billion by November 2024, according to the State Bank of Pakistan (SBP).

Ahtasam Ahmad, Sector Analyst at Profit Pakistan Today, said the external front presented a challenging situation even as he called Chinese loans a major hindrance for debt relief resolution. 

“The government is facing the daunting task of managing borderline unsustainable debt, along with low SBP reserves, making it difficult to stay financially afloat,” he said.

China accounted for about 30 percent of Pakistan’s external debt. Pakistani journalists Shahbaz Rana appealed the Islamabad government to refrain from accepting condition-free foreign commercial loans as he predicted 2024 may not differ from 2023 in terms of yawning external and domestic financing needs.

Dr Ikramul Haq, lawyer at Pakistan’s Supreme Court, said the Islamabad government was trapped in further debt enslavement, which led to the worst economic crisis in the country's existence. 

“Pakistan’s real fiscal problem is reckless borrowing and ruthless spending, pushing the country deeper and deeper into the deadly debt trap,” he said.

Pakistan has been facing problems on the international trade front as well. While it showed a little improvement in the last leg of 2023, the overall trade scenario remained gloomy for Pakistan. The decline in trade deficit did not result from an increase in exports but from a decline in imports. So it is difficult to stop the current account deficit from widening in the coming months of 2024.

Bangladesh has been doing much better on the economic front. Bangladesh is set to achieve 5.6 percent growth rate in 2024 while Pakistan’s economy will struggle to reach 2 percent. Bangladesh’s have become 33rd largest economy in the word world with the GDP of USD 455 billion. Pakistan’s GDP is pegged at USD 340 billion, which is about two-third of Bangladesh’s GDP.​

Besides acute inflation, high unemployment, widening financial deficit, and rising external debt, the World Bank has highlighted basic problems such as the human capital crisis, weak education system, ineffective human resources management, and food crisis, which are going to haunt Pakistan’s economy.

Malnutrition is a big challenge for Pakistan to overcome as around 80 percent of children do not get important nutrients, thus causing negative effects on economic growth. On several human development parameters, Bangladesh is doing better than Pakistan.

Climate change is another big issue that Pakistan could not stop it from affecting its economic prospects.

Being a climate-vulnerable country, Pakistan may see a significant impact on its agriculture sector and thus economic growth in case of non-uniform rains, feared Dr Abid Qaiyum Suleri, who is a member of the Pakistan Climate Change Council. Asian Development Bank (ADB) had expected a slowing down of Pakistan's economy in the aftermath of erratic rains-led floods in 2022.

Pakistan is set to hold general elections in February 2024. In the wake of political instability, the anticipated chaos is likely to affect the economic growth of the country. Political uncertainty Pakistan will maroon market and business activities in Pakistan, said Karachi-based communications strategist Sara Danial. “As the next election approaches, the likelihood of a potential economic downturn or recession is expected to increase,” she said.

Pakistan’s economy has remained the prey of political unrest. Pakistan has been in a political quagmire since former Prime Minister Imran Khan was ousted from power in April 2022 and jailed later. The political turbulence has had its bearing on the country’s economy. Islamabad economist Dr Vaqar Ahmed said “Statistics clearly show that our economy has plummeted due to multiple factors in the last ten months including political and policy uncertainty.” Ahmed is joint executive director of the Sustainable Development Policy Institute.

Sergi Lanau, director of emerging market strategy at Oxford Economics, said political instability did not sound well when Pakistan was facing a series of problems including high inflation, unemployment, and sluggish growth. “It makes things quite complicated. This is very bad news in a situation that was already very hard.”

Politicians are obsessed with grabbing power when the country is facing the worst economic challenges, said Pakistani journalist Farhan Bokhari. “Pakistan is set to enter another year surrounded by deep-rooted challenges over its medium- to long-term future,” he said.