Pakistan has been grappling with political and economic instability for decades, unable to chart a course for long-term progress and prosperity for the country and its people.
In the face of the current political turmoil, the current economic crisis in Pakistan is likely to escalate to a level that the emerging government may find extremely difficult to manage. The economy is already in shambles, due to an unprecedented depreciation of the rupee, dwindling reserves, rising international commodity prices, and rising current account and budget deficits.
A growing challenge for the new government is to correct the trade imbalance. According to the latest data released by the Pakistan Bureau of Statistics, the country’s trade deficit jumped 70% to a record high of $35.4 billion in the first nine months of the current fiscal year 2021-22 ( July to March). This is straining the foreign exchange reserves of the State Bank, which can currently only cover two months of import bills.
The EU and the UK are Pakistan’s main trading partners. Pakistan exports approximately $9 billion worth of goods to these two regions, while its exports to the United States amount to nearly $6 billion. The US, EU and UK account for more than 50% of Pakistan’s exports.
With Pakistan’s duty-free access to the EU on 91% of tariff lines under the GSP Plus pact, the EU has become Pakistan’s most important trading partner, providing a lifeline for exports Pakistani.
However, earlier former Prime Minister Imran Khan hit out at EU Ambassador for asking Pakistan to condemn Russia for its invasion of Ukraine, and lately the letter scandal of conspiracy has marred economic relations with the EU and the United States.
Pakistan should strive to restore and strengthen bilateral trust with the EU to ensure the continuity of GSP-Plus trade preferences beyond 2023. In addition, Pakistan has the opportunity to take advantage of the seven conventions EU supplements that will help countries like Pakistan apply for GSP-Plus. Status Plus from 2024 to 2033. The new agreements focus on improving accessibility for people with physical disabilities, preventing child labor and protecting the environment.
Pakistan should aim to mature its commercial ties with the United States and Europe beyond politics. Pakistan’s diplomatic relations should be based on shared interests with each country. There are several examples of countries whose economic ties remain intact despite political or border disputes. For example, in 2021, overall trade between China and India stood at $125.66 billion, up 43.3% from the previous year. Meanwhile, there have been many military and political scuffles between India and China over Ladakh. The Ladakh standoff had completely halted cooperation on all fronts except trade at the time.
Remarkably, China has overtaken the United States as India’s largest trading partner. Similarly, despite tariffs and a simmering regional dispute between the world’s two largest economies, trade between China and the United States jumped 28.7% to $755.6 billion in 2021. Essentially, both countries have a strong desire to engage and avoid outright conflict whenever possible. In other words, despite bitter economic and political disagreements, the economies and societies of China and the United States remain inextricably linked.
Pakistan must learn the political maturity and insight of these countries in order to avoid a chaotic situation. Politics, economics and social welfare are all linked. These three elements must work together for a country to prosper.
Relations between the countries are commonly referred to as “ties”, and this can be a reasonable exposition option to describe Pakistan’s relations with the United States and Europe – but only when the word is used in a more economic sense. than emotional.
The author is assistant professor at Abdul Wali Khan University in Mardan. He can be contacted at: [email protected]