The economic condition of Pakistan is at its worst. The country is facing many economic challenges, which are causing a great deal of concern for the government. The country has been facing an economic crisis for a long time now.

A country that was once gaining the highest percentage of economic and industrial growth in South Asia to the second most upcoming bankrupt country in the World Bank’s forecast, several reasons are behind this situation in Pakistan.

Below is the complete analysis of what’s happening in Pakistan and what reasons, or policies influenced Pakistan’s current economic situation:

Political Instability

The biggest cause of the country’s current economic crisis is the instability of government and democracy. You might wonder to know that since the separation, Pakistan has had eighteen prime ministers and none of them has completed their tenure of 5 years in history.

In the cases, the prime minister gets assassinated, ousted by the assembly, stated ineligible by their court, gets arrested, and due to various other reasons, no Paki PM has ever completed their tenure.

Political and government instability influences stock market investors to a great extent. It makes the stock market investors think:

“if a county can’t even handle its government, how can it stabilize and handle stock market points?”

And the point is valid, which causes the investor’s low percentage, resulting in the fall of stock market points which weakens the currency value, and hence inflation.

Wrong Foreign Policies

Since 2002, Pakistan has had one of the worst foreign policies a country can have. Pakistan’s foreign policy is according to the benefit of western countries than local citizens.

For example, from 2008-2018, the USA performed a military operation in Pakistan and nuked 400 drone bombs in Pakistan to eliminate the Al-Qaeda that was involved in the 9/11 attack on the USA. The operation did eliminate Al-Qaeda members but with a sacrifice of 80,000 innocent local citizens while the USA was the ally of Pakistan.

Ever heard that your ally or friend country is bombing your own country? It never happened or will happen.  But the Pakistan and USA is the prime example, USA claimed to be an ally or friend of Pak but bombed 400 drones in Pakistan and killed 80,000 innocent people.

All this occurred due to the worst foreign policy of Pakistan which allows the other foreign country to use air space for military operations in some other country or attack their native land in return for aid or financial help.

This foreign policy makes Pakistan “a state of terrorism” and affected the foreign investors and startups investing in Pakistan.

Foreign Country Involvement

On 10 April 2022, Khan became the country’s first prime minister to be deposed through a no-confidence motion in parliament. As per the former Prime Minister, Imran Khan, the USA was involved in the regime change of his cabinet and seat.

As the country’s state machinery and cabinet agreed to Khan’s objection, the new government never accepted the former prime minister’s allegation. Now, nobody knows the actual truth, but as per the hints, experts, and the path where Pakistan is moving, it seems like the USA had something to do with the regime change of Khan’s government.

This created instability in the country and affected the foreign investors to pull back their funds from PKR, which devalued the PKR, and hence sudden extreme inflation.

Army’s Monopoly in the National Reserved Funds

The army takes a major chunk of funds in Pakistan. The army is the largest employer, with about 1.8 million people working for it. The army is also one of the largest organizations in Pakistan, with all its functions being carried out by it.

The Pakistani Army has taken a major chunk of funds in the country, which has led to the country’s economy is unable to make payments to some of its creditors.

Even if today, other countries support Pakistan with financial aid, most probably, the majority of the aid will be sent to the army’s budget and the real aim of the aid will never be fulfilled.

The Pakistani military has been using funds from the defense and other budgets to pay its debts and finance its operations.


The incidence of corruption in Pakistan is high. According to a report by Transparency International, the country is ranked among the most corrupt countries in the world. The report has ranked Pakistan as the number one most corrupt country in Asia Pacific Region followed by India and China.

Corruption has become a major problem in Pakistan because of weak governance, poor law enforcement, and inadequate control over public finances. The lack of transparency and accountability has led to rampant misuse of public resources for personal gain by officials.

Corruption is a major problem in Pakistan. It is not only a moral issue but also a threat to national security and the economy. Corruption has increased in the last few years, as it is causing huge losses to the government and the country’s economy.

The Pakistani government has taken measures to fight against corruption, but these have not been successful so far. Corruption is still rampant in Pakistan and it will continue to remain so till there are no efforts made to curb it. The only way to eliminate corruption from our society is by taking strong action against those involved in this crime.

Corruption has become a major problem in Pakistan today because of several reasons:

1) Lack of education about the crime: Most people do not know what corruption is even though they are aware that it exists in their neighborhood or workplace; they cannot even imagine how corrupting it can be until they experience it themselves; therefore, they do not know how much harm it can cause them or others around them.

2) Lack of awareness about its dangers: People are generally unaware of the damage caused by corruption because they do not know what steps need to be taken against it. They do not know how serious this crime can be.

Less Literacy Rate

Pakistan’s literacy rate is only about 58% while other developed nations have at least 95% and its neighboring countries hold a literacy rate of at least 75% and above.

The major cause of less literacy rate in Pakistan is because of government’s less interest in the education sector. They only allocate 2% of their budget to the education sector which is way lower for a developing nation to become a literate country.

Less literacy means less knowledge of finance and wrong management of the economy in a nation, which plays an essential role in the economic stability of any country.

Poor Loan Policies

To ensure that the country does not face any problems related to the economy, Pakistan introduced several policies which were not beneficial for the common people at all. These policies were counterproductive, and they drained out most of the resources from public sector banks as well as private sector banks thereby making them unable to provide loans at reasonable rates to small-scale industries and businesses which resulted in the closure of many factories and businesses across Pakistan leaving millions unemployed because of no jobs available in such industries or businesses due to closure of these factories or businesses.

High Import Duties

Did you know that Pakistan is in the best geographical location in terms of import and export requirements? Unfortunately, Pak prefers to import their essentials from countries that are 7 seas far than those which are next to their border e.g, India.

Essentials like Tea, cooking oil, minerals, IT, cars, and construction materials are the major imports of Pakistan, and their border neighbor country, India is the best exporter for them in terms of cost and pricing. But unfortunately, due to their clash, they prefer to import essentials from the western and eastern countries which are 9x more expensive than India’s imports.

These policies affect the GDP and import and export ratio to a great extent.

China’s Monopoly in Pakistan

China has been a “friend” of Pakistan for many years. But it is not an outright friend. Nor are they allies. They are partners and have been so for decades.

China has destroyed every aspect of life in Pakistan since they started pouring money into the country (and they still are). China destroyed the economy. Tourism was destroyed because of Chinese influence on the banana nation.

The education system was destroyed because China put money into it and made it subservient to its own interests instead of giving Pakistan a chance to develop on its own terms. The legal system was destroyed because China wanted to make sure that no one could challenge its power over the island nation.

The health care system was destroyed because China wanted to get rid of any doctors who might stand up against them or do anything other than follow orders from above without question; so many doctors fled abroad in fear for their lives when they saw what happened during martial law in Pakistan at the hands of India-

Flooding Caused a Sudden Hike in Food Prices and Inflation

Flooding in Pakistan has caused a spike in food prices and inflation. The floods have affected at least 19 million people and killed more than 12,000 people.

The country’s total output is expected to fall by 10.2%, according to the International Monetary Fund (IMF). The IMF predicts that normal rainfall will continue to pose an economic risk for Pakistan over the coming months. This is because it takes time for farmers to sow crops after flooding and the damage from the floods will take time to repair.

The IMF said that flooding was likely to cause “significant” damage to crops, livestock, and fisheries, as well as forestry and horticulture plantations. It added that this could lead to a fall in agricultural production in 2019-22 by 2%-4%.

No Foreign Investments

The reason, why Pakistan is so poor is that no one is willing to invest money in their country due to the constant threat of war between India and Pakistan. The only way that Pakistan can ever become prosperous again and have a better standard of living for its people would be if they could develop peace with India and start trading with them again after all these years.