Pakistan is facing a dire economic crisis, marked by soaring inflation and rising joblessness. Despite a slight decrease in weekly inflation rates, the country is grappling with the highest inflation in the region. Coupled with skyrocketing energy tariffs and high-interest rates, these economic pressures are forcing the closure of factories, leading to widespread unemployment. The situation has sparked countrywide protests and poses a significant threat to the nation’s economic stability.

Bloomberg has disclosed that Pakistan’s inflation rate is the highest among its regional counterparts. The American media outlet highlighted that the government was compelled to hike energy prices in order to secure a new program with the International Monetary Fund (IMF). While inflation in the country has somewhat decreased, electricity bills have now surpassed house rents, igniting nationwide protests due to the surge in power tariffs and the implementation of IMF-mandated reforms.

In its report, Bloomberg stated: “The South Asian nation, where nearly half of the population survives on less than $4 a day, has witnessed a 155% increase in electricity prices since 2021, following the government’s decision to raise industrial and retail rates to improve its chances of securing IMF loans.”

“The energy sector has become a severe point of contention as Pakistan grapples with a persistent economic crisis. With inflation hovering around 12%—the highest in Asia—purchasing power has significantly diminished, leading to a four-year low in electricity consumption as individuals and businesses abandon the gas-reliant national grid in favor of solar panel installations.”

Bloomberg further detailed that in July, residential electricity prices surged by 18% per unit as Pakistan secured a new $7 billion loan from the IMF. This increase has pushed electricity bills beyond household rents, which typically range from $100 to $700 per month. The report also noted that widespread protests by citizens, business groups, and opposition parties have erupted across the country, prompting Prime Minister Shehbaz Sharif to announce a Rs50 billion subsidy over the next three months to mitigate the impact of the price hikes on the most vulnerable electricity users.

Pakistan and the IMF have agreed on a plan to restore the viability of the energy sector as part of the bailout program, which includes cost-cutting measures and the privatization of state-owned power distribution companies. According to Pakistan’s power regulator, the country loses approximately 16% of its generated electricity due to theft and transmission and distribution inefficiencies.

Additionally, the Pakistan Bureau of Statistics (PBS) reported that the weekly inflation, as measured by the Sensitive Price Indicator (SPI), saw a marginal decrease of 0.16% for the combined consumption groups during the week ending on August 15. The SPI was recorded at 322.03 points, down from 322.54 points in the previous week. However, compared to the same week last year, the SPI for the combined group showed a significant increase of 16.86%.

The Sensitive Price Indicator (SPI), based on the 2015-16 baseline, tracks inflation across 17 urban centers and 51 essential items for all expenditure groups. Recent data reveals that for the lowest consumption group (spending up to Rs 17,732), the SPI saw a slight increase of 0.07%, rising to 311.04 points from last week’s 310.83 points. Similarly, the SPI for the consumption group spending between Rs 17,732 and Rs 22,888 experienced a minimal rise of 0.01%. However, for higher consumption groups, including those spending between Rs 22,889 and Rs 29,517, Rs 29,518 and Rs 44,175, and above Rs 44,175, the SPI declined by 0.05%, 0.10%, and 0.25%, respectively.

The ongoing increase in energy tariffs and interest rates has led to a substantial rise in production costs, triggering the shutdown of over a hundred small and large factories, including Sitara Textile Mills, one of Faisalabad’s leading textile manufacturers. Operational mills have been forced to reduce their production by as much as 40%. Recently, a unit of Sitara Textile ceased operations, resulting in 900 job losses. The widespread closures of textile units have left between 150,000 and 200,000 workers unemployed in Faisalabad alone. If the government does not intervene by reducing electricity and gas prices and lowering the markup rate to a single digit, the remaining operational mills are also at risk of closure. Most factories have stopped accepting new export orders and are solely focused on fulfilling existing commitments, with more shutdowns expected in the coming month.

The global market currently presents favorable conditions for increasing exports, as many American and European brands are shifting away from China, and the situation in Bangladesh could potentially boost Pakistan’s export orders. However, the alarming closure of over 50% of factories in every industrial zone across the country has prompted prominent business leaders to express deep concern. They warn that without immediate, decisive action from the government, the economy could face a catastrophic downturn. Business leaders have called for the urgent abolition of the two-tier tax-and-levy system, which places a heavy burden on the formal industrial sector, forcing many industrialists to halt operations.

The ripple effects of factory closures include employee retrenchment and layoffs, leading to rising unemployment and increased frustration among the populace. This situation has already contributed to a surge in street crime across major cities, while law enforcement agencies struggle to contain the rising tide of criminal activity. It is imperative that the political leadership prioritizes law and order to prevent further deterioration.

It is critical for those in positions of power to ensure that citizens can lead quality lives. Failure to address these pressing issues will result in a bleak and unsettling future for the nation.

The combined impact of soaring inflation and rising unemployment is pushing Pakistan toward an economic disaster. If immediate action is not taken to address these issues, the nation risks plunging further into crisis. It is crucial for the government to implement decisive measures to stabilize the economy, protect jobs, and ensure that citizens can maintain a decent quality of life. Failure to act now will only deepen the economic turmoil and further destabilize the country.