With a raging war in Ukraine on heels of pandemic, i. world faces a scenario similar to what we have seen for a hundred years in in pastwhen the Great War and the flu pandemic collided. War in Ukraine further exacerbates global economy already disrupted by Covid-19 and its aftermath.
These crises created a “perfect storm” with 85 million people pushing back in extreme poverty from the start of pandemic with a rise in product prices and crashes in global supply chains. world It has also had to fight with indirect impact of sanctions that are caused overall increase in global energy prices by 7.7%, and increased pressure on world stocks, oil, food prices and other commodities.
In the Asia-Pacific region, these challenges exacerbated existing inequalities and economic vulnerabilities of several countries, leading them down treacherous path of loans to save economic solvency. Countries like Sri Lanka, Afghanistan and Pakistan facing grave’debt disaster” and are forced to do difficult decisions of budget cuts on critical development expenses.
According to a recent policy analysis showsSri Lanka’s long-term external borrowing, deteriorating social sector, rising inflation and indefinite negotiations with The IMF brought the country to a state of economic default. Just like our research on Afghanistan highlights how ongoing humanitarian and economic emergency in the country is driven by deep structural and policy imbalances that need fix to keep profit of in last two decades.
Meanwhile, although Pakistan has witnessed growth of 5.97% in 2020-2021 – y. second highest in in last 14 years is currently faced with a debt in excess of 250 billion dollars rising from 57.9% of GDP in 2013 up to 74% in 2021. This also experience highest inflation in in last two years – increase to 13.8% in May 2022 from 12.7% in March 2022. In addition, the country is facing an unbearable burden of current account deficit, with projected increase in the budget deficit to 6.3% of GDP in 22 fiscal year. BUT trade imbalance and depletion of foreign exchange reserves also result in currency devaluation. Upstairs of those numbers are of forever narrow national tax base: in 2021-2022 taxes were only 12% of GDP, reflecting the huge income gap that required meet public Expenses.
Now there’s horror need concentrate on easing the downward economic spiral in Pakistan as fast as possible while making it easier for the man development impact. UNDP Pakistan National Human Development Report 2020 on “Three P. of Inequality: Power, People and Politics” highlights this point by establishing need increase costs on human development as well as social protection, creating policies and reforms to bridge socio-economic gaps and promote decent work and gender equality as important levers to mitigate inequalities and promote sustainable development.
This is all the more so because path of external borrowing was unreliable one for Pakistan, although long-term loans from multilateral institutions and external donors were preferred policy financing solution national development and financial expenses. For development countries like Pakistan, political stability combined with good management and dynamic strategy for governing sovereign debt as well as public finance with support from development partners, this is the formula of minimalism required overcome financial and economic challenges. Therefore, there is critical need currently for home- grown solutions based on the principle of sustainability and self-sufficiency.
One solution is to use alternative funding mechanisms, including private impact-oriented industry investments in SDG oriented development climate finance projects and instruments, such as green bonds, to help decrease addiction on foreign loans and avoid current account deficit. To achieve this, UNDP is proposing a bold $1 trillion global move. of public as well as private investments in SDGs, focusing on on mobilization public finance, unlocking private capital and strengthening SDG impact management, with fundamental goal of achieving the 2030 Agenda.
As part of our funding for Development Portfolio in Pakistan, UNDP is developing and supporting innovative financial solutions, attracting both government and private sector to reduce pressure on public Expenses for development programs. in partnership with government of Pakistan, UNDP positions Pakistan’s SDG investment portfolio at global investment platforms; production policy reports such as first Pakistan SDG Investment Report 2021; in first Pakistan SDG Investor Map; contribute to the disaster risk insurance and financial solutions; and setting up Pakistan first SDG Project Development Fund for investment and financial structuring to stimulate sustainable development.
As the 2030 Agenda clock ticks, Pakistan faced with urgency to optimize quality and structure of its economic stabilization and growth politics if it aspires to be strong economy by 2047. Necessary move towards investment-based, export-oriented growth, powered by renewable energy sources. Such growth must be supported by a highly productive service sector and a thriving agricultural sector that can help import substitution of staple food items.
It would only possible through investment in human capital and alignment national economic policy to a globally accredited financial for development paradigm. Full use of the country’s youth potential, as highlighted in UNDP Pakistan National Human Development Report 2017 on “Release Potential of Young Pakistan, positioning women as power-agents of economic growth and prosperity, as well as the direction of marginalized segments of society into a sustainable and community-driven social safety netsCan reduce burden on state and receive common benefits for in economy.
Innovation in global economic foresight points to a fundamental evolving need harmonize economic growth with diversified development results. For decades, GDP has been regarded as the only indicator of economic growth. However, now with other vital components such as environment, social sector dynamics and inclusiveness directly or indirectly affects countries’ economic progress, it is time to rethink and reposition Pakistan’s economic system. model. That’s where the transition to reliable economy concentrated on Financing for Development sets in motion, and where social impact-oriented investments can power economic growth how way out of crushing debt trap.
Published in Express Tribune, June 18.th2022.
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