The economic situation in the country currently can be quite simply described as catastrophic. Inflation levels are at an all time high; economic growth rate is likely to fall further, there is a balance of payments deficit and dollar prices are incrementally increasing along with fuel prices. Moreover, there is a debt crisis which is unlikely to be solved any time soon. The country is facing an economic recession which may be exaggerated by the economic policies being implemented. At a time when there is a need for business activity to continue, orders have been passed to halt operations after a certain time. Reduced economic activity only results in an economic slump and this is what Pakistan might face in the near future. It must be understood that reduced economic activity is likely to lead to a slump which is in essence a recession. An economy with already falling growth rates cannot afford such an outcome. Although, closing down of markets early and imposition of lockdowns on weekends may lessen the costs faced by businesses, it will not help the economy in real terms. Reduced economic activity will result in a reduction in total demand in the economy due to slashed incomes and this will subsequently lead the economy into a recession. Inflation may be curtailed but so will economic growth and without a steady growth rate the economy suffers tremendously.
The Pakistani economy is currently facing a myriad of issues therefore the solutions must also be multifaceted. Initially, work must be done to curtail inflation without significantly affecting business activity. It should be understood that inflation in itself is not disastrous for an economy as long as it is within limits. Therefore, costs must be cut but not to an extent where it starts affecting the total output produced in an economy. Such policies and measures will only lead to further shortages which will increase prices further and cause more inflation. Such measures will lead Pakistan towards hyperinflation and an economic depression. Lessons must be learnt from history. The great depression is one event which should be carefully studied when the issue of inflation and slow economic growth is at the forefront. In the depression economic activity slumped so deeply that consumer spending and investment dropped which resulted in firms laying off workers which further reduced demand which then led to the great depression. If Pakistan wants to prevent that it must not implement policies that reduce business activity as there is already a lot of unemployment and the economy cannot afford anymore. However, businesses will be forced to lay off workers which will reduce the total market demand plunging the economy into recession.
The current financial crisis being faced by Pakistan will not be solved by reducing business activity, it will only worsen with such measures. Therefore, the government should devise plans that boost economic activity while keeping inflation at the lower side. It is better to have economic activity along with inflation rather than having zero inflation with no economic activity as people suffer more when they are laid off from jobs than when they have to pay more for certain products. It is imperative to increase employment and keep the business cycle on the upper side rather than the lower side so that people invest and keep the economy afloat. People are already suffering enough from high prices, they will not be able to survive unemployment as well. Therefore, churning the wheel of economic activity must be of utmost importance and the rest of the economy will settle along with it if complementing policies are adopted.
