Pakistan and the Sri Lankan Economic Crisis

Written by Fizza Ayub Khawaja on Saturday, 12 November 2022. Posted in Business Education

Illustration by Autumn Qiu for Girls For Business


Sri Lanka has been trapped in a major economic crisis since 2019— some economists have even claimed it to be the worst economic hit that the country has taken since its independence in 1948. To summarize the predicament that Lanka has found itself in, amid the tourism decline the country faced due to Covid-19, it started falling short of its national debt repayment. As a short term, but ineffective solution, it leased its port to a Chinese company for 99 years, effectively falling into a ‘debt trap’. At present, Lanka has not only defaulted on its repayments, but national unrest, protests and political uncertainty have become its common feature. 

Now, looking towards Pakistan, economists have related the country to be following in Lanka’s footsteps. Depreciating currency, declining economy and constant political calamities have shown similar indicators between the two South Asian nations. Another twin factor, Pakistan also seems to be dependent on Chinese assistance, mainly for developing its port in Balochistan - CPEC (China Pakistan Economic Corridor). This collaborative investment project has shown signs of Pakistan facing the same ‘debt trap’ as Sri Lanka. 

While Lanka is already trapped in a downward spiral, some key signs that Pakistan is showing need to be noted as well. In May 2022, the Pakistani Rupee hit an all time low against the dollar with 1 USD equaling 200 PKR, since then, the currency has further devalued. Moreover, PM Imran Khan, slowed down CPEC’s progress which left China dissatisfied and relations with Saudi Arabia and Turkey have also deteriorated, leaving the country isolated in its economic downfall. As Khan became involved in misalignments between USA and Russia, the situation worsened even more with Biden turning a cold shoulder, as Khan visited Putin on the very day the Ukraine invasion took place. 

Now that Khan has been ousted and the Sharif Government has come into power, the parallels between the issues faced by Pakistan are alarmingly similar to those of Sri-Lanka pre-crisis. With dwindling foreign exchange reserves, imported necessities such as food and fuel are predicted to become scarce. With the recent mass flooding, even the relief requested from the IMF is bound to fall short. With an economic crisis looming in the future, some economists have tried to warn the nation of its impending doom. 

‘We may not be in Sri Lanka’s shoes yet, but are not very far of as there are some comparable symptoms.’ - Zahid Hussain (Pakistani Columnist) 

With a dire crisis slowly unfolding in front of the nation’s eyes, policy makers are faced with the harsh realities of stringent economic reforms. With economic and political uncertainty being common to Pakistan’s past, only those with an iron fist will be able to stop the nation from plummeting in the same way as Lanka.

About the Author

Fizza Ayub Khawaja

Fizza Ayub Khawaja

Fizza is a Business Education Writer at Girls For Business.

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