Social implications of the current economic crisis

Inflation, unemployment and income disparity are tearing society apart

Pakistan is currently confronted with an economic crisis that surpasses the realm of balance sheets and fiscal policies, affecting the very core of the societal fabric. Though the current crisis is viewed in terms of numbers and economic indicators, this is just one side of the coin.

The ongoing situation is having a detrimental effect on the social landscape of Pakistan, it is not merely an abstract conundrum, it is an explicit force that shapes the very existence of the general populace. As we delve into the social implications of an escalating economic crisis, we find a complex interconnection of social issues that provides a visible picture of upcoming threats.

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These concerns include an unprecedented increase in poverty rates and a widening gap in income inequality as wealth is getting concentrated day by day in Pakistan. In addition, due to a massive rise in the inflation rate, a significant portion of the population is confronted with serious economic vulnerability due to the previous increase in the standard of living. These further strain social cohesion and unity.

Moreover, it is observed that whenever there is an increased fiscal deficit in the country, the education sector experiences a massive hit and this happened again this time, thus the cost of education has been increased. Students from marginalized areas are left with no option but to give up their education and support their families amidst the perpetuating cycle of poverty. Thus, an economic crisis is having a multifaceted effect on society, and it is crucial to comprehend these detrimental repercussions.

Unemployment is a key indicator of the health of an economy, and it is a direct product of economic crisis leading to recessions. One of the significant reasons is insufficient economic investment resulting in limited job opportunities and minimal business growth due to the lack of confidence of investors amid political chaos and economic uncertainty.

Moreover, the education system falls short of providing graduates with the necessary job market skills, fueling the increased unemployment rate. The country has witnessed a significant loss of millions of jobs in both formal and informal sectors during the current fiscal year due to the country’s ongoing economic and financial challenges. In this regard, the International Labor Organization has estimated that the number of unemployed people will reach 5.6 million by the end of this year, which is in line with the unemployment rate of 8.3 percent estimated  by the IMF.

Evidence suggests that unemployment leads to serious anxiety and depression. This in effect increases domestic violence and other social issues. In this regard, there is an exceptional increase in the divorce cases, as observed in Lahore. Most women accuse their husbands of domestic violence due to financial and social issues, and demand separation.

The way forward for curbing this necessitates a holistic strategy that includes targeted initiatives to reduce poverty, improve access to healthcare and education, and create an entrepreneurial culture that promotes self-employment. Rebuilding a more resilient and fair society depends equally on creating an environment that promotes social activity and civil society engagement.

Furthermore, food insecurity, lack of resources and rising debts directly correlate to increasing mental health issues among people in Pakistan. In the midst of the ongoing protests across Pakistan against inflated power bills, a man committed suicide after failing to pay a Rd 40,000 electricity bill, the second such incident in the last month.

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Moreover, to make ends meet people are immigrating to other countries by formal and informal means leading to a massive brain drain in the country. Over 800,000 Pakistani citizens left the country in 2022 in search of  better job opportunities abroad . Thus, it is crucial to understand the far-reaching societal implications of soaring unemployment due to ongoing financial stress.

Whenever there is an economic crisis in a country it leads to accelerating poverty and inequality in a country, due to lost economic and employment opportunities. The current economic downturn is pushing an unprecedented number of people below the poverty line, due to the ever-increasing cost of living since the previous year.  It is estimated that in the previous year due to political turmoil and economic uncertainty 100 million people from the lower middle-income class have been pushed below the poverty line. Notably, leading economists in Pakistan have criticized the current budget due to an insufficient allocation for poverty alleviation funds. This will further lead to a decline in human development across the country in the coming time. This shows how, at the current time, the authorities are just viewing this crisis in terms of statistical indicators. Thus, it is crucial to design strategies considering the social implications of this ongoing economic uncertainty.

In line with poverty, wealth concentration is another major socio-economic issue that Pakistan is confronted with. Pakistan has struggled with wealth disparity for a long time, which is characterized by a disproportionately small fraction of the population holding a significant portion of the country’s wealth. As a matter of fact, according to a report by Oxfam, the top one percent of the population is wealthier than the bottom 70 percent, highlighting the size of the wealth disparity and its grave implications for the development of the nation’s economy and social structure. As reported by the World Bank, 10 percent of wealthy households in Pakistan hold 42 percent of the nation’s income, which in contrast with 50 percent of poor households collectively having 13 percent of wealth, which shows a stark difference between the classes. One of the contributing factors to these disturbing statistics is the economic crisis due to the concentration of economic power in the hands of a few people and their self-centred approach leading to such a crisis. This startling disparity in wealth and income distribution fuels a cycle of poverty that gets more and more difficult to break, frequently resulting in higher crime rates and social unrest across the nation.

In the past year, a rise in street crime has been observed in major cities of Pakistan. This reflects the repercussions of deeper societal issues such as growing inequality, poverty, and unemployment. According to the Citizens-Police Liaison Committee (CPLC), Karachi has witnessed a worrisome increase in street crime, with over 21,000 cases reported in the first three months of 2023. Tragically, robberies have resulted in 34 fatalities and 150 injuries, with incidents of car, motorcycle, and mobile phone theft surpassing 20,000.

Moreover, in Rawalpindi, street crime remains a significant concern too, with 89 cases resulting in the loss of motorcycles, mobile phones, and gold jewellery valued at over Rs 3.5 million. Despite police investigations and registered cases, street crimes continue in the city. A retired bureaucrat and vice president of a gated housing society in Lahore revealed that high unemployment and escalating inflation are pushing many young men towards criminal activities, impacting the lives of law-abiding citizens.

Similarly, in urban areas, incidents of purse snatching, and mobile theft are witnessing an increase. Several videos circulating on social media capture individuals on motorcycles approaching vehicles and using firearms to demand cash from the occupants.

The way forward for curbing this necessitates a holistic strategy that includes targeted initiatives to reduce poverty, improve access to healthcare and education, and create an entrepreneurial culture that promotes self-employment. Rebuilding a more resilient and fair society depends equally on creating an environment that promotes social activity and civil society engagement.

Manahil Bazai
Manahil Bazai
The writer is working as a Research Assistant at Balochistan Think Tank Network (BTTN), Quetta


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