Pakistan at risk of becoming a 'zombie' state due to political, economic chaos

Writing for Dawn, author Sakib Sherani explains that the term "zombie" banks is used to describe barely surviving banks and firms that are financially unviable but are kept alive by repeated government bailouts. 

This article poses the question of whether there can be "zombie" countries that are nominally sovereign and independent, but only on paper. Such countries would have suffered state breakdown, with a collapsed economy and an inability to service debts and obligations to foreigners. They could only meet essential import needs through handouts and bailouts from friendly countries. A significant portion of the population would have grown tired of a corrupt, self-serving elite, leading to businesses and the affluent moving their capital abroad. Lebanon is an example of a failed state, and Pakistan is in danger of becoming one. 

Widening internal fissures and a chain of events since the establishment's regime change operation in April 2022 have accelerated Pakistan's downward spiral into political, economic, social, and institutional chaos. The wheels appear to have come off the political system, with the economy in a tailspin. Businesses and industries are closing, with massive unemployment, capital flight, and brain drain from the country. 

The economic crisis is headed towards Pakistan's banks, with rising pressure from mounting losses on their credit and investment portfolios due to a sharp increase in non-performing loans and interest rates. The government's borrowing from the banking system accounts for almost 70% of the latter's total lending and 92% of its entire deposit base. 

The article concludes that an unequivocal and immediate return to constitutional rule and the rule of law is the only way forward. The timely holding of free and fair elections by a credible and neutral set-up and the transfer of power without impediment or conditions to the elected civilian government will defuse the multiple pressures that have built up. However, ultimately, the answer revolves less around what needs to be done and more around who will step up.

To read the full article visit www.dawn.com