While Pakistan may be celebrating the formation of new government most likely to be headed by Imran Khan, the problem of crumbling economy is still unsolved. While every Pakistani would wish the celebrations of politics turns to their economy as well, a lot of Pakistanis are moving towards cryptos to sustain themselves from rising inflation and falling Pakistani Rupee, just like what happened in Venezuela.
Pakistan’s crumbling economy looking for respite
Pakistan is going through troubled times. Its political instability is also looming over its economy. Its outgoing government expects the economy will grow at the fastest pace in more than a decade in the coming fiscal year, but economists are doubtful. Growth in South Asia’s second-largest economy is set to ease to 5.2 percent in the year starting July, according to the average of six economists surveyed by Bloomberg.
The projected slowdown comes as the government scales back plans for spending on roads and infrastructure to meet fiscal targets — the key to winning financial support from the International Monetary Fund.
In its global humiliation, the international watchdog against money laundering and financing of terrorism, the Financial Action Task Force (FATF), has also put Pakistan on a list of “jurisdictions with strategic deficiencies”, also known as the greylist. FATF’s reasoning is Pakistan’s “structural deficiencies” in anti-money laundering (AML) and combating the financing of terrorism (CFT). This is not the first time Pakistan has found itself on one of FATF’s list of not-so-good guys; the country was there in 2008 and from 2012 to 2015.
But Pakistan stands out as the most significant name on the list with the largest population and the largest economy, not to forget the largest military.
The Pakistani rupee has also fallen to the all-time low amid country’s central bank fears of a balance of payments crisis. The apparent devaluation shows signs of vulnerability in Pakistan’s nearly $300 billion economies, as dwindling foreign reserves and a widening current account deficit trigger speculation about going back to the International Monetary Fund for loans for the second time since 2013.
As the Pakistani Rupee devalues a lot of Pakistanis are moving to cryptocurrencies to sustain, something that is banned by its government. This was apparent as the number of people buying and selling bitcoin reached to 57 on the platform Localbitcoins the only source for people to buy and sell cryptocurrencies after its first bitcoin exchange Urdubit shutdown.
“People are turning to cryptocurrency as an investment, but slower than the western world as the literacy rate is lower here and its a totally new phenomenon for them,
” said Abu Shaheer, the founder of Pakistan-based cryptocurrency Pakcoin. “With falling Rupee, some are using it as alternative means of payments,”
“Most people using cryptocurrencies are a day or short-term traders finding investment opportunities in crypto and are growing in number.”
Pakistan replicating Venezuela trends
Venezuela became an example for people moving to Bitcoin as the inflation spiraled upward rapidly. The country is in steep crisis in recent years ever since oil prices fell below the $100 area in 2014 down to a third of the price in early 2016. The Bolivarian Republic of Venezuela is home to one of the worst hyperinflation crisis in the world ever.
President Nicolas Maduro had blamed the external factors and US interference but the reality was Inflation has skyrocketed to 8900% in March 2018, according to tradingeconomics.com. and Venezuelan Bolívar plunges in the streets of Caracas which lowered the purchasing power of the official minimum wage rendering the Bolivar nearly worthless.
As the South American countries economy reached its lowest in April, LocalBitcoins volume for the week of 14 April 2018 was of 2,789,991,957,138 Venezuelan Bolívares. The previous week held a figure below two trillion VEF, at 1,744,669,576,098 Venezuelan Bolívares. Volumes were mostly below 1 trillion VEF before that.
Looking the situation Erik Voorhees of Shapeshift had tweeted Volume of person-to-person Bitcoin trading in #Venezuela hits a record high last week… sadly as much a measure of BTC adoption as it is of #bolivar debasement.
— Erik Voorhees (@ErikVoorhees) April 19, 2018
This unleashed the replies as people of Venezuela took to Twitter to say that it’s at mercy of cryptocurrency the are surviving. One tweet read
“Thanks to crypto and trading I can live here in Venezuela without suffering what the most of people suffer every day. But is heartbreaking see people eating directly from garbage can (entire families) and see so much poverty”, he said.
As Pakistan economy is crumbling it’s resembling the same signs as Venezuela as far as shifting to cryptocurrencies is concerned. Even for the crypto community a country being forced to use crypto is not a good sign. Hope the new government improves the economic situation and its embraces cryptocurrencies in good times and not amidst crises
Will Pakistan be able to solve its crisis or will sink just like Venezuela? Do let us know your views on the same.