Increased economic crisis in Pakistan; Why did protests break out in Occupied Kashmir?

A police officer was killed and more than 90 others injured in violent protests in Pakistan-occupied Kashmir (PoK) since Friday (May 10), Pakistani media reported.

The violence erupted after about 70 members of the joint Awami Action Committee, led by traders, were arrested in the region during a strike against rising prices of food, fuel and essential commodities. Pakistan’s economic crisis and high inflation have resulted in hardships for its people, and the suspension of trade with India has further affected a section of traders.

Protests in Pakistan Occupied Kashmir

Traders staged a road blockade on Friday protesting the hike in electricity and food prices. In August 2023, there were similar protests against high power charges.

A general strike was held in Muzaffarabad, the capital and largest city of Pakistan-occupied Kashmir, as public transport, shops, markets and businesses were closed. A large number of protesters broke barricades and clashed with the police in Mirpur and Muzaffarabad divisions. On Sunday, paramilitary rangers were called in to guard government buildings like the legislature and courts.

Pakistan’s economy has seen extremely high inflation and poor economic growth for more than two years due to rising energy costs. Consumer inflation has remained above 20% since May 2022, and will touch 38% in May 2023, Dawn newspaper reported.

Discrimination is shown

Leaders in Pakistan-occupied Kashmir are protesting the Pakistani government’s discriminatory approach to power-sharing. Dawn newspaper reported that Chief Minister Chaudhry Anwarul Huq of the region complained that he was not getting his fair share of the 2,600 MW of hydropower generated by the Neelam-Jhelum project.

Chief Minister Huq has said that his demand for resources to increase the salaries of government employees was not met in the recent budget and he was forced to divert development funds to pay for them.

Decline of Indian trade

Following the February 2019 Pulwama terror attack, traders in Pakistan-occupied Kashmir were hit hard by India’s 200% tariff hike on Pakistani goods such as dry dates, rock salt, cement and gypsum. As a result, Pakistan’s exports to India declined on average. Exports were only $2.5 million per month between March and July 2019, compared to $45 million per month in 2018, Dawn newspaper reported.

The situation became more difficult after Pakistan suspended all trade following India’s constitutional changes in Jammu and Kashmir in August 2019. India-Pakistan trade has shrunk to $2 billion annually over the past five years, a fraction of the $37 billion trade potential estimated by the World Bank.

Pakistan’s economic crisis

Pakistan’s foreign exchange reserves have dwindled sharply since global food and fuel prices rose after the Russia-Ukraine war. A similar looming currency balance crisis in 2022-23 also crippled Sri Lanka, leading India to extend support measures.

According to the State Bank of Pakistan, the country’s foreign exchange reserves fell from $20.1 billion in August 2021 to $2.9 billion in February 2023, enough to cover only one month of imports. Pakistan imports nearly 40% of its total primary energy supply.

Pakistan’s largely aid-dependent economy has an underdeveloped private sector, and its stock market has shown the lowest growth in years. The country’s Gross Domestic Product (GDP) declined by 0.17% in FY23. The International Monetary Fund (IMF) recently said that Pakistan has total financing needs of $123 billion over the next five years, with $21 billion in 2024-25 and $23 billion in 2025-26.