WEF lists rapid inflation, state collapse, terror as major risks for Pakistan

The World Economic Forum has warned that Pakistan is facing multiple major risks – including inflation, state collapse and terrorism – and said the country was also among larger emerging markets exhibiting a heightened risk of default like Argentina, Egypt, Ghana, Kenya, Tunisia, and Turkiye.

In its annual report ‘Global Risks 2023’, the World Economic Forum listed a total of 10 risks for Pakistan. These are:

  • 1. Digital power concentration and monopolies
  • 2. Failure of cybersecurity measures (including loss of privacy, data fraud or theft, cyber espionage)
  • 3. Rapid and/ or sustained inflation
  • 4. Debt crises
  • 5. State collapse
  • 6. Lack of widespread digital services and digital inequality
  • 7. Interstate conflict
  • 8. Terrestrial biodiversity loss and ecosystem collapse
  • 9. Terrorist attacks
  • 10. Employment and livelihood crisis

The report says affordability and availability of basic necessities can stoke social and political instability. It may also exacerbate instability in countries facing simultaneous food and debt crises, such as Tunisia, Ghana, Pakistan, Egypt and Lebanon, it added.

“Conflict and geo-economic tensions have triggered a series of deeply interconnected global risks. These include energy and food supply crunches, which are likely to persist for the next two years, and strong increases in the cost of living and debt servicing. At the same time, these crises risk undermining efforts to tackle longer-term risks, notably those related to climate change, biodiversity, and investment in human capital.”

The report about Pakistan noted that a combination of extreme weather events and constrained supply could lead the current cost-of-living crisis into a catastrophic scenario of hunger and distress for millions.

As a result, it can also turn the energy crisis towards a humanitarian crisis. Energy shortages – because of supplier shut-offs or natural, accidental, or intentional damage to pipelines and energy grids – could cause widespread blackouts and fatalities, if combined with seasonal extreme weather.

The report identifies that the cost-of-living crisis is the biggest short-term risk while the failure of climate mitigation and climate adaptation are the largest long-term concerns. The geopolitical rivalries and inward-looking stances will heighten economic constraints and further exacerbate both short- and long-term risks.

Also, estimates suggest that over 800,000 hectares of farmland have been wiped out by 2022 floods in Pakistan, which has resulted in increasing commodity prices significantly in a country that is already grappling with record 27 percent inflation. Water stress is also widespread in Pakistan which particularly impacts women and girls responsible for water collection, with knock-on impacts for health and education outcomes.

More widespread scarcity, combined with paralysis of international cooperation mechanisms, has necessitated a degree of water nationalism, resulting in prolonged disputes between neighbouring states and countries.

The WEF says the global pandemic and war in Europe have brought energy, inflation, food, and security crises back to the fore. These create follow-on risks that will dominate the next two years: the risk of recession; growing debt distress; a continued cost of living crisis; polarized societies enabled by disinformation and misinformation; a hiatus on rapid climate action; and zero-sum geo-economic warfare.

According to the report, the coming years will present tough trade-offs for governments facing competing concerns for society, the environment and security. Already, short-term geo-economic risks are putting net-zero commitments to the test and have exposed a gap between what is scientifically necessary and politically palatable. Dramatically accelerated collective action on the climate crisis is needed to limit the consequences of a warming world.

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