Economic Impact of Indian Demonetization on Pakistan
Today’s date, one of the major reasons why Pakistan has become bankrupt is India’s demonetization. Recently, Pakistani Javed Khanani, who was handling 40% of the fake currency circulating in India after demonetization, committed suicide, and what is the condition of Pakistan today?
People in Pakistan carry cooking gas in plastic bags. The government has reduced the salary of everyone from minister to MP and the union minister of this Pakistan has even said that from now onwards only take tea for one time in Pakistan. But maybe Pakistan does not have to see this day, If in 2016 India would not have been demonetized the currency. In fact till 2016 Pakistan in its official government currency process of Punjab and Balochistan is printing Fake Indian Currency. And due to Pakistan getting the benefit of 500 crores every year and India being ruined. But, all this stopped in one stroke as soon as demonetization took place. Rs 500 and Rs 1000 Currency becomes illegal.
According to the Indian Ministry of Finance, the total number of fake notes that came into India in 2010 from abroad was pegged at ₹ 1,600 crores, and going by this estimate, the report pegged the total profit figure at ₹ 500 crores. In this article, we will see the Economic Impact of Indian Demonetization on Pakistan.
In The News: Pakistan Economic Crisis
Pakistan’s economic crisis is getting worse by the day. By the end of January 2023, the country’s external debt had risen by 38% to PKR 20.69 trillion as compared to a year earlier. Pakistan revenue reported in January 2022 that the State Bank of Pakistan (SBP) had an external debt of PKR 14.98 trillion.
There was a massive devaluation of the local currency against the US dollar, according to the report. In comparison with January 2022, the exchange rate of the local unit was PKR 176.74. However, the rate fell by 51% in January 2023 to PKR 267.94.
By the end of January 2023, Pakistan’s government had accumulated PKR 54.94 trillion in debt. By the end of January 2023, domestic debt had reached PKR 34.26 trillion. Meanwhile, the country’s long-term loans increased to PKR 27.51 trillion.
Demonetization by the Indian Government
The demonetization of Indian Currency was a surprise move by the government of India on 8th November 2016 that aimed to curb illegal activities such as terrorism and money laundering. This decision had far-reaching consequences on the economy of Pakistan, which had been relying on the smuggling of fake Indian currency through porous borders. The illicit activities of the Pakistani government and its citizens were not only a major source of income but had played a role in keeping the legal economy of the country alive. The abrupt demonetization of Indian currencies caused a massive blow to the Pakistani economy.
Role of the Pakistan Government in Printing Fake Currency
The Pakistani government has been accused of printing and circulating fake Indian currency in India. This fake currency circulating in India is estimated to be around ₹ 1,600 crores in the year 2010. The counterfeit Indian currency was being used to finance various illegal activities such as smuggling, terrorism, and money laundering. This had become a major source of income for the Pakistani government as well as citizens and was also used for the funding of Terrorist organizations.
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Smuggling of Fake Currency
The smuggling of fake Indian currency into India has been going on for many years. This activity was being carried out by the Pakistani government as well as by individual citizens for their personal gains and to finance illegal activities. To bypass the strict regulations and laws, the smugglers took the help of the porous borders between Pakistan and India. The fake currency was smuggled into India in large quantities to defraud the citizens of India.
Effects of Demonetisation on Pakistan’s Economy
The decision of the Indian government to demonetize the Indian currency resulted in a major blow to the Pakistani economy. The value of the Pakistani Rupee decreased as the fake currency in circulation was taken out of circulation suddenly. This resulted in a decline in the purchasing power of Pakistani citizens. This drop in purchasing power leads to a decrease in the demand for Pakistani exports and imports thereby weakening the economy.
Furthermore, a massive amount of jobs, due to the lack of demand for Pakistani-produced goods, were lost resulting in an increase in the poverty rate in Pakistan. Furthermore, the ban on fake Indian currency led to a decrease in the GDP growth rate of the country causing a further decline in the economic status of country.
The government of Pakistan had been financing illegal activities by printing and circulating fake Indian currency and this has resulted in a major blow to the economy of the country. The sudden withdrawal of the fake currency has resulted in a decline in the purchasing power of the Pakistani Rupee and has caused a huge loss of jobs to the citizens. Furthermore, the GDP growth rate of the country has been declining in wake of the decline in export and import demand. The decision of the Indian government to demonetize the Indian currency has had a major impact in the economic and social standpoint of Pakistan.
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