ISLAMABAD: In its global crisis risk report, the World Economic Forum (WEF) has identified debt crisis, sustained and rapid inflation, state collapse, failure of cyber security measures and concentration of digital power as the top five risks faced by Pakistan.
Inflation-hit Pakistan
In its ‘Global Risks 2023’ report, the global forum said that inflation-hit Pakistan was also among larger emerging markets exhibiting a heightened risk of default. Other countries include Argentina, Egypt, Ghana, Kenya, Tunisia, and Turkey.
According to the WEF report, affordability and availability of necessities can stoke social and political instability and may also exacerbate instability in countries facing simultaneous food and debt crises, such as Tunisia, Ghana, Egypt, Lebanon and Pakistan.”
The report said water stress was widespread, and its scarcity, combined with the paralysis of global cooperation mechanisms, has necessitated a degree of water nationalism, resulting in prolonged disputes.
“In the face of spreading humanitarian issues and instability, water infrastructure continues to be used both as a weapon and target, mirroring past water conflicts and terrorism in India, Afghanistan and Pakistan,” it said.
WEF report also referred to the super floods in Pakistan, which destroyed swathes of agricultural land, increasing commodity prices significantly in a country already grappling with record 27% inflation.
Cost of living
The WEF report said 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 in import-dependent countries or turn the energy crisis towards a humanitarian crisis in the poorest emerging markets.
The “cost of living issues” is ranked as the most severe international risk over the next two years, peaking in the short term.
Geo-economic conflict
It further warned that geo-economic conflict had triggered a series of deeply inter-connected global risks, adding that the cost of living was the most considerable short-term risk. At the same time, a slow climate adaptation process was a long-term concern. These include energy and food supply crunches, likely to persist for the next two years, and substantial increases in the cost of living and debt servicing.
These risks undermine efforts to tackle longer-term risks, notably those related to climate change, biodiversity and investment in human capital.
Released ahead of the annual WEF meeting, the report warned that unless the world starts to cooperate more effectively on climate mitigation and climate adaptation over the next ten years, this will lead to continued global warming and ecological breakdown.
Failure to mitigate and adapt to natural disasters, biodiversity loss and environmental degradation represent five of the top ten risks, with biodiversity loss as one of the most rapidly deteriorating international risks over the next decade.
Balancing act
According to the WEF report, governments will continue to face a dangerous balancing act between protecting a broad swath of their citizens from a prolonged cost-of-living crisis without embedding inflation and meeting debt servicing costs as revenues come under pressure from an economic downturn, the increasingly urgent transition to new energy systems, and less stable geo-economics and geopolitical environment.
Without a change in trajectory, the WEF report warned, vulnerable countries could reach a perpetual crisis where they cannot invest in future growth, green technologies and human development.
Saadia Zahidi, managing director of the WEF, said, “Climate and human development must be the main concern of global leaders to boost resilience against future shocks.”
