IT is true that cost of political uncertainty is deep rooted and painful which tarnish image of a country. It obfuscates the country policy direction and investors become pessimists therefore they quit the country and prefer to invest in those country which are politically stable. Policy makers even cannot formulate or maneuver a long term economic policy like ten years plan, fifteen years plan etc. Protests just like Arab springs, have failed to strengthen democracy but they further ravaged it and broken the dream of pure democracy and stability.
The political instability has a direct relationship with the economic stability of a country. Because foreign investors don’t invest where there is civil or Sectarian war. CPEC is the robust example of FDI in Pakistan. It’s due to the corollary of little bit better political stability after 2013 as compare to previous years. They will help us to ameliorate our infrastructure especially in backward areas. The FDI also helps to enhance technology so that it could be possible to improve our exchange rate and increase our export level. Same as due to political turmoil or turbulence in 1971, at the time of creation of Bangladesh our GDP growth fell from 11.35% in 1970 to 0.47% in 1971.likewise the removal of PML-N government in 1992, growth fell from 7.7% to 1.7% in 1993. According to a study conducted by IMF economists, in a country where government changes overnight have significantly lower growth than others. They found that an additional cabinet change reduces the annual real GDP per growth rate by 2.39% points.
The second issue is due to political turmoil farmers or suppliers start to accrue their goods or products like floor, wheat, corn etc instead of excess demand, because they think that near future the prices of these products will be soared due to excess demand so they can get maximum profit, people also starts to accrue much goods due to fear of shortage in future this self-fulfilling behavior causes demand pull inflation. High inflation subdue the purchasing power which retards investment. So to control inflation government will import these deficient goods that cause current account deficit, which is also one of the major problems in third world countries. Due to political turmoil Mafia’s emerge according to a report wheat crisis in 2020 in Pakistan was due to some elites who sold wheat into international markets because Minimum support price was higher in international market as compared to in Pakistan, so to get maximum windfalls they sold them illegally.
Industrial shutdown at the time of Imran khan dharna or other protests they had adverse impact on industrial sectors especially in capital. According to a report the country economy had lost of over RS 1.5 billion due to protest and lockdowns during 2012 and 2018. Therefore due to uncertainty the exchange rate has been depreciated from last two years which surpassed the country debt burden. The continuously dipping of points in stocks exchange market also should be noted during political turmoil in Pakistan.
The political uncertainty also leads to institutional instability and corruption. Today in many of the third world countries like Pakistan, Myanmar, Yemen, Syria etc where clashes occur between state institutions and due to their strong bureaucracy they influence and thrown their elected government and also influence in state policy making etc. Due to institutional instability both government and their bureaucrats don’t trust on each other instead they try to seduce each other. A palpable example is in 2015 a clash between Prime Minister and Army Chief in Yemen and recently Myanmar army usurped and imposed emergency which tarnish or tainted democracy in Myanmar.
• There should be true democracy. If in Pakistan democracy would be pure than we would have been unsurmountable or prime
• Strong judiciary is also mandatory. In those countries where judiciary is free and robust, they are enjoying true democracy. Because through strong democracy it could be possible to draw a limit to state institutions under which they will do their work and also they will be able to promulgate their decisions freely without any external pressure.
• Media should be free. In most of the third world countries their governments control media.