ISLAMABAD: The World Economic Forum in its global crisis risk report has identified debt crisis, sustained and/or rapid inflation, state collapse, failure of cyber security measures, and concentration of digital power as top five risks faced by Pakistan.

In its ‘Global Risks 2023’ report, the global forum said that Pakis­tan was also among larger emerging markets exhibiting a heightened risk of default. Other countries include Argentina, Egypt, Ghana, Kenya, Tunisia, and Türkiye.

According to the report, “[A]ffordability and availability of basic necessities can stoke social and political instability … may also exacerbate instability in countries facing simultaneous food and debt crises, such as Tunisia, Ghana, Pakistan, Egypt and Lebanon.”

It said water stress was widespread and its scarcity, combined with paralysis of international co­operation mechanisms, has nec­essitated a degree of water nationalism, resulting in prolonged disputes.

“In the face of spreading humanitarian crises and state ins­tability, water infrastructure continues to be used both as a weapon and target, mirroring past water conflicts and terrorism in India, Pakistan and Afghanistan.”

Cost of living to be top global crisis risk over next two years, warns Global Risks 2023 report

The 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’

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”, it added.

However, the “cost of living crisis” is ranked as the most severe global risk over the next two yea­rs, peaking in the short term.

“Biodi­versity loss and ecosystem collapse” is viewed as one of the fastest deteriorating global risks over the next decade, and all six environmental risks feature in the top ten risks over the next ten years.

Nine risks are featured in the top ten rankings over both the short- and the long-term, including “geo-economic confrontation” and “erosion of social cohesion and societal polarisation”, alongside two new entrants to the top rankings: “Widespread cybercrime and cyber insecurity” and “large-scale involuntary migration”.

‘Geo-economic tensions’

It further warned that conflict and geo-economic tensions had triggered a series of deeply inter-connected global risks, adding that cost of living was the biggest short-term risk while a slow climate adaptation process were long-term concerns. These include energy and food supply crunches, which are likely to persist for the next two years, and strong increases in cost of living and debt servicing.

At the same time, 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 World Economic Forum meeting, the report warned that unless the world starts to cooperate more effectively on climate mitigation and climate adaptation, over the next 10 years this will lead to continued global warming and ecological breakdown.

Failure to mitigate and adapt to climate change, natural disasters, biodiversity loss and environmental degradation represent five of the top 10 risks — with biodiversity loss seen as one of the most rapidly deteriorating global risks over the next decade.

In parallel, crises-driven leadership and geopolitical rivalries risk creating societal distress at an unprecedented level as investments in health, education and economic development disappear, further eroding social cohesion. Finally, rising rivalries risk not only growing geo-economic weaponisation but also remilitarisation, especially through new technologies and rogue actors.

The next decade will be characterised by environmental and soc­i­etal crises, driven by underlying geopolitical and economic trends.

Balancing act

According to the 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, an increasingly urgent transition to new energy systems, and a less stable geopolitical environment.

Without a change in trajectory, the report warned, vulnerable countries could reach a perpetual state of crisis where they are unable to invest in future growth, human development and green technologies.

“Climate and human development, the report added, must be the main concern of global leaders to boost resilience against future shocks,” said Saadia Zahidi, the managing director of World Economic Forum.

Published in Dawn, January 12th, 2023