Pakistan is reportedly on the verge of being bankrupt as the country¡¯s economic situation is facing a dire future with no immediate positive outlook. This is despite the ongoing negotiations between Islamabad and the International Monetary Fund (IMF) to resume the $6 billion bailout package, as per an ET report.
The crisis-hit?country¡¯s currency Pakistani Rupee (PKR) is reportedly on a ¡®free fall¡¯ as it crossed 212 per USD on June 21. Whereas Pakistan's foreign exchange reserves have depleted to a critical level and the country has less than six weeks of import cover remaining. The reserves are currently below USD 9 billion, according to a report published in Pakistan Tribune.
The Pakistani rupee has plunged and devalued by a massive 34% in the past year. In contrast, it closed at PKR 157.54 in June last year. As a result, the?Pakistani Rupee has become Asia¡¯s ¡°worst-performing currency in 2022¡± with a fall of nearly 16.5% (since December 31, 2001) against the US Dollar that putting it at the bottom of a basket of 13 peers, including the Japanese Yen, South Korean Won, and the Bangladeshi Taka, as per ET report.
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The depreciation in PKR¡¯s value comes as Pakistan battles a widening current account deficit, coupled with the State Bank of Pakistan (SBP)-held reserves hitting their lowest level since November 2019. Adding more problems to Pakistan¡¯s economy and its population, the Shehbaz Sharif-led coalition government has reportedly increased fuel prices, the third time in the last month, to fulfil the IMF ¡®conditionalities¡¯ to revive the bailout package.
This has hit the common population severely as there are reports of shutdowns of cab services, restaurants, and home deliveries after the recent fuel hikes. Petrol prices in Pakistan have reportedly been raised by 56% and high-speed diesel prices have gone up by a massive 83% since May 26, putting further pressure on the common people.
Amidst all this, China has shown willingness to provide fresh commercial loans of over USD 2 billion to Pakistan, according to Pak media reports.
Pakistan¡¯s Finance Minister Miftah Ismail announced the price rise of petroleum products saying the government had no choice but to ¡°pass on the impact of international prices¡± to consumers. These developments have deepened the political turmoil in the country as Prime Minister Shehbaz Sharif blamed the former Prime Minister Imran Khan¡¯s government for policies that ¡°damaged the economy,¡± and resulted in the recent fuel price hikes.
On the other hand, former PM Khan reportedly castigated the coalition government for ¡°succumbing to the IMF pressure¡± and warned that these increased prices would ultimately prove ¡°bone-breaking¡± for the salaried class in Pakistan.
Imran Khan has reportedly called for nationwide protests against the rising fuel and food prices and warned that more hikes and inflation were in the offing and urged people to ramp up their struggle against the ¡°imported government¡±.
Meanwhile, the Shehbaz Sharif-led government faces two main challenges here, as per an ET report. The first is to stabilize the country¡¯s economy, and the second is to keep the common people happy amid looming general elections in Pakistan.
The government has taken these harsh measures to desperately revive the IMF programme, which is critical for Pakistan¡¯s economy, as many believe that this would bring more foreign lending and improve foreign exchange reserves that have fallen over 50% in the last 10 months, according to a report in The Gulf News.
Soaring inflation, fuel and food price hikes, unavailability of essential commodities, shutting down of small businesses, and worsening political crisis may lead to Pakistan's ¡°default¡± for the ¡®second¡¯ time in the country¡¯s history. The resumption of the IMF programme and emergency loans from friendly countries will not provide long-term relief to Pakistan¡¯s economic woes.
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