Pakistan is believed to be on the brink of bankruptcy as the country’s economic situation faces a dire future with no immediate positive prospects. This is despite ongoing negotiations between Islamabad and the International Monetary Fund (IMF) to resume the $6 billion bailout, according to an ET report.
The crisis-hit country’s currency, the Pakistani Rupee (PKR), is said to be in “free fall” as it crossed 212 to the USD 1 on June 21. As Pakistan’s foreign exchange reserves have been depleted to a critical level and the country has less than six weeks of import cover remaining. Reserves are currently below $9 billion, according to a report in Pakistan Tribune.
The Pakistani rupee has plunged and devalued by 34% over the past year. In contrast, it closed at 157.54 PKR in June last year. Consequently, the The Pakistani rupee has become the “worst performing currency in Asia in 2022” with a fall of almost 16.5% (since December 31, 2001) against the US dollar which places it at the bottom of a basket of 13 peers, including the Japanese yen, South Korean won and Bangladeshi taka, according to the ET report.
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The depreciation in PKR’s value comes as Pakistan struggles with a growing current account deficit, coupled with reserves held by the State Bank of Pakistan (SBP) hitting their lowest level since November 2019. Adding more problems to Pakistan’s economy and its people, the Shehbaz Sharif-led coalition government reportedly hiked fuel prices, the third time in the past month, to fulfill IMF ‘conditionalities’ to revive the bailout .
This has hit the common population hard as there are reports of taxi services, restaurants and door-to-door closings after the recent fuel hikes. Petrol prices in Pakistan are said to have risen by 56% and high-speed diesel prices have risen by 83% since May 26, putting additional pressure on ordinary people.
Amidst all this, China has shown its willingness to provide more than $2 billion in new commercial loans to Pakistan, according to Pak media.
Blame the former prime minister
Pakistani Finance Minister Miftah Ismail announced the rise in oil prices, saying the government had no choice but to “pass on the impact of international prices” to consumers. These developments have added to the political unrest in the country as Prime Minister Shehbaz Sharif has accused former Prime Minister Imran Khan’s government of policies that “damaged the economy” and led to recent oil price hikes. fuel.
On the other hand, former Prime Minister Khan reportedly lambasted the coalition government for “succumbing to IMF pressure” and warned that these price increases would eventually prove “destructive” for the working class in Pakistan.
Imran Khan reportedly calls for nationwide protests against rising fuel and food prices and warned that more hikes and inflation were in sight and urged people to step up their fight against “imported government”.
Meanwhile, the government led by Shehbaz Sharif faces two main challenges here, according to an ET report. The first is to stabilize the country’s economy, and the second is to keep ordinary people happy amid the looming general elections in Pakistan.
The government took these tough measures to desperately revive the IMF program, which is essential for Pakistan’s economy, as many believe it would lead to more foreign lending and improve foreign exchange reserves which have fallen by more than 50% over the past of the past 10 months, according to a report in The Gulf News.
Soaring inflation, rising fuel and food prices, unavailability of basic commodities, closure of small businesses and worsening political crisis could lead to Pakistan’s “default” for the ” second time in the country’s history. The resumption of the IMF program and emergency loans from friendly countries will not solve Pakistan’s economic difficulties in the long term.
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