Back‘At the end of road’: Pakistan heading for a Sri Lanka-esque future as IMF visits. Explained
The country with the fifth largest population in the world has just less than $3.7 billion in the state bank -- enough to cover just three weeks of imports.
PremiumThe International Monetary Fund (IMF) is slated to visit the economic crisis stricken country of Pakistan on Tuesday to discuss a vital cash injunction, as the Asian nation looks to a bleak economic future, reminding one of the situation Sri Lanka faced that took place last year.
Pakistan government had recently hiked prices of petrol by ₹35 per litre , as the Pakistani Rupee witnessed a historic plunge against the US Dollar a few days ago.
With no assurance of countries willing to offer monetary help, Islamabad looks at national bankruptcy.
Here's looking at what brought Pakistan to its knees ‘economically’
"Inflation is so high that one cannot earn enough"
The country with the fifth largest population in the world is still reeling from the after effects of a political turmoil, a devastating flood that submerged one-third of the country has just less than $3.7 billion in the state bank -- enough to cover just three weeks of imports.
In absence of letters of credit, Pakistan has been rendered unable to afford commodities.
Apart from essential food and medicines, credit issuing had been stopped thereby creating a backlog of thousands of shipping containers at Karachi port stuffed with stock the country can no longer afford.
Industry has been hammered by the imports block and massive rupee devaluation. Public construction projects have halted, textiles factories have partially shut down and domestic investment has slowed.
Pakistan Rupee's historic plunge
The government loosened controls on the rupee to rein in a rampant black market in US dollars, a step that caused the currency to plunge to a record low. Artificially cheap petrol prices have also been hiked.
Pakistan's debts
State Bank governor Jamil Ahmed last month said the country owed $33 billion in loans and other foreign payments before the end of the fiscal year in June.
A diplomatic offensive has seen $4 billion rolled over by lending nations, with $8.3 billion still on the negotiating table.
PM Sharif's stance
Prime Minister Shehbaz Sharif for months held out against the tax rises and subsidy slashing demanded by the International Monetary Fund, fearful of backlash ahead of elections due in October.
What IMF is saying?
"We're at the end of the road. The government has to make the political case to the public for meeting these (IMF) demands," former World Bank economist Abid Hasan told AFP.
"If they don't, the country will certainly default and we'll end up like Sri Lanka, which will be even worse."
Pakistanis look at bleak future
In downtown Karachi, dozens of day labourers including carpenters and painters wait with their tools on display for work that never comes.
"The number of beggars has increased and the number of labourers has decreased," AFP quoted a 55-year-old mason Zafar Iqbal, who was eating biriyani from a plastic bag donated by a passerby.
At the petrol pump, a widow with her son said every few hundred rupees (75 cents) of fuel for their motorcycle was precious, with the pair only eating two meals a day.
Pakistan's political pandemonium
The tumbling economy mirrors the country's political chaos, with former prime minister Imran Khan heaping pressure on the ruling coalition in his bid for early elections while his popularity remains high.
Khan, who was ousted last year in a no-confidence motion, negotiated a multi-billion-dollar loan package from the IMF in 2019.
But he reneged on promises to cut subsidies and market interventions that had cushioned the cost-of-living crisis, causing the programme to stall.
Sri Lanka vs Pakistan
Sri Lanka defaulted on its debt last year and endured months of food and fuel shortages that sparked protests, ultimately forcing the country's leader to flee overseas and resign.
In Pakistan, time is of the essence, with Nasir Iqbal from the Pakistan Institute of Development Economics warning the economy had already "virtually collapsed" due to mismanagement and political turmoil.
(With inputs from AFP)
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
