pakistan: Pakistan on brink of economic collapse

With the depletion of foreign exchange reserves and rising inflation, Pakistan is on the brink of economic collapse and is on a path similar to Sri Lanka’s economic demise.

Pakistan’s central bank, the State Bank of Pakistan (SBP), has sent an SOS to the government that falling foreign exchange reserves could negatively affect the country’s importing capacity. The decline in Pakistan’s forex reserves, which fell on June 17 to $8.24 billion by 2022,” the European Times said in a report.

“This trend is likely to continue for the foreseeable future under pressure from debt service and other payments. In order to preserve dwindling forex reserves, the SBP has called for a temporary ban on imports of all non-essential goods. The bigger challenge today is “However, the risk of rising fuel imports affecting Pakistan’s energy security. In the long run, therefore, the risks of Pakistan moving in the Sri Lankan direction are all too close and real,” the report added.

Pakistan’s current economic indices are pretty bad. According to the UNDP, Pakistan has a debt of more than $250 billion.

“This cost of living crisis is plunging millions of people into poverty and even famine at a breathtaking pace and with it, the threat of increasing social unrest grows by the day,” UNDP head Achim Steiner.

This statement came against the background of Pakistan’s mounting economic problems. Earlier today, the Pakistrupee depreciated to an all-time low against the US dollar as it fell to PKR 240.5 against the dollar in the interbank market.

The Pakistani currency lost 4.48, or 1.89 percent, compared to its close of 236.02 at 12:03 a.m. yesterday, the Dawn newspaper reported, citing the Forex Association of Pakistan (FAP).

According to the Foreign Exchange Association of Pakistan, the rupee has lost more than 30 percent of its value since the beginning of 2022.

On Wednesday, Pakistan’s Finance and Revenue Minister Miftah Ismail expressed hope that pressure on the rupee would ease within a few weeks. “From next month, dollars in Pakistan through exports and remittances will be more than dollars out through imports and debt service. Therefore, the pressure on the rupee would ease and the currency would appreciate in value,” said Ismail. .

He said multiple factors, including the international record high of the US dollar, rate hikes, global inflation and supply chain disruption, have led to the rupee’s depreciation.

Earlier this month, the IMF reached a staff-level agreement with the Pakistani authorities to complete the combined seventh and eighth review of the Extended Fund Facility (EFF).

Despite the agreement, ongoing political and economic turmoil in the country has raised concerns among investors, Pakistan’s Business Recorder reports.

This demise of Pakistani rupees comes as Moody’s Investors Service and Fitch Ratings said it expected Pakistan to secure the $1.2 billion bailout of the International Monetary Fund (IMF).

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