Two weeks money left to run the country
The State Bank of Pakistan has told the government in its latest report that there is only $ 4.34 billion left in the country’s foreign exchange reserves, due to which the country has only money left to buy goods for a maximum of 2 weeks, while Pakistan needs to meet its own requirements. Billions of dollars of debt also have to be repaid. According to the Financial Post report, this has happened only because of the ineptitude of the political class and excessive involvement of the military in decision making. According to the report of the Financial Post, Pakistan’s foreign exchange reserves are just over $4 billion when Pakistan has repaid a loan of one billion dollars to two UAE banks only last week. That is, Pakistan is now stuck in a dire situation and it does not see any way out of this vortex.
How serious has the crisis become?
The report of the Financial Post states that the amount sent from abroad to Pakistan has decreased from $ 15.8 billion to $ 14.1 billion. Whereas, the Bank of Pakistan has said in its report, that the country’s foreign exchange reserves touched the lowest level of $4.343 billion, which is only enough for two weeks. A severe shortfall in foreign exchange reserves has led to severe food inflation in the country, with people struggling to survive without essential food and energy resources, the Financial Post reported. The wheat crop has been destroyed due to the severe floods in Pakistan last year, due to which the flour has run out. At the same time, there has been an outcry in the country for pulses as well.
IMF is the last resort… but
Saudi Arabia and China have given a deep blow to Pakistan in the name of giving new loan, so now IMF is the last option left with Pakistan. Pakistan’s Prime Minister Shehbaz Sharif had said in a tweet last week that the IMF officials are coming to Pakistan only after a day, but the IMF officials did not reach Pakistan. At the same time, Dawn newspaper has said in its report that IMF has clearly told Pakistan that first it should implement the conditions of IMF, only then the officials will go to Pakistan to discuss the next tranche of loan.
Help came for the flood… but
Pakistan raised $10 billion at a donor conference in Geneva on January 10 for the severe floods that hit the country from June to October last year. But, it is important to note here, that Pakistan had actually appealed for $16 billion as aid to recover from the floods. But, interestingly, of the promised financing, $8.7 billion, or 90 percent, will be in the form of loans for individual projects that will be launched over the next three years. However, the terms of these loans are yet to be revealed, which raises concerns about its repayment at the given time frame, claims the Financial Post report.
How did you get a blow from Saudi and China
Prime Minister Shehbaz Sharif traveled to Saudi Arabia earlier this month to seek financial aid, where Saudi Arabia has asked its officials to “study” the $2 billion deposit in Pakistan’s State Bank. But, last week, the Finance Minister of Saudi Arabia has given a big blow to Pakistan by saying in the Davos summit that Saudi Arabia will now give loan with conditions, because this money belongs to the tax payers of Saudi Arabia. Means, Saudi Arabia will give loan for investment in Pakistan, not for help. At the same time, Pakistan has also sought help from China at the time of economic crisis, but no response has come from China so far. Last year, China refused to give loan to Pakistan. At the same time, the irony is that if Pakistan gets help from Saudi Arabia and China, it will not be financial aid, but economic loan, which will further increase Pakistan’s debt.
Why is there a crisis in Pakistan?
The Financial Post has said in its report that the reason for the worsening economic crisis in Pakistan is due to the recurring economic crisis, which is mainly due to the fiscal deficit. That is, the government of Pakistan spends much more than necessary, domestic resources are wasted and governments have miserably failed to manage the economic system. Prime Minister Shehbaz Sharif, while addressing a Pakistan Administration Service (PAS) event on 14 January, said that “it is shameful to have a nuclear weapon in one hand and a begging bowl in the other.” That is, the serious condition of Pakistan can be understood. On the other hand, even if Pakistan escapes from default this time, Pakistan will not be able to live peacefully, because in the next two years, Pakistan has to repay a debt of $40 billion, which will be impossible to repay.