With a mere $4.5 billion in its kitty – $3 billion of which belongs to Saudi Arabia – Pakistan is struggling to keep its economy going.
The spiraling economic crisis and shortage of foreign currency reserves had led to an acute shortage of food, medicines and other essential items in Pakistan.
To make matters worse, large parts of Pakistan have been suffering due to chronic shortage of electricity, resulting in huge losses to industries and subsequent loss of jobs for millions of people.
The economic crisis in Pakistan is similar to the levels faced by Sri Lanka, which had gone through a similar situation prior to its default. Pakistan is now at the same juncture.
While several economists have claimed that Pakistan has already become a bankrupt nation, a mere few days or weeks at the most are left for an imminent disaster and an official declaration of the same unless some sort of miracle takes place.
The Pakistan economic crisis is going from bad to worse. The forex reserves at the State Bank of Pakistan (SBP) has touched its lowest ever level of $4.343 billion, which is just enough to keep the Pakistan economy afloat for two weeks.
The alarmingly low level of forex reserves has led to severe inflation in the food prices all over Pakistan which has left millions of people struggling to survive without the required food and energy resources.
According to a report by the ‘Financial Post’, this dip in Pakistan’s forex reserves came after a loan of $1 billion was repaid by the South Asian country to a couple of banks based in the United Arab Emirates (UAE).
The foreign remittances to Pakistan have also declined from $15.8 billion to $14.1 billion.
However, the International Monetary Fund (IMF) has rolled out a portion of a six-billion-dollar loan, after which Pakistan is hoping to receive further financial support and aid from international financial organisations and friendly countries such as Saudi Arabia, China, and the UAE.
A couple of weeks ago, several global financial institutions and countries had pledged to give a total of $10 billion dollars at a donor conference in Geneva on January 10 for the victims of the floods that had ravaged Pakistan from June to October last year.
However, over $9 billion of that amount were actually project based loans that will be given to Pakistan over a period of three years. As a result, the promised funds will not help Pakistan tide over its current financial problems.
According to an ANI report, the much talked about hybrid system foundation of which had been established by the Pakistan military establishment to decimate two main political irritants – Pakistan Muslim League Nawaz (PML N) and Pakistan People’s Party (PPP) – is responsible for the current Pakistan economic crisis.
This system had been introduced through the then Inter-Services Intelligence (ISI) Director General Shujaah Pasha in the year 2010.
Noted Pakistani economist Khurram Hussain has opined that Pakistan can recover from the current economic quagmire only if it accepts by accepting the stringent term and conditions laid down by the International Monetary Fund. But that will mean that the political and military establishment in Pakistan will have to pay a huge political price domestically due to subsequent economic hardships faced by the people.
He also pointed out that current prime minister Shehbaz Sharif had held several meetings with former finance minister Miftah Ismail before coming into power and discussed the economic challenges confronting Pakistan.
The latter had warned Shehbaz Sharif that his government will have to increase prices to exorbitant levels in order to combat the Pakistan economic crisis.
However, when the Pakistan government started to implement the IMF conditions, several members of the ruling party started protesting against the price hike. With Shehbaz Sharif not succumbing to their pressure, they started contacting his elder brother Nawaz Sharif, who is currently in London.
Current finance minister Ishaq Dar, who was then staying in London due to cases pending against him in Pakistan, told Nawaz Sharif that Miftah Ismail is unable to handle the situation. Nawaz Sharif convened a meeting in London which was attended by both Dar and Ismail in which all sides agreed on a change of finance minister.
Dar then returned to Pakistan and started to implement his outdated ideas without understanding that the global economic scenario has undergone a sea change.
According to Khurram, Dar wasted the next four months and stalled the IMF program, which further aggravated the economic situation in Pakistan.
Economist Yousaf Nazar, who has been a vocal critic of Dar’s policies, has opined that Miftah Ismail’s policies and his stance before the IMF was correct.
“Both the Sharifs were wrong to replace him with Dar. It is not too late. He should be brought back as the Finance Minister,” he was quoted as saying by ANI.
Other Pakistani economists have said that tough decisions will have to be taken in order to battle the current economic crisis facing Pakistan which may cause some setbacks in terms of domestic politics to the PML (N), but the damage will not be so much that the party gets totally finished.
Even 2024 has not brought too much good news for Pakistan. The country’s policymakers have proved incapable of pulling out the country out of the ongoing economic mess.
The rulers and institutions of Pakistan have lied so much to Saudi Arabia, United Arab Emirates (UAE), China, and the United States (US) that these countries as well as global institutions such as the IMF and the World Bank are not ready to trust the country.
ANI quoted a section of Pakistan observers said that the country’s government should avoid putting the entire financial burden of the conditionality of the IMF program on the people alone and urged the ruling elite to share some of the load.
Analysts known for their proximity with Islamist groups have warned that Pakistan is moving fast towards a situation similar to the one faced by Sri Lanka a few months ago when the country had gone bankrupt and people took to the streets and attacked the palaces of top political leaders.
Sri Lanka was forced to take a slew of drastic decisions when the IMF refused to help out. These included a reduction in the strength of the Sri Lanka Army. Sri Lanka’s situation is a big warning for Pakistan. Just like Sri Lanka, Pakistan is also close to China and has differences with India.
Pakistan will have to overcome its economic crisis and in case the situation aggravates, the IMF is very likely to place various kinds of demands including a reduction in the size of the Pakistan Army, an end to the country’s much touted nuclear program, and turning the Line of Control (LoC) in Jammu and Kashmir into a permanent border with India.
Former Pakistan PM Imran Khan in his interview with BBC on January 18 held the Shehbaz Sharif government for the ongoing storm of poverty, inflation and unemployment ignoring the facts that, it is he himself who for undying lust for power has been constantly pushing Pakistan towards political and economic collapse.
At a time when the international community was pledging aid of USD 11 billion for Pakistan at the Climate Resilient Pakistan conference in Geneva, the chairman of the Pakistan Tehreek-e-Insaf (PTI) party was aggravating politics by making moves to the dissolution of the assemblies in the provinces of Punjab and Khyber Pakhtunkhwa (KP).