Pakistan is staring at bankruptcy as the country’s foreign exchange reserves declined to an 8-year low of below $5 billion and this will cover less than three months of imports. With loan repayments to be made many analysts and economists are saying that the country may face a balance of payments crisis in the coming months.
Pakistan economic crisis staring at bankruptcy
On Wednesday, Finance Minister Ishaq Dar said, Pakistan would implement fiscal measures prescribed by the International Monetary Fund (IMF) to achieve its budget goals for the 2022-23 fiscal year. Moreover, Pakistan needs to raise more than $26 billion to repay foreign debts and reduce its massive current account deficit. Nearly 30% of Pakistan’s foreign debt is owed to China. The decline of forex reserves leaves Pakistan with import cover for only over a month. In the next three months, the country has to pay $8.3 billion to external debtors.
The primary concerns are meeting the obligations of foreign debt and acquiring essential goods such as medicine, food, and energy. As a result, thousands of shipping containers are currently stranded at the port of Karachi, as the banks are unable to assure foreign exchange payments. The cargo includes perishable food items and medical equipment, with a combined value of tens of millions of dollars.
Further, there has been a shortage of wheat flour in the country for the last few days, prices have been increased by PKR 1000 and current rates hover around PKR 3000 per bag. Videos of people protesting on the streets for food as prices of essential items have skyrocketed in the country go viral on social media.