Updated: January 22, 2023 15:44 IST
Islamabad [Pakistan]January 22: Pakistan’s economic crisis is going from bad to worse. Foreign exchange reserves in the State Bank of Pakistan (SBP) recently touched a two-week low of $4.343 billion. This is only due to the inefficiency of the political class and the over-involvement of the military in decision-making, the Financial Post reported.
According to a Washington-based financial news organization, this record on the forex stock comes after a $1 billion loan was disbursed by Pakistan to two United Arab Emirates (UAE) banks. Foreign remittances to Pakistan decreased from $15.8 billion to $14.1 billion. Notably, on January 6, foreign exchange reserves in the SBP touched a record low of US$4.343 billion, enough for just two weeks.
Low foreign exchange reserves have also led to severe food inflation, with people struggling to survive without access to much-needed food and energy supplies, the Financial Post reported.
Now that Pakistan has secured part of a six billion dollar loan from the International Monetary Fund (IMF), it is seeking financial support and assistance from international financial institutions and friendly countries like Saudi Arabia, China and the United Arab Emirates, the report said.
Pakistan had earlier raised $10 billion at a donor conference in Geneva for the floods that hit the country from June to October last year.
It should be noted here that Pakistan has provided $16 billion in aid for flood relief. Interestingly, 90 percent of these financial commitments ($8.7 billion) are project loans due over the next three years. Although the terms of these loans are yet to be disclosed, this has raised concerns about repayment within the given time frame, according to a Financial Post report.
To support Pakistan, Saudi Arabia has said it will deposit another $2 billion in the State Bank of Pakistan, after “studying” it, in addition to which the United Arab Emirates is expected to contribute $3 billion. Similar assistance is expected from China, the report said.
Ironically, all this funding is in the form of loans, which increases Pakistan’s long-term debt and increases its annual debt service requirement. At the same time, the country is facing problems in clearing imported goods and letters of credit due to delayed payments from banks.
Another reason for the country’s poor economic condition, the report states, is that Pakistan’s frequent economic crises are mainly caused by persistent fiscal deficits, government spending tendencies, neglecting domestic resources and increasing excessive spending. The report stated.
“It was a shame to have a nuclear weapon in one hand and a begging bowl in the other,” Prime Minister Shehbaz Sharif said while addressing a passing out ceremony for probationary officers of the Pakistan Administrative Service (PAS) on January 14. The Post reported.
Sharif, however, blamed the Pakistan Tehreek-e-Insaf (PTI) for wasting time by creating “political unrest” in street protests. However, such political wrangling will not help Sharif save Pakistan from an impending default crisis, the Financial Post noted. (ANI)