Pakistan’s economy nears collapse as foreign currency reserves plunge
Pakistan’s economy is at risk of collapse as the country is facing a severe foreign currency shortage and rolling blackouts, leaving businesses struggling to operate.
As per an article in Financial Times, shipping containers full of imports are piling up at Pakistani ports, according to the country’s central bank, with buyers unable to secure the dollars to pay for them.
Associations for airlines and foreign companies have warned that they have been blocked from repatriating dollars by capital controls imposed to protect dwindling foreign reserves.
The difficulties were compounded by a nationwide blackout on January 23 that lasted more than 12 hours.
Prime Minister Shehbaz Sharif has expressed his “sincere regrets for the inconvenience” and has said an inquiry will determine the cause.
Analysts warn that Pakistan’s economic situation is becoming untenable and is at risk of following Sri Lanka, where a lack of foreign reserves triggered severe shortages of essential goods and eventually led to a default in May.
Islamabad’s foreign reserves have dropped to under $5bn, less than a full month of imports, and Sharif’s government remains in a deadlock with the IMF over resurrecting a $7bn assistance package that stalled last year.
The country is still reeling from devastating floods last year, which affected tens of millions of people and caused damage costing an estimated $30bn.
International lenders pledged more than $9bn to aid the country’s recovery at a donor conference in Geneva this month, but details about how and when that money will arrive are still being negotiated.
Sharif’s government has said it is committed to reviving the IMF deal to unlock the next tranche of funds. But the sides remain at an impasse over the IMF’s demand that Pakistan accepts economic reforms such as raising subsidised energy prices.