Pakistan’s Economic Crisis: Struggling to Avoid Default as Inflation Reaches 48-Year High
By Pakistan is in the grip of a severe economic crisis as it battles high levels of external debt and a deteriorating security situation.[0] The nation has implored the International Monetary Fund (IMF) for economic aid and has vowed to carry out reforms in return for the money.[1] The rate of inflation has skyrocketed, hitting its highest point in 48 years, making it increasingly difficult for people to purchase essential items.[1] The government is facing the challenge of averting national bankruptcy, with no other avenues for a rescue package.[1]
The International Monetary Fund has cautioned multiple times that this situation could put fragile economies in a precarious state.[2] The Global economy expects a slight increase in growth for emerging markets and developing economies this year, as the US dollar weakens, global inflation drops, and China's reopening stimulates demand. Nevertheless, the potential to manage debt remains a cause for concern.[2]
In 2013, ex-Prime Minister Nawaz Sharif consented to the terms of an International Monetary Fund loan with a total sum of $6.6 billion, to be paid out over a period of 36 months[3] Despite this, his administration was not able to expand the number of people paying taxes or to sell off unprofitable, state-owned enterprises.[3] In 2019, then-Prime Minister Imran Khan initiated the current bailout program; however, he was removed from office via a parliamentary vote last year.[3] The loan program has been subject to three revisions in the past two years, with each new finance minister seeking to renegotiate the terms.[3] In September, Ishaq Dar was appointed as Pakistan's newest finance minister.[3] Dar referred to the extended postponement of the IMF team, which was scheduled to arrive in October yet didn't arrive until late January, as “abnormal.”[3]
Pakistan is not only struggling with crippling inflation, but also with shortages of basic necessities, sometimes for seemingly ridiculous causes.[4] An example of a product imported from Brazil and America is soyabean meal, which is a key ingredient in poultry feed.[4]
The Pakistani rupee experienced a fall of 9.6% against the US dollar on January 26, the most significant decline in a single day within the past two decades.[5] Hundreds of foreign containers filled with food and medical supplies have been stuck in ports for weeks due to the severity of the dollar crisis, as authorities lack the funds to make the necessary payments.[5]
The Pakistani Prime Minister Shahbaz Sharif's administration is now tasked with a difficult challenge: persuading the International Monetary Fund (IMF) to restore their loan to the nation, in order to prevent a default, according to DW news.[5]
0. “Blackouts and soaring prices: Pakistan's economy is on the brink” KADN, 2 Feb. 2023, https://www.kadn.com/news/national/blackouts-and-soaring-prices-pakistans-economy-is-on-the-brink/article_5970e7bd-7938-5b26-b82e-117a7dfebe14.html
1. “Pakistan Economic Crisis: Can IMF Intervention Avert National Bankruptcy?” ap7am, 5 Feb. 2023, https://www.ap7am.com/lv-370535/
2. “Blackouts and soaring prices: Pakistan's economy is on the brink” kuna noticias y kuna radio, 2 Feb. 2023, https://kesq.com/news/2023/02/02/blackouts-and-soaring-prices-pakistans-economy-is-on-the-brink-2/
3. “Analysis | Why Pakistan Is Struggling to Get Another IMF Bailout” The Washington Post, 5 Feb. 2023, https://www.washingtonpost.com/business/energy/why-pakistan-is-struggling-to-get-another-imf-bailout/2023/02/04/3d446f86-a508-11ed-8b47-9863fda8e494_story.html
4. “The Pakistan Crisis Is Far Worse Than We Think” Swarajya, 4 Feb. 2023, https://swarajyamag.com/commentary/the-pakistan-crisis-is-far-worse-than-we-think
5. “World News | Instead of Fixing Economy Pak Politicians Embroiled in a Tug-of-war: Report” LatestLY, 4 Feb. 2023, https://www.latestly.com/agency-news/world-news-instead-of-fixing-economy-pak-politicians-embroiled-in-a-tug-of-war-report-4795452.html
