Islamabad. Pakistan’s economy has been going down the drain for the past few months, with many indications clearly showing that the country is facing its worst situation since 1971. 1971 was the same year when Pakistan had to face the war against India and Bangladesh became an independent country. The situation in Pakistan is so bad that common citizens are facing acute shortages of food, electricity, medicines, and other essential items.
Amid growing concerns about economic turmoil, Pakistan media has quoted Pakistan Democratic Movement (PDM) spokesman Hafiz Hamdullah as indicating that the upcoming elections will be postponed if the situation does not improve. So let’s know how bad is the condition of the neighboring country? These economic signals of Pakistan can reveal the country’s shaky economy.
Foreign exchange reserves at 9-year low According to
Geo News report, Pakistan’s foreign exchange reserves reached a record low of $4.56 billion, which can cover only three weeks’ imports. This is a disastrous situation for a country that relies heavily on imports. Reports suggest that the drop in foreign funds is due to the repayment of USD 1 billion in commercial loans to two UAE-based banks.
Fiscal Deficit 43%
Pakistan’s fiscal deficit has increased 43 times for the July-September quarter of 2023, according to a report on Pakistan’s revenue, citing official data released by the Ministry of Finance. The report further elaborated that the country’s budget deficit during the first quarter of the current financial year stood at 1 percent of the GDP, as against 0.7 percent in the corresponding quarter of the previous financial year.
Prices have skyrocketed
Pakistan’s Sensitive Price Indicator (SPI) for the week ending January 19, 2023, saw a sharp rise in prices of essential commodities with a 32% year-on-year (YoY) increase, according to Pakistan’s Department of Revenue if media reports are to be believed Is. Meanwhile, experts are indicating a hike of 100 basis points to bring the benchmark rate to 17 percent.
Wheat prices push up inflation
Pakistan mainly depends on imports from Russia and Ukraine to meet its essential food requirements. Before the war between Russia and Ukraine started, Pakistan’s wheat import from both countries was $1.01 billion. However, wheat supplies have been largely disrupted since the Russia-Ukraine conflict. But along with crop losses due to floods, Pakistan is facing a severe shortage of food grains, which has led to a steep rise in prices.
The value of the Pakistani Rupee against the dollar is another dire sign of the stress the country is facing. The exchange rate in the interbank foreign exchange market is being held at 229 Pakistani rupees against the dollar due to the decrease in the domestic market due to increasing import payments, exports, and remittances. Apart from this, due to deterioration in the balance under exports and remittances, the value of the rupee has also decreased.
The government has also failed to take a loan from the International Monetary Fund (IMF) after it failed to meet the conditions for a further hike in petrol and diesel prices, delaying loan payments from the IMF. With no clarity from the government, the IMF is delaying the approval of its 24th loan, pushing the country into a deeper crisis.