The Pakistan Economy is at High Risk

Pakistan faces economic collapse as its foreign currency reserves deplete and inflation rises, simulating Sri Lanka’s economic decline.

In a report by the European Times, Pakistan’s central bank, the State Bank of Pakistan (SBP) has alerted the government that falling foreign exchange reserves may affect the country’s import capacity.

To preserve diminishing forex reserves, the SBP has advocated a temporary ban on the import of all non-essential goods. However, the greater challenge today is the growing threat of rising fuel imports that threaten Pakistan’s energy security. In the long run, Pakistan’s loss of energy security is very real,” the report said.

SEE ALSO: Pakistan Reported The First Fresh Polio Case

Pakistan’s economic indicators are quite poor at the moment. There are more than USD 250 billion in debt owed by Pakistan, according to the UNDP.

According to UNDP head Achim Steiner, the cost-of-living crisis is pushing millions of people into poverty and starvation at an alarming rate, resulting in social unrest.

A mounting economic crisis is causing Pakistan to make this statement. In the interbank market, the Pakistani rupee dropped to PKR 240.5 against the US dollar earlier today, a record low.

A Dawn newspaper report cited the Foreign Affairs Association of Pakistan (FAP) as saying that the Pakistani currency lost 4.48 percent, or 1.89 percent, from yesterday’s close of 236.02.

Pakistan’s Foreign Exchange Association estimates that the rupee has lost over 30 percent of its value since 2022.

According to the Minister of Finance and Revenue, Miftah Ismail, the rupee’s pressure should ease in the coming weeks. As a result, pressure on the rupee will subside and the currency will appreciate as incoming dollars from exports and remittances surpass outgoing dollars from imports and debt servicing in the next month.

A number of factors have contributed to the rupee’s decline, including the US dollar reaching historic highs, interest rate hikes, worldwide inflation, and disruptions in supply chains.

An agreement between the IMF and Pakistan authorities was reached earlier this month regarding the seventh and eighth Extended Fund Facility (EFF) reviews.

In spite of the agreement, Pakistan’s Business Recorder reported investors are concerned about the country’s political and economic turmoil.

The rupee’s downfall comes as Moody’s Investors Service and Fitch Ratings expect Pakistan to obtain an IMF bailout of USD 1.2 billion.