Pakistan is in the midst of an “economic meltdown” as its forex reserves dropped by over 40 per cent since the exit of Miftah Ismail and the taking over of Ishaq Dar as the new Finance Minister, reported The Express Tribune.
Amid growing fears of an economic meltdown, senior analysts have said that the government needs to fix responsibility for the depletion of Pakistan’s foreign exchange reserves in a matter of months otherwise “course correction” won’t be possible.
“Who is responsible for the depletion of our foreign exchange reserves in a matter of months? The government has to fix responsibility,” said Naveed Hussain, Editor (Print & Digital) of The Express Tribune, while speaking on ExpressNews talk show ‘Experts’ on Thursday.
“In April 2022, the state coffers had nearly USD 11 billion, but the reserves plummeted to USD 7.8 billion by August,” he added while referring to the time when the PDM took over the government after ousting Imran Khan through a vote of no-confidence.
This quick depletion of the forex reserves was blamed on the PDM government’s indecisiveness vis-a-vis revival of the IMF program which had been stalled since the last days of PTI’s government.
“When Miftah Ismail quit, the SBP reserves stood at USD 7.8 billion, but they have dropped to USD 3.5 billion as of Thursday, triggering talk of economic collapse in the international media,” Hussain said.
According to the State Bank of Pakistan (SBP) data, the rupee further crumbled in the interbank market on Friday, closing at Rs 262.6 to a dollar, down Rs 7.17 or 2.73 per cent from Thursday when the Pakistani currency fell 9.6 per cent–the biggest one-day drop in over two decades, reported The Express Tribune.
The government was desperate to secure external financing, with less than three weeks’ worth of import cover in its foreign exchange reserves, which fell from USD 923 million to USD 3.68 billion in the latest SBP data.
“Who is responsible for nearly 45 per cent evaporation of our vital foreign exchange reserves in a matter of three months?” he asked.
The US dollar appreciated sharply within the last three days, crushing the rupee in a record-shattering rally after Ishaq Dar, the economic wizard of the PML-N, gave up his rationality-defying efforts to artificially bolster the currency.
Ayaz Khan, Group Editor of Roznama Express, said that Miftah Ismail was a “thousand times better” finance minister than Ishaq Dar but is not acceptable because he does not belong to the “House of Sharifs”.
Pakistan is trying to convince the International Monetary Fund (IMF) to revive the much-needed bailout program for the cash-strapped country.
The rupee free-fall began after foreign exchange companies removed a cap on the exchange rate, a key demand of the IMF as part of a programme of economic reforms it has agreed on with Islamabad for the revival of the multibillion-dollar loan programme, reported The Express Tribune.
Notably, Pakistan secured a USD 6 billion IMF bailout in 2019, which was topped up with another USD 1 billion last year. Still, the global lender then stalled disbursements in November due to Pakistan’s failure to make progress on fiscal consolidation and economic reforms.
“In August, the IMF Executive Board revived the bailout program after a hiatus of six months, approving a USD 1.1 billion tranche. Subsequently, the reserves swelled to USD 8.8 billion in September,” Hussain said.
Meanwhile, the US dollar rally – which has already added another nearly Rs 4,000 billion to the public debt within three days – is likely to open up floodgates of inflation, while compliance with the IMF conditions, which are a must for the revival of the loan program, would further escalate the cost of living for the common man, reported The Express Tribune.
– Business Tribune