According to the State Bank of Pakistan (SBP), the country’s foreign exchange reserves slipped to the alarming level of below $3 billion for the first time in nine years, reducing import capacity to slightly over two weeks ahead of the proposed revival of the IMF $6.5 billion loan program. According to the details, after an external loan payment worth $ 170 million, the forex reserves slid down to $2.92 billion during the last week, which raised the risk of default on the repayment of foreign debt.
Pakistan’s economy has been in turmoil long before the summer catastrophic supper floods, and the government shuffle last April because of the global energy crisis, skyrocketing inflation, and the disastrous effects of war in Ukraine along with continuous political unrest and internal choas that prevailed in the country since late 2022. The economic crisis usually emerged in Pakistan on a periodic basis as the Country’s domestic production is nominal vis-a-vis its consumption and foreign imports that imbalance the national economy every other year so foreign loans had been an ad-hoc solution to recurrent economic challenges throughout history. Yet, governance has become difficult for the administrators as the new loans are insufficient to manage both repayments of foreign debt and running state businesses simultaneously, while politicking monetary affairs by the successive governments had proved to be poisonous for the economic policies of the country in the past. Currently, the nation faces a worst economic crisis, the risk of a debt repayment default as the South Asian nation has to pay back nearly $ 75 billion by 2025 that is an impossible phenomenon without the implementation of comprehensive economic reforms, revenue generation, as well as loan restructuring with foreign donors to make things manageable. Pakistan’s foreign reserves have sharply declined due to the reduction in foreign remittances, dollar smuggling, the rupee continuous depreciation, and delay in the 9th review of the IMF program, thus complicating the already fragile economy.
Currently, the revival of the IMF program became essential for the economic survival of Pakistan because friendly nations also linked their economic assistance with the IMF recommendation. Recently, Pakistan and the IMF have concluded the crucial 9th review of the ongoing EFF, while the global lender handed over a regressive reforms agenda to the government to meet its economic goals in the coming months, however, Washington based shylock has yet not okayed the release of $1.2 billion tranche for the country.
The Finance Minister and other high-ups are confident and have started jubilating triumph over the success of the revival of the IMF program which would be helpful in everting impending economic collapse for at least this time. According to the government, the dialogues with the IMF were extremely difficult and the government was compelled to sacrifice a lot in terms of the party’s political assets, public welfare, and development goals to make it happen. In fact, government Economists must once think about their leadership talent as they failed to achieve excellence even in a single area of the national economy despite the abundance of human and natural resources in the country. Thus, the nation has no optimism about the performance of its leaders in the future.