Pakistan’s economic crisis: It may default on loans as economy collapses

The economic crisis of the country has worsened due to which the loss of more than 30 billion dollars has been caused due to which the Prime Minister shehbaz sharif Some tough decisions to make.

1) pakistan forex According to a report in Geo News, imports reached a record low of $4.56 billion, which can only cover three weeks’ worth of imports. This is worrying for a country that is heavily dependent on imports. Reports suggest that the drop in funds is due to repayment of USD 1 billion in commercial loans to two UAE-based banks.

2) With interest rates at 17 percent, and inflation hitting 24.5% in December, and foreign reserves barely enough to cover three weeks’ worth of imports, Pakistan is in dire need of external financing.

3) the International Monetary Fund And Pakistan signed a $6 billion bailout in 2019, topping last year’s $1.1 billion, but it came with conditions aimed at reducing the budget deficit before the loan was released.

4) Pakistan has sought Washington’s support to help roll out an IMF program that will release $1.1 billion to its strained economy on Thursday.

Dawn quoted sources as saying that Finance Minister Ishaq Dar met the US Treasury delegation and told them that Pakistan will honor its international commitments and is in the process of taking “very tough decisions” such as increasing natural gas and electricity prices. .

5) On January 19, Abu Dhabi Fund for Development (ADFD) increased its deposits by $2 billion State Bank of Pakistan (SBP).

According to Geo News, the UAE President has pledged an additional $1 billion loan in addition to rolling over the existing $2 billion loan.

The SBP currently has foreign exchange reserves of $4.5 billion, equivalent to three weeks’ import bills of the central bank. According to the bank, SBP’s foreign exchange holdings declined to a critical level of $4.3 billion, which is barely enough for three weeks of imports.

6) Pakistan’s National Austerity Committee (NAC), formed by Prime Minister Shehbaz Sharif, is considering various measures, including a 10 per cent cut in salaries of government employees, Geo News reported.

7) It mainly depends on imports from Ukraine and Russia to meet its essential food needs. The ongoing war has disrupted the supply chain and the country is facing a grain shortage due to crop damage due to floods, which has caused prices to rise drastically.

7) The Sensitive Price Index (SPI) has increased by 32% in the prices of essential commodities based on the week ending January 19, 2023, according to Pakistan Revenue, according to Pakistan media reports. Meanwhile, experts are indicating a hike of 100 basis points to bring the benchmark rate to 17 per cent.

8) The value of Pakistani Rupee against Dollar also indicates a dire situation as increasing import payments, inflows under exports and remittances is holding the exchange rate at PKR229 to a dollar.

9) The fuel crisis is expected to worsen after Italy-based LNG trading company, ENI, said it would not be able to deliver its next cargo. Geo News quoted The News as saying, “Gas shortfall will reduce to 700 mmcfd as imported LNG as only five cargoes at 13.37% of Brent and 2 at 10.2% of Brent under GTG agreements with Qatar.” Cargo will be available in February. There will be no LNG cargo from ENI in the month of February at a cost of 12.14%. And this will lead to gas crisis in the country.”