UPCOMING ECONOMIC CRISIS IN PAKISTAN

Despite ongoing negotiations between Islamabad and the International Monetary Fund

(IMF) to resume the USD 6 billion bailout package from the IMF, Pakistan is on the

verge of bankruptcy as the country's economic situation is facing a dire future with no

immediate positive outlook. This puts Pakistan on the verge of having to declare

bankruptcy.
Since the Pakistani Rupee (PKR) surpassed 212 to the US Dollar on June 21, it has been

described as being in a "free slide." In light of the fact that Pakistan's foreign exchange

reserves have been reduced to an alarming degree, and the nation has less than six weeks'

worth of import cover.

In the previous year, the value of the Pakistani rupee has dropped by a staggering 34%,

which is equivalent to a loss of PKR 53.67. In comparison, it reached a high of PKR

157.54 in June of the previous year. As a direct consequence of this, the Pakistani Rupee

has risen to the position of "worst-performing currency in 2022" in Asia. It has

depreciated against the United States Dollar by nearly 16.5 percent (since December 31,
2001), which places it at the very bottom of a basket of 13 peers, including the Japanese

Yen, the South Korean Won, and the Bangladeshi Taka.

Pakistan is struggling with a growing current account deficit, and its State Bank NSE

1.56 percent of Pakistan (SBP)-held reserves have achieved their lowest level since

November 2019. This has resulted in a depreciation in the value of the PKR, which has

occurred simultaneously. To meet the 'conditionalities' set out by the IMF in order to

resurrect the bailout, the coalition government that is led by Shehbaz Sharif has just

raised the cost of petrol for the third time in the last month. This has added further

challenges to Pakistan's economy and its populace.

The average person has taken a significant blow as a result of this, since there have been

stories of businesses closing down as a result of the recent increases in the price of fuel,

including cab services, restaurants, and home delivery services. Since May 26, fuel prices

in Pakistan have increased by 56%, which is equivalent to an increase of PKR 84 (the

current price for a litre of petrol is PKR 233), and high-speed diesel prices have increased

by an astounding 83%, which is equivalent to an increase of PKR 133 (the current price

for a litre of high-speed diesel is PKR 263), putting additional strain on the country's

working class.
Many people believe that this would bring more foreign lending and improve foreign

exchange reserves that have fallen over 50 percent in the last 10 months, according to a

report in The Gulf News. Therefore, the government has taken these severe measures to

desperately revive the IMF program, which is critical for Pakistan's economy.

Miftah Ismail, Pakistan's Finance Minister, was the one who announced that prices would

be going up for petroleum items. He said that the government had no alternative but to

"pass on the impact of foreign pricing" to Pakistani consumers. These events have

exacerbated the political unrest that already existed in the country, as the current Prime

Minister Shehbaz Sharif accused the government of the former Prime Minister Imran

Khan for policies that "hurt the economy" and led to the recent increases in the cost of

petrol.

In the meanwhile, the administration that is led by Shehbaz Sharif is confronted with two

primary challenges: maintaining economic stability in the country and ensuring that the

general populace remains content in the face of impending general elections in Pakistan.

Sharif is aware that Imran Khan now possesses a second weapon at his disposal with

which he may attack the coalition government in addition to his ongoing protests on his

"controversial" removal from office in April of this year. Therefore, the immediate

resumption of the IMF's financial program may bring some stability to Pakistan's

economy as well as work as a face-saver, which could be projected as a success for the

coalition government in the next elections. This success could be projected as a success

of the coalition government in the next elections. In a survey conducted by the Institute
for Public Opinion Research (IPOR), a survey research institute based in Islamabad, 43%

of respondents complained of adverse economic conditions during the rule of Imran Khan

and the Pakistan Tehreek-i-Insaf (PTI), while 33% felt that the economy had improved

during that period (Aug 2018 – Apr 2022). In the same breath, 55% of respondents

pleaded with the current administration to do something about the spiraling cost of living.

(source: economic times)