Islamabad, June 24 (SocialNews.XYZ) Amid falling remittances and depleting foreign exchange reserves, Pakistan has come on the brink. The policy makers in the country have indicated their intention to adopt unconventional measures.
Recently, Pakistan Federal Minister for planning Ahsan Iqbal urged the countrymen to cut down on the consumption of tea to help reduce the import bill. He said, "I appeal to cut down the consumption of tea by 1-2 cups because we import tea on loan."
The Planning Minister also revealed that the traders' community has also been asked to close markets by 8.30 p.m. to conserve energy to cut down import bill of petrol products.
The Minister's appeal to cut down the consumption of tea did not go down well with people as revealed by the exchange of views on Twitter.
Import of tea constitutes an important component of Pakistan's total import bill which stood at $400 million in 2021-22 and $340 million in 2020-21.
Such appeals reflect desperation and helplessness of the Pakistani economy which has fast lost its resilience in last few years. It is reflected by its depleting foreign exchange, depreciating currency and ballooning debt service obligations. The situation of the Pakistani economy has also deteriorated due to loss of growth momentum post-Covid pandemic outbreak, higher level of double deficit and drying up of foreign investment etc.
The economic problems facing Islamabad would not be easy to solve by desperate unconventional measures. Pakistan needs structural changes as problems of the economy are deep rooted. Temporary solutions may give some respite and breathing space, but Islamabad doesn't afford to postpone its reforms any further.
China had agreed in principle in March 2022 for granting a fresh rollover of $2.5 billion in commercial loans to Pakistan for one year, out of approximately $21 billion outstanding official loan including commercial, bilateral and safe deposits.
This is over and above Beijing's earlier decision to roll over $2 billion, taking the total roll over amount to $4.5 billion.
Meanwhile, IMF has also agreed to extend the Extended Fund Facility to Pakistan with additional funds on compliance to its conditionality of doing away with subsidies and raising taxes and power tariffs.
The debt-ridden Pakistani economy is under compulsion now to fulfil the IMF conditionality requiring management of external financing requirement which, among others, also aimed at avoiding depletion of foreign exchange reserves.
Pakistan, according to official data, owed $16 billion of non-Paris Club countries on December 31, 2021 out of which China's bilateral debt stood at $14.81 billion.
China's SAFE deposits stood at $4 billion. Pakistan also owned commercial loans to China to the tune of $10.77 billion provided by different consortium of international and domestic banks in dollar. The Chinese commercial loans to Pakistan were to the tune of over $2.5 billion till December 2021.
The IMF had assessed that Pakistan's gross external financing sector requirements stood at over $30 billion in FY 2021-22 while current account deficit was projected at $12.9 billion on the completion of 6th review under $6 billion Extended Fund Facility Programme for Pakistan.
Nevertheless, by the end of June 22, the current account deficit is likely to end up at a much higher level, estimated to be in the range of $16-18 billion. The IMF assessed that the gross national financing requirements would be standing a $35 billion for the budget for FY 2022-23.
On June 10, Pakistan's newly elected government's Finance Minister, Miftah Ismail presented a $47 billion (PKR 9.52 trillion) budget aiming to achieve 5 per cent economic growth less than previous year's growth of 5.97 per cent.
Out of the total annual budget, around 40 per cent is reserved to make foreign and domestic debt payments, indicating that the debt servicing of the country might increase to $23 billion in budget 2022-23.
Pakistan's foreign exchange stood at $9.2 billion by end May, which is enough to cover only 45 days of Pakistan import bill. The import cost would further increase due to continued decline in the exchange rate of PKR against dollar which stood at PKR 205 against the USD for the first time in the history on June 7.
Pakistan's economic woes are not expected to ease in the coming weeks. The country's import bill continues to balloon due to oil imports and other expenditures, while exports have not risen enough to cover the current account deficit.
Lack of international support has further worsened the situation. Pakistan needs to take tough decisions and undertake economic reforms so as to stabilise and revitalise its economy.