KARACHI: Concerns are at peak over the health of Pakistan’s economy as foreign reserves run out, inflation stands at decades-high levels and industrial growth slows down, with experts and industry leaders raising alarm and calling on the government to take decisive action, particularly on a stalled IMF bailout plan. 
The biggest worries center around Pakistan’s ability to pay for imports such as energy and food and to meet sovereign debt obligations abroad. Right now, foreign exchange reserves with the central bank stand at just $4.6 billion, barely enough to cover a month’s imports, compelling the government to restrict the import of goods, including industrial raw materials, to stop dollar outflows.  
Before devastating floods last year, an estimated $33.5 billion was needed to fulfil external financing needs for the 2022-23 financial year, according to the central bank, to be arranged through the daunting target of almost halving the current account deficit and receiving debt rollovers from friendly countries. 
But in the aftermath of the floods, exports have slumped and imports have grown to make up for essential commodities lost in the flooding of millions of hectares of farmland. 
Meanwhile, the Pakistani rupee has weakened 20 percent since the start of the year and the decline in the currency is pushing up the cost of imports, borrowing and debt servicing, and in turn will further exacerbate inflation running already at a multi-decade high. 
“The situation is alarming,” Tariq Yousuf, President of the Karachi Chamber of Commerce and Industry (KCCI), told Arab News. “More than 7,500 containers [of imports] are stuck at ports and our industries are facing an acute shortage of raw materials, bringing them almost to the verge of collapse.” 
Last year, the cash-strapped country imposed a ban on the import of luxury goods to avoid a balance of payment crisis but lifted some of the restrictions after pressure from the industrial sector. 
Experts warn that a dire dollar crunch in Pakistan may further hurt the import of essential items in the coming months and lead to a shortage of several food items. The fast-depleting forex stockpile has currently left banks refusing to issue new letters of credit (LCs) for importers, hitting an economy already squeezed by soaring inflation and lackluster growth. The central bank has also restricted overseas payments and halved the amount of foreign currency that a person can carry overseas to $5,000. 
Qaiser Ahmed Sheikh, chairman of the standing committee of the National Assembly (NA) on Finance and Revenue, told Arab News Pakistan was in a “dire situation.” 
“There are problems opening LCs, approved by the State Bank of Pakistan, affecting raw material imports.” 
Without an LC as a financial guarantee to foreign exporters, import clearances rarely go through. 
Sheikh said thousands of import containers were stuck at various ports, which was affecting the manufacturing industry and fueling a fear of industrial closure and further inflation hikes. 
The inflation rate in Pakistan is already worryingly high, recorded at 24.5 percent in December 2022, double the figure from around 12 percent in December 2021.   
“Both industrialists and the masses are concerned that commodity prices are rising on a daily basis,” Sheikh said. “The inflation will increase further if the State Bank of Pakistan does not allow new LCs opening and the clearance of older LC contracts.”  
The situation is particularly precarious for the country’s pharmaceutical industry, currently left with only a few days of stock. 
“Pharmaceutical industries keep inventory for three months, but since November 2022 raw material arrival has stopped due to the LCs issue,” Dr. Sheikh Kaiser Waheed, spokesman of the Pakistan Pharmaceutical Manufacturers’ Association (PPMA), told Arab News.  
“Due to resource constraints, the drugs for diabetes, cardiac patients, cancer patients etc, are in short supply,” he said. “This shortage is also partly due to excessive buying by patients as precautionary measures after reports of the import situation came out.” 
The economic strain has caused a number of textile units, car assemblers, and other industries to suspend or scale down their operations while fears of petroleum product shortage from next month loom, according to industrialists and government sources. 
In a meeting with industrialists at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the central bank governor this week announced that a joint committee would be set up with the FPCCI to resolve the “huge backlog in LCs,” according to a statement from the Chamber. 
Pakistani senior economists interviewed by Arab News said the current economic situation was a result of the government’s “indecisiveness” with regards to negotiations with the International Monetary Fund (IMF). 
A 9th IMF review to clear the release of the next tranche of funds to Pakistan has been pending since September. 
“The economic situation of Pakistan is alarming … but the indecisiveness of government officials further compounds the situation,” Dr. Ashfaque Hassan Khan, a senior economist, said. 
Current Minister of Finance Ishaq Dar and Minister of State for Finance, Aisha Ghaus Pasha, did not respond to requests for comment for this story. 
“The only options before the government now are to either accept the IMF program (with all its conditions) or leave it,” Khan added. “Pakistan is now in a catch-22 position. The government ahead of the general elections would be reluctant to burn its political capital (by imposing more taxes and raising the rate of inflation).”  
There is also talk of a mini-budget being announced to meet IMF conditions after its 9th review of the $7 billion IMF Extended Fund Facility (EFF). 
“The government is negotiating with the IMF on an energy tariff increase and setting a market based exchange rate of the US dollar, which will increase inflation and there are discussions on the interest rate hike also,” Sheikh, the chairman of the NA standing committee, said. 
“A mini-budget will be announced, as without it the IMF’s conditionalities cannot be fulfilled”. 
The chairman denied having knowledge of the exact measures and proposed date of the mini-budget, amid speculation about a new petroleum levy and more taxes on imported and local vehicles. 
“Hopefully ‘terms of engagement’ with the IMF finalized by the government of Pakistan are solid enough to finalize the 9th review,” Dr. Khaqan Najeeb, former adviser to the finance ministry, said. 
 “To get out of the present economic crisis, Pakistan must work on getting the IMF back, have a market determined exchange rate, rollover, reprofiling or restructuring of debt and effective social protection,” Dr. Sajid Amin, a senior economist, said.