ISLAMABAD: Pakistan’s ongoing political and economic crises have hit its fragile economy hard, experts said on Saturday, adding that the country’s financial turmoil was likely to aggravate further in the coming years since its foreign debt repayments were gradually exceeding.
With only $4.2 billion forex reserves, enough to cover the import bill of just about three weeks, the South Asian nation of 220 million has been struggling to revive a stalled $7 billion International Monetary Fund (IMF) bailout program to avert a balance of payments crisis.
The political and constitutional crises in Pakistan began in April last year after the ousting of former prime minister Imran Khan in a parliamentary no-confidence vote. Since then, Khan’s Pakistan Tehreek-e-Insaf (PTI) party has been staging protests across the country in a bid to return to power through snap polls.
The PTI and its allies also dissolved the Punjab and Khyber Pakhtunkhwa provincial assemblies in January to escalate political pressure on Prime Minister Shehbaz Sharif’s coalition government for early national elections. The government has so far resisted the demand, though the country’s top court directed the election regulator earlier this week to hold the Punjab elections on May 14.
“The political wrangling and the constitutional crisis have caused irreparable loss to our fragile economy as all the economic indicators have diminished since April last year,” Dr. Vaqar Ahmed, a senior economist and joint executive director at an Islamabad-based think-tank, Sustainable Development Policy Institute, told Arab News.
According to the Pakistan Bureau of Statistics, the country’s exports have registered a decline of 9.21 percent from $20.57 billion in July-Feb 22 to $18.67 billion in July-Feb 23. Likewise, the State Bank of Pakistan data show that the country’s foreign remittances have posted a decline of 10.85 percent in the same period from $20.18 billion to $17.99 billion.
The foreign exchange reserves have declined by a staggering 61 percent from $10.8 billion on April 8, 2022, to $4.2 billion on March 31, 2023, the central bank data reveal. Similarly, the rupee has depreciated a whopping 37 percent against the US dollar from 178 to 285 in a year.
The sharp rupee depreciation and all other economic downfall have led to the highest-ever annual inflation in the cash-strapped country with consumer price inflation jumping to a record 35.37 percent in March from a year earlier.
“Pakistan’s foreign debt repayments are exceeding $20 billion per annum in the next three years and unfortunately we may not have the required reserves to repay them,” Ahmed said, adding that this was leading to pressure on the rupee and causing double-digit inflation in the country.
He suggested the government to convene an all-parties conference with multilateral and bilateral donors to thrash out a “viable strategy” to avert debt default.
“We have to prepare ourselves for the next two to three years to overcome the economic crisis,” he added.
Ahmed said the government’s ban on imports had led to a decline in the nation’s exports due to shortage of the raw material while foreign remittances dropped due to lack of confidence of overseas Pakistanis in the present system.
Pakistan’s economy is expected to grow by only 0.4 percent in the current fiscal year ending June 2023, according to the World Bank, which says the slower growth reflects subdued private sector activity amid deteriorating confidence, import controls, belated fiscal tightening, and the impacts of the unprecedented floods of summer 2022.
Afia Malik, a senior research economist at Pakistan Institute of Development Economics in Islamabad, said the country’s economic improvement was “directly linked” to political stability to boost exports and remittances.
“The policymakers will have to chart out a long-term strategy to address all the looming economic issues,” she told Arab News. “Otherwise, even if we could address them in the short term through foreign loans, they would re-emerge after some time.”
“We need to focus on export- and investment-led industrial growth in the longer run to boost our foreign exchange reserves, create jobs for youth, and bring down spiraling inflation,” she added.
