Pakistan’s economy grinding to a halt

There’s not enough US dollars to pay imports

KARACHI, Pakistan (AFP) — Thousands of containers packed with essential food items, raw materials and medical equipment have been held up at Pakistan’s Karachi port as the country grapples with a desperate foreign exchange crisis.

A shortage of crucial dollars has left banks refusing to issue new letters of credit for importers, hitting an economy already squeezed by soaring inflation and lackluster growth.

“I have been in the business for the past 40 years and I have not witnessed a worse time,” Abdul Majeed, an official with the All Pakistan Customs Agents Association, said.

State bank forex reserves this week dwindled to less than $6 billion.

He was speaking from an office near Karachi port, where shipping containers are stuck waiting for payment guarantees — packed with lentils, pharmaceuticals, diagnostic equipment and chemicals for Pakistan’s manufacturing industries.

“We’ve got thousands of containers stranded at the port because of the shortage of dollars,” Maqbool Ahmed Malik, chairman of the customs association, said, adding that operations were down at least 50 percent.

State bank forex reserves this week dwindled to less than $6 billion — the lowest in nearly nine years — with obligations of more than $8 billion due in the first quarter alone.

The reserves are enough to pay for around a month of imports, according to analysts.

Pakistan’s economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels, while devastating floods and a major shortage of energy have piled on further pressure.

The South Asian nation’s enormous national debt — currently $274 billion, or nearly 90 percent of gross domestic product — and the endless effort to service it makes Pakistan particularly vulnerable to economic shocks.