Pakistan bailout plan revisited
INFLATION has risen to a 48-year high in crisis-hit Pakistan, according to government data released yesterday, as IMF officials visit for urgent talks on a stalled bailout package.
Year-on-year inflation in January was recorded at 27.55%, its highest since May 1975.
Pakistan’s economy is in dire straits, stricken by a balance-of-payments crisis as it attempts to service high levels of external debt, amid political chaos and a deteriorating security situation.
The world’s fifth most populous country has less than $3.7 billion in its central bank, enough to cover just three weeks of imports.
On Tuesday, a delegation from the International Monetary Fund arrived in Islamabad to revive negotiations over a stalled bailout package with the government, which had long held out from meeting the global lender’s tough conditions. Food prices rose by a staggering 43% in January year-on-year, which analyst Yousuf Nazar, who is based in the UK, described as a “killer”.
“The overall rate actually masks or understates the misery of the people, and what is really going on behind these numbers,” he said. “It also reflects badly on the management, on the managers of the economy.”
In the past week, with the prospect of national bankruptcy looming and no countries willing to offer less painful bailouts, Islamabad has started to bow to pressure to meet IMF demands.
The government loosened controls on the rupee to rein in a rampant black market in US dollars, a step that caused the currency to plunge to a record low. Artificially cheap petrol prices have also been hiked.
The state bank is no longer issuing letters of credit, except for essential food and medicines, causing a backlog of thousands of shipping containers at Karachi port stuffed with stock the country can no longer afford.
Industry has been hammered by the imports block and massive rupee devaluation. Public construction projects have stopped, textiles factories have partially shut down and domestic investment has slowed. The National Consumer Price Index for January rose by 2.88% from the previous month, the figures released by the country’s statistics bureau yesterday showed.
Former prime minister Imran Khan, who was ousted last year in a no-confidence motion, negotiated a multibillion dollar loan package from the IMF in 2019. But he reneged on promises to cut subsidies and market interventions that had cushioned the cost-of-living crisis, causing the programme to stall.