Imports threatened as forex reserves hit eight-year low
The latest data from the central bank released overnight — for the week ending Dec.30 — show the country has half the foreign exchange reserves it held a year ago
Pakistan’s central bank forex reserves have plunged to an eight-year low of $5.6 billion, posing a serious challenge for the country in financing imports.
Coupled with another $5.8 billion held by commercial banks, the nation has $11.4 billion in reserves — enough to pay for just three weeks of imports, traders and economists said.
“This is a very grave situation. If things get worse, Pakistan will need to have its loans restructured,” said Mohammad Sohail, the head of economic watchdog Topline Securities in Karachi, alluding to a possible default.
Pakistan’s economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels, but devastating floods and a global energy crisis have piled on further pressure.
The latest data from the central bank released overnight — for the week ending on Dec.30 — show the country has half the foreign exchange reserves it held a year ago.
Servicing foreign debt and paying for crucial commodities such as medicine, food and energy are among the chief concerns. Thousands of shipping containers are held up at a Karachi port because banks have been unable to guarantee foreign exchange payments.
Cargo includes perishable foodstuffs and medical equipment worth tens of millions of dollars.
“A major hospital in Karachi could not carry out eye surgeries for a month because of a lack of equipment,” said Masood Ahmed, chairman of the Healthcare Devices Association of Pakistan.
Successive governments have failed to shore up multilateral or bilateral aid to meet foreign payments, although a $6 billion International Monetary Fund deal was restarted ater Pakistan finally met conditions such as ending subsidies on fuel.
But Islamabad has so far only received half the funds — the last payment in August — with a further review of the package ongoing.
“All hopes are pinned on the release of the remaining amount,” Sohail said.
Pakistan oten looks for financial rescue from allies including China and Saudi Arabia, but analysts say the two countries are holding off until Pakistan gets the IMF green light.
Prime Minister Shahbaz Sharif spoke with both his Chinese counterpart and the IMF managing director on Thursday.
Shahbaz said on Friday the Chinese premier informed him that Beijing had told the IMF that China stands with Islamabad in this difficult situation.
On Friday, army chief was in the Saudi capital where he was reportedly pushing for financial relief.
Separately, the government is launching the “Talented Youth Internship Programme” for 30,000 unemployed graduate youths of Pakistan, Federal Minister for Planning and Development Ahsan Iqbal said
Presiding over a meeting of private sector representatives to provide internship to youth, he said the duration of internship will be six months and a monthly stipend of Rs25,000 will be given to the youth.
The minister said the future of the country depends on purposeful education and skill acquisition of youth as two-thirds of Pakistan’s population is below 30 years.
Iqbal maintained that the main task of the ministry of planning is to plan the future of the youth, adding that the development of Pakistan depends on the active role of the youth and the private sector.
Under this programme, he said some 30,000 youth would get an opportunity to work in the industry.
The minister also stressed the need to forget all the differences and work together to get the country out of the economic crisis.
The economy of a country with a population of 220 million does not sink in eight months, he said, adding that when there is a fire in the house, the first thing to do is to extinguish the fire.
The minister said that every Pakistani should play a role in bringing the country out of the economic crisis. “Every Pakistani would have to become champion of ‘Turnaround Pakistan Campaign.’”