Experts: Pakistan groans amid deteriorating economic and livelihood crises

 ISLAMABAD

- The Pakistani economy is entering a difficult stage according to current indicators, which economists believe indicate the possibility of declaring the government bankrupt in the coming stages, in the event that external support is not obtained to revive the deteriorating economy.

This comes at a time of increasing political tension, after the government of Shahbaz Sharif announced that it would continue to rule until the next elections, the summer of next year.

Severe shortage of foreign exchange reserves

Pakistan is currently suffering from an acute shortage of foreign exchange reserves, the largest decline since 2019, as foreign exchange reserves reached 16.4 billion US dollars, due to the increase in the current account and trade deficits, and the rise in foreign debt payments.

Reserves of the Central Bank of Pakistan decreased by $190 million to $10.308 billion.

Analysts say the latest central bank reserves could cover 1.54 months' worth of imports, according to Pakistan's The News International on May 13.

On the other hand, the rupee (the local currency) reached its lowest level in the country’s history, as its trading price against the US dollar reached 200 rupees at the close of trading last Thursday afternoon, according to the data of the Pakistan Forex Association, and it reached this point in a rapid decline after The dollar was trading at 192 rupees at the start of the week.

A government on the verge of bankruptcy

The government of Shahbaz Sharif - which was formed from the coalition of parties that were opposing the PTI government - still keeps not raising prices on basic items for fear of increasing the resentment of the citizens who were criticizing the price hike during Imran Khan's rule.

However, the current state of the economy and the level of the collapse of the local currency make it difficult for the government to maintain the old prices, and the government tried a few days ago to convince the owners of sugar factories to reduce sugar prices to 70 rupees per kilo, but the government’s request was rejected, which means the continuation of the old price and the possibility of higher prices during the stage. coming.

Also, oil prices are rising globally, and if prices are not raised, the government will have to bear the price difference.

A few days ago, it was announced a great possibility to raise oil and fuel prices, but the government retracted that, at a time when the country is witnessing frequent power cuts amid rising temperatures, which increases the suffering and resentment of the citizens.

Negotiating with the IMF

Meanwhile, the government is negotiating with the International Monetary Fund to obtain an urgent loan of one billion dollars, as negotiations began between the two parties in Qatar on Wednesday and are expected to continue until next week.

The International Monetary Fund sets difficult conditions from the point of view of the Pakistani government, as the latter must carry out economic reforms, including lifting subsidies on some key elements such as oil, and this increases citizens' fears, despite the Prime Minister's pledge not to raise prices.

Finance Minister Moftah Ismail told the International Monetary Fund on Wednesday that the government understood the current economic crisis, and agreed that it would have to take "hard decisions" while mitigating the effects of inflation on middle- to low-income groups.

In this context, Shaquille Ramai, a political and economic analyst and head of the Asian Research Institute of Civilization and Development in Islamabad, said he believes there is no other option at this time but to raise prices.

He added that the International Monetary Fund does not seem in a mood to help Pakistan overcome the crisis without raising prices, noting in an interview with Al-Jazeera Net that it is now clear that friendly countries will not provide financial support without obtaining tacit approval from the International Monetary Fund, as they did in 2019. .

With regard to accepting the conditions of the International Monetary Fund, political and economic analyst and director of the Islamabad Institute for Political Studies Abdul Karim Shah said that the government will not be able to solve economic problems without fulfilling the conditions of the International Monetary Fund, which are difficult.

He added in an interview with Al Jazeera Net that the government would not take the risk of accepting these conditions for fear of the people's discontent.

Pakistan is currently experiencing a severe shortage of foreign exchange reserves, the largest since 2019 (Shutterstock)

contingency plan

In light of these very declining indicators of the economy, the government announced on Thursday an emergency rescue plan, as Information Minister Marium Aurangzeb said that the government had imposed a ban on the import of 38 non-essential luxury goods under an “emergency economic plan,” a decision that the Prime Minister responded to in a tweet on Twitter, Saying that it would "provide the country with valuable foreign exchange," he called for "austerity" to overcome this crisis caused by the "wrong" economic policies of the PTI government, he said.

Commenting on plans that could save Pakistan's economy from further deterioration, Ramai said the government has very limited space to play with.

He said that the economic reality indicates that it will take some time to fully recover from the current crisis.

Thus, it seems that it will be very difficult for the current government to overcome the crisis in the short term.

Ramai says that Pakistan needs urgent financial assistance from the International Monetary Fund and friendly countries during the next two months, otherwise the crisis could bring Pakistan close to default.

For his part, Abdul Karim Shah says that there are so far no indications of aid from the friends of Pakistan.

He believes that the best solution is for the government to respond to the demands, which call for early elections that could be a solution to the political and economic crises the country is going through.

This comes at a time when Imran Khan is mobilizing his supporters to pressure the current government, which he describes as "imported" as he roams all over the country to deliver speeches to his supporters, in addition to calling for preparations for a gathering in the capital, Islamabad, and its closure, and this will have a significant impact on the economy. Especially if it turns into violence.