Due to a shortage of dollars, banks are refusing to open new letters of credit for importers, affecting an economy already battered by runaway inflation and sluggish growth.

“I have been in this business for 40 years and I have never known a worse period,” testifies for AFP Abdul Majeed, an official of the Pakistan Association of Customs Officers (APCAA).

At the port of Karachi (south), thousands of shipping containers are blocked awaiting payment, filled with products crucial to the Pakistani economy.

Everything is concerned, from luxury goods to foodstuffs, chemicals or pharmaceuticals, and vital medical equipment.

“We have thousands of containers stuck at the port because of a lack of dollars,” explains Maqbool Ahmed Malik, president of the APCAA, who specifies that the volume of operations there has dropped by at least half.

This week, the state bank's foreign exchange reserves fell to less than $6 billion at the start of 2023, the lowest in nearly nine years - with liabilities of more than $8 billion in the first quarter alone .

Reserves are sufficient to pay for about a month's worth of imports, analysts say.

Pakistan's economy has collapsed alongside a latent political crisis, with the rupee falling and inflation hitting levels not seen in decades.

Dollars in a Karachi exchange office, January 10, 2023 in Pakistan © Asif HASSAN / AFP

Devastating floods this summer and a major energy shortage have added to the pressure.

The huge debt of this South Asian country - which currently amounts to 274 billion dollars, or nearly 90% of gross domestic product - and the recurring difficulties in repaying it make it particularly vulnerable to economic shocks.

Agreement with the IMF

Islamabad has pinned its hopes on a deal with the IMF, negotiated under late leader Imran Khan, but the final payment has been pending since September.

The global lender is demanding the withdrawal of remaining subsidies on petroleum products and electricity, intended to help the 220 million inhabitants to meet the cost of living.

The price of rice on a wholesale market in Karachi, January 10, 2023 in Pakistan © Asif HASSAN / AFP

This week, Prime Minister Shehbaz Sharif urged the IMF to give him some breathing room to deal with this "nightmarish" situation.

"I have to queue for two or three hours to buy subsidized flour, the prices are unaffordable," said Zubair Gul, father of four and day laborer in Karachi.

For Shah Meer, an office worker, borrowing from relatives or using credit cards is the only way out: "An ordinary man cannot afford to buy milk, sugar or vegetables" .

With elections slated for the end of the year, implementing the conditions demanded by the IMF would be political suicide, but Pakistan is unlikely to get new credit without making at least some cuts.

On Thursday, the United Arab Emirates agreed to extend a $2 billion loan and gave the country another $1 billion, helping it avoid an immediate default.

A seller in the market in Karachi, January 10, 2023 in Pakistan © Asif HASSAN / AFP

Last week, more than 9 billion dollars in international aid were promised to rebuild the country so that it can better resist the onslaught of climate change.

However, these funds will not be enough to solve the current currency crisis, which is why Mr Sharif continues to press his allies, including Saudi Arabia, Qatar and Beijing, which has invested billions in the project. China-Pakistan Economic Corridor (CPEC).

The currency crisis has added to the difficulties of textile manufacturers - accounting for around 60% of Pakistani exports - who have suffered from energy shortages, damage to cotton crops during floods and a recent increase in taxes.

In Faisalabad, the center of the textile industry, about 30% of the looms are stopped, with the rest working every other day, said Baba Latif Ansari, head of the Labor Qaumi Movement union.

"More than 150,000 workers who had come from the surrounding villages to work here have had to return due to the lack of work in recent weeks. Others are sitting at home hoping that the situation will improve," he explains. at AFP.

Some factories have complained of a delay in importing raw materials such as dyes, buttons and zippers, as well as spare parts for machinery stuck in Karachi port.

A table of foreign currency exchange rates in Karachi, January 10, 2023 in Pakistan © Asif HASSAN / AFP

Abdul Rauf, a cereals and pulses importer, says he has only 25 days of stock left and that without the release of the dollars there will be a "huge shortage" during the holy month of Ramadan which begins in March.

"I have never witnessed a situation where people are so worried."

© 2023 AFP