State of Pakistan’s economyDate: 07 December 2021 Tags: Miscellaneous
Recently, the hacked account of Pakistan embassy in Serbia mocked PM Imran Khan for the state of economy through a tweet.
Pakistan is going through a serious economic crisis. It had to take bail-out loans from Saudi Arabia and China to keep its economy from collapsing.
The galloping inflation in the country has forced the government to not pay officials from months, causing dissatisfaction among various sections.
The government claims that the GDP growth is projected to touch 4-year high of 5%. This also increases the risk of inflation and Balance of Payment crisis.
Pakistan is facing combination of problems such as trade deficit, current account deficits, galloping inflation, currency devaluation, depleting foreign reserves etc.
The two immediate problems plaguing the economy is inflationary pressure and payments crisis, caused due to domestic and international reasons.
The situation is even worse than the one faced in 2018 when the foreign exchange reserves were at multi-year low.
The liquid foreign reserves of Pakistan stood at $22.773 billion. It has declined by $691 million due to external debt repayments.
The GDP growth has fallen continuously. The current account deficit of the country, which is the difference between import and export of goods and services, has increased.
Excessive availability of the country’s currency in international market has affected its valuation. The value of Pakistani rupee is witnessing a free-fall.
Pakistan approached IMF for a bailout on a $6 Billion special package. In exchange, Pakistan is expected to undertake structural reforms.
Saudi Arabia has agreed to grant $3 Billion loan to Pakistan, which will be deposited in the Central Bank. However, the conditions of approval have been stringent.
An interest rate of 4% is imposed on the loan, apart from draconian default clauses, restrictions on the legal recourse of Pakistan etc.