In a last-ditch effort to avert the looming default, the ruling coalition’s Prime Minister Shehbaz Sharif and PML (N) leader Nawaz Sharif are expected to visit Saudi Arabia in the coming days to convince the Kingdom to provide an additional breather of $2 billion in deposits. They will have to pursue UAE and Qatar as well to fulfill commitments on the external front to solace the IMF for the revival of the IMF program.
By Staff Reporter
ISLAMABAD: Pakistan is facing an economic crisis amidst a deepening judicial standoff and increasing political uncertainty. The scheduled verdict for holding elections in Punjab and KP provinces today has all eyes on the top court of Pakistan, the issue of Pakistan’s ailing economy remains the least interesting topic among those who really matter in the country.
With worsening macroeconomic indicators and rapidly depleting foreign exchange reserves, the ship is sinking, and no one possesses the control to change the direction of a rudderless ship. The brewing crisis is set to convert into a storm with the approach of dilly-dallying tactics amid depleting foreign exchange reserves held by the State Bank of Pakistan.
The ongoing judicial crisis is expected to have a far-reaching impact on the economy, as rapidly depleting foreign exchange reserves held by the State Bank of Pakistan have nosedived to $4.2 billion as of March 24, 2023.
The country’s debt servicing requirements, including principal and mark-up, are almost $4.5 billion during the ongoing last quarter of the current fiscal year, but the current foreign exchange reserves position cannot meet the requirement of immediate repayment needs. Therefore, the crisis is knocking at the doors, and the revival of the IMF remains a far cry.
This looming crisis could result in Pakistan defaulting if no action is taken in the next few months.
In a last-ditch effort to avert the looming default, the ruling coalition’s Prime Minister Shehbaz Sharif and PML (N) leader Nawaz Sharif are expected to visit Saudi Arabia in the coming days to convince the Kingdom to provide an additional breather of $2 billion in deposits. They will have to pursue UAE and Qatar as well to fulfill commitments on the external front to solace the IMF for the revival of the program.
The Minister for Finance Ishaq Dar and his official entourage are also scheduled to attend the spring meetings of the IMF and WB in Washington from April 10 to 16, 2023. The Minister for Finance is expected to visit Washington from April 13 to 16, 2023, and on the sidelines, he is supposed to meet with the IMF, WB, and US Treasury Department officials to secure dollar loans from multilateral and bilateral creditors.
During the visit, the ongoing IMF-funded program under the $6.5 billion Extended Fund Facility (EFF), which is set to expire by June 30, 2023, will also be discussed. Islamabad will have to convince the IMF for clubbing the upcoming 10th and 11th reviews after the completion of the outstanding 9th review under the EFF program. However, the incumbent regime has failed to get smooth sailing in the completion of the outstanding 9th review since last November 2022, so the upcoming budget for 2023-24 remains a daunting task.
In the worst-case scenario, if the IMF program does not revive back, then there is no plan B except to obtain dollar loans from KSA and China to pass through the next few months and then go for a fresh bailout package in the next financial year. However, it is essential to keep in mind that the foreign debt servicing requirement alone will be standing at a whopping need of over $27 billion in the next financial year.
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