In order to overcome the rising inflation, Pakistan has asked for $6 billion loan from the International Monetary Fund (IMF). According to Abdul Hafeez Sheikh, the head of Pakistan’s Finance Ministry, this loan will be paid by Pakistan to IMF in three years in installments. Sheikh says that without financial assistance, Pakistan neither can meet its business losses nor can it control rising inflation.
IMF has admitted that Pakistan’s economic situation is very bad. Pakistan’s growth rate has slowed down. Inflation is continuously increasing. The government and the people are drowning in debt. According to a World Bank report, by the end of December 2018, the debt of Pakistan’s public was 73.2 per cent of GDP, which is likely to increase to 82.3 per cent in 2019. This is the highest level of debt in the past 17 years. The Pakistani government wants to solve the problems of rising inflation, rising debt, and slow growth rate, but every possible attempt of the government have been unsuccessful until now.
However, Pakistan’s economist Talat Anwar says that the borrowing from the IMF will increase the problems of the common people even more. According to them, the IMF will definitely give loans on some conditions and implementing those conditions will further reduce the value of Pakistani currency, which will increase the prices of commodities and food items consumed on a daily basis. IMF can force the Pakistani government to increase interest rates, which are currently around 10.75 per cent. It can slow down the investment and also reduce the employment generation along with the growth rate.
It is notable that Pakistan has been struggling with a serious economic crisis for the last year. Its foreign exchange reserve has come down to less than two months’ import. Pakistan hoped that countries like Saudi Arabia, China, etc. would give financial help to it. However, these countries have given some financial help to Pakistan, but it has been inadequate. By the way, Prime Minister Imran Khan is still looking forward to getting help from China. Khan hopes that China can help Pakistan to get out of the current crisis. Khan can also travel to China to achieving this purpose.
According to economists, earlier, Pakistan was getting funding on free-floating mechanisms, but by 2017, there was a devaluation of 34 percent in Pakistani currency. A Pakistani bank president even said that Prime Minister Imran Khan may have to lose his chair when there is a further decline in Pakistani currency because Pakistan’s financial situation will get worse in the days to come. Khan is also targets of the Opposition due to appointing former IMF employee Raza Bakir as the new Governor of the Central Bank. The opposition parties feel that the new governor of the central bank has failed to handle Pakistan’s economy.
The value of the dollar against Pakistani currency is increasing and it has reached Rs 141. It is being speculated that it can also reach the level of Rs 150. Pakistani citizens are unable to meet their daily needs due to the devaluation of the Pakistani rupees. The price of everything is constantly increasing. Petrol price has reached Rs 112 per liter. Significantly, its price is still increasing. Shahid Khan Abbasi, a senior leader of the Muslim League (Nawaz) said that in the last nine months, the burden of debt on Pakistan has increased to Rs 28 thousand billion. Inflation has also doubled in this period.
Recently, the World Bank released a report titled “South Asia Economic Focus-Export Wanted”, according to which Pakistan’s average inflation could reach 7.1 per cent in the current financial year and it will reach 13.5 per cent next year. According to the same report, Pakistan’s economy is growing at a rate of 3.4 per cent in the current financial year, which can reach 2.7 per cent next year.
Due to uncontrolled inflation, the common people are also cutting their food items. People have also made changes in the food items of their choice. The common people have either stopped to eat expensive foods like Paneer, fruits, milk, etc. or reduced to take more quantities of such items. The condition of small businessmen has become worse. Many businessmen have had to close their business. In the current situation, the remaining traders may have to close their business. Medium and large businesses also do not have a good economic status. Their business has also had adverse effects. Due to reaching a high level of inflation, there has been a huge reduction in the demand for diversified products. People are becoming unemployed. The growth rate is going downwards.
The Pakistani stock market condition is also very bad. The stock market CEO Richard Moran has resigned from his post before completing his term. It is being said that if the economic situation of Pakistan does not improve, then in the coming years, international financial institutions can take a tough stance against Pakistan’s crispy economy.
It can be said that Pakistan’s economic situation is getting worse and current Prime Minister Imran Khan has failed miserably in improving the situation. Does the Opposition say that the government is not able to understand how to overcome the rising inflation? In the current situation, the expectations of a better economy in Pakistan are very low in the coming years.
By Satish Singh
(Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of AFTERNOON VOICE and AFTERNOON VOICE does not assume any responsibility or liability for the same.)