Pakistan: ‘Responsibility has to be fixed for financial apocalypse’

According to The Express Tribune, Pakistan is experiencing a “economic meltdown” as a result of a 40% decline in its foreign exchange reserves following Miftah Ismail’s resignation and the appointment of Ishaq Dar as the country’s new finance minister. 

Senior analysts have stated that the government needs to assign blame for the reduction of Pakistan’s foreign exchange reserves in a couple of months or “course correction” won’t be possible amid mounting fears of an economic disaster. 

“Who is to blame for the short-term decline in our foreign exchange reserves? The government must establish accountability, “Naveed Hussain, Editor (Print & Digital) of The Express Tribune, made this statement on the Thursday episode of the ExpressNews talk show “Experts.”

“In April 2022, the state coffers had nearly USD 11 billion, but the reserves plummeted to USD 7.8 billion by August,” he added while referring to the time when the PDM took over the government after ousting Imran Khan through a vote of no-confidence.

This quick depletion of the forex reserves was blamed on the PDM government’s indecisiveness vis-a-vis revival of the IMF program which had been stalled since the last days of PTI’s government.

“When Miftah Ismail quit, the SBP reserves stood at USD 7.8 billion, but they have dropped to USD 3.5 billion as of Thursday, triggering talk of economic collapse in the international media,” Hussain said.

According to the State Bank of Pakistan (SBP) data, the rupee further crumbled in the interbank market on Friday, closing at Rs 262.6 to a dollar, down Rs 7.17 or 2.73 per cent from Thursday when the Pakistani currency fell 9.6 per cent–the biggest one-day drop in over two decades, reported The Express Tribune.

The government was desperate to secure external financing, with less than three weeks’ worth of import cover in its foreign exchange reserves, which fell from USD 923 million to USD 3.68 billion in the latest SBP data.

“Who is responsible for nearly 45 per cent evaporation of our vital foreign exchange reserves in a matter of three months?” he asked.

The US dollar appreciated sharply within the last three days, crushing the rupee in a record-shattering rally after Ishaq Dar, the economic wizard of the PML-N, gave up his rationality-defying efforts to artificially bolster the currency.

Ayaz Khan, Group Editor of Roznama Express, said that Miftah Ismail was a “thousand times better” finance minister than Ishaq Dar but is not acceptable because he does not belong to the “House of Sharifs”.

Pakistan is trying to convince the International Monetary Fund (IMF) to revive the much-needed bailout program for the cash-strapped country.

The rupee free-fall began after foreign exchange companies removed a cap on the exchange rate, a key demand of the IMF as part of a programme of economic reforms it has agreed on with Islamabad for the revival of the multibillion-dollar loan programme, reported The Express Tribune.

Notably, Pakistan secured a USD 6 billion IMF bailout in 2019, which was topped up with another USD 1 billion last year. Still, the global lender then stalled disbursements in November due to Pakistan’s failure to make progress on fiscal consolidation and economic reforms.

“After a six-month delay, the IMF Executive Board reactivated the rescue programme in August by approving a USD 1.1 billion tranche. The reserves then increased to USD 8.8 billion in September “added Hussain. 

The US dollar rally, which has already increased the public debt by nearly Rs 4,000 billion in just three days, is expected to unleash a wave of inflation, and adhering to IMF requirements, which are necessary for the revival of the loan programme, will drive up the cost of living for the average person even more, according to The Express Tribune.