Pakistan is in the midst of a dire economic crisis, and the country is holding emergency discussions with the International Monetary Fund (IMF) in the hopes of receiving assistance to avert a complete collapse of its currency reserves.
It has so much debt that it can’t even pay its import bills for a month, and its currency reserves are so low that even that is a stretch.
Thursday will mark the departure of an International Monetary Fund team that has been in the country for the past 10 days in an effort to negotiate access to much-needed international funding.
Pakistan’s annual inflation rate jumped to over 27% in January, the highest level since 1975, causing widespread concern about the country’s economic health in a crucial election year.
The Pakistani rupee hit a new all-time low of 275 per dollar this week, compared to 175 per dollar a year earlier.
One of Pakistan’s most significant issues is the country’s lack of foreign currency.
Jubilee Textiles and other factories in Faisalabad, Pakistan’s industrial hub, have recently closed due to a lack of access to dollars to import the commodities they require, rather than the frequent power disruptions that have plagued Pakistan for years.
“But how can we produce anything if we can’t even import components? It’s too late, we’ve already lost money “manager Fahim told the BBC that all 300 employees had been sent home.
The printing presses at Jubilee only recently began operating again after being shut down for a whole month. When the BBC came by, stacks of white cotton sheets were sitting in iron tubs, silent but for the drip, drip of an industrial washer. The tubs were covered in a light layer of brick dust.
Fahim, as he walked through the factory’s frozen network of machines, said that the company had just run out of the dyes they import from China, not because the dyes weren’t available, but because the bank had taken weeks to clear the dollars needed to pay for them.
Currency shortages have been blamed on the government, which is said to be keeping the bank’s exchange rate artificially high. They let it fall at the end of last month, which may be good for some businesses but will likely increase prices for everyone else.
Many firms and factories in Pakistan have reported slowing down or stopping operations as they wait for imported items that are piling up in ports.
A government minister told the BBC in late January that more than 8,000 containers containing everything from medication to food were piling up in Karachi’s two ports. According to accounts from the local media, some of that has cleared, but a lot of it is still trapped.
Multiple issues converging at once
Global gasoline prices have skyrocketed as a result of the coronavirus epidemic and Russia’s invasion of Ukraine, which has had a negative impact on Pakistan and many other countries. Pakistan imports a lot of fossil fuels, and the cost of importing food has recently skyrocketed.
With a weaker rupee, the cost of gasoline rises, which has repercussions for the production and distribution of consumer goods. Fuel prices were recently raised by the government by almost 13%, although further hikes are not planned.
The United Nations estimates that flood damage last year cost more than $16 billion. Large swaths of Pakistan were flooded, washing away farms and damaging the country’s food supply. The cost of necessities like wheat and onions has risen dramatically.