Syed Mansoor ul Hassan + Ameer Hamza
The dangers hanging over the Pakistani economy seem to be increasing towards extremes. Current foreign exchange reserves are not even able to meet one month’s imports. The deadlock between the International Monetary Fund (IMF) and the government of Pakistan due to the shortage of foreign currency is fueling the worsening situation, while economists have already expressed that the loan from the IMF The agreement on the next tranche will open the way for more loans and aid, while the IMF is currently looking at the dollar crisis and black sales in Pakistan.
The adjustment according to the market and the end of the unannounced cap imposed in the inter-bank market is a link in the same chain, according to which the dollar has become expensive up to Rs. 19.60 interbank and 28.50 in open market. The loans increased by 2800 billion rupees. In the local market, the price of gold increased by Rs 4900 to Rs 195,500 per tola, similarly, silver increased by Rs 50 to Rs 2150 per tola. This is a new record of gold and silver price in the country’s history.
How did all this happen and was it inevitable? In this context, on January 24, the Exchange Companies Association of Pakistan, while indicating the end of the cap (fixed rate) on the dollar, made it clear that the end of the ban on the price of the dollar was hidden for the purpose of selling in black. The outgoing foreign capital will circulate and the shortage of dollars in the country will be removed and the black market will be discouraged. Traders and industry circles have warned that the 10.6% devaluation of the rupee in a single day will increase the cost of imported goods and raw materials, and further increase in the prices of daily essentials will add to the hardships of the people.
It is also being feared that petrol prices increased an average of Rs 250 pkr per liter but economists believe that removing the cap from the dollar rate was the last option. It is true that for the past few days the dollar crisis in the country had reached such an extent that many containers were not being cleared at the Karachi port because the importers did not have foreign exchange for payment, while the imported raw materials did not reach the factories.The country was facing a crisis of many products, including medicine shortages.
After removing the cap on the dollar, the IMF has announced to start formal negotiations with the Pakistani authorities from next week for the completion of the 9th review and the release of a billion dollar loan installment. Discussions will also be held and the issue of reducing revolving credit in the energy sector will also be considered. It is a matter of great concern that the foreign exchange reserves with the State Bank have further reduced to $6.3 billion and despite a possible $1 billion from the IMF, this volume will remain $6.4 billion.
According to some experts’ estimates, the criterion of safe reserves is at least 12 billion dollars. On the other hand, the IMF wants to make the release of the new tranche conditional on the government of Pakistan taking more stringent measures. In this context, it should be noted that due to extreme inflation, the condition of the common man has become worse and taking any such step would be tantamount to adding salt to his sufferings by adding any kind of increase in inflation.
