Pakistan’s economic downfall continues after floods
Despite the approval of a loan from the International Monetary Fund, Pakistan’s allies are not inclined to help it financially. While the rupee continues its drop, a food crisis looms high after floods wiped out crops. Now the country may not be able to import oil.
Islamabad (AsiaNews/Agencies) – A loan from the International Monetary Fund (IMF) will not be enough to revive Pakistan's economy, this according to several experts who spoke to Nikkei Asia. In their view, more radical emergency steps are needed.
The Pakistani government is faced with serious challenges following recent floods, estimated to have caused damages worth US$ 30 billion. A food crisis could also break soon.
Analyst Maryam Zia Baloch notes that, with crops destroyed by the floods, Pakistan will be forced to export less and import more food.
“Pakistan will need more dollars to cover the import bills. This will definitely put pressure on the exchange rate and the trade deficit will worsen," she explained.
In late August, the IMF approved a US$ 1.17 billion loan dollars, which should have pushed other countries to offer financial support to prevent Pakistan from collapsing economically.
The United Arab Emirates and Qatar have refused to transfer funds directly to the State Bank of Pakistan, preferring to make investments with long-term effects.
Saudi Arabia has instead agreed to roll over a US$ 3 billion deposit for another year, but this is not likely to help Pakistan solve its economic problems.
According to economist Yousuf Nazar, foreign countries have grown tired of helping Pakistan as evinced by the paltry US$ 600 million pledged by the international community for flood victims in Sindh and Balochistan.
The Pakistani rupee has continued to lose value over the past two weeks, now exchanged at 239 per US dollar while inflation is running at 27.3 per cent, the highest in 47 years. Foreign currency reserves are very low and the rupee’s low value does not make investments attractive.
For Nazar, a number of steps can be taken to revive the economy, including cutting defence spending, increasing fuel prices, and resuming trade with India and Iran.
However, the government’s main concern should be energy supply. if the money to buy oil runs out, Pakistan risks to be brought to a standstill.
Inflation could reach 70 per cent, like in Sri Lanka, but it would be a wrong strategy, Nazar argues, to wait to hit rock bottom.
"Pakistan needs to act now and should not hope for its allies to come for help," he said. "Hope is not a strategy.”