Pakistan’s Financial Crisis: ‘Tighten Your Seat Belts’

EXPRESS TRIBUNE Reports that Pakistan is facing a balance of payment crisis. It is again looking toward friendly countries for help, as it has been unable to revive the $6.5 billion IMF bailout.

The country’s foreign reserves stand at around $6.7bn which are not enough to service the $8.8bn principal and interest payments during the January-March period of current fiscal year.

Pakistan’s external debt servicing for FY23 stands at 60 per cent of its exports, up from 12pc in FY11, reports Dawn.

According to ET report, the country is hoping to conclude talks with Saudi Arabia soon on financial help. The new army chief was also expected to play a role in bagging the bailout during his upcoming maiden visit to the Kingdom.

The IMF’s ninth review is delayed, says the report. IMF had asked Pakistan for more info to finalize its ninth review. Pakistan needs external financing from friendly countries on an urgent basis.

Finance Minister Ishaq Dar says he would expect to get $3bn from the friendly country. “We hope that we will soon conclude talks, which we have started with Saudi Arabia…”

“Pakistan would not default”, Dar told media earlier. Some elements were peddling a false narrative that Pakistan was about to default or might have already reached that point,” Dar said according to ARY.

According to Dawn, “The precarious situation Pakistan finds itself in today has been in the making for at least 10 years. Pakistan’s liabilities to the rest of the world (i.e. net international investment position) have increased from $60bn in 2011 to $129bn by March 2022. Importantly, this was driven by a significant increase in borrowing from multilateral institutions and ‘friendly’ countries to finance unsustainable levels of consumption.”

An analyst told that “The state of Pakistan has practically defaulted, tighten your seat belts.”

“The rot was never that deep.”