Pakistan chasing hard currency to survive
Pakistan is sinking into crisis due to a shortage of dollars and accelerating inflation, making it even more urgent for Prime Minister Shehbaz Sharif to get funds from the IMF. The country is in desperate need of funds, as its reserves have dropped to $3.7 billion, less than a month of covering imports of even staple goods, Bloomberg reported.
“Pakistan has taken the IMF program seriously by making these decisions even though we are in an election year,” said Suleman Rafiq Maniya, head of consultancy at Vector Securities Pvt. “It all depends on the visit of the IMF team and their reaction. . These measures are quite painful and have a huge political cost." In fact, in order to have funds in hard currency from the IMF, the country must commit itself to very strong restrictive policies, with a drop in family subsidies and above all an unprecedented surge in petrol and energy prices, moves that accentuate even extreme poverty of the Pakistanis.
Sharif said his coalition government was determined to complete the bailout after a delay in implementing key decisions, even if it means paying a political cost just months before a national election. An arduous task awaits the country's economic leaders, led by Finance Minister Ishaq Dar, who will have to convince the IMF that the country is ready to implement other severe measures, including raising taxes and gas prices.
Developing markets applying for IMF funding are facing increased pressure to loosen their grip on currencies, which will help improve current account balances. This month, Egypt underwent its third devaluation in less than a year. According to calculations by Bloomberg Economics, the rupee is expected to stabilize at 266 to the dollar, according to a Monday note by Mumbai analyst Ankur Shukla.
In Pakistan, the rupee's slide this month was triggered by a decision by foreign exchange firms to abolish the cap on the dollar-rupa exchange rate on the open market. The supply of dollars from the exchange companies dried up and locals turned to the black market, as the greenback sold for about 10% more than advertised rates. Individuals rushed to grab dollars in the face of the domestic currency crisis.
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The article Pakistan on the hunt for hard currency to survive comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-pakistan-a-caccia-di-valuta-forte-per-sopravvivere/ on Tue, 31 Jan 2023 11:00:09 +0000.