Pakistan’s economy in on the verge of collapse as thousands of containers are stuck up at the seaports due to the severe shortage of dollars, a report published in the Financial Times warned on Thursday.
Analysts warn that Pakistan’s economic situation is becoming untenable and is at risk of following Sri Lanka, where a lack of foreign reserves triggered severe shortages of essential goods and eventually led to a default in May, the British daily said.
The report quoted officials as saying that factories such as textile manufacturers were closing or cutting hours to conserve energy and resources.
The difficulties were compounded by a nationwide blackout on Monday that lasted more than 12 hours. “Already a lot of industries have closed down, and if those industries don’t restart soon, some of the losses will be permanent,” Sakib Sherani, founder of Macro Economic Insights in Islamabad, told FT.
Foreign reserves held by the central bank have dropped to under $5 billion, less than a full month of imports with the federal government remains in a deadlock with the IMF over reviving a $7 billion bailout package that stalled last year.
“Every day matters now. It’s simply not clear what the way out is,” FT qouted Abid Hasan, a former adviser to the World Bank, as saying. “Even if they get a billion [dollars] or two to roll over . . . things are so bad that it’s going to be just a Band-Aid at best.”
Planning Minister Ahsan Iqbal told the Financial Times that the country had “drastically” reduced imports in an attempt to conserve foreign currency.
Analysts said this included restricting banks from opening letters of credit for importers, leading a steel industry body this week to threaten halting production.
The IMF and the PM Shehbaz Sharif-led government are at loggerheads over the former’s demand that Pakistan accepts economic reforms such as raising subsidised energy prices.
“If we just comply with the IMF conditionalities, as they want, there will be riots in the streets,” Iqbal told FT. “We need a staggered programme . . . The economy and society cannot absorb the shock or cost of a front-loaded programme.”