Pakistan’s forex reserves depleting again despite IMF assistance

New Delhi: Pakistan is once struggling with dwindling foreign exchange reserves despite the International Monetary Fund (IMF) assistance. After the country’s forex reserves — held by its central bank- dropped below the $8 billion in August, it rose to $8.7 billion in the beginning of the month, thanks to the IMF loan of $1,166 million under its Extended Fund Facility (EFF). But for the week ending on September 9, the country’s reserves once again fell to $8.6 billion — down $176 million.

The country’s central bank said that the fall in foreign exchange reserves was due to external debt and other payments.

While latest data published by the State Bank of Pakistan revealed that the much required reserves are still above the $8 billion mark, the worry for policymakers is that they have started to deplete. In January, this year, the reserves held by SBP was more than $16 billion.

Initial reports have suggested that the damages caused by the massive floods in Pakistan could be more than $40 billion. Importantly, the floods have damaged swathes of crops leading to huge shortage of food and price rise.

Pakistan Prime Minister Shehbaz Sharif recently said that the economic situation in the country was already in a critical situation when the coalition led by Pakistan Muslim League-Nawaz (PML-N) took charge in April. Even before the floods hit the country, it was under the grip of a severe heatwave, which also caused damages to the agriculture sector.

“The problem gets aggravated due to large scale corruption in the system..so even relief materials don’t reach the common people, who are the real victims,” an analyst dealing with South Asia told India Narrative.

In August, the cost of food in Pakistan surged by 29.53 per cent compared to the same month in the previous year. “However, the impact of the floods is yet to be fully felt and Pakistanis need to prepare for worse,” the analyst said.

The IMF stalled its $6 billion loan programme in 2020 after approving the same in July 2019. However, the programme has just been revived with a $1.17 billion loan. Besides, the IMF, a few other countries including China, Saudi Arabia, UAE and Qatar have also come forth to help the cash strapped country.

Pakistan’s politics has also made the going tough. Islamabad has refused to resume trade with India despite several policymakers underlining the need for it. Not just that. It has also refused to give approval to aid agencies to source relief material from India. Last week, it denied aid from Bangladesh as well.

‘Even friendly nations think we’re beggars,’ Sharif said while speaking at a Lawyers’ Convention. “Today, when we go to any friendly country or make a phone call, they think that we have come to beg for money,” he said.