Pakistan on the Verge of an Economic Collapse

Pakistan is on the verge of economic collapse and is moving in the same direction as Sri Lanka's economic decline as a result of its declining foreign exchange reserves and growing inflation. The economy of Pakistan is currently progressing poorly. Pakistan, according to the UNDP, has debts totaling more than USD 250 billion.

Since imports were a major part of the Pakistani economy, the increase of the dollar prices led to a decrease in foreign reserves. Pakistan's economic turmoil is mostly a result of Pakistan's political unrest.

"State Bank of Pakistan, Pakistan's central bank, has issued a warning to the government that the country's capacity to import goods may be significantly impacted with depletion in foreign reserves. The decline in Pakistan's foreign exchange reserves, which on June 17, 2022, reached USD 8.24 billion"

Due to the pressure of upcoming debt repayments and other obligations, this tendency is probably going to continue. The SBP has urged a temporary restriction on the import of all non-essential items in order to preserve depleting foreign exchange reserves. The risk presented by increasing fuel imports, which affect Pakistan's energy security, is now the bigger problem. Long-term hazards of Pakistan adopting Sri Lanka's example are thus all too present and substantial.

Achim Steiner, the chairman of UNDP, said that the cost-of-living problem is pushing millions of people into poverty and even hunger at a breath-taking rate, increasing the possibility of escalating social unrest. The context for this comment was Pakistan's worsening economic woes. The Pakistani rupee hit a record low against the US dollar earlier today, falling to PKR 240.5 per dollar in the interbank market. Pakistani rupees sank by 4.48, or 1.89 percent. According to the Foreign Exchange Association of Pakistan, the rupee has lost approximately 30% of its value since the year 2022 began.

Miftah Ismail, Pakistan's Minister of Finance and Revenue, expressed optimism that the pressure on the currency will subside in a few weeks. "From the next month on, Pakistan will receive more revenue from exports and remittances than it does through imports and debt service. As a result, the rupee would no longer be under as much pressure and would strengthen" Ismail said. The rise in interest rates, global inflation, supply chain disruptions and the US currency reaching historic highs, among other factors, he claimed, have all contributed to the devaluation of the rupee.