Even though the International Monetary Fund (IMF) programme has resumed after a seven-month hiatus, Pakistan continues to struggle with a major dollar liquidity crunch as the catastrophic floods have exacerbated the macroeconomic conditions.
According to Geo, since many politicians and economists advocated for Pakistan to ask the IMF for a Rapid Financing Instrument (RFI) or Natural Calamity Response-related Funding Facility, the Pakistani government has not yet submitted a new request in anticipation of the Washington-based international lender’s unenthusiastic response.
After being put on hold in February 2022 by the previous PTI-led government’s provision of unfunded fuel and energy subsidies, the IMF project under $6.5 billion was restarted in late August.
Since then, there has been pressure on Pakistan’s currency; nevertheless, the recent devastating floods have hurt the economy, contrary to what experts had anticipated would happen with the restart of the IMF programme.
The rupee has dropped 9 per cent against the US dollar in recent days due to intense pressure on the currency rate.
According to reports, the issue has gotten worse as demand for imports has multiplied and there are not enough dollars in the country. Pakistan’s macroeconomic risks are not going away without greater dollar inflows.
The early estimates of damages have now increased to almost $18 billion as a result of the severe flooding, with Pakistan’s agriculture industry taking the biggest hit.
The worst agricultural performance will put pressure on rising import demand for commodities, and if Pakistan cannot attract the appropriate levels of dollar inflows, food shortages may occur in the ongoing financial year.
In contrast to the projected aim of 3.9 per cent for the current fiscal year 2022–2023, the agriculture growth could remain zero or perhaps turn negative.
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