Pakistan’s economic chaos continues unabated. The recent assertion by State Bank governor Jameel Ahmad that the country has enough dollars to meet its foreign debt obligations has failed to calm the nation’s creditors and markets.
The State Bank of Pakistan’s reserves are below $8bn and words alone will inspire zero confidence. Further, Pakistan’s credit default swap — an indicator used to insure against debt restructuring or default — has widened to 64.2 % from 52 % at the start of November.
Both Finance Minister Ishaq Dar and the State Bank may believe the rupee’s real worth is below 200 a dollar but, as an editorial in Dawn noted, “If the exchange rate continues to hover much above the rupee’s ‘actual worth’ in spite of this, it is primarily because we are almost dollar illiquid. Had the bank not imposed stringent import curbs at the expense of economic activity, delayed profit repatriation, and not restricted other legitimate dollar payments, its reserves would have dropped far below even the current level.”
Unfortunately, as Dawn pointed out, “our dire economic condition hasn’t been enough to push the government to implement serious structural reforms and privatise state enterprises or services to revamp the economy. The IMF is not happy with the fiscal authorities for missing crucial programme targets like the primary budget surplus, and the new Extended Fund Facility performance review seems to have been delayed indefinitely.”
Further, “political turmoil amidst a protest campaign launched by former prime minister Imran Khan is keeping friendly nations from lending a hand, despite their recent announcements of billions of dollars in assistance.”
The fault, the Dawn editorial noted, “doesn’t lie in the market-determined exchange rate; it lies in our economic and political priorities.”