As if managing the political situation in the country that continues to become more precarious, uncertain and volatile with each passing day was not enough to contend with, navigating the economy through this instability is proving to be as difficult a task for the ruling government. The latest blow, that will surely affect businesses and households alike, is the impending summer gas crisis after Singapore LNG trading company GUNVOR backed out of delivery of four LNG cargoes that were to be delivered in the remaining four months, in April, May and two in June of its five-year contract ending in July 2022, and the decision of Pakistan LNG Limited not to procure spot LNG cargo for April either.
That the Petroleum Division is reportedly ‘extremely worried’ that it will be unable to meet gas demand of the power sector means the deficit will be supplemented from other sectors leading to certain industries suffering outages. The government is already managing an increased import bill owing to the global geo-political situation following the Russian invasion of Ukraine that has sent international oil prices skyrocketing.
Businesses are therefore facing higher cost of doing business and a weaker rupee, that reached a new low against the dollar, touching 182.00 in the interbank market yesterday, is not helping. Apart from dollar flight in the form of foreign divestment in government backed securities from the country owing to political uncertainty, there have been a number of debt servicing payments falling due, with all this pressure being worsened by speculators seeking safe havens, with the result that the value of the rupee has been facing tremendous pressure, which has led to its slide. The State Bank of Pakistan has found itself obliged to use its foreign exchange reserves to prop up the rupee.
It is pretty clear that the economy is headed towards another bout of instability, the worst effects of which will, as always, inevitably be borne by the citizens of the country. It is imperative therefore that whatever constitutional procedures need to be executed, should be, without any unnecessary or unconstitutional delay. As things stand, no one comes out of this as a winner, be it the opposition or the ruling PTI government as they will both be met with an extreme economic crisis to deal with on the other side.
