That Prime Minister Shehbaz Sharif will personally talk to the IMF about the release of Pakistan’s held-up tranche is not good news. Perhaps the dire straits in which Pakistan finds itself can be seen from the fact that after meeting its latest debt servicing obligation, the country’s forex reserves have sunk to a mere $4.5 billion, which only provides 45 days of cover for imports. Fuel, edible oil and lifesaving medicines are not yet short, but all three are imported and essential, and if, despite all the pooh-poohing by Finance Minister Ihaq Dar, Pakistan is indeed sailing very close to a default on its foreign obligations. With every de bt servicing payment, the precipice draws closer.
Another problem that has arisen is that banks are not paying out dollars to those who maintain dollar deposits with them. That is raising memories of the 1998 confiscation of foreign exchange, when banks were told either to pay rupees, or to issue foreign exchange bearer certificates. There is something wrong, because those deposits are supposed to be covered by their own foreign exchange holdings. That might explain why depositors are being offered other currencies, which they do presumably have. Theeee failure to pay back depositors could well result in a sort of run on the banks, not on rupee accounts, but on foreign exchange accounts. The government, and the State Bank, cannot continue for ever, staggering thus from crisis to crisis, scrabbling together the foex needed to make the next payment. Signs are beginning to become visible, in the closing down of factories. While newer car factories might be seen as evidence that luxury consumption was being curtailed, the same cannot be said about the closing of Millat Tractors. That means that the whole Green Rervolution, which depended on mechanization half a century ago, may now be grinding to a halt.
At this point in time, it almost seems irrelevant who is responsible for the state of the economy. The PTI is almost slavering for a default, while the PDM blames the crisis on bad decision-making when it was in office. Fixing blame is needed, but only if it also generates a solution, which neither party seems to have. If the PTI was indeed to blame, and it must admit that a modern economy cannot go bad so soon as it claims, it has been a year since it lost office. The PDM cannot escape responsibility now.
