Pakistan’s economy grinding to a halt as dollars dry up

Thousands of containers filled with essential food, equipment and medical supplies have been stored at the port of Karachi in Pakistan as the country grapples with a severe financial crisis.

The dwindling value of the dollar has left banks refusing to issue new letters of credit to exporters, straining the already-existing economy due to high inflation and a lack of funds.

“I have been in business for the past 40 years and I have never seen a bad time,” said Abdul Majeed, an official at the All Pakistan Customs Agents Association.

He speaks from an office near the port of Karachi, where cargo containers wait for payment to be cleared – full of food, medicine, lighting equipment and chemicals for Pakistan’s industries.

“We have thousands of containers stranded at the port due to lack of dollars,” said Maqbool Ahmed Malik, chairman of the customs agency, adding that operations have dropped by 50 percent.

State bank reserves this week fell to less than $6 billion — the lowest in nine years — with more than $8 billion of obligations due in the first quarter alone.

The reserves are enough to pay for about a month from abroad, according to experts.

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Pakistan’s economy has been crippled by a growing political crisis, with decades of high inflation and inflation, while floods and energy shortages have increased.

The South Asian country’s high debt – currently at $274 billion, or nearly 90 percent of gross domestic product – and its relentless efforts to manage it make Pakistan vulnerable to financial crisis.

– Running on a tightrope –

Islamabad has been pinning its hopes on the IMF deal brokered by Pakistan’s last prime minister Imran Khan, but the latest payment has been pending since September.

The international lender wants the remaining oil and electricity tariffs to be removed in order to help 220 million people with the cost of living.

Prime Minister Shehbaz Sharif this week urged the IMF to give Pakistan a breathing space as it grapples with “dangers”.

Zubair Gul, a 40-year-old father of four and a daily wage laborer in Karachi, said it has become “very difficult” to make ends meet.

“I have to stand in line for two or three hours to buy subsidized flour – regular prices are not affordable,” he told AFP.

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For Shah Meer, an office worker, borrowing from relatives or using a credit card are the only ways to make ends meet.

“An ordinary person cannot afford to buy milk, sugar, porridge or anything you can name,” he said.

With an election due at the end of the year, implementing — or campaigning for — the IMF’s demands would be politically suicidal, but Pakistan is unlikely to get a new loan without cuts.

On Thursday, the United Arab Emirates agreed to repay more than $2 billion in debt owed by Pakistan and give the country an additional $1 billion in credit, helping it avoid default.

Islamabad got a reprieve last week when donors pledged more than $9 billion to help rebuild after floods that left nearly a third of the country under water last year.

But the money, even if it arrives, will not help the current forex crisis, so Sharif continues to pressure his allies – including Saudi Arabia, Qatar and Beijing – who have invested billions as part of the China-Pakistan Economic Corridor project.

– Escape the debt trap –

The economic crisis has exacerbated the woes of textile manufacturers, who account for nearly 60 percent of Pakistan’s exports.

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They have suffered from the lack of electricity in the country, the destruction of cotton crops during floods, and the recent increase in taxes.

The problems have caused about 30 percent of the electricity supply in Faisalabad, the capital of the textile industry, to be temporarily closed, with the rest working on other days, said Baba Latif Ansari, head of the Labor Qaumi Movement. .

“More than 150,000 workers who came from the surrounding villages to work here had to return because of the lack of work in the last few weeks. Some are staying at home hoping that things will improve,” he told AFP.

Some factories have complained about the influx of imported goods such as paints, buttons, zippers and machine tools at the Karachi port.

Abdul Rauf, an exporter of wheat and cereal, said that with only 25 days left and without the release of dollars, there would be a “significant decrease” in the holy month of Ramadan, which begins in March.

“I have never seen things that people are worried about,” he told AFP.

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