Calling on the International Monetary Fund (IMF) as a country is a lot like calling those late-night TV loan companies for money; it’s only done hat in hand and with pure desperation. For Pakistan, the time of embarrassment and shame has come and gone.
As it stands, the country has all but drained its foreign exchange reserves. With skyrocketing foreign debt and not enough cash to cover the imports they have on order for even the month of February, things are getting dire. After 10 days of talks with IMF representatives, the country has little it can do but wait. Facing a historic 27% inflation rating, they are now at the highest level since 1975, and with this being their election year things are especially tough.
Last year, the rupee was coming in at 175 per US dollar. Now, it has plummeted to 275, making things exceptionally more expensive for the people of Pakistan. With a complete lack of foreign currency entering their country, many major manufacturers are stuck without material. For decades blackouts have been a concern in manufacturing, but now the lack of capital has gone too far.
January saw 8,000 containers backed up in Karachi’s two ports. From medicine to food and everything in between is in these containers. While some have begun to clear, much remains stuck there. Between the toll from COVID and the tremendous surge in fuel costs for Pakistan because of the Russia-Ukraine conflicts, the country has become truly cash poor, and the threat of a complete economic collapse is imminent.
Becoming reliant on subsidies during election years has made it hard to fix the problem. Pakistan has spent decades overspending on its military and debt for no results. Their massive debt is something no country wants to take on, but they have no place to sell it off to.