Pakistan’s economy has slipped into a major economic crisis with the country shutting shopping malls and other public places to save energy import bills, even as the prices of daily essentials such as flour, sugar and ghee shoot through the roof. Pakistan is struggling to cope with growing debt, inflated energy import costs, dwindling foreign exchange reserves, global inflation, political instability, and slowdown in GDP growth. The Prime Minister Shehbaz Sharif-led government is taking desperate measures like ordering shopping malls and markets to shut by 8:30 pm and restaurants by 10:00 pm in order to save energy consumption.

Food shortage in Pakistan; sugar, flour, ghee shoot up

The crisis has escalated to an extent that the government auctioned a Pakistani embassy property in the US a few days ago. Not only this, Pakistan’s Lahore is facing a massive shortage of flour where the prices have shot up drastically with non-availability in most shops. With such a shortage, the price of a 15 kg flour bag went up to Rs 2,050, after an increase of Rs 300 in two weeks, said a Pakistani news outlet ARY News. The government also hiked the prices of sugar and ghee by 25 per cent to 62 per cent for sale through the Utility Stores Corporation (USC), reported The Dawn.

Pakistan is heavily dependent on imported fuel. The government has also ordered all central government departments to reduce energy consumption by 30 per cent. These measures are directed to help the country save 62 billion Pakistani rupees ($274 million), according to a tweet by the country’s ruling party. The situation has prompted analysts to draw comparisons with a similar crisis faced by India’s other neighbouring nation Sri Lanka earlier last year.

What Pakistan’s economic situation looks like at the moment

Pakistan’s foreign exchange reserves dwindling fast; IMF bailout tranche delayed

Pakistan’s total liquid foreign exchange reserves fell to $11.7 billion in December – half of that at the start of the year, said the central bank. The country’s finances are also suffering because of the differences with The International Monetary Fund (IMF) over a review process, which has delayed the release of a $1.1 billion bailout tranche. Pakistan had, in 2019, secured a $6 billion bailout package from the IMF, and the financial institution gave the country a fund of $3.9 billion till August last year. While the next tranche was expected in September, it was delayed due to a pending review by the IMF.

Pakistan’s widening trade deficit, weakening rupee

Besides these factors, Pakistan’s suffering is also the result of a flood that hit the nation in 2022 from June to October, which affected nearly 33 million people and according to reports, is believed to have led to damages worth over $30 billion. The flood, in fact, increased Pakistan’s dependence on imports even as the country’s exports dipped. As per the Pakistan Bureau of Statistics, the country’s trade deficit stood at over $2.8 billion in December 2022 as exports declined by over 16 per cent to $2.3 billion. Further, the Pakistani Rupee too is falling nearly 30 per cent in 2022, compared to the US dollar.

Pakistan has to meet external financing needs to the tune of over $30 billion up until June 2023, said a Reuters report. And this includes energy and debt repayments. This, however, looks difficult with the country’s GDP growth pegged at just 2 per cent by the World Bank. In its annual debt report, the World Bank estimated that Pakistan’s total external debt was at $130.433 billion by 2021. While the State Bank of Pakistan Governor Jameel Ahmad, in a podcast earlier in December, said that $ 20 billion had been accounted for, Pakistan still needs to manage $13 billion during the rest of the fiscal year.