Pakistan's economy continues to sink despite international support

Credits: ANI

Islamabad: Despite support from Saudi Arabia and International Monetary Funds (IMF), Pakistan is on the verge of economic collapse with a lack of funds. The political instability, deteriorating business environment and mismanagement of the economy have pushed the country into investment fatigue from the traditional partners exposing the country to economic risks as well as political uncertainty, reported Asian Lite International.

Initially, there was hope for Pakistan, when on August 29, the Board of the International Monetary Fund (IMF) completed the combined seventh and eighth reviews under the Extended Fund Facility (EFF) for Pakistan, allowing the authorities to draw the equivalent of SDR 894 million (USD 1.1 billion).

But the recent floods and heavy monsoons in the country have dampened the hope of a quick revival from the economic crisis, reported Asian Lite International. The initially estimated losses due to the natural disaster have accumulated in the range of USD 18 billion.

Pakistan`s agriculture sector faces the worst blow as at least 18,000 sq km of agricultural land have been wiped out.The agriculture growth might remain zero or slide into negative against the envisaged target of 3.9 per cent for the current financial year 2022-23.

Nearly 80 districts of Pakistan have been worst hit by the floods. Thousands of people have been lodged in tents or are waiting for shelter under open skies along the main highway that leads to Hyderabad. Either side of the highway could be seen inundated by floodwater for miles.

In the wake of the increased economic losses and reduced GDP growth, the per capita income is projected to slow down. The government had envisaged a GDP growth rate of 5 per cent for the current fiscal year.

Moreover, poverty and unemployment will go up manifold from 21.9 per cent to over 36 per cent. Some 37 per cent population was hit by poverty after floods in 118 districts, as estimated by the Pakistan government.

The catastrophic floods displaced more than 33 million people and are estimated to have caused USD 30 billion of damage, adding to skyrocketing inflation and a financial crisis. In this scenario, IMF help would be inadequate.

Although the US Agency for International Development (USAID) has provided an additional USD 30 million and China promised RMB 100 million in humanitarian assistance, Pakistan needs more to keep its essential supplies and post-flood reconstruction, reported Asian Lite International.

Recently United Nations Secretary-General Antonio Guterres, who recently visited Pakistan said that Pakistan needed "massive" financial support for relief, recovery and rehabilitation in the wake of the catastrophic floods that displaced more than 33 million people and are estimated to have caused USD 30 billion of damage.

The remarks of the UN Secretary-General came after he attended a briefing at the National Flood Response Coordination Centre (NFRCC) alongside Prime Minister Shehbaz Sharif.

Pakistan would need additional funding to buoy the sinking economy. For the ongoing fiscal year, the IMF estimated the need for an additional USD 4 billion in other financing commitments from development partners including Qatar, China, Saudi Arabia, UAE, and IFIs, reported Asian Lite International. Islamabad is expecting Riyadh to reload deposit money in Pakistan`s Central Bank before December, according to Finance Minister of Pakistan Miftah Ismail.