Pakistan is staring at bankruptcy as the country’s foreign exchange reserves plunged to an 8-year low of $5.6 billion. This will cover less than one month of imports. With loan repayments to be made many analysts and economists are saying that the country may face a balance of payments crisis in the coming months.
Pakistan needs to raise more than $26 billion to repay foreign debts and reduce its massive current account deficit. Nearly 30% of Pakistan’s foreign debt is owed to China. The dwindling of forex reserves leaves Pakistan with import cover for only over a month. In the next three months, the country has to pay $8.3 billion to external debtors.
The release of $1.1 billion that was originally scheduled to be disbursed by the IMF in November of last year has yet to be approved, resulting in Pakistan having insufficient foreign exchange reserves to cover only one month’s worth of imports.