The economic crisis in Pakistan seems to be worsening by the day, as the country’s currency has witnessed its biggest one-day decline in over two decades. The Pakistani rupee fell to 262 against the dollar, experiencing a 9.6% drop. However, it has since recovered slightly and is currently trading at 242 against the dollar.
The severe slump in the currency prompted the International Monetary Fund (IMF) to resume lending to Pakistan. The country has been relying on IMF funding to prevent further financial collapse, with a key demand being the removal of a cap on the Pakistani rupee-dollar exchange rate.
Federal Board of Revenue Chairman Asim Ahmed has described the current financial situation in Pakistan as “critical,” citing a shortfall in revenue. Ahmed stated that the ₹7.47 trillion (Pakistani rupee) revenue target would be achieved by bringing those who have not been paying taxes into the tax net.
Currency experts attribute the pressure on the rupee to the IMF talks resumption and a sharp decline in the country’s foreign exchange reserves. According to media reports, Pakistan’s foreign exchange reserves have plunged to only $3.68 billion by the week ended January 20, 2023. The official reserves of the State Bank of Pakistan have also fallen by $923 million to $3.678 billion as of the week ended January 20, 2023, compared to $4.601 billion the previous week.
It is worth noting that Pakistan secured a USD 6 billion IMF bailout in 2019 and an additional USD 1 billion last year. However, the lender suspended disbursements in November of last year due to the country’s failure to make more progress on its way to fiscal consolidation. The IMF announced on Thursday that it was sending a mission to Pakistan at the end of January to discuss the resumption of disbursements.