Pakistan stares at bankruptcy even as Saudi decides to conduct study to assist Pak economy

Pakistan is staring at bankruptcy amid a precarious foreign exchange reserves level and a highly unstable political environment with former Prime Minister Imran Khan pressing for an early general election.

Pakistan’s foreign exchange reserves have plunged to $5.6 billion, the lowest in almost nine years, which will cover less than one month of imports. The country needs to raise more than $26 billion to repay foreign debts and reduce its massive current account deficit, according to people aware of the matter.

State-run Saudi Press Agency reported on Tuesday that the Saudi Fund for Development will conduct a study on increasing its deposits in Pakistan’s central bank to $5 billion from $3 billion earlier.


The development comes days after Pakistan’s army chief, General Syed Asim Munir, met the Saudi Crown Prince recently to seek financial support.

The country is also reportedly looking to seek extension of a $2.1 billion loan from China in March. Nearly 30% of Pakistan’s foreign debt is owed to China.

Pakistan’s economic situation has worsened after the floods that inundated a third of the nation and halved its growth. Increasing energy prices, a weaker rupee and flood-related delays in agricultural production have reduced estimated growth in this financial year to about 2%, said one of the persons.

Last week, the Pakistan government ordered all malls and markets to close by 8:30 pm as part of measures to conserve energy.

Defence minister Khawaja Asif told journalists that the cabinet-approved measures to shut markets, including restaurants, were aimed at saving about 62 billion Pakistani rupees ($273 million).

Asif also said that Prime Minister Shehbaz Sharif had ordered all government departments to reduce electricity consumption by 30%. He said the energy conservation plan also included banning the production of energy inefficient bulbs and fans from February and July respectively.

The Pakistan Business Forum, a private sector policy advocacy organisation, recently cautioned the government that the constant depreciation of the currency was impacting the nation’s economy.

While the Shehbaz Sharif government has sought to blame the previous regime for the country’s economic downfall, Khan’s party has cited data that shows a sharp deterioration in exchange rate and energy prices, among other indicators, under the current dispensation.